2025 (7) TMI 1342 - HC - Companies Law

Recall Application Dismissed: No Suit Filed, Time-Barred Agreement, and Limited Company Court Powers Under Companies Act 2013

The HC dismissed the recall application challenging the 1987 order and the disclaimer of the property in winding up proceedings. The court held that the ... Recall of an Order - order passed in the absence of the present applicant - suppression of material facts - Section 53A of the Transfer of Property Act - Powers of the Company Court in winding up proceedings - The effect of Section 53A of the Transfer of Property Act - Effect of dismissal of the applicant’s application for enforcement of the 1987 order - order under recall was otherwise valid in law or not - Locus standi of the applicant - Whether there has been any suppression of material fact - Existence of ground for recall. Powers of the Company Court in winding up proceedings - legal effect of the direction passed by the Company Court vide order dated August 14, 1987 - HELD THAT:- Looking into the powers of the Company Court, Section 273(1)(e) of the Companies Act, 2013 (for short, “the 2013 Act”), in its residuary portion, confers power on the Company Court to pass “any other order”. However, the principle of ejusdem generis applies and such “any other order” cannot be on a higher footing than the previous powers given to the said court, which relate to the interests of the company in a restricted mode - Section 180(a) of the 2013 Act empowers the Company Court, in a winding up proceeding, to entertain any suit/proceeding by or against a company which indicates that to assert the right of the company available in civil law, the company had to file a proper suit which can at best have been entertained by the Company Court. The Company Court would step into the shoes of a Civil Court in such event and could not have greater powers than the Civil Court de hors the law. Even the Civil Court could not pass a decree for specific performance without a judgment on trial. Several factors such as whether the company was ready and willing to perform its part of the contract and other aspects of the matter such as whether the possession of the property was ever handed over “in terms of the agreement” were to be looked into on evidence by the Company Court even if such a suit was entertained - since no suit for specific performance of the agreement for sale has been filed and the statutory limitation period has already expired in that regard, the agreement, even existent, would be toothless at the juncture when the order under recall was passed and could not be specifically enforced in law. Thus, the powers of the Company Court, if read in the light of the Companies Act, 2013 as well as the Transfer of Property Act, 1882 and Section 9 of the Code of Civil Procedure, are restricted. As such, the legal effect of the order dated August 14, 1987 could not operate virtually as a decree of specific performance mandating the DA to execute a conveyance, that too, without the pre-condition of registration of the agreement, incorporated in the self-same order, being complied with. The effect of Section 53A of the Transfer of Property Act - HELD THAT:- In view of the expiry of the limitation period, there is no subsisting enforceable contract in favour of the Company (in Liquidation). Thus, the rigours of Section 53A of the Transfer of Property Act, the pre-condition of which is the subsistence of a valid agreement between the parties, cannot be applied - Secondly, it is an admitted position that the Company (in Liquidation) was a lessee in respect of a part of the property-in-question and a licensee in respect of the other part. Thus, it was already in possession of the property prior to the execution of the purported agreement for sale. That being so, it was required to be proved by evidence and adjudicated, as in a regular civil suit for specific performance of contract, as to whether the possession could be construed to have been handed over or continued in terms of the agreement or continued by virtue of the prior jural relationship of the lessor-lessee/licensor-licensee between the company and the DA. Such an exercise was never undertaken by any court, simply because no suit for specific performance of the contract was instituted at any point of time, be it before the Company Court or a regular civil court - Hence, it cannot be said that the bar under Section 53A of the Transfer of Property Act is ex facie applicable. Thus, the reliance of the recall applicant is misconceived. Effect of dismissal of the applicant’s application for enforcement of the 1987 order - HELD THAT:- It is an admitted position that as long back as in the year 2018, the applicant’s own application for enforcement of the order dated August 14, 1987 by execution of a conveyance in favour of the company was dismissed for default. Thus, the principle embodied in Order IX Rule 9 of the Code of Civil Procedure is attracted and the applicant is, even otherwise, debarred from urging the same claim by way of the present recall application. It is well-settled that what a person cannot directly do in law, cannot be done indirectly as well. Whether the order under recall was otherwise valid in law? - HELD THAT:- Section 333 of the Companies Act, 2013 provides for disclaimer regarding properties of the company burdened with onerous covenants. In absence of a valid and enforceable agreement in law, at present juncture or at the juncture when the disclaimer order was passed, the subject-property was an onerous burden on the Company (in liquidation), since it had to clear off the huge amounts of arrears of occupation charges in lieu of rent as well as licence fees for the subject-property. Such burden could easily be construed to have offset the consideration amount which was allegedly paid by the Company (in Liquidation) to the DA. In any event, the fact of such payment of full consideration amount had to be established by evidence, in absence of which, it cannot be said that the Company (in Liquidation) performed its part of the agreement - Even otherwise, in absence of enforcement of the purported agreement for sale, the title remained all along with the DA. Thus, the DA had a right in law for release of the property in its favour, since the property was never the asset of the company. Locus standi of the applicant - HELD THAT:- Section 2(26) of the 2013 Act defines a “contributory” as a person liable to contribute towards assets of a company in the event the company is wound up. Since the official stand of the O/L is that the secured creditors have already been paid off substantially and there is no further liability of the Company (in liquidation) in that regard, the applicant does not have any further interest in the company by virtue of being a contributory thereto. A contributory stands on the same footing as a shareholder otherwise and does not, per se, have any right or interest in the assets of a company. Thus, the applicant does not have any locus standi to file the recall application on the grounds stated therein. Whether there has been any suppression of material fact - HELD THAT:- None of the facts now pointed out, mostly centred around the existence of a purported agreement of 1980 for sale of the property in favour of the Company (in Liquidation), were relevant issued for the purpose of the disclaimer application. Hence, there was no suppression of any “material” fact to justify the recall of the order-in-question. Existence of ground for recall - HELD THAT:- It is well-settled that no order passed in a concluded proceeding (here, the disclaimer application of the DA) can be recalled unless there a gross error on the part of the court itself tantamounting to application of the principle of Actus Curiae Neminem Gravabit. Here, no case is being made out. Insofar as the recall application is concerned, no ground for review under Order XLVII of the Code of Civil Procedure has also been made out. No ground for recall of the order has been made out - Appeal dismissed. ISSUES: Whether an order allowing disclaimer application can be recalled on the ground of non-service of notice to the applicant.Whether suppression of material facts relating to a prior winding-up order and an agreement for sale affects the validity of the disclaimer order.The legal effect and enforceability of a Company Court order directing completion of sale of property in winding-up proceedings.Applicability of Section 53A of the Transfer of Property Act in the context of possession and agreement for sale in winding-up proceedings.Whether dismissal of a prior application for enforcement of the winding-up order precludes subsequent claims based on the same order.Validity of the disclaimer order under Section 333 of the Companies Act, 2013, considering the nature of the property and liabilities involved.Locus standi of a contributory to file a recall application challenging the disclaimer order.Whether there was any suppression of material facts justifying recall of the order.Whether any ground for recall or review under Order XLVII of the Code of Civil Procedure has been established. RULINGS / HOLDINGS: The contention of non-service was rejected as the advocate for the applicant had accepted notices and appeared in proceedings post the alleged date of shifting practice, making the ground for recall 'a mere camouflage'.The facts relating to the 1987 winding-up order and agreement for sale were not material to the disclaimer application and thus not suppressed in a manner justifying recall.The order dated August 14, 1987 was not a decree for specific performance but a procedural direction contingent on registration of the agreement, which never occurred; hence, it lacks enforceability as a specific performance decree.Section 53A of the Transfer of Property Act does not apply as there was no subsisting enforceable contract and possession was held under prior lessor-lessee or licensee relationships, not under the agreement for sale.The applicant's prior application for enforcement of the 1987 order was dismissed for default in 2018, invoking the principle that 'what a person cannot directly do in law, cannot be done indirectly as well,' barring revival of the claim via recall.The disclaimer order was valid as the property was an onerous liability to the company in liquidation, with no enforceable agreement transferring title, and thus the DA had a lawful right to release of the property.The applicant, as a contributory, lacked locus standi since all secured creditors have been paid and no further liability exists, and a contributory does not per se have rights in company assets.No suppression of material facts was established because the undisclosed facts were not relevant to the disclaimer application adjudication.No ground for recall or review under Order XLVII CPC was made out, as there was no gross error or miscarriage of justice warranting such relief. RATIONALE: The court applied the principles governing Company Court powers under the Companies Act, 2013, particularly Sections 273(1)(e), 180(a), and 333, emphasizing that the Company Court's jurisdiction is coextensive but not superior to that of a Civil Court in enforcing contracts and property rights.The principle of ejusdem generis limited the scope of 'any other order' under Section 273(1)(e) to orders consistent with the Company Court's statutory powers.The absence of a registered agreement and failure to institute a suit for specific performance within the statutory limitation period rendered the purported agreement unenforceable, negating any effect under Section 53A of the Transfer of Property Act.The court relied on procedural rules under the Code of Civil Procedure, including Order IX Rule 9 on dismissal for default and Order XLVII on review, to reject attempts to indirectly revive dismissed claims.Service of notice on a recognized agent (advocate) was held to be legally effective under Order III Rule 3(1) CPC, negating claims of non-service based on shifting of the advocate's practice location.The court distinguished between interlocutory/chamber orders and final decrees, noting that the 1987 order was passed in chambers and did not conclusively adjudicate title or specific performance rights.The court noted that contributories, defined under Section 2(26) of the Companies Act, do not have inherent rights to company assets absent outstanding liabilities, affecting locus standi in such matters.No dissent or doctrinal shift was indicated; the judgment adhered to established statutory interpretation and procedural principles.