1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO. 26 OF 2008 IN ARBITRATION PETITION NO. 377 OF 2007 ALONG WITH NOTICE OF MOTION NO. 1974 OF 2008 Delta Distilleries Limited ] a company registered under the ] provisions of the Companies Act, 1956 ] having its registered office at Alpha House, ] 3 Kartar Bhavan, Arthur Bunder Road, ] Mumbai-400 005 ]..Appellant/ [Ori.Petitioner] Vs. 1. Shaw Wallace & Company Ltd. ] a company registered under the ] Indian Companies Act, 1913 and having ] its Registered Office at 4, ] Bankshall Street, Calcutta ] 700 001 and branch office at ] Dunlop House, 132-A, ] Dr.Annie Besant Road, ] Worli, Mumbai – 400 018 ] 2. Shaw Wallace Distilliers Ltd. ] a company registered under the ] Companies Act, 1956 and having its ] Registered Office at 4, Bankshall Street ] Calcutta – 700 001 and branch office ] at Dunlop House, 132-A, ] Dr.Annie Besant Road, Worli ] Mumbai-400 018 ] 3. United Spirits Limited ] a company registered under the ] Companies Act, 1956 and having its ] Registered Office at Le Pare Richmonde ] 51, Richmond Road, Banglore- ] 560 025 ]...Respondents 2 .... Mr. Ravi Kadam, Senior Advocate along with Dr.Birendra Saraf, i/b Mr.C.T.Chandratre for Appellant Mr.Shiraz Rustomjee with Ms. Prembhari Thakkar i/b Ms.Desai and Chinoy for Respondents .... CORAM : B.H.MARLAPALLE AND SMT.V.K.TAHILRAMANI, JJ. DATE OF RESERVING JUDGMENT : 3rd FEBRUARY, 2010 DATE OF PRONOUNCING JUDGMENT : 11th FEBRUARY, 2010 JUDGMENT : [PER B.H.MARLAPALLE, J.] 1 This appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (the Act for short) and admitted on 28th November, 2008 arises from the order dated 27th November, 2007 passed in Arbitration Petition No. 377 of 2007 thereby dismissing the said petition filed under Section 34 of the Act by the present appellant. The present respondent nos.1 and 2 are the claimants against the appellant before the learned Arbitrator in the arbitration proceedings referred on or about 17th May, 2002 and on 10th July, 2007 an application came to be filed by respondent no.3 seeking to implead itself as the claimant no.2 in place of the present respondent no.2/original claimant no.2 and the said application came to be allowed by the learned Arbitrator on 12th July, 2007 3 though it was opposed by the appellant. 2 The original claimant no.2 i.e. Shaw Wallace Distilleries came to be merged with another company by name Maharashtra Distilleries Ltd. pursuant to the scheme of amalgamation sanctioned by this Court on 26th March, 2003 and the said scheme became effective from 10th April, 2003. On 12th May, 2003 the name of Maharashtra Distilleries Ltd. came to be changed to Shaw Wallace Distilleries Ltd. Shaw Wallace Distilleries Ltd. came to be merged with McDowell and Co. Ltd. pursuant to the scheme of amalgamation sanctioned by this Court on 7th August, 2006 and 5th September, 2006. On 17th October, 2006, McDowell and Co. Ltd. changed its name to United Spirits Ltd. and consequently, on 10th July, 2007 this new company i.e. United Spirits Ltd. submitted an application before the learned Arbitrator to bring it on record as the claimant no.2 in place of the original claimant no.2 i.e. Shaw Wallace Distilleries Ltd. 3 The learned Arbitrator in her order dated 12th July, 2007 noted that pursuant to the order passed by this Court on 7th August, 2006 and 5th September, 2006, Shaw Wallace Distilleries Ltd. and certain other companies were merged with the applicant i.e. McDowell and Company and the assets and liabilities, inter alia, of Shaw Wallace Distilleries came 4 to be vested in the applicant. Under the scheme of amalgamation all legal proceedings by or against Shaw Wallace Distilleries were to continue as if pending on behalf or against the applicant. The applicant became entitled to be substituted in the place of original claimant no.2 at the highest from 5th September, 2006 on which date, the applicant company came on the scene under the scheme of amalgamation. With effect from 12th May, 2003 the name of Maharashtra Distilleries Ltd. was changed to Shaw Wallace Distilleries Ltd. i.e. the name of the original applicant no.2 and Shaw Wallace Distilleries Ltd. came to be merged with McDowell and Co. Ltd. and its name was subsequently changed to United Spirits Ltd. (the applicant) with effect from 17th October, 2006. Hence, the applicant company became entitled to apply in its own name to be brought on record in the arbitration proceedings on 10th October, 2006. Thus, Shaw Wallace Distilleries Ltd. as the amalgamated company, was in existence from 12th May, 2003 till 5th September, 2006 and it could not be said that there was such a delay as it would dis-entitle the applicant to make the application for substitution. For these reasons, the plea raised by the present appellant that the application for its substitution was submitted beyond the period of limitation of three years, was rejected. It was further held that Article 120 read with Article 121 of the Limitation Act, 1963 had no application as it was not the case where the plaintiff/applicant had died. Reliance was placed on clause 17 of the amalgamated scheme 5 sanctioned on 5th September, 2006 and it was noted that it provided for the suit/appeal or other proceedings by or against the transferor company and it was not abated or discontinued but the said proceedings would be continued by or against McDowell and Co. Ltd. (renamed as United Spirits Ltd.), in the same manner and to the same extent as by or against the transferred company as if the scheme had not been made. The learned Arbitrator noted that the present appellant had also submitted an application to bring the applicant company on record in its counter claim and the same application also was allowed. 4 In Arbitration Petition No. 377 of 2007, the following issues were raised by the appellant: (1) Upon sanctioning of the Scheme of Amalgamation by this Court, the original second claimant ceased to have any existence in the eyes of law; (2) The claim of the second claimant must be deemed to have abated upon the sanctioning of the Scheme of Amalgamation; (3) An application for bringing on the record the successor or merged company ought to have been made within the period prescribed by Articles 120 and 121 of the Schedule to the Limitation Act, 1963 or at any rate, within the period prescribed by Article 137; (4) The application that was moved before the Arbitrator was in any 6 event, beyond the period of three years from the date of the order of this Court dated 26th March, 2003 sanctioning the Scheme of Amalgamation and was, therefore, beyond limitation. 5 The learned Single Judge considered the rival contentions on all these four issues and recorded findings against the appellant while dismissing the petition. 6 In the present appeal, almost the same issues but in a different format, have been raised by the appellant. Shri.Kadam, the learned Senior Advocate appearing for the appellant submitted that (1) upon sanctioning of the Scheme of Amalgamation by this Court on 26th March, 2003 and the said Scheme having come into effect from 10th April, 2003, the original second claimant ceased to have any existence and it is deemed to be dead, (2) the claim of the second claimant must be deemed to have abated upon the Amalgamation Scheme brought into effect from 10th April, 2003, in view of the provisions of Order XXII Rule 3 of the Civil Procedure Code, unless an application for bringing on record the successor or merged company was made within the period prescribed by Articles 120 and 121 of the Schedule to the Limitation Act, 1963, (3) the application could not have been made under Order XXII Rule 10 of the Civil Procedure Code and (4) in any case, such an application under 7 Order XXII Rule 10 ought to have been made within a period of three years from 10th April, 2003 and as the said application was made on 10th July, 2007, it was beyond limitation and therefore, ought to have been rejected. In support of these contentions, reliance has been placed on the following decisions: i) S.K.Gupta and another Vs. K.P.Jain and another [(1979) 3 S.C.C. 54]; ii) Rikhu Dev Chela Bawa Harjug Dass Vs. Som Dass [AIR 1975 S.C. 2159]; iii) Bhagwan Dass Chopra Vs. United Bank of India and others {AIR 1988 S.C. 215]; iv) Singer India Ltd. Vs. Chander Mohan Chadha and others [(2004) 7 SCC 1]; v) A Bull Bench decision of the Kerala High Court in the case of Gautami Devi Sitamony Vs. Madhavan Sivarajan [AIR 1977 Kerala 83]. 7 Strictly speaking the provisions of the Code of Civil Procedure 8 do not apply to the arbitral proceedings but, even on principles analogous to those under the Code of Civil Procedure, the Arbitrator had to consider the application submitted by the present respondent no.3 for being substituted in place of the claimant no.2. Section 394(1) of the Companies Act, states that the Tribunal/Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters: (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company; (ii) the allotment or appropriation by the transferee company of any shares, debentures policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii)the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; (iv)the dissolution, without winding up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs dissent from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall 9 be fully and effectively carried out; Order XXII Rule 3, Order XXII Rule 10 of the Civil Procedure Code and clause 6.1 of the amalgamation scheme sanctioned on 26th March, 2003 and clause 17.1 of the scheme sanctioned on 5th September, 2006 read as under: Order XXII Rule 3. Procedure in case of death of one of several plaintiffs or of sole plaintiff :- (1) Where one of two or more plaintiffs dies and the right to sue does not survive to the surviving plaintiff or plaintiffs alone, or a sole plaintiff or sole surviving plaintiff dies and the right to sue survives, the Court, on an application made in that behalf, shall cause the legal representative of the deceased plaintiff to be made a party and shall proceed with the suit; (2) Where within the time limited by law no application is made under sub- rule (1), the suit shall abate so far as the deceased plaintiff is concerned, and, on the application of the defendant, the Court may award to him the costs which he may have incurred in defending the suit, to be recovered from the estate of the deceased plaintiff. Order XXII Rule 10-Procedure in case of assignment before final order in suit: 1) In other cases of an assignment, creation or devolution 10 of any interest during the pendency of a suit, the suit may, by leave of the Court, be continued by or against the person to or upon whom such interest has come or devolved. 2) The attachment of a decree pending an appeal therefrom shall be deemed to be an interest entitling the person who procured such attachment to the benefit of sub-rule (1). ” Clause 6.1 of the Scheme of Amalgamation dated 26.03.2003, “All suits, actions and proceedings of whatsoever nature by or against the Transferor Company pending and / or arising on or before the Effective Date shall be continued and be enforced and / or proceeded with by or against the Transferee Company as effectually as if the same had been pending and / or arising against the Transferee Company." Clause 17.1 of the Scheme of Amalgamation dated 05.09.2006, " If any suit, appeal or other proceeding of whatever nature by or against the Transferor Company(ies) is pending, the same shall not abate or be discontinued or in any way be prejudicially affected by reason of the arrangement by anything contained in this Scheme, but the said suit, appeal or other legal proceedings may be continued, prosecuted and enforced by or against McDowell in the same manner and to the same extent as it 11 would or might have been continued, prosecuted and enforced by or against the Transferor Company(ies) as if this Scheme had not been made." 8 Shri.Rustomji, the learned counsel appearing for the respondents has supported the order passed by the learned Arbitrator and urged that the concurrent findings recorded by both the legal authorities below do not call for any interference in this appeal. He submitted that on the merger/amalgamation, the company merged/amalgamated does not suffer a civil death and its properties/ownership/liabilities etc. stand transferred to the new company. Order XXII Rule 3 of Civil Procedure Code applies in a case of death of individual plaintiff and the application is required to be made by the legal representative, the respondent no.3 was not required to make an application under Order XXII Rule 3 of Civil Procedure Code and it rightly made an application under Order XXII Rule 10 of the Civil Procedure Code. The contentions of the appellant that the arbitral proceedings had abated on account of failure of the applicant or the successor company of claimant no.2 for being substituted are illconceived and without any support in law. As per Shri. Rustomji, if on devolution during the pendency of the arbitration proceedings, the applicant company became entitled for being substituted, it was required to submit an application for 12 the same under Order XXII Rule 10 of Code of Civil Procedure and there was no limitation period applicable. Even if the limitation is to be counted, the application submitted on 10th July, 2007 was very much within the limitation as the applicant company became entitled to apply for the same on 17th October, 2006 or at the most on 5th September, 2006. It was, therefore, urged that the appeal was required to be dismissed as being devoid of merits by relying upon the following decisions and even in addition to the decisions relied upon by the Arbitrator: 1) Dhurandhar Prasad Singh Vs. Jai Prakash University and others [AIR 2001 S.C. 2552]; 2) Government of Orissa Vs. Ashok Transport Agency and others [(2005) 1 S.C.C. 536] 3) Severn Trent Water Purification INC Vs. Chloro Controls (India) Pvt.Ltd. And another [(2008) 4 S.C. 380 ] and 4) Sitabai Ramchandra Jaltare and others Vs. Masjid Nurun Mohalla Jingerwadi [ AIR 1979 Bom. 109 : 1978 Mh.L.J. 789] 9 In the case of Singer India Ltd. (supra) the Supreme Court held that in an amalgamation, the two or more Companies are fused into 13 one by merger or by one taking over the other. Reconstruction or amalgamation has no precise legal meaning. It referred to the decision in the case of Saraswati Industrial Syndicate Ltd. Vs. CIT [AIR 1991 S.C. 70] and noted that when two companies amalgamated into one, the transferor company loses its identity as it ceases to have its business. However, their respective rights or liabilities are determined under the Scheme of Amalgamation, but the corporate identity of the transferor company ceases to exist with effect from the date of amalgamation is made effective. In the case of Severn Trent Water Purification INC (supra), the Supreme Court rejected the contentions that on amalgamation/merger, the amalgamated/merged company suffers a death. It referred to “Stroud ’s Judicial Dictionary of Words and Phrases and held that the word “death ” mentioned in a statute normally refers to the ceasing of life of a natural person. The Supreme Court went on further and held that in the context of the company law, winding up of a body corporate is not the same thing as or equivalent to death of a member. An individual and a body corporate expressly have been treated separately which is clear from Sections 430, 431 and 432 of the Companies Act. A Court of law cannot adopt a construction which would result in amendment of the statute. 14 Thus, the first ground raised by the appellant that on amalgamation/merger the applicant no.2 suffered a “death ” stands rejected, in view of above enunciations. 10 Rule 3(1) of Order XXII of the Code, provides that where one of two or more plaintiffs dies and the right to sue does not survive to the surviving plaintiff or plaintiffs alone, or a sole plaintiff or sole surviving plaintiff dies and the right to sue survives, the Court, on an application made in that behalf, shall cause the legal representative of the deceased plaintiff to be made a party and shall proceed with the suit. If no application is made within the period provided from for making such an application under the law, the suit would abate in so far as the deceased plaintiff is concerned. It operates when there is a death of a party and the consequence of failure to move for impleading the legal representatives, is the termination of the proceedings by reason of the abatement of the suit as contemplated under sub-rule (2). Thereafter, there is no subsisting suit. In the case of sole plaintiff or sole defendant, the suit abates as against the sole plaintiff or sole defendant and if the abatement is in regard with one of the plaintiffs or one of the defendants, to that extent, the suit would abate. Provision of course, has been made to bring back the suit live by setting aside the abatement if proper cause is shown. Order XXII Rule 10 of the Code, states that in the case of an assignment, 15 creation or devolution of any interest during the pendency of a suit, the suit may, by leave of the Court, be continued by or against the person to or upon whom such interest has come or devolved. Thus provision indicates that the right of the assignee is to seek to continue the suit is not absolute as it is for the Court to consider whether leave is to be granted. In appropriate cases, the Court may grant leave to continue the suit and such an assignment is bound by the previous proceedings or suit and his right is only one of further prosecution of the suit. In the case of Keshab Rai Vs. Jyotiprasad [AIR 1932 Calcutta 783], a Division Bench held that “Rules, 2, 3 and 4 of the Order XXII of the Code of Civil Procedure relate to cases of devolution in interest in case of death of a plaintiff or defendant when such plaintiff or defendant was suing or was being sued respectively in his personal capacity and that these Rules do not apply when a suit is brought by or against the person in his representative character and to such a suit, provisions of Order XXII Rule 10 of the Code would be applicable. In the case of Roshan Lal Kunja Mal and others Vs. Kapur Chand and others [AIR 1960 Punjab 382], it has been held that where a suit was brought by trustees and some of them die during the pendency of the suit, the new trustees can be added as parties under Order XXII Rule 10 of the Code. While approving this view of the Calcutta and Punjab and Haryana 16 High Courts, a Division Bench of this Court in the case of Sitabai Jaltare (supra) held that “the Order XXII Rule 3 applies to cases where the plaintiff leaves behind the estate which could be inherited by his heirs or successors and if they are brought on record, then the provisions of Order XXII Rule 3 will apply. However, the case would be different where the suit is brought by the plaintiff not in his personal capacity but in his representative capacity as a trustee, was otherwise, and in case when he dies, his own legal representative would not automatically become trustees and would not be legal representatives within the meaning of clause (11) of Section 2 of the Code. Only those trustees who are elected or appointed under the scheme of the trust can step in his shoes and continue the suit. A new trustee would apply to come on record under Rule 10 of Order XXII of the Code and the application could be made at any time during the pendency of the suit or appeal but while granting leave to the applicant to proceed with the suit or appeal, the Court would consider the question on merits and at the same time, the applicant cannot be thrown out simply because it is not within a particular period. 11 In the instant case, there are two mergers and name of the companies was changed on two occasions. The merger of claimant no. 2 became effective from 10th April, 2003, and within about 40 days 17 therefrom, i.e. on 12th May, 2003, the name of Maharashtra Distilleries Ltd. came to be changed to Show Wallace Distilleries Ltd. i.e. original claimant no.2. Show Wallace Distilleries Ltd. was again merged with McDowell and Co. Ltd. on 5th September, 2006 and the said new company changed its name to United Spirits Ltd. on 17th October, 2006. The learned Arbitrator was, therefore, right in her conclusions that the cause for substitution for claimant no.2 arose on 17th October, 2006 or at the earliest on 5th September, 2006 and therefore, the application made by the present respondent no.3 for substitution was not belated or in any case beyond limitations. We endorse the confirming view of the learned Single Judge in this regard. 12 Even otherwise, as per the legal position discussed herein above, the application for substitution was rightly considered under Order XXII Rule 10 of the Code by the learned Arbitrator and it could not have been considered under Order XXII Rule 3 of Code of Civil Procedure. Shri.Kadam has fairly conceded that the applicant could not be held to be a legal representative of the original claimant no.2 within the meaning of Section 2(11) of the Code. It is well settled that the legal representative is required to apply to continue the suit under Order XXII Rule 3 of the Code in case of death of a plaintiff. In a case covered by Order XXII Rule 10 of the Code, where rights are derived by an assignee or successor in 18 interest pending arbitration, it is for that assignee or transferee to come on record if it so chooses and to defend the suit. It is equally open to the assignee to trust its assignor to defend the suit properly but with the consequence that any decree against the assignor will be binding on it and would be enforceable against it. 13 In the case of Ashok Transport Agency (supra), the defendant-Company came to be merged with Orissa Mining Corporation Ltd., an Undertaking of the Government of Orissa. Clause 7 of the amalgamation scheme reads as under: “Saving of legal proceeding - If on the appointed day, any suit, prosecution, appeal or other legal proceedings of whatever nature by or against the dissolved company be pending, the same shall not abate or be discontinued, or be in any way prejudicially affected by reason of the transfer to the resulting company of the undertaking of dissolved company or of anything contained in this Order. But the suit, prosecution, appeal or other legal proceeding may be continued, prosecuted and enforced against the resulting company in the same manner and to the same extent as it would or