9911796707
TMI Blog1998 (2) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... in U.K. and went into liquidation in 1980. Substantial number of shares in that company were held by Parry Murry Co. Ltd. another company registered in U.K. and which company was a subsidiary to E.I.D. Parry Ltd. According to the plaintiff, the loan advanced by the assignor of its donor was a group loan payable jointly and severally by all the members of the E.I.D. Parry group and the amount claimed in this suit is the amount outstanding after adjusting the payments made on 24-7-1981 and 1-6-1982 by the liquidator of Parry Murry Foods Ltd. to the donor of the plaintiff. It is further alleged by the plaintiff that the defendant has acknowledged the liability in its annual report for the year 1980. The cause of action for the suit is said to have arisen when the loan was advanced i.e., on 25-5-1973 and 28-4-1975 when the loan was assigned in favour of Elettroffin Societa Anonima Finanziaria Holding, the plaintiff s donor as also on 18-8-1981 when the demand is said to have been made on behalf of the plaintiff, and on 17-12-1982 when the gift deed was executed. 2. The defendant in the written statement has repudiated the claims so made by the plaintiff. Defendant has stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan availed by the Parry Murray Foods Ltd. At para 9 of the written statement, it has been stated that the defendant company took over the assets and liabilities of the former company EID Parry Ltd. the new company being known as E.I.D. Parry (India) Ltd. pursuant to a scheme of amalgamation and arrangement, but that does not in any way entitled plaintiff to maintain this suit, as E.I.D. Parry Ltd. had no liability whatsoever to the plaintiff s donor in respect of the loan advanced by the assignor of the donor to Parry Murray Foods Ltd. which was an independent legal entity and which loan transaction did not in any way involve the E.I.D. Parry Ltd. It is also stated that consequent to the amalgamation, the defendant has taken over the investment made by the EID Parry Ltd. in the share capital of the subsidiary company Parry Murray Co. Ltd. and not the liability of Parry Murray Co. Ltd. The liability of Parry Murray Co. Ltd. are its own and the defendant is not liable to answer for the same. The defendant has denied that the loan advanced to Parry Murray Foods Ltd., was in any manner a group loan casting liability on the defendant. The defendant s predecessor-in-title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 19-6-1976, has taken over all the assets and liabilities of Parry Co.? 4. Was the suit claim settled in full between the parties concerned pursuant to the compromise ? 5. Whether the suit loan was a group loan of E.I.D. Parry Ltd. ? 6. Whether the liquidators of Parry Murray Foods Ltd. have acknow-ledged liability for the suit loan ? 7. Is the alleged gift void ? 8. What relief the parties are entitled to ? 7. Issue No. 1 was replaced by an order made by this Court on 15-10-1985 as under: What is the law applicable to the transaction in view of the situs of the work ? 8. The plaintiff in support of its case examined three witnesses. PW 1, Mr. Ballerni, Controller of Internal Accounts of the plaintiff s donor in Switzerland, PW 2, Dr. Cesare Rossi, Director of the plaintiff company since 1973 and PW 3, Mr. G.R.K. Paramahamsa, Executive of the Plaintiff company at Delhi. Ex. P. 1 to P. 87 were marked for the plaintiff. 9. For the defendant, no witness was examined and no document was marked. Plaintiff s witness PWs 1 and 2 have been cross-examined at length and the defendant has relied upon the contents of the numerous documents produced by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnor of the donor in respect of the loan advanced by the assignor of the donor to Parry Murray Foods Ltd. 12. Reliance was placed by the learned counsel for the plaintiff on Ex. P. 12 which is a letter dated 21-5-1973 addressed by Parry Murray Co. Ltd. to the Senior Administrative Manager, Societa Anonima Elettrifications, S.P.A., Italy. In para 2 of that letter, it is stated that the letter was to be addressed to Parry Murray Foods Ltd. as this is the company that would be taking the loan in connection with the Malaysian project in which.... Parry Murray Foods and Parry Murray Co. Ltd. would together be taking up 49 per cent of the equity of the Malaysian company, but that Parry Murray Foods Ltd. would be contributing the major portion of the share capital. The last sentence in that letter is strongly relied upon by the plaintiff and that sentence reads thus: "Needless to say, the loan would still be treated as a group loan ." 13. Despite that letter, the subsequent loan agreement admittedly executed on 25-5-1973 [Ex. P2] was an agreement between Parry Murray Foods Ltd. and Gekonsult-Anstalt. There was no mention of the defendant or its predecessors-in-title or even o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the donor had proved its claim in the liquidation proceedings against Parry Murray Foods Ltd. The donor of the plaintiff was, through one of its representatives, a member of committee of inspection of Parry Murray Foods Ltd., and was also a party to the compromise reached between the liquidator of Parry Murray Foods Ltd. and Parry Murray Co. Ltd. under which, Parry Murray Co. Ltd. was to pay 50,000 over a period of three years in full and final settlement of its liabilities towards Parry Murray Foods Ltd. The exact nature of those liabilities are not ascertainable from the documents produced, that there was a claim by Parry Murray Foods Ltd. against Parry Murray Co. Ltd. is evident from the fact that a compromise was reached in respect of that liability and subsequently payment was also made. All these other docu-ments do not in any way show that the defendant or its predecessors-in- title had acknowledged any liability or even that the plaintiff had made claim against them in respect of the loan. It has been admitted in the plaint that the two sums of 20,000 had been received by the plaintiff prior to the institution of the suit from the Liquidator. The receipt of furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intended to enter into legal relationship whenever a loan transaction took place. The condition subject to which the loans are advanced are recorded in the agreements which were meant to bind the contracting parties and any discussion anterior to the execution of the agreement cannot be read into the agreement in order to foist liability on the companies which are not parties to the agreement. 18. Even the document relied upon by the plaintiff namely Ex. P. 1 is not a document executed by the defendant or its predecessors-in-title E.I.D. Parry Ltd. It is a letter written by the Parry Murray Co. Ltd. in which it is stated that the loan offer is to be made to Parry Murray Foods Ltd. and that the money is meant for the project in Malaysia to be undertaken by the Malaysian company in which Parry Murray Co. Ltd. and Parry Murray Foods Ltd. would together hold 49 per cent of stake which major part would be held by Parry Murray Foods Ltd. The last sentence in that letter that the loan would be still be treated as a group loan can at best be read to mean that the loan would be treated as one obtained by Parry Murray Co. Ltd. and Parry Murray Foods Ltd. The group referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmittedly it, was not followed by the execution of any agreement wherein E.I.D. Parry Ltd. undertook liability for the loan to be advanced to Parry Murray Foods Ltd. 20. The Learned counsel for the plaintiff contended that it is permissible even for the companies to enter into contract with others orally through their empowered officers. While that is the position the law on facts established in this case does not show that there was any concluded contract between E.I.D. Parry Ltd. and the donor of the plaintiff whereby E.I.D. Parry Ltd. undertook the liability for the loan which at that time was yet to be disbursed, and in respect of which an agreement was yet to be entered into. The agreement subsequently entered into was not an agreement with E.I.D. Parry Ltd. at all, but only with the borrowing company, and in which agreement no mention whatsoever is made E.I.D. Parry Ltd. Admittedly no other document was brought into existence to show that E.I.D. Parry Ltd. had bound itself to repay the loan to be advanced to Parry Murray Foods Ltd. 21. The conduct of the plaintiff belies the assertion of PW 2 is that E.I.D. Parry Ltd. had agreed to make itself liable for the repayment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es mentioned therein, where the Courts in U.K. and India pierced the veil of the subsidiary a holding company in cases involving holding and subsidiary company s relationship. The cases mentioned therein do not in any way support the case sought to be pleaded for the plaintiff herein that the assets of the holding company can be made liable for the debts incurred by a subsidiary company in which the holding company holds substantial shares. The separate legal person-ality of the company is the bed-rock of the Company law and piercing the veil of the company is permissible only in exceptional circumstances. It is not the normal rule that at the instance of creditors the corporate veil of the subsidiary be pierced in order to make the holding company liable to answer the claims of the creditors of a subsidiary. Generally, the recognised exceptions to the rule of not piercing the veil are in cases of fraud, tax evasion and cases of like nature. In such cases, the Court would not hesitate to pierce the corporate veil, in order to ensure that justice is done and that the law is not abused. The mere fact that the holding company has a subsidiary company however does not imply that when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intly and severally liable. Reliance was placed on the statement of Halsbury s Laws of England (4th Edition - Volume 6). As no joint promise has been proved the extent of liability of joint promissors does not arise for consideration in this case. 26. The material issue as to whether the suit loan was a group loan of E.I.D. Parry Ltd. is therefore to be answered in the negative. Plaintiff has failed to establish that it was a group loan of E.I.D. Parry Ltd. for which defendant s predecessors in title E.I.D. Parry Ltd. was liable. The defen- dant which took one s assets and liabilities of E.I.D. Parry Ltd. did not incur any liability to the plaintiff s donor by reason of the defendant taking over all the assets and liabilities of E.I.D. Parry Ltd. as E.I.D. Parry had no liability towards plaintiff s donor. 27. Issue No. 7 is the alleged gift void has also to be answered in the affirmative. The gift deed purports to gift to the plaintiff the debt allegedly owed by E.I.D. Parry (I) Ltd. to the donor of the plaintiff. The gift was in respect of a non-existent debt. As there was nothing to be conveyed under the gift deed, the gift is void. The fact that the document is said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay any further amount to the plaintiff s donor apart from what had been paid by the Liquidator of Parry Murray Foods Ltd. No such action appears to have been taken. That would be indicative of the fact that the plaintiff s donor did not regard that Parry Murray Co. will be liable in any manner for this loan given to Parry Murray Foods Ltd. after 50,000 was paid by Parry Murray Co. Ltd. to the Liquidator of Parry Murray Foods Ltd. 31. Issue 3, as to whether the defendant company, after its coming into existence on 19-6-1976, has taken overall the assets and liabilities of E.I.D. Parry Ltd. must be answered in the affirmative, as it is admitted by the defendant that consequent to the scheme of amalgamation and arrange- ment sanctioned by this Court on 25-4-1976 (Ex. P. 86) and the order of the High Court in U.K. (Ex. P. 87 dated 6-5-1976) that the assets and liabilities of the U.K. Company E.I.D. Parry Co. Ltd., have been taken over by E.I.D. Parry (India) Ltd. Such taking over however does not benefit the plaintiff as the claim made in this suit was not one of the liabilities of the E.I.D. Parry Co. Ltd. No liability with regard to the suit claim had been taken over b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
