TMI Blog2016 (3) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 392 which is both ubiquitous and unregulated. In other words, the maxim exclusio unis est exclusio alterius (which means "mention of one thing implies the exclusion of another") squarely applies to this case. The other feature peculiar to this case is that the power of the Company Court to decide upon matters and disputes which do not directly relate to its jurisdiction, apart from being limited in its operation to what is expressly stated in Section 446, is also excluded in relation to matters and causes which are to be tried by Tribunals and Courts of exclusive jurisdiction. Thus, it was ruled in Indian Bank v Official Liquidator [1998 (5) TMI 342 - SUPREME COURT OF INDIA ] that even under Section 446, the Court does not possess the power to set aside the order of a tribunal constituted under a rent control legislation. Thus the Company Court acted correctly in refusing to exercise jurisdiction under Section 392 having regard to the nature of reliefs claimed by the appellants - CO. APP.19-25/05, 26-32/05, 52/05, 84/05, 53/05, 85-88/05, 83/05, 33-39/05 & 89-92/05 - - - Dated:- 29-2-2016 - S. Ravindra Bhat And Deepa Sharma, JJ. For the Petitioner : Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed. The relevant claims in these applications were for directions to retrieve possession of various properties, of which the company was a tenant at some point in time. It was contended that the company was in possession of these premises and was using it for its business. The company contended that directions under Section 392 of the Act were necessary for the proper implementation of the Scheme. 4. The respondents were third parties and they contested the claim of the applicant/company on diverse grounds. Some of them alleged that they were lawful tenants of the premises, which was made over to them by the landlord after the previous tenant, i.e the company had been evicted. These third party respondents also stated that their possession was settled since they were paying rents to the concerned landlords. Additionally, it was urged that the rent legislation applicable and in force in various States protected their possession and that the company could not seek recourse to Section 392. 5. The appellants had relied upon the order dated 26.05.1978, particularly, Clause 8 of the sanctioned Scheme which talked about the jurisdiction of the Company Court to oversee its impleme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to entertain and adjudicate the disputes. The applicants had relied upon the judgements of the Supreme Court reported as S.K. Gupta and Anr. v. K.P. Jain Anr. 1979 (3) SCC 54; Sudershan Chit (India) Limited v. O. Sukumaran Pillai and Ors. 1985 (58) Comp. Cas 633; Divya Vasundhara Financiers Ltd. v. K.N. Samant 1990 (69) Com. Cas. 646 and J.K. (Bombay) (P) Ltd. v. New Kaiser-Hind Spg Wvg. Co. Ltd. and Ors. Etc. 1969 (2) SCR 866. 6. The respondent/objectors contended that the Court did not possess jurisdiction under Section 392 as alleged by the appellant. It urged that the Scheme had achieved its object and that the company's direct creditors had been paid off. There was no request for winding-up of the company or appointment of the Official Liquidator attached to the Court. It was also pointed out that over ₹ 70 lakhs was lying to the credit of the company and furthermore, an application - C.A. No.403/1997 was pending, where it was stated that the purpose of the sanctioned Scheme had been achieved. The respondent also contended that the order of 26.05.1978 did not empower the propounders or the Administrator to file applications. The main objective to be achiev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the judgment of the Supreme Court in the case of S.K. Gupta (supra) and Divya Vaundhara Financiers Ltd. Vs.K.N. Samant [1990] 69 Comp Cas 646. 36. However, it may be noted that in S.K. Gupta (supra) the Court was dealing with the aspect of modification of the scheme at the instance of the applicant who was not the original propounder. Whether such person could move application for modification of the scheme was the question for consideration before the court and dealing with this question, the Court held that Section 392 does not specify that a member or creditor or in the case of a company being wound up, its liquidator, can alone move the Court under Section 392. The Court took the view that the expression any person interested in the affairs of the company could moved the Court for necessary modification and the Court can make such modifications for proper implementation of the scheme. The question posed here is totally different. The relief is claimed against the third parties and matter does not related to the modification of the scheme. S.K. Gupta (supra) was considered in the case of Divya Vasundhara 1984 (56) Comp Cas 487 and after quoting relevant portion thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it was held that it enabled the adjudication of rights of parties if the disputes were of a complex civil nature which required trial on facts. As a result of this discussion, the applications were dismissed. 9. Learned counsel for the appellants urged that the impugned judgment is in error of law. It was argued that the learned Single Judge placed an erroneous interpretation of Clause 8 as well as Section 392. Learned counsel relied upon the orders dated 27.03.1980 and 28.11.1990 to urge that restoration of various godowns and offices to the company was an integral part of the objectives underlining the sanction of the Scheme itself. Likewise, orders of the Company Court dated 04.12.1984 and 29.01.1985 were relied upon. 10. Learned counsel argued that Clause 8 read with Section 392 provided a mechanism for the effectuation of the Scheme. The peculiarity of the business carried on by the company, i.e. transport, was such that godowns and other premises were essential for its functioning. During the pendency of long drawn proceedings, Directors of the company and their relatives had not only siphoned off the assets but colluded with previous landowners of the premises resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, or such claim or question has arisen or arises or such application has been made or is made before or after the order for the winding up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) 3 [***] (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a high Court. 13. Both parties have extensively relied upon S.K. Gupta (supra). The issue there was that after a Scheme was sanctioned under Section 391, the Court modified it under Section 392 by substituting a third party as proponents and rejected an application for winding-up of the company. The High Court permitted the substitution of the original propounder. The Supreme Court held that the modification constituted a change of a basic nature that could not be brought within the framework of Section 392. After considering the text of Sections 391 and 392 as well as previous decisions in J.K. (Bombay) (supra) and Mansukh Lal v. M.V. Shah 1976 (46) Comp. Cas 279, where the power of the Court to continue supervising of a compromise was termed as one extending to, unenvisaged, unanticipated, unforeseen or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 already mentioned, is that all such directions that the Court may consider appropriate to give or make such modifications in the scheme, must be for the proper working of the compromise and/or arrangement. 14. The Court also noticed Section 2(29) of the Act which defines the expressions, modify and modification as, including making of additions and omissions. Thereafter, it was held: According to the definition 'modify' and 'modification' would include the making of additions and omissions. In the context of s. 392 'modification' would mean addition to the scheme of compromise and/or arrangement or omission therefrom solely for the purpose of making it workable. Reading s. 392 by substituting the definition of the word 'modification' in its place, if something can be omitted or something can be added to a scheme of compromise by the Court on its own motion or on the application of a person interested in the affairs of the company for the proper working of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court held that even though the power under Section 392(1) is of wide amplitude, there are in-built limitations in the provision itself. The in-built mechanism can be invoked only for the purpose of working out a proper arrangement; it was further stated that: The power cannot be invoked for purposes of determination 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 or interest in fact or in law. 17. In Reliance Natural Resources Ltd v Reliance Industries Ltd 2010 (7) SCC 1, it was held by the Supreme Court (after considering the decision in SK Gupta) that: 155. It is true that in paragraph 26 of the said decision it was stated that if something can be omitted or something can be added to a scheme of compromise by the Court, on its own motion or on the application of a person interested in the affairs of the company then there ought not to be any justification for restricting the meaning of the word of modification and whittle down the powers of the court. However, the next paragraph holds the key to the judgment that the basic fabric of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and its members or between the company and its creditors or any class of the members or creditors and whether for amalgamation, reconstruction of the company or for the payment of its creditors, made provision for the manner in which the creditors of a company have to be paid, as a compromise or arrangement between the company and its creditors normally would, it is doubtful if the court would have any power either under Section 392 or Section 394 of the Act of 1956 or under the corresponding provisions of the Act of 1913 to make the direction of the kind sought by the petitioner and become a forum capable of making a decree or an executable order having the force of a decree, which is what the appellant in effect seeks. Section 392 of the Act of 1956, which confers much wider powers on the court than were conferred under the Act of 1913, does not empower the court to make any such direction and the only effect of the sanction of the compromise or arrangement between the company and its creditors would be that the parties become bound by the terms of the arrangement but if in terms of the arrangement payment is not made it could only invoke Sub-section (2) of Section 392 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the Scheme with some modifications. At the same time, in the course of the judgment, the Company Judge had expressed certain reservations in the following terms: This brings me to consider what should be done about the scheme. Strictly speaking I should not approve the scheme because the necessary material is not before the Court but the choice before the Court is also a very poor one because if the scheme is rejected and the company is wound up then I see precious little hope for the creditors because even the Committee of Management has not been able to get at the assets. On the other hand, how is the Court to comply with the requirements of Sec. 391(2) of the Companies Act. If the original board of Directors of the company has been responsible for not maintaining the books etc. then there would be a ground for refusing the scheme. Unfortunately, the present position has emerged when the Court itself had appointed a Board of Management consisting mainly of lawyers who have not been able to do much in the matter of recovering the assets or tracing out the same. I, thus, feel that I should not reject the scheme merely because in this very special case the latest financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court at an earlier date may be substituted by other persons during the currency of the scheme by orders of this Court. 19. Some features of the Scheme were modified and directions were also issued by the judgment delivered on 27.03.1980. That judgment recounted the steps taken and directions made earlier to secure possession of a godown located at Naya Bazar. The legal proceedings emanating from it had found its way to the Supreme Court after appeals were disposed of. Further directions/modification inter alia were to the following effect: H. The Administrator would take immediate steps for the reconstruction and completion of the accounts of the Company todate and have the same audited by an approved auditor. The Administrator would also prepare an inventory of godowns, offices, other moveable and immoveable property of the Company, which according to the record of the Company was owned or was in possession of the Company, make an investigation as to who was in possession of these properties, as also the circumstances in which and the authority under which the possession may have been delivered to or taken and to take all steps what may be necessary for the restorati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable proceedings, when concededly there never was an impediment to their institution, prosecution or execution. In other words, Section 446 never operated, because there was never any winding up order. Such being the case, there was no bar to the maintainability of such eviction proceedings, before the lawfully constituted tribunals empowered to try them. The culmination of those proceedings, in the form of eviction decrees took place in some cases, in 1976 even before the sanction of the scheme under Section 391. In these circumstances, whatever be the intent or assumed intent of the propounder, the Company Court could never have exercised jurisdiction. 22. An aspect- and one important in this case, which was touched upon in Sudershan (supra), in a tangential manner (because the issue was never directly in question in that case) is that Section 446 of the Act applies only when a winding up order subsists. The next vitally important fact is that except Section 446 (and dependent on the conditions which are to be fulfilled as spelt out by it) there is no other power under the Companies Act, authorizing the Company Court to exercise universal jurisdiction, as it were, and adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X
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