BOWREAH JUTE MILLS (P) LTD Vs. GLOSTER LTD

JUDGEMENT

(1.) BACKDROP : Fort Gloster Industries Ltd. (hereinafter referred to as the 'Fort Gloster ') had two divisions; cable division and jute division. The company, although a public limited company, had scattered shareholding amongst the members of the public as well as financial institutions. Bangur family, a family of industrialists in the State, held the controlling block of shares. In 1992 the Board of Directors decided, for proper expansion and development, the cable division and jute division should have independent entities. They proposed a scheme of demerger. Accordingly, Fort Gloster retained the cable division and transferred the jute division to a new company named as Gloster Ltd. (hereinafter referred to as 'Gloster '). The jute division had two mills, North mill and New mill. Prior to its demerger in the year 1988 Fort Gloster entered into an agreement with Hooghly Mills Ltd. (hereinafter referred to as Hooghly), the owner of a neighboring jute mill to sell the North Mill along with vacant land attached thereto. The liability attached to the North Mill was also transferred to Hooghly. By the agreement of sale, the entire North Mill along with its assets and liabilities stood transferred to Hooghly. The physical possession was also handed over to Hooghly and since then they were carrying on business.

(2.) AS per the agreement for sale, the sale was subject to appropriate permission from governmental authorities. A sum of rupees One Lac was kept as outstanding to be paid at the time of execution of the conveyance. Hooghly paid the entire consideration, save and except a sum of rupees One Lac, to Fort Gloster in 1988 itself. Hence, in 1992 when the Board of Directors decided to divide the cable division and jute division, they did not consider the North Mill as we find from the records. We however, do not find any valuation report in the records to support the share exchange ratio. We are thus not sure as to whether the management took into consideration the North Mill at the time of demerger in 1992. The dispute arose between the members of the Bangur family as we are told, that did not have any direct link with the present litigation. After the overwhelming majority of the shareholders approved the scheme, this Court sanctioned it. The order of sanction was duly drawn up, completed and filed with the Registrar of Companies, West Bengal and the demerger attained finality. In the order as drawn up, the schedule appended to the order, did not take into account the North Mill. Be that as it may, after the demerger, both the companies were functioning under different heads of management. The sale was not also concluded in respect of North Mill in absence of permission from the Land Ceiling Authority. Hooghly subsequently transferred the jute mill to Bowreah Jute Mills Pvt. Ltd. (hereinafter referred to as Bowreah) (Appellant in Appeal No. 287 of 2012). In 2009, Gloster Ltd. filed an application with an innocuous prayer for correction of the drawn up order as according to them, since jute division stood transferred by demerger, the North Mill also came through such demerger, subject to the agreement for sale. Since sale was frustrated in absence of permission from the Land Ceiling Authority, it should retain with them. However, because of the mistake crept in the order so drawn up, it would need correction. Gloster also took the plea that the order was required to be drawn up as per Form No. 42 of Company Court Rules, 1959. While doing so, the portion as statutorily required to be incorporated "and all other the property, rights and powers of the transferor company " was omitted. Correcting the drawn up order should incorporate that. Prayer (a) of the Judge 's summons is quoted below : "The order dated 31 May 1993 in Company Petition no. 28 of 1993, as drawn by the Company Department be clarified and/or modified and/or rectified by directing that not only the assets and properties, rights and interests of the Jute Division. specified in Schedule B of the said order but also all other properties, rights and interests of the Jute Division including North Mill of the transferor to and vested, without any further act or deed, in the applicant company under Section 394 (2) of the Companies Act, 1956 but subject to all charges affecting the same ".Fort Gloster contested the said proceedings. Bowreah also intervened. Initially they were allowed to participate, however at the final hearing learned Judge found, they could not have any say in the matter. Learned Judge dismissed the application by holding that the North Mill was not in contemplation when the sanction was prayed for and granted. Gloster filed the appeal being A.P.O. No. 194 of 2012 without making Bowreah a party. Bowreah intervened. The Division Bench, while admitting the appeal, permitted Bowreah to make submission. However, at the time of hearing of the application, Gloster objected to their presence as according to them, the learned Judge had already held that they would not be entitled to hearing. Hence, they should not be heard. At that juncture, we granted leave to Bowreah to file independent appeal against the order of the learned Judge, holding that they were not necessary party in the proceeding. Pursuant to such leave, Bowreah filed Appeal No. 287 of 2012.

(3.) S.K. KAPOOR IN REPLY : Mr. Kapoor, in reply distinguished the English case to contend that the facts would defer. On the Apex Court decision in the case of M. Nagabhushana (supra) Mr. Kapoor contended, the issue was decided between the same party whereas in the present case the arbitration proceeding was between the Gloster on the one hand and Bowreah on the other hand and the present application was between the Gloster and Fort Goloster where the learned Judge specifically held that Bowreah was not a necessary party. Hence, the proposition of law as to res judicata would not apply at all. He rather conceded that North Mill was possibly an issue that would have to be decided in the pending civil action between the parties. He would rather insist to have correction of the order by incorporating the words so missed out from Form-42. It would have statutory force. On the issue of limitation, he contended, the reasons were assigned as to why Gloster did not approach the Court earlier. It was only after mistake surfaced during other proceedings, Gloster came to know of the said mistake and approached the Court. With the leave of the other counsel, he cited the Apex Court decision in the case of Chandra Bhal Vs. The State of U.P. reported in 1971 Volume-III Supreme Court Cases page-983 and in the case of Narayanan Vs. Kumaran & Ors. reported in 2004 Volume-IV Supreme Court Cases page-26. Mr. Dhruba Ghosh, while distinguishing Chandra Bhal (supra) : Mr. Dhruba Ghosh, learned counsel dealt with the decision in the case of Chandra Bhal (supra) to say that the said decision would rather support Bowreah, not Gloster.