2013 (8) TMI 774 - HC - Companies Law

Mistake in the scheme - Constitution of an arbitral tribunal u/s 11 of the Arbitration and Conciliation Act, 1996 - It was possible for the applicant to prosecute its request under Section 11 of the 1996 Act with a caveat that the order sanctioning the scheme as drawn up carried a mistake in the North Mill not having been specifically included in the schedule to the scheme - despite such mistake, the surrounding circumstances made it obvious that such property had passed to the applicant under the sanctioning order - The order on the request u/s 11 may then had been without prejudice to the applicant s contention that the order sanctioning the scheme was mistaken or left unaffected the applicant s right to urge such ground at a subsequent stage Whether the North Mill was transferred to the petitioner Held that - Once the applicant had asserted its right to the North Mill on the basis of the order sanctioning the scheme as drawn up, and failed - it was no longer open to it to claim that the order was erroneously drawn up in the North Mill not being included in the schedule thereto - A mistake of court in an order that operates in rem may be corrected at the instance of any person demonstrating to be prejudiced thereby - but the right of such person may not be recognised any longer if he has stood by and allowed a previous opportunity to pass when he ought to have asserted the mistake and attempted to have it rectified particularly if such conduct has resulted in a right having accrued to any other - The consequence may be harsh and may confer an undeserving windfall on another - But the ethos of the applicable principles in matters of public policy demands that the applicant be left to its fate for a course of conduct that it consciously charted for itself at an earlier point of time.

Summary

Issues Involved: Mistake in the court's order, right to arbitrate, res judicata, estoppel, and correction of court's mistake.

Detailed Analysis:

Mistake in the Court's Order:
The primary issue revolves around the transferee company's claim that a mistake occurred in the court's order sanctioning a scheme of arrangement, which did not specifically include a jute mill (North Mill) that was allegedly transferred to and vested in it. The applicant discovered this mistake following a recent court order related to the constitution of an arbitral tribunal under Section 11 of the Arbitration and Conciliation Act, 1996.

Right to Arbitrate:
The applicant lodged a request under Section 11 of the 1996 Act, asserting an arbitration agreement from March 24, 1988, and claiming that disputes regarding the North Mill, which was part of the agreement for sale, should be arbitrated. The court, however, found that the North Mill did not pass to the applicant under the scheme of arrangement, as the relevant schedule did not mention the North Mill.

Res Judicata:
The court examined whether the principle of res judicata applied, given that the applicant had previously asserted its right to the North Mill under the scheme during the Section 11 proceedings. The court concluded that the applicant could not reassert this claim by now suggesting that the order sanctioning the scheme was erroneously drawn up.

Estoppel:
The court held that the applicant, having previously insisted that the North Mill passed to it under the scheme, could not now change its position to claim a mistake in the order. The applicant's conduct in the previous proceedings precluded it from asserting a different stance.

Correction of Court's Mistake:
The applicant argued that a court's mistake could be corrected at any time. However, the court noted that the applicant's right to apply for correction had a limitation period, which had expired due to the applicant's previous conduct and the elapsed time since the alleged mistake was discovered.

Conclusion:
The court dismissed the applicant's claim, emphasizing that the applicant's previous actions and the principle that a party may not approbate and reprobate barred it from now asserting a mistake in the court's order. The court also noted that the applicant could have raised the issue of the mistake during the Section 11 proceedings but chose not to, thereby forfeiting its right to claim such a mistake later. The application was dismissed with no order as to costs.