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TMI Blog2012 (8) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... r and demerger it can be concluded they were schemes between body corporates and no clause suggests that the cause of action of the original plaintiffs was extinguished. If the shares of BDA or its distillery were to be transferred to another company or group of companies, that transfer was subject to the original cause of action which the original plaintiffs had against Mr. Kishore Rajaram Chhabria and BDA. That had to be expressly given up at the time of transfer of undertakings and other assets under the schemes - there is devolution of interest of the original plaintiffs upon the applicant, United Spirits Ltd granting them leave to prosecute the suit in place of the original plaintiffs. X X X X Extracts X X X X X X X X Extracts X X X X ..... t as the Managing Director of SWC, he abused his position to acquire control of BDA. The above entities holding shares in BDA were in his absolute control. Now, B.D.A. had a large liquor business with a distillery at Aurangabad. SWC and AIL, which were the original plaintiffs filed the above suit in the year 1992, inter alia, alleging that Mr. Kishore Rajaram Chhabria was guilty of taking over control of B.D.A. and thereby divesting SWC of this subsidiary. It was said that he was in breach of his fiduciary duty as a director of SWC. Simultaneously, an interim application was filed inter alia to restrain Mr. Kishore Rajaram Chhabria from diverting the liquor business of SWC, by taking over its subsidiary BDA. This Court, on 5th May, 1992 promptly granted an injunction. Padma Khastgir J. directed maintenance of status quo of the distillery of BDA at Aurangabad regarding its managerial staff and marketing of its products. Mr. Kishore Rajaram Chhabria appealed to the Division Bench. The appeal was heard extensively before that bench. Ultimately by its judgment and order pronounced on 27th August, 1993, the Division Bench held that Chhabria was not guilty of any wrong doing. The matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stilleries and Breweries Ltd., the eighth defendant and Intrust, the seventh defendant. As a result of orders passed by a Single Judge of this Court on 16th January, 2009, and its division bench on 3rd and 25th March, 2009 and the order dated 21st August, 2009 passed by the Supreme Court, all assets, liabilities, rights and obligations of SWC in the suit were transferred to an vested in United Spirits Ltd. The schemes specifically provided so. By the application (G.A. No. 1678 of 2001) the applicant United Spirits Ltd. wants the following reliefs: a) Leave be given to serve a copy of this application on Allied Blenders And Distillers Private Limited, BKC Enterprises Private Limited, Officer's Choice Spirits Private Limited and Deepak Roy: b) Allied Blenders And Distillers Private Limited, a company incorporated under the provisions of the Companies Act, 1956 and carrying on business, inter alia, at 10/1/H, 1st Floor, Diamond Enterprises Private Limited, a company incorporated under the provisions of the Companies Act, 1956 and carrying on business, inter alia, at 394-C Lamington Chambers, Lamington Road, Mumbai - 400 004, Officer's Choice Spirits Private Limited, a company incor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the management of any company. Therefore the following orders are passed. (a) A copy of this application, if not already served, be served on Allied Blenders & Distillers Private Limited. (b) Direction for filing of affidavits is made. Affidavitin- opposition be filed by 9th December 2011. List this application on 22nd December, 2011 along with item no. 51 of today's list. Affidavit-in-reply may be filed in the meantime. (c)Allied Blenders & Distilleries Private Limited may be free to raise a sum of INR 2 billion as stated in the website, because the Court does not wish to interfere in its management or consider this issue without the company being before it. (d) The first and sixth defendants are restrained from doing any act with the above sum that would result in change in the paid-up capital of the sixth defendant or Allied Blenders & Distillers Private Limited, without the leave of this Court. Stay of operation of this Court is prayed for by Mr. Pratap Chatterjee. Considering the contentions involved, stay of this order is granted for one week from date. All parties are to act on a signed photocopy of this order on the usual undertakings." The contentions which arise i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged with Mc. Dowell and later United Spirits Ltd. But this demerger of B.D.A. and merger of Herbertsons with Mc. Dowell and United Spirits Ltd. did not destroy the cause of action of Mc. Dowell against Mr. Kishore Rajaram Chhabria and B.D.A. and later United Spirits Ltd. which acquired the rights and obligations of SWC and SWDL. In the suit filed at the instance of Mr. Kishore Rajaram Chhabria in the Bombay High Court being C.S. No. 1301 of 2006 he asked for some orders which tantamounted to stay of this suit. That prayer was refused in the judgment and order passed by the Bombay High Court on 21st July, 2006 which was affirmed on appeal by a Division Bench of that Court on 29th August, 2006. It was submitted by Mr. Sudipto Sarkar, learned Senior Advocate and supplemented by Mr. Pratap Chatterjee and Mr. Ajoy Krishna Chatterjee, learned Advocates that these corporate entities or this mesh of holding and subsidiary companies is a veil. The real persons in control are Mr. Vijay Mallya and Mr. Kishore Rajaram Chhabria, of the respective companies and their subsidiaries. The disputes of the parties have to be seen in this perspective. Now, this liquor business cannot be reclaimed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Furthermore, this death is also to be equated with the death of a natural person. According to them, only Rules 1, 2 and 3 of Order XXII will apply. Those rules deal with consequences of, inter alia, the death of the plaintiff or the defendant. If the right to sue survives the suit does not come to an end. In the event of survival of the right to sue there is prescribed a specific time for the legal representative of the deceased plaintiff or defendant to make an application for recording the death and for substitution of the legal representative. This application is hopelessly barred. The suit has long abated. Considering the above submissions, leave to continue the "dead" suit should not be granted. I will discuss the cases cited by the learned Counsel when I discuss the issues. DISCUSSION ABATEMENT: The scheme of Order XXII clearly shows that a difference is drawn between the consequences to the suit upon devolution of interest by death of a natural person and devolution of interest otherwise. It is in this way. Rules 3 and 4 under Order XXII provide that upon death of a plaintiff or defendant, an application has to be made. His legal representative is substituted. Under Rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any formal application. Rule 10 does not say so. Such a person has to only obtain the leave of the Court, to continue the action which is not interrupted by devolution. Justice Mathew, speaking for the Supreme Court opined as follows in Rikhu Dev, Chela Bawa Harjug Dass Vs. Som Dass (deceased) through his Chela Shiama Dass (AIR 1975 SC 2159) "8. This rule is based on the principle that trial of a suit cannot be brought to an end merely because the interest of a party in the subject matter of the suit has devolved upon another during the pendency of the suit but that suit may be continued against the person acquiring the interest with the leave of the Court. When a suit is brought by or against a person in a representative capacity and there is devolution of the interest of the representative, the rule that has to be applied is Order 22, Rule 10 and not Rule 3 or 4, whether the devolution takes place as a consequence of death or for any other reason. Order 22, Rule 10, is not confined to devolution of interest of a party by death; it also applies if the head of the mutt or manager of the temple resigns his office or is removed from office. In such a case the successor to the head o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause of action is dead. The argument of Mr. Sarkar is that there is only one person who can be equated with the various corporate bodies which claim to be merged with the applicant United Spirits Ltd. He is Mr Vijay Mallya. Similarly there is only one person behind the corporate bodies constituting Mr. Kishore Rajaram Chhabria's group of companies. That person is Mr. Kishore Rajaram Chhabria. So having agreed to give up B.D.A. which necessarily included its liquor undertaking and business to Chhabria, Mr. Vijay Mallya cannot turn around and claim it back. He and his companies are bound by the settlement. In my opinion, this submission is not correct. First of all, that these two persons are the alter ego or the actual face of the companies that they control, have to be established at the trial. It is not established on affidavits. Secondly, on examination of the schemes of arrangement, amalgamation, merger and demerger etc., I find that body corporates are involved. For example, Herbertsons relinquished its interest in B.D.A. Now, relinquishment of its interest in B.D.A. by Herbertsons is not equivalent to United Spirits relinquishing their rights against Mr. Kishore Rajaram Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llery, even up to the stage of Supreme Court. Mr. Sarkar appears to be right in his submission that at that point of time there was a break in the chain. On 14th December, 1993 four U.B. Group Companies which were under the control of Mr. Vijay Mallya, Herbertsons, East Coast, Endavour and Consolidated purchased the entire share capital of 1,00,000 equity shares of BDA. This included the 25,000 shares, the transfer of which was the subject matter of this suit. Therefore, BDA came to be controlled by Mr. Vijay Mallya. Subsequently on 7th February, 1992 there was a further allotment of 54,000 equity shares to Herbertson after increasing the share capital of BDA from 1,00,000 equity shares to 1,54,000 shares of Rs. 10/- each. Thereafter East Coast, Endavour and Consolidated transferred their shares to Herbertson. BDA became a wholly owned subsidiary of Herbertson. Then came the settlement of 2005. The control of BDA came back to Mr. Kishore Rajaram Chhabria, as discussed above. After this, on 5th September, 2006 Herbertson merged with Mc Dowell Company Limited whose name was changed to United Spirits Ltd., the applicant. As there was no interim order Mr. Kishore Rajaram Chhabria made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was given up. This point of view finds support in the judgment of the Bombay High Court of 21st July, 2006 which was up upheld by its Division Bench on 29th August, 2006. As I have held before the applicant has acquired the original cause of action of the plaintiffs. That cause of action is an action by the company against the allegedly errant director, Mr. Kishore Rajaram Chhabria. If that cause of action is saved and the applicant succeeds in the suit then Mr. Kishore Rajaram Chhabria has to give back what he had taken out from the original plaintiffs or if that is no longer possible its money equivalent. In those circumstances any disposition after filing of the suit, which includes the distillery at Aurangabad which at that time belonged to BDA would have to abide by the result of the suit. In those circumstances the applicant would be entitled to trace the assets of the original plaintiffs into those hands into which they may have come. All observations with regard to extinction of the cause of action and passing of an interim order are prima facie. RELIEFS: Therefore, I declare that there is devolution of interest of the original plaintiffs upon the applicant, United S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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