GLOSTER LIMITED Vs. FORT GLOSTER INDUSTRIES LIMITED

JUDGEMENT

(1.) Nearly two decades after the sanction of a scheme of arrangement, the transferee company has come to court complaining of a mistake on the court's part in the drawn-up order sanctioning the scheme not specifically including a jute mill that it says stood transferred to and vested in it under the scheme. To boot, the applicant claims that it discovered such mistake consequent upon a recent order passed by this court on a request made by it for the constitution of an arbitral tribunal under Section 11 of the Arbitration and Conciliation Act, 1996. The transferor company is equivocal in its stand, but that may have little impact on how the application is decided. A non-party, which was not involved in the scheme and has not been impleaded by the applicant herein, had obtained leave to intervene in the present proceedings by an order made at an earlier stage. However, the order permitting such non-party to participate in the proceedings was not unreserved; it was made without prejudice to the applicant's contention: the intention of the court at such stage being to postpone a decision on the desirability of the non-party being heard in course of the present application to the final stage. The scheme of arrangement, sanctioned by an order of May 31, 1993 provided for, inter alia, certain properties of Fort Gloster Industries Limited being parked with Gloster Limited (then known as Gloster Jute Mills Limited). The property which is relevant for the purpose of the present application is known as the North Mill and is referred to as such herein. At the time that the scheme was sanctioned, or even when the first application to ultimately obtain the sanction of the scheme of arrangement was lodged in court, possession of the North Mill had been made over by Fort Gloster to one Hooghly Mills Company Limited under an agreement for sale and a substantial part of the consideration received by Fort Gloster. The agreement for sale required certain statutory formalities - primarily, permission under the Urban Land (Ceiling and Regulation) Act, 1976 - being obtained. It is not in dispute that such formalities were not complied with within any reasonable time of the agreement for sale being executed, though Hooghly Mills is said to have transferred possession of the North Mill and its rights under the agreement for sale to Bowreah Jute Mill Limited. Bowreah Jute had obtained conditional leave to intervene in this application, but at the final hearing it was found that such non-party had no right to come in or be heard in course of these proceedings since, even if this application were to be allowed, its rights would not be compromised as Bowreah Jute would have a chance to have its say if the order allowing this application is made the basis for any future action against it. At any rate, even if this application were to be allowed, Bowreah Jute's interest, if any, in the North Mill would remain unaffected since its alleged possession thereof and any interest therein does not fall within the ambit of the assessment that the court is called upon to make now. Bowreah Jute has already instituted a suit in this court against, inter alia, Hooghly Mills, Fort Gloster and the applicant herein, seeking specific performance of its agreement with Hooghly Mills.

(2.) At the time that the scheme of arrangement was propounded, the two companies involved therein had a common management or, in any event, the two belonged to the same business family. It is not uncommon for divisions in the family business being effected by a scheme of arrangement, though the applicants in such cases in the yesteryears were known to be much more secretive of the real intention than they are now. The obvious benefit of having a family division implemented through a scheme of arrangement was to obtain a single window clearance and the seal of the court thereon. The third and, until recently, the most compelling reason to cause the transfer of any company's assets by way of a scheme was to avoid the payment of any stamp duty for the transfer; as the view long held in this court was that such transfer was involuntary and only consequent upon the order sanctioning the scheme which did not make it exigible to stamp duty. Upon the position at law now being otherwise, the most lucrative of the reasons to seek the transfer of immovable properties standing in the names of companies by way of a scheme is gone and there are fewer schemes of such nature being filed in court.

(3.) The applicant lodged a request under Section 11 of the 1996 Act by way of AP No. 211 of 2010 asserting an arbitration agreement of March 24, 1988 and claiming that, despite the applicant's effort, the mechanism for securing a reference under the arbitration agreement had failed. The applicant asserted that it was entitled to have the arbitral tribunal put in place by the Chief Justice of this court or his designate. The eo nomine parties to the March 24, 1988 matrix contract which contained the arbitration clause were Fort Gloster and Hooghly Mills. The applicant herein claimed in the request under Section 11 of the 1996 Act that the North Mill, which was the subject of the agreement for sale of March 24, 1988, stood transferred to and vested in the applicant in pursuance of the scheme of arrangement that was subsequently sanctioned by the order of May 31, 1993. The applicant asserted, or should be understood to have asserted, that upon the North Mill being vested in it, the rights and obligations of Fort Gloster qua Hooghly Mills in the agreement of March 24, 1988 stood transferred by operation of law to the applicant. It claimed, in course of the request under Section 11 of the 1996 Act, that disputes had arisen between it and Hooghly Mills in respect of the North Mill and such disputes were covered by the arbitration clause contained in the agreement for sale. In course of such matter, it came to light that Hooghly Mills claimed to have made over possession and transferred its rights relating to the North Mill to Bowreah Jute. A point also arose as to whether the applicant herein had stepped into the shoes of Fort Gloster. Notices were required to be issued to both Fort Gloster and Bowreah Jute. The order dated December 16, 2010 declining the applicant's request under Section 11 of the 1996 Act recorded that Fort Gloster went unrepresented, but Bowreah Jute participated in the proceedings.