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Court Committee, Divya Vasundhara Financiers Pvt. Ltd. Vs. Kamlakar Narayan Samant and anr. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtGujarat High Court
Decided On
Case NumberCompany Application Nos. 188 of 1979, 198 of 1981 and 50 of 1982 in Company Petition No. 18 of 1978
Judge
Reported in[1984]56CompCas487(Guj); (1983)1GLR44
ActsCompanies Act, 1956 - Sections 392
AppellantCourt Committee, Divya Vasundhara Financiers Pvt. Ltd.
RespondentKamlakar Narayan Samant and anr.
Appellant Advocate Arun H. Mehta, Adv.
Respondent Advocate G.N. Desai, Adv.
Cases ReferredUnion of India v. Asia Udyog P. Ltd.
Excerpt:
company - agreement of sale - section 392 of companies act, 1956 - respondents executed agreement to sale land in favour of company - company sought declaration that company entitled to specific performance of said agreement - whether court has power under section 392 to adjudicate upon right and interest claimed by company against third party - held, rights under said agreement has to be established in civil court of competent jurisdiction. - - 221 situate within the revenue limits of village eksar taluka, borivili, greater bombay, said to have been executed one kamalakar narayan samant in favour of the company by amending the summons in the aforesaid company applications or by taking out fresh summons within two weeks from the date of the said order, and in case of failure to seek.....b. k. mehata, j.1. by a common order of march 8, 1982, in company application no. 104 of 1981 and company application no. 232 of 1980, this court had directed the learned advocate, mr. r. m. desai, for the court committee to seek apppropriate directions in the matter of the rights claimed by the divya vasundhara financier pvt. ltd., under an agreement to sell a land bearing no. 221 situate within the revenue limits of village eksar taluka, borivili, greater bombay, said to have been executed one kamalakar narayan samant in favour of the company by amending the summons in the aforesaid company applications or by taking out fresh summons within two weeks from the date of the said order, and in case of failure to seek amendment, or take fresh summons withing the stipulated period, interim.....
Judgment:

B. K. Mehata, J.

1. By a common order of March 8, 1982, in Company Application No. 104 of 1981 and Company Application No. 232 of 1980, this court had directed the learned advocate, Mr. R. M. Desai, for the court committee to seek apppropriate directions in the matter of the rights claimed by the Divya Vasundhara Financier Pvt. Ltd., under an agreement to sell a land bearing No. 221 situate within the revenue limits of village Eksar Taluka, Borivili, Greater Bombay, said to have been executed one Kamalakar Narayan Samant in favour of the company by amending the summons in the aforesaid company applications or by taking out fresh summons within two weeks from the date of the said order, and in case of failure to seek amendment, or take fresh summons withing the stipulated period, interim relief granted by this court restraining respondent No. 1 herein from transferring and/or parting with possession of the said land in terms of the instand vacated. As regards the interin relief granted in Company Application No. 104 of 1981 restraining respondents Nos. 2,3, and 4 from developing the land, it was discharged. The summons issued for examination of Shri V.A. Phadke and Shantilal Shsh, who were the attorney connected with the aforesaid agreement was also dischrged.

2. Pursuant to the aforesaid direction the applicants have taken out the present summons by moving Comapny Application No. 50 of 1982, seeking declaration that the company is entitled to specific performance of the said agreement dated May 3, 1975, and directing the vendor- respondent No. 1 herein, or his successors, assignees-in-interest, heirs and legal representatives, to specifically perform the aforsaid agreement by xecuting a regular deed of conveyance, and also for handing over possession of the said land to the company. In the alternative, the applicants have claimed damages is a sum of Rs. 73,02,39,840 over and above the amount of refund of Rs. 2,15,000 paid by the company to Shri V. A. Phadke on such rate of interest which the court may deem fir. An alternate direction authorising the company to file appropriate suit or proceeding for specific performance of the aforesaid agreement and/ or damages is also prayed for. A further direction authotising the company to makes an application for being a party defendant in Civil Suit No. 1797 of 1981 filed by respondent No. 2 against respondent No. 1 in the High Court of Judicature at Bombay, or in any other suit that may be filed by respondentNo. 2 in any other court is also prayed for. A direction has been also sought for examination of Shri K. D. Patel, ex-director of the company, Shri V. A. Phadke of M/s V. A. Phadke & Co. and Shantila Shah of M/s. Shantilal Shah & Co. of bomaby pending the hearing and final disposal of this application, interim relief restraining respondent No. 1 from transferring by sale, mortgage, assignment, gift or in any other manner, or parting with the possession and/or sub-dividing, or developing, constructing upon, or allotting or booking any members for the purpose of development of the aforesaid land is also prayed for. A further interim relief against respondent Nos. 2 and 4 is also prayed for restraining them from encroaching upon, or taking possession of, or constructing, ir developing, or diposing of either by allotting, or booking any members for the purported development of the said land. Further interim relief against respondents Nos. 2 and 4 from proceeding further with Civil or filing any other suit, or initiating proceeding for obtainining specific performance of the alleged agreement to sell in their favour is also prayed for.

3. Notice was directed to be issued by this court against respondents Nos. 2, 3 and 4 by its order of March 19, 1982. No notice was necessary against respondent No. 2 since the said respondent has filed his apperance through learned advocate, Shri A. S. Qureshi, and in the light of his statement on the said day that respondernt No. 1 has no intention to transfer, assign or alienate the land in question, and that the alleged agreement between respondents Nos. 2 to 4 and in the High Court of Judicature at Boamby was contested by respondent No. 1, and in the case of any order of the court for specific performance of the said agreement, no transfer will be effected without a week's notice to this court, no interim relief as prayed or was required to be granted.

4. Respondent No. 1 has filed his own affidavit-in-reply, while on behalf respondents Nos. 2 to 4 an affidavit of Shri Vasant Premji Shah, respondent No. 4 herein, has been filed opposing the directions sought for in this summons.

5. Before I deal with the rival contentions urged on behalf of the parties hereto, it may be desirable to set out briefly as to what the rival cases are. It is claimed of the Divya Vasundhara Financiers Pvt. Ltd. (hereinafter referred to as ' the country ') that respondent No. 1 has entered into an agreement to sell the land bearing S. No. 221 approximately admeasuring 500 acres situate within the revenue limits of village Eksar, Taluka Borivili, Greater Bombay, at Rs. 2.75 persq metre on as it is where it is basis, and particularly on the terms and conditions recorded in the articles of agreement executed between the parties. In pursuance of the said agreement, the company paid to the vendot a sum of Rs. 2,00,00 as part deposit, or arned money, on execution of the said agreement the receipt of which had been admitted acknowledged in the said agreement itself, and the said amount was agreed to be deposited with M/s. V. A. Phadke & Co., solicitors, as stake-holders, and the remaining amount of Rs. 1,00,000 towards the earnest or deposit was to be paid with in one month from the date of the agreement. The balance of the sale price was to be paid as detailed in the said agreement. It is further cliaed that the company by three payments of Rs. 5,000 each, effected on May 2, 1975, May 12, 1975, and August 1, 1975, paid in all Rs. 15,000 to M/s. V. A. Phadke & Co. for the said Borivili land. In spite of the payments as above, no steps were taken by respondent No. 1 and/or his solicitors, M/s. V. A. Phadje & Co., to furnish the title clearance certificate to the was not made, though the company was always redy and willing to carry but is obligations under the said agreement.

6. On July 27, 1976, a letter was addressed to Shri K. D. patel, erstwhile director of the company, by M/s. V. A. Phadke & requsting him to make the payment as agreed and send the cheque for necessary amount with Shri Sudhir Tanna, who was the clerk of the said firm, and was deputed personally to carry the said letter. on or about May 1, 1978, a telegram was sent by the said Shri K. D. Patel, on behalf of the company addressed to M/s. V. A. Phadke & Co., Bombay, protesting that in spite of several request they have failed to satisfy the company about the clear and marketable title of the vendor and also failed to obtain permission under the Urband Land (Ceilling and Regulation) Act, 1976, and did not deliver the original title deeds for investigation to the solicitors of the company. It was also pointed out in the said telegram that respondent No. 1 was trying to dispose of the land to other person which he was not entitled to do, and thereby committed breach of the agreement and, therefore, the company was entitled to specific performance of the agreement which it did not entile to rescind as they were redy and willing to purchase the land on satisfaction of the solicitors of the company about the marketable title of the vendors. According to the company, the sale consideration was to be paid by instalments as per the details contained in cls. 1, 2 and 4 of the agreement in question. The vendor was under obligation to obtain a title clearance certificate as provided in cl.ll. The solicitors, M/s. V. A. Phadke & Co. were also required to draw a mortagage deed creatinf first mortgage on the property so as to secure the payment of the balance of the sale price remaining due and paybable under the said agreement after payment of the earnest money of Rs. 3,00,000 and the further sum of Rs. 18,00,000 as provided in cls. 1 and 4 of the said agreement. The Company is still capable of performing specifically the said agreement and it has not violated any essential terms of the contract as provided therein. According to the company, the present market value ofthe land is about Rs. 300 per sq. yard, and, therefore, in any case, it is entitled to claim damages at that rate from the vendor. in these circumstances, the company claims directions as prayed for particularly the direction in the matter of a decree for specific performance, or damagves since the period of limitation for the aforesaid relief would commence to run from March 25, 1981, in the light of the provisions contained in the said agreement that the balance amount of the sale price was to be paid by six monthly instalments spread over a period of five years after the mortgage deed creating first legal mortgage was executed.

7. On the other hand, the case of respondent No. 1 is, as set out in his reply affidavit prejudice to his legal contentions about the maintainaability of such a summons, or the juridiction of this court. The genuiness, valisity and enforceability of the alleged agreement, on the own showing of the company are not the questions inasmuch as, firstly because the company are not the questions inasmuch as, firstly because the company has admittedly failed to pay Rs. 1,00,000 towards the earnest or deposit within one month from the date of the alleged agreement. Secondly, because the comapny has failed to pay Rs. 3,50,000 on or before October 30, 1975, nor have they made payment as contemplated by January 31, 1976, or March 25, 1976. Thirdly, because no efforts were made by the company to investigate the title nor administered requisitions, nor issued and advertisement which establishes the conduct of the company that it was no more ready and willing to perform its part of the contract, and. fourthly, because the relliefs for specific performance or damages were clearly barred because the cause of action, if any, in favour of the company arose as far back as an on March 25, 1976. And, lastly because the court has no jurisdiction to grant such reliefs since no cause of action, or part thereof, has arisen within the jurisdiction of this court.

8. Respondent No. 1 has also resisted the summons on a two-fold ground. In the first place, judge's summons which is an application for the amendment in Company Application No. 188 of 1979 is misconceived and not maintainable, and in the second place in any case, this court has no jurisdiction, power or authority in the nature of a defree, or otherwise against a third person and parties other than the company, and its unsecured creditors, who are bound by the scheme sanctioned by this court.

9. The reply affidavit, filed on behalf of respondent Nos. 2 to 4, is for the limited purpose of opposing the application for amendment as sought for by the applicant. The application, according to respondents Nos. 2 to 4, is one liable to be dismissed ex facie, inasmuch as the present summons seeking the amendment of Company Application No. 188/79 is misconceived because the original application was not competent. Secondly, because the court has no jurisdiction under s. 392 of the Companies Act to issue directions in the nature in which they have been prayed for. Thirdly, there was no concluded agreement bewteen the company and respondent No. 1 as is clearly established from the affidavits filed by Shri Shah of M/s. Shantilal Shah & Co. and V. A. Phadke of M/s. V. A. Phadke and Co, the two attorney admittedly connected with the alleged agreement, and particularly the affidavit of Shri Shantilal Shah discloses that alleged agreement to sell was false, concoted, fabricated and non-existent and in any case because some of the direction sought for by the present summons have alredy been rejected by this court by its irder od March 8, 1982, and the letters patent appeal preferred from that order was also dismissed by a Division Bench by its order of March 25, 1982.

10. Following four question, therefore, arise for mmy consideration :

(1) Whether this court has power or authority under section 392 of the Companies Act, 1956, in exercise of its jurisdiction of supervision over the scheme of arrangement between the company and its creditors and/or members approved by it, to adjudicate upon the rights and interest claimed by such company against thrid parties.

(2) If question No. 1 is answered in the affirmative, whether the court was jurisdiction, power or authority to issue directions in the nature of a decree for specific performance and/or damages and/or return of the deposit or earnest money paid by holding a regular trial a civil court.

(3) Whether the present application for amendment of the directions sought for in company Application No. 188 of 1979 and other companion matters, namely, Company Application Nos. 104 of 1981, 198 of 1981 and 232 of 1980 is competent, inasmuch as the said applications were totally misconceived and not maintainable in law.

(4) If question No. 3 is answered in the negative, what appropriate directions should be issued in the matter.

11. Re : Question Nos. 1 & 2 : In order to determine these two questions, it would be necessary to keep the proper perspective and context of the power of this court under s. 392 of the Companies Act. 1956. Section 392 is one of the group of section providing for compromise, arrangement and reconstruction in Chapter V of the Companies Act, 1956. Section 391 empowers the court to compromise or make arrangement with the creditors and members. Section 391(1) provides that the court may, on an application of the company or any or its creditors or members, or of the liquidator of a company which is being wound up, direct a meeting of the different interests of the company to be held for purposes of considering and approving with or without modification a compromises or arrangement which is proposed between such company and its creditor and/ or members, or any class of them. Sub-s. (2) provides that such a compromise or arrangement as approved by the prescribed statutory majority will be binding on all the interest concerned, provided it is sanctioned by the court on being satisfied that the applicant has disclosed to the court all material facts which have relevance, for, according the sanction, namely, latest financial position, auditor's report pendency of any investigation and such other like material Any scheme which is fair and reasonable and evolved in good faith would be sanctioned if it is able to secure the prescribed majority of the different interest affected thereby (vide Alabama, new Orleands Texas and Pacific Junction Railway Co., In re : [1891] 1 Ch 213 (CA). The effect of the order of the court sanctioning the scheme is that the scheme becomes binding on all its creditors, liquidators and contributories and a dissentting members of sny class of interst is not entitled to question it afterwards. A scheme, when sanctioned, acquiries a statutory force and it enjoins a greater sanctity than a mere agreement between the parties concerned. It cannot be modified or varies subsequently by an agreement by parties (vide Premila Devi v. People Bank [1939] 9 Comp Cas 1 (PC). It is in this context, collocation and perspective of s, 391 that altogether a new provision, without any precedent in the earlier Act pertaining to the Companies Act in this country, or any similar Act in the United Kingdom is inserted in the statute book by s. 392. The marginal note of the section indicates the scope and width of the power. By s. 392, High Courts have been empowered to enforce comrpromises and arrangments sanctioned in respect of a company under s. 391. The nature of the power is, therefore, a power of superintendence so that the obeject of the compromise of arrangment is not allowed to be frustrated by any of its parties in implementation thereof. In the course of that power of supervision, the court may, either at the time of making such order accordings sanction, or at any time thereafter, issue such directions inregard to any matter or make such modification the compromise or arrangment, as it may consider necessary, for the proper working of the compromise or arrangement. If the court is satisfied that a sanctioned compromise or arrangement is not satisfactory workbale, even with modifications, it may, suo motu, or on an application of any interested person in the affairs of the company, make an order of winding up of such company, and on such an order being made, it is deemed to be one made under s. 433 of the Companies Act. The legislative guideline for exercise of the power under s. 392(1)(b) is the only consideration for the proper working of a compromise or arrangement. No soubt, the power contained in s. 392(1)(b) of the Companies Act, 1956, is of wide amplitude, but it cannot be said that it is a power without any limitation. There is an inbuilt limiration on the power of the court in the section itself. The inbuilt limitation is that it can be invoked only for purposes of proper working of a compromise or arrangement. In exercise of that power, it cannot be doubted that the company court can issue necessary directions with a view to remove any impendiment, difficult or obstruction which may arise in the working of such scheme of compromise or arrangement. No strati jacket formula can be laid down so as to provide for all situations as to when that power can be invoked, or when the court can refuse to exercise such power. It is to judged in the context of a given situation arising from time to time. The crux of the problem, whenever such power is invoked, is for the court to ask itself whether a proper working of the arrangment of compromise is obstructed by any contingency or a situation which was not envisaged not could have been anticipted at the time of framing or sanctioning the Scheme, and if the court finds on considerration of the relevant material placed before it on affidavit or otherwise, that the proper functioning of the scheme of compromises or arrangement is jeopardized, the court may give such direction necessary in order to ensure a proper and efficient working thereof. The width and scoe of the power contained in s. 392 was consiered by the Supreme Court in the context of the question, whether an application for modification of the scheme sanctioned by the court under s. 391(2) could or could not be made by any person other than member or creditor. The Supreme court, speaking through Desai J. held in S. K. Gupta v. K. P. Jain [1979] 49 Comp Cas 342 (SC), as under (p. 351) :

'The purpose underlying s. 392 is to provide or effective working of the compromise and/or arrangement once sanctioned and over which the court must exercise continuious supervision (see s. 392(1)), and if over a period there may arise obstacles, difficulties or impendiments, to remove them, again, not for any other purpose but for the proper working of the comperomise and/or arrangement. This power either to give directions to overcome the difficulits or if the provisions of the scheme themselves create an impediment, to modify the provision to the extent necessary, can only be exercised so as to provide for smooth working of the compromise and/or arrangment. To effectuate this purpose, the power of widest amplitude has been conferred on the High Court and this is a basic departure from the scheme of the U.K. Act in which provision analogous to s. 392 is absent. The sponsors of the scheme under s. 206 of the U.K. Act have tried to get over the difficulty by taking power in the scheme of compromise or arrangement to make alternations and modifications as proposed by the court. But the Legislature foreseeing that a complex or complicated scheme of compromise or arrangement spread over a long period may face inforseen and unanticipated obstacles, has conferred power of widest amplitutde pm the court to give directions and, if necessary, to modify the scheme for the proper working of the compromise or arrangement. The only limitation on the power of the court, as alredy mentioned, is that all such directions that the court may consider appropriate to gieve or make such modification in the scheme, must be for the proper working of the compromise and/or arrangement.' (emphasis (here printed in italics.) supplied)

12. The above exposititon of the width and scope of the power clearly indicates that the power of superintendence which is to be exercised by issuing appropriate directions, or effecting necessary modification so as to ensure a proper working of such compromise or arrangement. I do not think that this power can be invoked for purposes of determinaiton or adjudication of any right or interest claimed by a company against persons who are not parties to the scheme of compromise or arrangement, and who dispute such rights ir interest in fact or in law. The learned counsel appearing for the court commitee, the applicant herein, was at great pains to emphasise that this court shoudl not feel inhibited in exercise of this power or authority of such wide amplitude in adjudication or determination of disputed rights or cliam of the company against person who are not parties to the compromise or arrangement, and on such adjudication or determination of the rights by holding a regular trial as if it is a civil court, it should not hesitate in issuing such direcitons, inter alia in the nature are established, to specifically perform the contract and/or to pay the amages or grant such other reliefs as the circumstances of the case may require. In my opinion, this is too tall a submission to be accepted. There are compelling and justifying reason for my disagreement. In the first place, the power under s. 392 is a supervisory power be only against the persons who are parties to it. Secondly, the power of issuing directions in the course of exercise of such a power of superintendence in regard to any matter or for modification, as may be necessary, is only for the proper working of the compromise or aarragement. The rights between itself and the creditors and/or members, or any class of them, can only be enforced in the manner in which such rights or claims can be enforced under the law. Merely because a scheme of compromise or arrangement has been made between a company and its creditors or members, it cannot claim that its disputed rights or claimes can be adjudicated upon by a company court which may be supervising such scheme. Thirdly, if the Legislature had intended that the company court supervising a schme of compromise or arrangement between a comapny and its creditors or members shold have the power of ordinary court to hold trials for adjudication or determination of disputed rights or claims of that company against third parties as if it is a court of ordinary civil jurisdiction, it would have appropriately provided in the section and invested the company court with the necessary powers. A mere comparison of s. 392(1) with s. 446(2) of the Companies Act, 1956, fortifies my view in the matter. Section 446(1) provides for the stay of a suit or legal proceeding when a winding-up order has been made or a provisional liquidator is appointed by a company court. Sub-s. (2) of s. 446 provides as under :

'(2) The court which is winding-up a company shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of -

(a) any suit or proceeding by or against the company;

(b) any claim made by or against the company (including claims by or against any of its branches in India);

(c) any application made under section 391 by or in respect of the company;

(d) any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in course of the winding-up of the company.'

13. Sub-s. (3) of s. 446 provides that any pending suit or proceeding by or against the company in any court other than that in which the winding-up of the company is proceeding may be transferred to and disposed of by that court notwithstanding anything to the contrary under anything to the contrary under any other law for the time being force. Sub-s. (2), therefore, confers a jurisdiction on the winding-up court and the provisions contained therein are very wide. This jurisdiction of the company court under sub-s. (2) extends to the whole territory of India to which the Companies Act extends (vide Official Liquidator v. Bhagwat Saran Garg [1970] 40 Comp Cas 657 (All)). If, therefore, Parliament intended that the power akin to one invested in company court under s. 446(2) is to be invested in company court for the enforcement of compromise and arrangement under s. 392, it would have similarly provided in appropriate terms so as to confer that jurisdiction. In the fourth place, if the power invested in a company court in s. 392 is held to be one akin to one under s. 446(2), the company court will be required to assume jurisdiction which it does not possess of adjudicating or determining the disputed rights between a company and the persons who are not parties to the scheme of compromise and/or arrangement as if it is a court of ordinary civil jurisdiction, irrespective of the question of the court itself and/or the territorial jurisdiction in the matter. The learned single judge of the Delhi High Court in Union of India v. Asia Udyog P. Ltd. [1974] 44 Comp Cas 359, was concerned with a question as to what is the power or authority of a company court in the context of a scheme of arrangement of amalgamation under s. 153 of the Indian Companies Act, 1913. Pursuant to the sanction of the scheme of amalgamation, the assets and liabilities of the transferor-company were taken over by the transferee-ocmpany. The Union of India moved the learned District Judge, Delhi, under s. 153 (1)(f) of the 1913 Act for an order providing for payment of an amount of Rs. 30.00.000 on account of the income-tax liability of the transferor-company, or from the voluntary liquidator of the transferor-company claiming that such an order would be one to secure the reconstruction or amalgamation fully and effectively. The learned District Judge rejected the application as not maintainable in law. In appeal to the Delhi High Court, a learned single judge also considered whether such an application was maintainable under s. 392 of the Companies Act. In the opinion of the learned single judge, though the powers conferred under s. 392(1) of the 1956 Act were of very wide amplitude, the directions cannot be issued for payment of the amount claimed by the Union of India since it cannot be side that the court issuing such instructions was either supervising the carrying out of the compromise or arrangement, or for the proper working thereof, and the court could not in such a case assume the role of an ordinary civil court for the enforcement of the creditors' right to payment as it could, for example, in a winding-up by virtue of the provisions of s. 446(2)(b) of the 1956 Act and its corresponding provisions in the 1913 Act. The view of the learned single judge of the Delhi High Court, therefore, fortifies the view which I am inclined to take in this matter.

14. Mr. Mehta invited my attention to my earlier decision by which I had made an order on September 14, 1979, giving directions to the court committee to execute a deed of conveyance and other necessary documents as may be required so as to convey the right, title and interest of the company in a plot of land bearing S. No. 10/part and S. No. 11/part admeasuring in all about 6,532 sq. yards as specified in the agreement of March 31, 1973, whereby M/s. Divya Vasundhara Financiers P. Ltd. agreed to purchase from Shri Champaklal H. Kothari and others the said plot of land. Mr. Mehta particularly drew my attention to that part of the said order where this court had, in exercise of its power under s. 392(1)(b) of the Companies Act, 1956, decided the rights of third parties and issued the appropriate directions in order to insure a proper working of the scheme. It is no doubt true that the directions given by the aforesaid order were in exercise of the power invested in company court under s. 392 of the Companies Act. But it was altogether in a different context of the peculiar facts and circumstances of that case where the rights of the company, viz., Divya Vasundhara Financiers P. Ltd., had ripened into full ownership by adverse possession in respect of the said land the possession of which was handed over under the aforesaid agreement of March 31, 1973, though the registered deed of conveyance was not executed in that behalf in favour of the company by the erstwhile owners thereof. It should be further noted that a specific provision was made in respect of Jal Pankhi project in the scheme of compromise sanctioned by this court in the matter of the said company. Part V of the scheme related to the housing project of Jal Pankhi Co-operative Housing Society. It was agreed under the said scheme that the company should accept Rs. 18.14 lakhs from the said society in consideration of which the society was to relieve the company from all its contractual obligations and the society will obtain conveyance directly from the original owners of the land on which the housing project was carried out. Some difference arose between the society, the company and the predecessors-in-interest of the land in the matter of execution of the deed of conveyance. The dispute arose out of the directions given by this court by its order of July 13,1979, by which the society was directed to pay a sum of Rs. 21,75,000 instead of Rs. 18,14,000 for conveying the clear right, title and interest of the company and the predecessors interest as named and specified in the aforesaid order. In clause V of the directions given by the said order, liberty was reserved to the parties to move the court for adjudication of any dispute that may arise inter se between the parties. The society, therefore, moved this court for adjudication of the dispute which had arisen between the company, the society and the predecessors in interest of the company. The notice of the summons was served on all the parties concerned and interested in the matter, including the predecessors-in-title of the said plot of land. No objection had been taken by any of the parties interested in the scheme, and represented before this court against the directions which have been sought from the court by the society. No appearance had been filed, nor any objection consequently had been taken by the the predecessors-in-interest of the land in question. In that context, this court considered as to whether it had a power to give directions, and if yes, what appropriate directions should be given. This court, inter alia, observed in its order of September 14, 1979, by which the appropriate directions were given in Company Application No. 264/79 as under :

'..... So far as the present aspect of the scheme is concerned, namely, the arrangement of the company with the applicant-society herein, there is no course open except the one which is provided in the scheme and modified by this court by its order of July 13, 1979. If the company, for any reason, legal or otherwise, for no fault of its own, finds it difficult to carry out that part of the arrangement contained in part 3 of the present scheme as modified by this court, it is the obligation of this court to ensure and enforce the scheme in a particular respect since in effect it carries out this statutory arrangement. It is no doubt true that this court has by its order of July 13, 1979, directed the company to execute a deed of conveyance so as to convey clear title to the applicant-society on the amount of consideration being paid as specified therein. The applicant-society has paid the first instalment of Rs. 8,80,000 before August 1, 1979, and has also paid the second instalment of Rs. 1,00,000 to the company. The necessary notices as directed by this court in the aforesaid order before executing the deed of conveyance have gone to and served upon the predecessors-in-interest of the company except Asha R. Kothari and Kantilal Kothari. At this stage, the applicant- society has moved this court for issuing necessary directions in order to carry out part of the scheme as modified from time to time by this court which relates to the applicant-society. It appears that since the company has not obtained any deed of conveyance from its predecessors-in-interest some of whom are not available and have not filed appearance in spite of the notice of the court and, therefore, do not appear to be willing to join the deed of conveyance in favour of the applicant-society as directed by this court, it has, therefore, become necessary that this court should enforce this part of the scheme pertaining to the applicant-society and execute the necessary deed of conveyance in favour of the applicant-society. Though I am not expressing any final opinion on this point, it would be in the interest of justice to execute the deed of conveyance because the original owners of the property, namely, Rajeshwari Devi Sada Jivatlal and others carrying on business in the name of M/s. Kamdhenu Builders are out of possession since the date of the first agreement to sell the said property, namely, January 2, 1967 and, therefore, on the principle of tacking of the adverse possession of their successors-in-interest, namely M/s, Juhu Land Development Corporation, Champaklal Harakhchand Kothari and others and the company under the respective agreements of sale of January 1, 1973, March 31, 1973, and November 2, 1973, the adverse possession of the present applicant-society has, therefore, ripened into full ownership. There is no dispute between the company and the applicant-society in giving the deed of conveyance.'

15. I do not think, therefore, that the aforesaid order can be pressed into service of the cause of the court committee in the present application. There are substantial reasons in support of my view. In the first place, there is no provision made for the Borivli Land in the scheme in the nature of arrangement or compromise between the company on the one hand and the owners of the said land on the other. No doubt, a reference is made in Schedule 'L' about the Borivili land. Schedule 'L' refers to the different advances made by the company against the land Banakhats. There is no reference to these different Banakhats in the scheme itself much less any arrangement made in respect thereof. Schedule 'L' is more in the nature of a statement of the debtors of the company. The rights of the company under the agreement pertaining to Borivli land with which I am concerned in the present application are vehemently disputed on behalf of the owners of the said land. In fact, it is one of their contentions that there was no complete agreement between the company and the said owners. It is the case of the owners, as referred to hereinabove, that there were merely negotiations between the erstwhile directors of the company and the owners of the land and no agreement in respect of the said land was executed by and between the parties. Unless, therefore, the company is able to establish that a valid and legal contract had come into existence between the company and the owners under which the owners of the land in question have become the creditors for the balance of the consideration to be paid therein, and the company has acquired the possession which it can defend on principle of part performance, or some such similar arrangement is effected between the parties, and that some definite provision in the scheme of arrangement in respect of the rights said to have accrued under the said agreement in favour of the company is made in the scheme itself to which the owners have agreed, it is difficult for the court to exercise its power under s. 392 which is, as stated above, the power of superintendence for purposes of enforcement of the arrangement or compromise between the company and the vendors. In that view of the matter, the first question, therefore, should be answered in the negative with the result that the second question does not survive for adjudication.

16. Re. : Questions Nos. 3 and 4. - It cannot be gainsaid that the company is entitled to seek appropriate directions in the matter of the rights which it claims under the agreement to sell the Borivili land in question. It is no doubt true that appropriate directions were not sought for in the Company Application No. 188 of 1979 with Company Applications Noos. 232 of 1980 and 104 of 1981 in this behalf. It is because of the objections raised by the opponents at that time that since the court committee has not asked for appropriate directions which it could legitimately seek from the company court in exercise of its supervisory power over the scheme of compromise and/or arrangement that this court has in its earlier order of March 8, 1982, directed the learned advocate for the court committee to seek appropriate directions. If, therefore, in pursuance of the said order of the court, directions, inter alia, in the nature of decree for specific performance and/or damages and/or return of the earnest money or security deposit are sought along with the directions for taking appropriate legal measures to enforce their rights under enforce their rights under the said agreement, it cannot be successfully urged that this should not issue alternative directions which the committee claims for enforcement of their rights. It has been urged on behalf of the respondents that there is no material before the court to justify the issuance of such alternative directions. I am afraid, I cannot agree with such a specious contention for the abvious reason that not only there is an agreement in favour of the company said to have been executed by respondent No. 1, but there are contemporaneous decuments which support the claim of the company that there was an agreement to sell the Borivli land in its favour. The contemporaneous documents are the receipts evidencing the acknowledgment of the payment of Rs. 2,00,000 by the company to respondent No. 1. The receipt is signed by M/s. V. A. Phadke & Co., the solicitors of the said respondent No. 1. Under the said agreement for sale, there is a reference to this payment of Rs. 2,00,000 which, according to the said agreement, was to deposited with M/s. V. A. Phadke & Co. It is no doubt true that respondent No. 1 has relied on certain facts and circumstances as emerging from the various averments made in the affidavit made on behalf of the company by Shri K. D. Patel in support of the present summons to contend that these circumstances caused a grave doubt about the genuineness, validity and the contents of the alleged agreement between the company and respondent No. 1. It should also be emphasised that basides relying on these facts and circumstances as emerging from the affidavit filed on behalf of the compoany, respondent No. 1 has, in paragraph 5, stated that he had not admitted the correctness of any statement or allegation made in the said affidavit which has not been specifically dealt with. In other words, respondent No. 1 has not specifically denied the execution of the said agreement. The copies of the correspondence placed on the record of this company application consisting of the copy of the letter dated July 27, 1976, addressed to Shri K. D. Patel, the exdirector of the company by M/s. V. A. Phadke and a copy of the telegram sent by Shri K. D. Patel to M/s. V. A. Phadke and Co. along with the postal receipts acknowledging payment of telegram charges. It appears that the telegram has been sent on May 1, 1978. This correspondence also prima facie indicates that there was an agreement to sell the Borivli land to company. The contents of the aforesaid letter and the telegram are self-explanatory in that behalf. The court committee has also produced an extract from the records of the company to show that some further payment of Rs. 15,000, by three instalments of Rs. 5,000 each, was made under the aforesaid agreement to sell. The said copies of the vouchers showing the payment are dated May 2, 1975, May 2, 1975, May 12, 1975, and August 1, 1975. Shri V. A. Phadke of M/s. V. A. Phadke and company has filed his affidavit in the earlier proceedings being Company Application No. 188 of 1979, wherein he has stated, inter alia, that to the best of his memory, no agreement for sale had ever been entered into by and between Shri Samant and the company though there were some negotiations in respect thereof. It should be recalled that, according to the said agreement, M/s. V. A. Phadke and company was to act as attorneys of the vendor and M/s. Shantilal Shah & Company had to act as attorneys of the company. Shri Shantilal P. Shah of M/s. Shantilal Shah & Company has field his affidavit as directed by this court by its order of March 8, 1982, in Company Application No. 188 of 1979. He has stated in paragraphs 3 and 4 as under :

'3. I say that in or about the last week of April, 1975, Shri Keshavlal D. Patel attended our office at Bombay and handed over a draft of the agreement for sale of property situate at Eksar Taluka, Borivli, Bombay, for approval. I say that my firm approved the said draft agreement for sale and sent it along with my firm's letter dated April 28, 1975, to M/s. V. A. Phadke & Co., Advocates for N. V. Samant, requesting them to call a meeting to settle the said draft in conference ......

4. Thereafter, I do not appear to have received any communication from Messrs V. A. Phadke & Co., nor from the said Keshavlal D. Patel in connection with the said draft agreement for sale. I am personally not aware of any agreement for sale in respect of the said property being executed by and between K. N. Samant and Divya Vasundhara Financiers Pvt. Ltd. The agreement for sale, if any, of the said Eksar Property has not been executed in my presence.' (emphasis (Here printed in italics.) supplied)

17. A copy of the letter of April i28, 1975, which is referred to in the aforesaid affidavit supports the statement made therein that the firm of M/s. Sjhantilal Shah & Company, after approving the draft agreement forwarded the same to M/s. V. A. Phadke & Company, and also requested for a meeting to settle the draft in a conference. A copy of the agreement which has been produced in the present company application shows that the said agreement is engrossed on a stamp-paper for Rs. 3 purchased in the name of M/s. V. A. Phadke & Co., Bombay. It cannot be said that the claim of the company that there was an agreement between the company and respondent No. 1 to sell the Borivli land cannot be dismissed exfacie. If, therefore, the court committe intends to enforce the rights under the said agreement, it cannot be said, as urged by the learned advocate for respondent No. 1, that this was indulging in frivolous and vexatious and vexatious litigation. What would be the rights of the company under the said agreement, if any, or what should be the legal reliefs to which the company is entitled in respect of its rights under the said agreement arre matters which the committee has to extablish in a civil court of competent jurisdiction and it may take appropriate measure as may be advised for enforcement of such rights including the right, if any, of being joined as a party in the civil suit filed by respondents Nos. 2 to 5 against respondent No. 1 in the High Court of Judicature at Bombay. I am, therefore, of the opinion that the court committee is entitled to seek the directions in that behalf.

18. For the reasons aforesaid, the court committee is directed and authorised to take such appropriate measures and actions as prayed for in para F(4) and (5) of the summons as it may be advised for enforcement of the rights of the company under the aforesaid agreement of April 29, 1975, said to have been executed by respondent No. 1 in favour of the company.

19. Summons is accordingly disposed of.

20. Though no interim reliefs have been granted at the time of issuing notice on the present summons in the light of the statement made by learned Advocate, Shri A. S. Qureshi, on behalf of respondent No. 1 who has prayed that respondent No. 1 should be discharged from the obligation of that statement, I am of the opinion that in order to ensure that no prejudice is caused to the cause of the company in the matter of the aforesaid rights, ad interim relief of maintaining status quo in the matter of transfer of the said land of Borivli should be granted till May 15, 1982, so as to enable the committee to take such actions to protect its interest as it may be advised. It is accordingly granted.

21. Having regard to the facts and circumstances of this case, there should be no order as to costs.


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