1959 (2) TMI 12 - HC - Companies Law

Summary

Issues Involved:
1. Whether a right to sue for damages for breach of contract appertaining to the business of the transferor company is transferred by a vesting order under section 153A of the Indian Companies Act, 1913.
2. Whether the transfer infringes the provisions of section 6(e) of the Transfer of Property Act.
3. Whether the decision in Nokes v. Doncaster Amalgamated Collieries Ltd. applies to the present case.

Issue-Wise Detailed Analysis:

1. Transfer of Right to Sue for Damages under Section 153A of the Indian Companies Act, 1913:
The court examined whether a right to sue for damages for breach of contract, which pertains to the business of the transferor company, is transferred by a vesting order under section 153A of the Indian Companies Act, 1913. The judgment held that the right to sue for damages for breach of contract falls within the wide definition of "property" in section 153A(4). The claim for damages appertains to the undertaking of the transferor company and passes with the undertaking. The court emphasized that the transfer takes place by virtue of the vesting order without any further act or deed, making it unnecessary to obtain a formal conveyance from the transferor company.

2. Infringement of Section 6(e) of the Transfer of Property Act:
The court addressed the argument that the transfer infringes section 6(e) of the Transfer of Property Act, which states that a mere right to sue cannot be transferred. The judgment clarified that section 6(e) prohibits the transfer of a "mere right to sue," but property with an incidental right to sue for damages may be transferred. The court reasoned that an undertaking or business as a going concern is property, and a right to sue for damages for breach of contract appertaining to the business is intimately connected with the enjoyment of the business. Therefore, the transfer of the incidental right to sue for damages together with the business is not a transfer of "a mere right to sue."

3. Applicability of Nokes v. Doncaster Amalgamated Collieries Ltd.:
The court considered whether the decision in Nokes v. Doncaster Amalgamated Collieries Ltd. applied to the present case. The House of Lords in Nokes' case dealt with the transfer of non-assignable rights and contracts, such as contracts of service, and held that such rights and contracts could not be transferred by a vesting order. However, the court distinguished the present case from Nokes' case, stating that the question of transferring a right to sue for damages appertaining to the business of the transferor company did not arise in Nokes' case. The judgment concluded that an accrued right to sue for damages is not a right which by its very nature is incapable of being transferred and may be transferred with property to which it is incidental without infringing any rule of law.

Conclusion:
The court held that the claim and the subject-matter of the suit lawfully vested in the appellant by virtue of the vesting order dated December 6, 1955, and the appellant is entitled to continue the suit. The appeal was allowed, and the judgment and order of Bose J. were set aside. The court made an order in terms of prayers (a), (b), (c), and (d) of the petition and certified that the case was a fit one for the employment of counsel before Bose J. The appellant was entitled to the costs of the appeal.