IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY APPLICATION No 302 of 1999 in COMPANY PETITION No 157 of 1995 with Co. Application Nos. 360/98, 58/99, 66/99 and 244/2000 in Company Petition No. 139 of 1988 For Approval and Signature: Hon'ble MR.JUSTICE P.B.MAJMUDAR ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgement? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- ICICI LTD. Versus O.L. OF A'BAD MFG. & CALICO PRINTING CO.LTD. -------------------------------------------------------------- Appearance: 1. Company Application No.302 of 1999 Mr.Mihir Thakore for SINGHI & BUCH ASSO. for Petitioner MR ASHOK L SHAH for Respondent Nos. 1 and 2 MR DS VASAVADA for Respondent No. 3 MR RM DESAI for Respondent No. 4 MR PRANAV G DESAI for Respondent No. 5-7 NOTICE SERVED BY DS for Respondent No. 8 2. Company Application No.360 of 1998 Mr.D.S. Vasavada for the applicant. Mr.R.M. Desai for respondent No.5. 3. Company Application No.58 of 1999 Mr.Mihir Thakore for Singhi & Buch Asso. for the petitioner. Mr.Shalin Mehta for respondent No.1. Mr.D.S. Vasavada for respondent No.2. Mr.L.D.Dave and Mr.R.M. Desai for respondent No.3 Mr.P.G. Desai for respondent No.6. Respondents 4 and 5 served. 4. Company Application No.66 of 1999 Mr.Mukul Sinha for the applicant. Mr.Pranav G. Desai for respondents 2 and 4. 5. Company Application No.244 of 2000 Mr.D.S. Vasavada for the applicant. Mr.Mihir Thakore for Mr.Singhi & Buch for respondent No.3. Mr.R.M. Desai for respondent No.4 Mr.Pranav G. Desai for respondent No.5 -------------------------------------------------------------- CORAM : MR.JUSTICE P.B.MAJMUDAR Date of decision: 19/01/2001 C.A.V. JUDGEMENT 1. Company Application No.302 of 1999 has been filed by the applicant ICICI Limited for following prayers :- " ... ... ... (A) This Hon'ble Court may be pleased to direct the Official Liquidator acting as Liquidator of Ahmedabad Jubilee Mills Limited (in liquidation) to hand over the properties, both movable and immovable, more particularly described in the Schedule to the Agreement dated 24.6.1983 between The Ahmedabad Mfg. & Calico Prtg. Co. Ltd. and Gaurav Chemtex Industries Ltd being property of The Ahmedabad Mfg. & Calico Prtg. Co. Ltd. (in liquidation) and the Official Liquidator acting as Liquidator of The Ahmedabad Mfg. & Calico Prtg Co. Ltd. (in liquidation) to take into custody and / or under his control all the properties forming part of The Ahmedabad Mfg. & Calico Prtg Co. Ltd (in liquidation) which are presently in possession of the Official Liquidator acting as Liquidator of Ahmedabad Jubilee Mills Limited (in liquidation); (B) This Hon'ble Court may be pleased to direct the Official Liquidator to transfer the amount realised out of sale of the plant and machinery, fixtures, furniture, spares, stores, etc. and presently lying as deposit in the Account of the Ahmedabad Jubilee Mills Ltd (in liquidation) to the account of The Ahmedabad Mfg. & Calico Prtg Co. Ltd (in liquidation for being applied to discharge the liabilities of The Ahmedabad Mfg. & Calico Prtg. Co. Ltd (in liquidation) to its secured creditors and workers. ... ... .... " 2. It is the case of the applicant that the applicant is a Company and is a financial institution established, inter alia, to function as the principal credit and lending agency for promotion of diverse industries. The Ahmedabad Manufacturing & Calico Printing Co. Ltd. (in liquidation) (which will be referred hereinafter as `Calico', for short), vide its letter dated 7th April, 1983, sought the approval of the applicant Company for the purpose of approval to the proposed reorganisation of Calico and the applicant agreed, in principle, to the proposed reorganisation subject to certain terms and conditions. One of the conditions was that the term loans availed from the financial institutions would be retained by Calico itself and would not be transferred to the subsidiary companies. Further, the properties of the subsidiary companies would continue to be charged to the financial institutions. That certain other terms and conditions have been mentioned in paragraph 3 of the present application. It is the say of the applicant that the Calico on 24.6.1983 entered into an agreement with one Gaurav Chemtex Industries Ltd. and by the said Agreement, Calico had agreed to transfer the undertaking, business and operation of its Division, known as "Jubilee Unit" to Gaurav Chemtex Industries Ltd. Said Gaurav Chemtex Industries Limited was subsequently renamed as "Ahmedabad Jubilee Mills Ltd." (`Jubilee', for short). Under the said Agreement, certain properties, movable and immovable, of Calico, belonging to the Jubilee Unit, and more elaborately mentioned in the Schedules to the said agreement were proposed to be transferred to Gaurav Chemtex Industries Ltd. According to the applicant, the said properties of Jubilee were charged to the applicant and accordingly, any transfer if and when effected would only give to the purchaser the right in the said properties less the amount due and payable to the applicant as to that extent, the applicant had proprietary interest in the said properties. It is further the say of the applicant in the application that various loans were advanced by the applicant to Calico and to secure the due payment of various loans advanced from time to time by the applicant to Calico, Calico created charges over all its movable and immovable properties including the properties belonging to its Division, Jubilee Unit, and for that purpose, various deeds of hypothecation on various dates were executed. It is the say of the applicant that Calico also created charge over its immovable properties in favour of the applicant by executing undertakings to create mortgage in respect thereto in favour of the applicant. It is also the say of the applicant that all the movable and immovable properties belonging to Calico, including the movable and immovable properties of its Jubilee unit have been charged to the applicant. It is also the say of the applicant that the applicant was not a party to the Agreement entered into between Calico and Gaurav Chemtex Industries Ltd. and neither the terms thereof bind the applicant nor curtail their rights in any manner nor it would relieve Calico of its obligation with respect to its liabilities towards the applicant. According to the applicant, Calico continues to be liable and the said properties and the charge created thereupon continue to be valid in favour of the applicant. 3. It is also their case that no movable or immovable properties of Calico have actually been transferred or conveyed by Calico to Gaurav Chemtex Industries Limited / Ahmedabad Jubilee Mills Ltd. (in liquidation) and the said properties continue to be owned by Calico and even though the possession of the said properties was handed over to Gaurav Chemtex Industries Ltd. / Ahmedabad Jubilee Mills Ltd. (in liquidation), the ownership in the said properties was never transferred by Calico to Jubilee and the said properties continue to remain in the ownership of Calico. It is also the say of the applicant that in response to an application moved by the Official Liquidator for possession of 128 looms which were agreed to be transferred under an agreement dated 24.6.1983 by Calico to Jubilee, Calico filed an affidavit categorically stating that the said looms had not been conveyed to Jubilee and are still of the ownership of Calico. 4. According to the applicant, various movable and immovable properties which came into the possession of the Official Liquidator acting as Liquidator of Jubilee, on Jubilee being wound up, are not the properties owned by the Jubilee, but are owned by Calico and that the Official Liquidator acting as Liquidator of Jubilee has sold certain plant and machinery purportedly belonging to Jubilee and has realised the sale proceeds therefrom. According to the applicant, sale realisation out of such sale of the plant and machinery by the Liquidator of Jubilee and other properties movable and immovable which are in possession of the Liquidator of the Jubilee and which have still not been disposed of are owned by Calico and are required to be handed over by the Liquidator of the Jubilee to the Official Liquidator acting as Liquidator of Calico for being applied towards the liabilities of secured creditors and workers of Calico (in liquidation). 5. It is the grievance of the applicant that the action of the Official Liquidator acting as Liquidator of Jubilee to sell and dispose of the properties of Calico without verifying whether the said properties belong to Jubilee or not is ex facie illegal. It is also the case of the applicant that since Calico had obtained various loans from the applicant and had also undertaken to create mortgage on its immovable properties in favour of the applicant and other financial institutions, Calico filed an Application under Section 536(2) of the Companies Act, inter alia, seeking sanction of the Gujarat High Court to validate the said transactions involving disposition of the properties by Calico as the loans were obtained by Calico in the ordinary course of business and for the purpose of meeting its obligations and keeping its business going. The said application was registered as Company Application No.10 of 1991 in Company Petition No.27 of 1987, and the Company Judge, by his order dated 6.5.1992, declared that any financial arrangement which may be entered into by Calico after commencement of winding up and which may entail disposition of the properties shall not result in any such disposition of the properties and the disposition of the properties which may take place to be void. 6. O.J. Appeal against the said order was dismissed, but the Special Leave Petition, which was preferred by the applicant before the Honourable Supreme Court, was registered as S.L.P. (Civil) No.10278 of 1995 and the Honourable Supreme Court, by its order dated 11.12.1995, was pleased to issue notice and subsequently, leave was granted. It is the case of the applicant that in the stay application, the Apex Court passed an order of status quo with respect to the properties of Calico in question. It is the say of the applicant that in view of that, the properties of Calico cannot be put to sale. However, the Advocates of both the sides, ultimately, submitted that the issues involved in the present applications are different as ultimately, it is required to be considered whether certain properties belong to Calico or Jubilee and accordingly, as per the submission of the Advocates, the status quo order granted by the Supreme Court has nothing to do with the controversy so far as the present application is concerned. 7. The applicant has also further stated that they have preferred Company Application No.58 of 1999 in Company Petition No.139 of 1988, by which it is prayed that the Official Liquidator of Jubilee Mills Limited (in liquidation) be restrained from dealing with any of the assets of Jubilee Mills Ltd. (in liquidation), including the realisations out of the sale of its assets (excluding land and building) till such time as the Civil Appeal No.4410 of 1997 filed by the Applicant before the Supreme Court is disposed of. 8. On the aforesaid averments, the present Company Application No.302 of 1999 has been filed by the present applicant. It is the say of the applicant that the Official Liquidator, acting as Liquidator of Jubilee cannot sell and dispose of the properties, which actually belongs to Calico. It is the say of the applicant that the ownership of the said property cannot be said to have been transferred legally in favour of Jubilee as full consideration has not been paid. For that purpose, the applicant has relied upon the statement of affairs of Jubilee. It is also the say of the applicant-Company that the properties which are in possession of Jubilee are subject to the charge of the applicant as the applicant is a secured creditor with respect thereto, and the applicant stands outside the winding up and is entitled to take over possession of the said properties and also will be entitled to the realisation from the sale thereof from the Liquidator of Jubilee through the Official Liquidator of Calico for being applied towards its dues. It is averred in the application that the amount realised by the Official Liquidator as Liquidator of Jubilee has also to be utilised for discharging the liabilities of the secured creditors and workers of Calico and that the same cannot be utilised for discharging any liability of Jubilee. It was prayed that the O.L. of Jubilee (in liquidation) should be restrained from disbursing any amount realised out of the sale of the properties in question. 9. So far as Company Application No.360 of 1998 is concerned, the same has been filed by the Textile Labour Association against the O.L. of Jubilee Mills Ltd. for necessary direction against the O.L. in charge of the affairs of the Jubilee Mills Limited for payment of certain amount to the workers of Jubilee. It is submitted in that application that Jubilee Mills Ltd. has been ordered to be wound up by this Court by passing order in Company Petition No.139 of 1986 and the Liquidator has already taken possession of the assets of the Company and that the Sale Committee has already been appointed in Company Application No.200 of 1996 for disposing of plant and machinery and that the sale has already been confirmed by this Court and that an amount of Rs.4/-crore-odd are lying with the Official Liquidator. Accordingly, appropriate directions were sought for in that application for disbursement of the amount. All secured creditors of the Company are also joined as parties in that application. However, it seems that there was some dispute whether I.C.I.C.I. was a secured creditor of Jubilee Mills (in liquidation) or not. 10. So far as Company Application No.66 of 1999 is concerned, that has been filed in the matter of Jubilee Mills (in liquidation), i.e. in Company Petition No.139 of 1988. . That application is filed on behalf of seven workmen of the Jubilee Mills Limited (in liquidation). It was stated that those workmen are not members of the T.L.A. and, therefore, separate application has been filed by them regarding their claim. It is pointed out in that application that as per the Statement of Affairs filed on 19.11.1990 under Section 454 of the Companies Act, 1956, the I.C.I.C.I. is not shown as secured creditor and, therefore, I.C.I.C.I. is neither fully nor partly a secured creditor and that the Statement of Affairs does not show any loan whatsoever being taken by the Jubilee Mills Limited (in liquidation) from the I.C.I.C.I. So, as per the said application, I.C.I.C.I. has no security whatsoever against any of the assets of the Jubilee Mills Limited (in liquidation) and that the I.C.I.C.I. is not a creditor qua the Jubilee Mills Limited. Ultimately, it was prayed that the Liquidator may be directed to disburse the dues of the applicant-workmen and that it should be declared that the I.C.I.C.I. is not a secured creditor in relation to Jubilee Mills Limited (in liquidation) and to declare that the I.C.I.C.I. has no claim whatsoever against Jubilee Mills Limited (in liquidation). 11. So far as Company Application No.244 of 2000 is concerned, the same has been given by the T.L.A. in the matter of Jubilee Mills Limited (in liquidation) and by the said application, it is prayed that the Sale Committee may dispose of the and land building of Jubilee Mills Ltd. (in liquidation) and may also dispose of the Sewing Thread Plant of the Jubilee Mills Ltd (in liquidation), which is lying in the compound of Calico Mills and it is also prayed to direct the existing Committee to dispose of the GPD and Coal ashes, Pasti and Raddi of the Jubilee Mills Ltd. (in liquidation). 12. Accordingly, so far as Company Application Nos.58 of 1999 and 302 of 1999 are concerned, the aforesaid applications have been filed by I.C.I.C.I. Limited, wherein they have asserted their rights over the property in question. As stated earlier, so far as Company Application No.302 of 1999 is concerned, the same is filed against the O.L. of Calico Printing Company Ltd. (in liquidation) and so far as Company Application No.58 of 1999 is concerned, the same has been filed in the matter of Jubilee Mills Ltd. (in liquidation). The basic contention of the I.C.I.C.I. Limited in the aforesaid applications are to the effect that the property has not passed legally from Calico to Jubilee and that the I.C.I.C.I. is, even otherwise, the first charge-holder over the said property which is in possession of the Liquidator of Jubilee. So far as other Company Application Nos. 360 of 1998, 66 of 1999 and 244 of 2000 are concerned, the same, as stated earlier, are at the instance of T.L.A. as well as the workmen for disbursement of the amount and for necessary direction against the Liquidator of Jubilee Mills Ltd. (in liquidation). 13. In all these Applications, therefore, the basic question which requires to be considered is whether the property in question can be said to be of Jubilee Mills Ltd. (in liquidation) and whether I.C.I.C.I. can be said to have any charge over the aforesaid property which is in the possession of the Liquidator of Jubilee Mills Ltd. (in liquidation). 14. During the pendency of the aforesaid applications, another Application was given by the I.C.I.C.I., being Company Application No.382 of 2000 in Company Application No.302 of 1999, in the matter of Calico (in liquidation), wherein it is prayed that the Official Liquidator of Jubilee Mills be directed to disclose before the Court the amount of consideration alleged to be paid by Jubilee Mills Ltd. (in liquidation) to Ahmedabad Manufacturing and Calico Printing Co. Ltd. (in liquidation) in pursuance of Agreement dated 24th June, 1983 for the properties transferred thereunder by Calico Mills Ltd. to Gaurav Chemtex Industries Ltd. 15. There are certain factual aspects which are required to be considered in the present proceeding. On 23.5.1983, Calico had entered into an agreement for reorganisation of the Jubilee Mills and on 29.5.1983, plant, machinery, land and building were transferred to Jubilee Mills Limited. Till 9th March, 1987, the Jubilee Mills worked as a separate legal entity under the Companies Act and it was registered as a separate Company as Jubilee Mills. On 5.9.1989, the High Court passed an order winding up Jubilee Mills. 16. Since the parties have addressed the Court in Company Application No.302 of 1999, wherein the basic controversy about the right, title and interest of I.C.I.C.I. Limited is the subject matter, the detailed reasons are given in the aforesaid Company Application No.302 of 1999. 17. It is argued by Mr.Thakore, appearing for I.C.I.C.I. Limited that I.C.I.C.I. is a creditor of Calico and is interested in protecting the assets of Calico, which would enure for the benefit of the secured creditors, workers and other creditors of Calico. I.C.I.C.I. has, therefore, locus standi to file the present application seeking reliefs claimed therein. It is stated by Mr.Thakore that all the movables of Calico as existing prior to 1983 and even thereafter are hypothecated to I.C.I.C.I. So far as the immovable properties of Calico are concerned, various undertakings were given from time to time by Calico to mortgage all the properties in favour of I.C.I.C.I. and that, therefore, an application was filed by Calico before this Court for permission to mortgage the properties to I.C.I.C.I. and the matter is ultimately pending in the Supreme Court. It is his say that sale of movables, i.e. plant and machinery, hypothecated by Calico in favour of I.C.I.C.I., was effected by the Sale Committee appointed by this Court and the proceeds thereof are lying with the O.L. of Jubilee. Regarding immovable property, it was argued by Mr.Thakore that the immovable properties, owned by Calico, can only be transferred by registered conveyance executed by Calico in favour of Jubilee and in absence of registered conveyance, the immovable properties would continue to be owned by Calico. To substantiate his contention, Mr.Thakore has relied upon the provisions of Section 54 of the Transfer of Property Act and the provisions of Section 17 of the Indian Registration Act. According to him, therefore, there was no conveyance in the eye of law so far as the immovable properties are concerned. He, therefore, submitted that all the immovable properties of Calico situated at its Jubilee Unit, including the land and building, referred to in the aforesaid Agreement dated 24.6.1983 have never been conveyed or transferred from Calico to Jubilee and, therefore, Calico continues to be its owner and no right, title or interest is conferred in favour of Jubilee so far as immovable properties are concerned. It is also further argued by Mr.Thakore that as per the Statement of Affairs filed in the case of Jubilee by the ex-Directors of Jubilee, it is clearly established that Jubilee does not own any immovable properties and the Directors thereof have never claimed any ownership rights in any immovable properties. The balance sheet shows fixed assets, which only comprise of plant, machinery, furniture and vehicles, but does not disclose any land and building. It was also argued by Mr.Thakore that Jubilee has never paid any consideration as agreed as per the agreement dated 24.6.1983 and since no consideration is paid, Jubilee has not acquired any title over the aforesaid immovable properties. In his submission, since Jubilee does not own any immovable properties, the Official Liquidator of Jubilee ought to hand over the immovable properties to the Official Liquidator of Calico and he cannot sell or dispose of any such properties, in as much as, Jubilee has no right, title or interest over the same. Mr.Thakore has also further argued that Jubilee also cannot be said to have become owner by adverse possession as Jubilee has come into possession of the immovable properties pursuant to an agreement dated 24.6.1983 between Calico and Jubilee and the possession of Jubilee is a permissive possession or, in any case, possession as a licensee pursuant to the agreement and, therefore, the said possession cannot be said to be adverse to the real owner. 18. Mr.Thakore has relied upon certain judgments, to which I will refer later on. 19. Mr.Thakore, for the applicant, has also further argued that since there is no transfer in the eye of law, no doctrine of estoppel can be made applicable against them. Simply they might have agreed for selling certain properties and, therefore, according to him, estoppel cannot apply against them. In his submission, even Section 53A of the Transfer of Property Act also cannot be made applicable as it cannot be said that Jubilee was ready, willing and prepared to perform the entire part of their contract as they have failed to show that they were ready to perform their part of the contract continuously and if there is a conditional willingness or partial willingness, benefit of Section 53A is not available. It is also stated that any discharge of liabilities by Jubilee of Calico would not amount to payment of consideration by Jubilee to Calico and it would only be discharge of its own liabilities, which have been taken over since `consideration' is defined in the agreement as "the difference between the value of the assets and liabilities as on the close of business on 29.6.1983". According to Mr.Thakore, since Jubilee has not paid the consideration, it has failed to perform its part of the contract and, therefore, it is not entitled to raise any defence of part performance. 20. So far as the movable properties of Calico are concerned, it is argued by Mr.Thakore that they were agreed to be transferred as per the composite agreement dated 24.6.1983. The said agreement provides for transfer of immovable and movable properties and when there is an agreement to transfer both, i.e. movable and immovable properties together,