2013 (12) TMI 1673 - SC - Companies Law

Eviction on the ground of illegal subletting - Unlawful subletting by the respondent-company - Seeking eviction of the Company in liquidation from the premises - Tenancy rights of the company in the tenanted premises are not the assets for the purpose of liquidation proceedings - rights of the company w.r.t. the landlord or tenants did not change- liberty to mention - Plea of RES JUDICATA- HELD THAT - The suit premises were not required by the liquidator for effective management of the winding up proceedings and the order was passed without prejudice to the rights and contentions of the official liquidator and further it was observed that it would be open for the official liquidator to raise all such contentions as permissible in law. The learned Company Judge also took note of the fact that the tenancy right of the company had not been disputed by the plaintiff and no decree could be passed without a full-fledged trial in the suit. Being of this view, he dismissed the application. The official liquidator had no objection for releasing the premises in favour of the landlord and as the sub- tenant was the only contesting party, and accordingly granted leave. The principle of res judicata debarring the appellant to file an application for grant of leave and further the observation liberty to applicant to apply does not enable the appellant to get out from that legal labyrinth because it does not confer a right on a party to re-agitate the matter. It operates at the successive stages in the same litigation but the basic foundation of Res Judicata rests on delineation of merits and has at least an expression of an opinion for rejection of an application. In order to attract it, it must be manifest that there has been conscious adjudication of an issue. A plea of res judicata cannot be taken aid of unless there is an expression of an opinion on the merits. It is well settled in law that principle of res judicata is applicable between the two stages of the same litigation but the question or issue involved must have been decided at earlier stage of the same litigation The appeal was allowed and the order of set aside was passed by the Division Bench and restore that of the learned Company Judge. The first respondent is directed to pay ₹ 50,000/- to the appellant towards costs of the appeal.

Issues Involved:
1. Whether the order dated 23.2.2006 operates as res judicata.
2. Interpretation of "liberty to apply" in the context of the order dated 23.2.2006.
3. Grant of leave under Section 446 of the Companies Act, 1956.
4. Jurisdiction and discretion of the Company Court in granting leave.

Issue-wise Detailed Analysis:

1. Whether the order dated 23.2.2006 operates as res judicata:
The Division Bench held that the order dated 23.2.2006 passed by the learned single Judge operates as res judicata, debarring the appellant from filing a fresh application for grant of leave. The Supreme Court, however, clarified that for res judicata to apply, there must be a conscious adjudication of an issue on merits. The order dated 23.2.2006 did not adjudicate on the merits of the application for leave but was based on a statement by the counsel for the third respondent that they would not oppose an amendment application. Therefore, the principle of res judicata was not applicable as there was no substantive decision on the merits of the case.

2. Interpretation of "liberty to apply" in the context of the order dated 23.2.2006:
The Division Bench interpreted "liberty to apply" as not conferring any right to re-agitate the matter. The Supreme Court, however, emphasized that the context in which "liberty to apply" was granted must be considered. The learned Company Judge had not dealt with the application for leave on merits and had recorded a statement from the third respondent's counsel. Thus, the "liberty to apply" allowed the appellant to file a fresh application if necessary, and did not restrict the appellant from seeking leave again.

3. Grant of leave under Section 446 of the Companies Act, 1956:
The Supreme Court reiterated that Section 446 aims to safeguard the assets of a company in winding up from unnecessary litigation. The official liquidator had stated that the suit property was not the company's property, and the learned Company Judge granted leave, considering that the company's interest was not involved. The Division Bench's decision to set aside this order was based on a misinterpretation of the earlier order as res judicata, which the Supreme Court corrected by allowing the appeal and restoring the learned Company Judge's order.

4. Jurisdiction and discretion of the Company Court in granting leave:
The Supreme Court highlighted that the Company Court has the discretion to grant leave under Section 446 to protect the company's interests and avoid unnecessary litigation. The learned Company Judge had exercised this discretion appropriately, considering the official liquidator's position and the nature of the suit. The Division Bench's interference was based on an incorrect application of res judicata, which the Supreme Court rectified by emphasizing the proper exercise of jurisdiction and discretion by the Company Court.

Conclusion:
The Supreme Court allowed the appeal, set aside the Division Bench's order, and restored the learned Company Judge's order granting leave to file a fresh suit. The first respondent was directed to pay costs to the appellant. The judgment clarified the application of res judicata, the interpretation of "liberty to apply," and the proper exercise of jurisdiction and discretion under Section 446 of the Companies Act, 1956.

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