9911796707
TMI Blog1982 (5) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said order, and in, case of failure to seek amendment, or take out fresh summons within the stipulated period, interim relief granted by this court restraining respondent No. 1 herein from transferring and/or parting with possession of the said land in terms of the interim relief prayed for in Company Application No. 232 of 1980, would stand vacated. As regards the interim relief granted in Company Application No. 104 of 1981 restraining respondents Nos. 2, 3 and 4 from developing the land, it was discharged. The summons issued for examination of Shri V.A. Phadke and Shantilal Shah, who were the attorneys connected with the aforesaid agreement was also discharged. Pursuant to the aforesaid directions, the applicants have taken out the present summons by moving Company Application No. 50 of 1982, seeking declaration that the company is entitled to specific performance of the said agreement dated May 3, 1975, and directing the vendor-respondent No. 1 herein, or his successors, assignees-in-interest, heirs and legal representatives, to specifically perform the aforesaid agreement by executing a regular deed of conveyance, and. also for handing over possession of the said lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No. 1 did not subsist, and in any case the suit filed by respondents Nos. 2 to 4 in the High Court of Judicature at Bombay was contested by respondent No. 1, and in the case of any order of the court for specific performance of the said agreement, no transfer will be effected without a week's notice to this court, no interim relief as prayed for was required to be granted. Before I deal with the rival contentions urged on behalf of the parties hereto, it may be desirable to set out briefly as to what the rival cases are. It is claimed on behalf of the Divya Vasundhara Financiers Pvt. Ltd. (hereinafter referred to as "the company") that respondent No. 1 has entered into an agreement to sell the land bearing S. No. 221 approximately admeasuring 500 acres situate within the revenue limits of village Eksar, Taluka Borivli, Greater Bombay, at Rs. 2.75 per sq. metre on as it is where it is basis, and particularly on the terms and conditions recorded in the articles of agreement executed between the parties. In pursuance of the said agreement, the company paid to the vendor a sum of Rs. 2,00,000 as part deposit, or earnest money, on execution of the said agreement the receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der obligation to obtain a title clearance certificate as provided in clause 11. The solicitors, M/s. V.A. Phadke Co., were also required to draw a mortgage. deed creating a first mortgage on the property so as to secure the payment of the balance of the sale price remaining due and payable under the said agreement after payment of the earnest money of Rs. 3,00,000 and the further sum of Rs. 18,00,000 as provided in cls. 1 and 4 of the said agreement. The company is still capable of performing specifically the said agreement and it has not violated any essential terms of the contract as provided therein. According to the company, the present market value of the land is about Rs. 300 per sq. yard, and, therefore, in any case, it is entitled to claim damages at that rate from the vendor. In these circumstances, the company claims directions as prayed for particularly the direction in the matter of a decree for specific performance, or damages since the period of limitation for the aforesaid relief would commence to run from March 25, 1981, in the light of the provisions contained in the said agreement that the balance amount of the sale price was to be paid by six monthly instalmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the court has no jurisdiction under section 392 of the Companies Act to issue directions in the nature in which they have been prayed for. Thirdly, there was no concluded agreement between the company and respondent No. 1 as is clearly established from the affidavits filed by Shri Shantilal Shah of M/s. Shantilal Shah Co. and V. A. Phadke of M/s. V. A. Phadke and Co., the two attorneys admittedly connected with the alleged agreement, and particularly the affidavit of Shri Shantilal shah discloses that the alleged agreement to sell was false, concocted, fabricated and non-existent, and in any case, because some of the directions sought for by the present summons have already been rejected by this court by its order of March 8, 1982, and the letters patent appeal preferred from that order was also dismissed by a Division Bench by its order of March 25, 1982. Following four questions, therefore, arise for my consideration : (1)Whether this court has power or authority under section 392 of the Companies Act, 1956, in exercise of its jurisdiction of supervision over the scheme of arrangement between the company and its creditors and/or members approved by it, to adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1] 1 Ch 213 (CA). The effect of the order of the court sanctioning the scheme is that the scheme becomes binding on all its creditors, liquidators and contributories and a dissenting member of any class of interest is not entitled to question it afterwards. A scheme, when sanctioned, acquires a statutory force and it enjoins a greater Sanctity than a mere agreement between the parties concerned. It cannot be modified or varied subsequently by an agreement by parties (vide Premila Devi v. Peoples Bank [1939] 9 Comp. Cas. 1 (PC). It is in this context, collocation and perspective of section 391 that altogether a new provision, without any precedent in the earlier Act pertaining to the Companies Act in this country, or any similar Act in the United Kingdom is inserted in the statute book by section 392. The marginal note of the section indicates the scope and width of the power. By section 392, High Courts have been empowered to enforce compromises and arrangements sanctioned in respect of a company under section 391. The nature of the power is, therefore, a power of superintendence so that the object of the compromise or arrangement is not allowed to be frustrated by any of its p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oper and efficient working thereof. The width and scope of the power contained in section 392 was considered by the Supreme Court in the context of the question, whether an application for modification of the scheme sanctioned by the court under section 391(2) could or could not be made by any person other than a member or creditor. The Supreme Court, speaking through Desai J. held in S. K. Gupta v. K. P. Jain [1979] 49 Comp. Cas. 342; (SC), as under (p. 351): "The purpose underlying section 392 is to provide for effective working of the compromise and/or arrangement once sanctioned and over which the court must exercise continuous supervision (see section 392(1)), and if over a period there may arise obstacles, difficulties or impediments, to remove them, again, not for any other purpose but for the proper working of the compromise and/or arrangement. This power either to give directions to overcome the difficulties or if the provisions of the scheme themselves create an impediment, to modify the provision to the extent necessary, can only be exercised so as to provide for smooth working of the compromise and/or arrangement. To effectuate this purpose, the power of widest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be accepted. There are compelling and justifying reasons for my disagreement. In the first place, the power under section 392 is a supervisory power for enforcement of a compromise or an arrangement. The enforcement can be only against the persons who are parties to it. Secondly, the power of issuing directions in the course of exercise of such a power of superintendence in regard to any matter or for modification, as may be necessary, is only for the proper working of the compromise or arrangement. The rights or claims of a company carrying on a scheme of compromise or arrangement between itself and the creditors and/or members, or any class of them, can only be enforced in the manner in which such rights or claims can be enforced under the law. Merely because a scheme of compromise or arrangement has been made between a company and its creditors or members, it cannot claim that its disputed rights or claims can be adjudicated upon by a company court which may be supervising such scheme. Thirdly, if the Legislature had intended that the company court supervising a scheme of compromise or arrangement between a company and its creditors or members should have the power of ordinar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossess of adjudicating or determining the disputed rights between a company and the persons who are not parties to the scheme of compromise and/or arrangement as if it is a court of ordinary civil jurisdiction, irrespective of the question of the court itself and/or the territorial jurisdiction in the matter. The learned single judge of the Delhi High Court in Union of India v. Asia Udyog P. Ltd. [1974] 44 Comp. Cas. 359, was concerned with a question as to what is the power or authority of a company court in the context of a scheme of arrangement of amalgamation under section 153 of the Indian Companies Act, 1913. Pursuant to the sanction of the scheme of amalgamation, the assets and liabilities of the transferor-company were taken over by the transferee-company. The Union of India moved the learned District Judge, Delhi, under section 153 (1)( f ) of the 1913 Act for an order providing for payment of an amount of Rs. 30,00,000 on account of the income-tax liability of the transferor-company, or from the voluntary liquidator of the transferor-company claiming that such an order would be one to secure the reconstruction or amalgamation fully and effectively. The learned Distric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement of March 31, 1973, though the registered deed of conveyance was not executed in that behalf in favour of the company by the erstwhile owners thereof. It should be further noted that a specific provision was made in respect of Jal Pankhi project in the scheme of compromise sanctioned by this court in the matter of the said company. Part V of the scheme related to the housing project of Jal Pankhi Co-operative Housing Society. It was agreed under the said scheme that the company should accept Rs. 18.14 lakhs from the said society in consideration of which the society was to relieve the company from all its contractual obligations and the society will obtain conveyance directly from the original owners of the land on which the housing project was carried out. Some difference arose between the society, the company and the predecessors-in-interest of the land in the matter of execution of the deed of conveyance. The dispute arose out of the directions given by this court by its order of July 13, 1979, by which the society was directed to pay a sum of Rs. 21,75,000 instead of Rs. 18,14,000 for conveying the clear right, title and interest of the company and the predecessors in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest of the company except Asha R. Kothari and Kantilal Kothari. At this stage, the applicant-society has moved this court for issuing necessary directions in order to carry out part of the scheme as modified from time to time by this court which relates to the applicant-society. It appears that since the company has not obtained any deed of conveyance from its predecessors-in-interest some of whom are not available and have not filed appearance in spite of the notice of the court and, therefore, do not appear to be willing to join the deed of conveyance in favour of the applicant-society as directed by this court, it has, therefore, become necessary that this court should enforce this part of the scheme pertaining to the applicant-society and execute the necessary deed of conveyance in favour of the applicant-society. Though I am not expressing any final opinion on this point, it would be in the interest of justice to execute the deed of conveyance because the original owners of the property, namely, Rajeshwari Devi Sada Jivatlal and others carrying on business in the name of M/s. Kamdhenu Builders are out of possession since the date of the first agreement to sell the said prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to have accrued under the said agreement in favour of the company is made in the scheme itself to which the owners have agreed, it is difficult for the court to exercise its power under section 392 which is, as stated above, the power of superintendence for purposes of enforcement of the arrangement or compromise between the company and the vendors. In that view of the matter, the first question, therefore, should be answered in the negative with the result that the second question does not survive for adjudication. Re.: Questions Nos. 3 and 4. It cannot be gainsaid that the company is entitled to seek appropriate directions in the matter of the rights which it claims under the agreement to sell the Borivli land in question. It is no doubt true that appropriate directions were not sought for in the Company Application No. 188 of 1979 with Company Applications Nos. 232 of 1980 and 104 of 1981 and 198 of 1981 in this behalf. It is because of the objections raised by the opponents at that time that since the court committee has not asked for appropriate directions which it could legitimately seek from the company court in exercise of its supervisory power over the scheme of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correspondence placed on the record of this company application consisting of the copy of the letter dated July 27, 1976, addressed to Shri K. D. Patel, the ex-director of the company by M/s. V. A. Phadke and Co., and a copy of the telegram sent by Shri K. D. Patel to M/s. V. A. Phadke and Co. along with the postal receipts acknowledging payment of telegram charges. It appears that the telegram has been sent on May 1, 1978. This correspondence also prima facie indicates that there was an agreement to sell the Borivli land to the company. The contents of the aforesaid letter and the telegram are self-explanatory in that behalf. The court committee has also produced an extract from the records of the company to show that some further payment of Rs. 15,000, by three instalments of Rs. 5,000 each, was made under the aforesaid agreement to sell. The said copies of the vouchers showing the payment are dated May 2, 1975, May 12, 1975, and August 1, 1975. Shri V. A. Phadke of M/s. V. A. Phadke and company has filed his affidavit in the earlier proceedings being Company Application No. 188 of 1979, wherein he has stated, inter alia , that to the best of his memory, no agreement for sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No. 1, that this was indulging in frivolous and vexatious litigation. What would be the rights of the company under the said agreement, if any, or what should be the legal reliefs to which the company is entitled in respect of its rights under the said agreement are matters which the committee has to establish in a civil court of competent jurisdiction and it may take appropriate measure as may be advised for enforcement of such rights including the right, if any, of being joined as a party in the civil suit filed by respondents Nos. 2 to 5 against respondent No. 1 in the High Court of Judicature at Bombay. I am, therefore, of the opinion that the court committee is entitled to seek the directions in that behalf. For the reasons aforesaid, the court committee is directed and authorised to take such appropriate measures and actions as prayed for in para F(4) and (5) of the summons as it may be advised for enforcement of the rights of the company under the aforesaid agreement of April 29, 1975, said to have been executed by respondent No. 1 in favour of the company. Summons is accordingly disposed of. Though no interim reliefs have been granted at the time of issuing n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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