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TMI Blog2023 (8) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of this latin maxim is that the practice of the Court is the law of the Court . Following this maxim, Coke C.J. in Burrowes Vs. High Commission Court held that the Court should always adopt the practice which has been prevailing before it. We hold that the practice developed by this Court of the Official Liquidators or Administrators filing a report instead of an affidavit, has to be followed till a new procedure is introduced. We answer the first question accordingly. Whether in view of the provisions of the Benami Transactions (Prohibition) Act, 1988, the Company can be said to be the owner of the property, though the property is shown to be under ownership of the true owners throughout? - In order to apply the plea of Benami, there has to be a sale/a conveyance. Title must pass from the existing owner to an other person who is a benamidar for the other. The transaction in the present case required 3 persons namely, the vendor, the benamidar/ostensible owner and the actual owner. The effect of the Benami Act, is that the relationship between the ostensible owner the real owner is snapped. In this case, as pointed out by the Learned Judge in his order of reference, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se misrepresentation, a finding can be recorded of fraud and misrepresentation, without trial only on basis of Administrator/Provisional Liquidator? - As seen from Section 446 of the Companies Act, the power of the Company Court is wide. Therefore, the Company Court can always decide on the validity of a decree when it is presented before it. Whether the decree is binding on the Company and consequently on the official liquidator are matters which have to be gone into at the time of the Trial. We add, the Company Court has the power not only to entertain suits or other proceedings but it can also decide the said suit or proceeding after taking evidence. Whether the Company Court has the jurisdiction to determine question of title of land falling outside jurisdiction of this Court in view of Clause 12 of Madras High Court Letters Patent? - The answer to this question lies under Section 10 of the Companies Act of 1956. If a Company is registered within the jurisdiction of a High Court exercising its jurisdiction under the Companies Act of 1956, then necessarily by virtue of Section 10 of the Act, the Company Court has the power to determine the title of the land of properties falling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court Letters Patent." 2. There existed a company by name Maxworth Orchards (India) Limited. The business model of the company was to buy land and to get customers to invest in its plantations. The customers, in turn, used to be given a small piece of land and the company undertook to maintain the land, by entering into separate maintenance agreement with them. 3. Towards that end, the company entered into an agreement for supply of Drip Irrigation System. The supplier was one, M/s.EPC Industries Limited. The said company raised a bill for Rs. 2,22,96,465.54/- out of which a sum of Rs. 1,70,93,353.60/- had been paid that left out a balance of Rs. 52,03,111.96/-. As the outstanding amount was not paid, a statutory notice was issued on 02.12.1997. By the time the notice was issued, the company had closed its operation and therefore, a winding up petition came to be presented. 4. On 24.02.1998, the company petition presented by M/s.EPC Industries Limited came to be admitted. This Court vide an order dated 12.02.2001 appointed Mr.K.Alagiri Swami, a learned Senior Counsel of this court as the administrator of the company. Pursuant to orders of the court on 06.02.2006, he came t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of every page. This is a practice which has been followed by this Court for decades. The Learned Judge felt that even an Official Liquidator should follow the same practice as being done by a private litigant by filing an affidavit together with a judge's summons. 10. We would like to recall a latin maxim at this point - "Cursus curiae est lex curiae". The meaning of this latin maxim is that "the practice of the Court is the law of the Court". Following this maxim, Coke C.J. in Burrowes Vs. High Commission Court, 3 Bulst. 48, 53 held that the Court should always adopt the practice which has been prevailing before it. In Freeman Vs. Tranah (1882) 12 CB 414, Creeswell J. held that the course of the court is the practice of the court. 11. Following these two precedence, a division bench of the Calcutta High Court, consisting of Mookerjee and Panton, JJ., held in Habibar Rahaman Vs. Saidannessa Bibi ILR (1924) 51 Cal 331 as follows:- "4. We are consequently of opinion that till a new procedure is introduced by competent authority, the Court should not deviate from its established practice. From this point of view, it has been maintained by high authorities that where a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law of the Court, a part of the post constitutional Indian Legal Jurisprudence. 14. We are not going to expand the authorities on this point as the constitutional bench judgment continues to hold the field. Suffice it to say, the principle of "Cursus curiae est lex curiae" has been applied repeatedly by the Supreme Court (See, Rais Ahmad Vs. State of U.P. And Ors. (1999) 6 SCC 391 and in Jamal Uddin Ahmad Vs. Abu Saleh Najmuddin and Anr. (2003) 4 SCC 257. 15. In light of the above, we hold that the practice developed by this Court of the Official Liquidators or Administrators filing a report instead of an affidavit, has to be followed till a new procedure is introduced. We answer the first question accordingly. Question No.2.Whether in view of the provisions of the Benami Transactions (Prohibition) Act, 1988, the Company can be said to be the owner of the property, though the property is shown to be under ownership of the true owners throughout? Answer: This is an interesting question that has been raised by the Learned Judge. As pointed out before, the business model of the company was to pay the landowners and obtain powers of attorney from the owners in favour of its e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admittedly the land was not in the name of respondent no.1, but continued to be in the name of the true owners. The facts also prima facie proved that the Company, at no stage, became registered owner of the property. And for the reason best known to it, was satisfied by getting the Power of Attorney in the name of its employers, who were to act on behalf of the true owners, and not on behalf of the Company. The vendors were never acting as attorney of the Company, as Power of Attorney was given by true owners. The Company was at liberty to have a Power of Attorney in its name, and thereafter could by resolution authorize any its employee to act on its behalf." 18. In order to apply the plea of Benami, there has to be a sale/a conveyance. Title must pass from the existing owner to an other person who is a benamidar for the other. The transaction in the present case required 3 persons namely, the vendor, the benamidar/ostensible owner and the actual owner. The effect of the Benami Act, is that the relationship between the ostensible owner & the real owner is snapped. In this case, as pointed out by the Learned Judge in his order of reference, there is no transfer at all. On receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, the greater the scope of fiduciary duty. [ Scott, Austin W. "The Fiduciary Principle", California Law Review 37, No. 4 (1949) : 539-55.] The person so entrusted with power is required to determine how to exercise that power. [ Tamar Frankel, Fiduciary Law, Oxford University Press, 2011] Fiduciaries are identified by ascendancy, power and control on the part of the stronger party and therefore, a fiduciary relationship implies a condition of superiority of one of the parties over the other. [ Ken Coghill, Charles Sampford and Tim Smith "Fiduciary Duty and the Atmospheric Trust", Ashgate (2012)] It is not necessary that the relationship has to be defined as per law, it may exist under various circumstances, and exists in cases where there has been a special confidence placed in someone who is bound to act in good faith and with due regard to the interests of the one reposing the confidence. Such is normally the case with, inter alia, attorney-client, agent-principal, doctor-patient, parent-child, trustees-beneficiaries [ Section 88, Indian Trusts Act, 1882] , legal guardian-ward [ Section 20, Guardians and Wards Act, 1890] , personal representatives, court appointed receivers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..... (b) where the person in whose name the property is held is a trustee or other person standing in a fiduciary capacity, and the property is held for the benefit of another person for whom he is a trustee or towards whom he stands in such capacity." 24. Therefore, the Benami Act, 1988 would be inapplicable. We also have to take note of the fact that the said legislation was amended by the Parliament under Act 43 of 2016. It introduced Section 2 (9) (b), clause (ii) which reads as follows:- "2. Definitions- (9). "benami transaction" means,- ….(b).the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by- ….(ii). A person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1966 (22 of 1996) and any other person as may be notified by the Central Government for this purpose." 25. The manner of transactions set forth above would go to show that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the transactions among the landowner, powers of attorney & the company. We answer the second question accordingly. Question No.3.Whether in absence of a petition under Sections 542 and 543 of the Companies Act, the transaction in favour of third party can be questioned by way of simple company application or company is required to file a civil suit to challenge the sale in competent Court having jurisdiction with permission of Company Court ? Answer: The third question framed deals with an issue as to whether in the absence of a petition under Sections 542 and 543 of the Companies Act, that issue can be gone into by the Company Court. The powers of the Company Court under section 446 (1) and (2) are necessary for answering the question. If a winding up petition is pending and a Provisional Liquidator is appointed, the Company Court ipso facto would have jurisdiction to entertain all the proceedings that are covered under Sections (a) to (d) of Section 446 (2). This principle has been laid down at least five (5) decades ago in Sudarsan Chits (I) Ltd vs O. Sukumaran Pillai & Ors (1984) 4 SCC 657. 31. Apart from this, under Section 456 of the erstwhile Companies Act, the Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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