The Director of Industries and Commerce,Chepauk, Chennai 600 005 v. P.N.Kumar

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 24.11.2008CORAMTHE HONOURABLE MR. JUSTICE D.MURUGESAN andTHE HONOURABLE MR. JUSTICE V.PERIYA KARUPPIAHOriginal Side Appeal No.227 of 2008 The Director of Industries and Commerce, Chepauk, Chennai 600 005. ...Appellant (2nd Respondent)Vs.

P.N.Kumar2. The Official Liquidator, High Court, Madras as Liquidator of M/s.Sears Electronics Limited ...Respondents (in liquidation) Applicant & 1st Respondent Original Side Appeal under Clause 15 of Letters Patent r/wOrder XXXVI, Rule-11 of Original Side Rules, praying to set asidethe judgement and decree dated 01.03.2007 made in C.A.No.1327 of2005 in C.P.No.61 of 1992. For Appellant: Mr.V.Veerarahavan Addl. Advocate General assisted by Mrs. Bhavani Subbarayan Spl. Govt. Pleader (C.S.)For Respondents (R1): Mr.Sriram Panchu Senior Counsel for Mr.K.ManiJUDGMENT(Order of the Court was delivered by D.MURUGESAN, J.)The Original Side Appeal questions the Judgement and Decreedated 01.03.2007 made in C.A.No.1327 of 2005 in C.P.No. 61 of 1992,whereby the learned single Judge, while rejecting the saidapplication taken out by one Mr.P.N.Kumar, the Director ofM/s.Sears Electronics Limited, seeking for a direction to the https://hcservices.ecourts.gov.in/hcservices/ Official Liquidator to pay a sum of Rs.2,05,806/- to the Directorof Industries and Commerce, Government of Tamil Nadu, in respect ofthe allotment order under reference in No.41179/EL3/87, dated29.09.1987 and to get the sale deed in favour of M/s.SearsElectronics Limited, a company in liquidation, directed theassignment of the land comprised in Plot No.2, in Dr.VikramSarabhai Instronics Estates, Thiruvanmiyur, Chennai-41 measuring anextent of 0.75 Acres to M/s.Sears Electronics Limited.

The dispute revolves on the following facts: By way of an order of allotment No.41179/EL3/87, dated29.09.1987, a shed No.Type II 39, in Dr.Vikram Sarabhai InstronicsEstate, Chennai, was allotted to SIPCOT and thereafter, theallotment was transferred to M/s.Sears Electronics Limited at atentative cost of Rs.3,21,375/- As the final cost was not fixed, the title continued to vest in the Department of Industries and Commerce. Since the company did not pay a sum of Rs.2,05,806/- eventowards tentative cost, in terms of para – 8 of the terms andconditions of the allotment, a show cause notice was issued toMr.A.K.Bhattacharya, the Managing Director and Mr.P.N.Kumar, the Director of the company. In spite of such notice, the companydefaulted payment and therefore, by exercising the conditions underpara – 9 of the terms and conditions of the agreement, action wastaken to cancel the hire purchase agreement.

In the mean time, the company entered into a joint ventureagreement with M/s.Electronics Corporation of Tamil Nadu, Government of Tamil Nadu Undertaking and though it was doing welltill 1992, in view of the slash in the business due to competitionand introduction of colour televisions in the market, they couldnot carry on their business thereafter. One of the creditors of thecompany by name M/s. Elcompca Electronics Industries PrivateLimited filed a company petition for winding up of the company, since the company was not in a position to settle their claim andwinding up order was passed on 26.11.1993 in C.P.No. 61 of 1992.The Official Liquidator also took charge of the property and assetsof the company, which are all situate in Madras and Mumbai.

In the above circumstances, the Director of the Company byname Mr.P.N.Kumar, approached the Company Court by filing companyapplication in C.A.No.1327 of 2005 in C.P.No.61 of 1992 seekingfor a direction to the Official Liquidator to pay a sum ofRs.2,05,806/- to the Director Industries and Commerce in respect ofthe allotment order No.41179/EL3/87, dated 29.09.1987 and to getthe sale deed in favour of M/s.Sears Electronics Limited, thecompany in liquidation, represented by the Official Liquidator. The said application was purportedly taken under Order XIV, Rule 8of the Original Side Rules, r/w Rule - 9 of The Companies (Court)Rules, 1959. By the order under appeal, the learned single Judgefound that in as much as the company had defaulted and noticedated 09.03.2005 was issued citing clause 8 of the hire purchaseagreement, calling upon the company to show cause, why theallotment should not be cancelled forfeiting the earnest money https://hcservices.ecourts.gov.in/hcservices/ deposit and though by letter dated 18.03.2005, the 1st respondentherein had communicated to the Official Liquidator for payment ofRs.2,05,806/- which was due and payable to the department by thecompany, such amount was not paid, found no ground to accept theprayer in the application to issue any direction to the OfficialLiquidator to pay the said sum and get the sale deed in favour ofthe company in respect of the shed. The company has not preferredany appeal questioning the said order and that portion of the orderhas become final.

The controversy in this appeal is that the learned Judgewhile dismissing the application, had directed the Director of the Industries and Commerce to assign the vacant land measuring anextent 0.75 Acres, which was allotted to the very same Company by aseparate allotment order dated 09.10.1985. Aggrieved by the saidOrder, the present appeal is directed at the instance of the Director of Industries and Commerce.

The facts leading to the allotment dated 09.10.1985 are asfollows:-A vacant land measuring an extent of 0.75 Acres in Plot No.2,in Dr. Vikram Sarabai Instronics Estates, Chennai was originallyallotted to M/s.Happy House (TV) Manufacturing Division, Madras byfixing a tentative cost of Rs.60,000/- per acre vide allotmentorder NO.190532/EE1/84-2, dated 09.10.1985. Thereafter, the name ofthe company was changed to M/s.Sears Electronics Limited on02.02.1987. Initially the company had paid the tentative costamounting to Rs.22,500/-. There is no dispute that thereafter thecompany has paid the entire tentative cost of Rs.60,000/-. However, neither regular allotment order was made nor the sale deed wasexecuted, as the department had not finalised the final cost. Inthe mean time, the company went into Liquidation and winding uporder was passed by the Company Court on 26.11.1993.

In the above circumstances, the appellant had approachedthis Court questioning the Judgement and Decree passed by thelearned single Judge in directing the Department of Commerce and Industries to assign the said land to the Company in liquidation.

Mr.V.Veeraraghavan, learned Additional Advocate General, appearing for the appellant had extensively taken us to theallotment order dated 09.10.1985, the deed of assignment dated05.02.1998; and various correspondences. He would submit thatwhile the land in question was allotted to the Company, it wasallotted only for the sole purpose for starting Industry of the Company. In clause 7 of the order of allotment, it was directedthat construction of the superstructure of the building should becommenced within 6 months from the date of taking possession of theplot, after getting the technical approval of the building and planfrom the Office. It was also directed that in the event, failureto comply with any of the conditions will result in cancellationof the allotment order and resumption of the plot by the Departmentwithout further notice and the earnest money deposit and the https://hcservices.ecourts.gov.in/hcservices/ initial payment will also be forfeited to the Department.

Further, the learned Addl. Advocate General would submitthat in any case, as the company had been wound up, it cannotutilize the land, the purpose for which the land was assigned. TheCompany also cannot be allowed to utilize the land for any otherpurpose. Therefore, the department cannot be compelled to assignthe land in favour of the company. He would also submit that inany case, there is a serious dispute, as to whether the companywould be entitled to sale deed in respect of the land that wasassigned in favour of the company, when no final cost was fixed andthe company has paid only the tentative cost. The relief of thedirection issued by the learned single Judge is beyond the scope ofthe petition. According to him, the company had approached the https://hcservices.ecourts.gov.in/hcservices/ company court, only in respect the shed which was allotted in aseparate allotment order, dated 29.09.1987 and the learned singleJudge had dealt with the issue in regard to the allotment of thevacant land measuring an extent of 0.75 Acres, made in favour ofthe Company by a separate order of allotment dated 09.10.1985. Theissue as to whether the company is entitled to the sale deed inrespect of the said plot was not the subject matter in the companyapplication and therefore, the said direction is liable to be setaside.

Mr.Sriram Panchu, learned senior counsel appearing forthe first respondent would on the other hand submit that in as muchas the company had paid the entire tentative cost, merely becausethe final cost was not arrived and the sale deed was not executed, the right of the company to have a sale deed, cannot be defeated. He would further submit that as the delay in executing the saledeed was only on the part of the department, the said delay cannotbe put against the company. He would also submit that after theallotment was made an extent of 21000 square feet of building wasconstructed on the land and in case, the sale deed was executed, the land could be sold and out of the sale proceeds there is apossibility of revival of the company. It is not the case of thedepartment, that the company had breached the conditions ofassignment and therefore, it is not entitled for a sale deed. Even when the applicant had approached the Court only in respect ofthe shed, by virtue of Rule 9 of the Companies (Court) Rules, the Company Court, in exercise of equitable jurisdiction would bejustified in ordering the sale of the land which was allotted in aseparate allotment order. The Court is empowered to mould therelief to render justice to the parties.

The respective submissions are carefully considered. Fromthe rival contentions, it is apparent that there is a seriousdispute, as to the entitlement of the company to seek for executionof sale deed, in respect of the vacant land in an extent of 0.75Acres allotted by way of a separate order dated 09.10.1985. It istrue that the company court would certainly entitled to pass ordersin the interest of company in a winding up jurisdiction, as it isdealing with equitable jurisdiction. However, the question is, asto whether the Company Court would be justified to deal with anissue and pass orders thereon, by moulding the prayer, when theapplicant himself has not approached the Court seeking for any suchrelief. In this regard, the affidavit of Mr.P.N.Kumar, filed insupport of the application in C.A.No.1327of 2005 is referable. Except stating that the company was also allotted a vacant landand an agreement was entered into on 12.05.1985 in respect of PlotNo.2, nothing is alleged as to the entitlement of the company tohave the sale deed in respect of said land.

We have carefully perused the counter affidavit filed bythe Director of Industries and Commerce. As the issue ofallotment of shed has come before this Court, only to put forthall the materials before the Court, without there being anysuppression, the Director of Industries and Commerce has proceededto make averments in the counter affidavit in respect of both theallotments made in favour of the company. Merely because thedetails as to the allotments are furnished in the counter affidavitthat would not certainly give a cause either for the company toseek for the relief or the Company Court to order sale of theplot, which is not the subject matter in the application.

In this context, we may also usefully refer the relevantprovisions of Rule 6 and 9 of The Companies (Court) Rules, 1959.Rule 6 of the Rules, reads as under:-"R.6. Practice and Procedure of the court and Provisions of the Code to apply. - Save as provided bythe Act or by these rules the practice and procedure ofthe Court and the provisions of the Code so far asapplicable, shall apply to all proceedings under the Act and these rules. The Registrar may decline toaccept any document which is presented otherwise than https://hcservices.ecourts.gov.in/hcservices/ in accordance with these rules or the practice andprocedure of the Court.and Rule 9 of the Companies (Court) Rules, 1959, reads as under:-" R.9. Inherent Powers of Court. - Nothing inthese rules shall be deemed to limit or toherwiseaffect the inherent powers of the Court to gie suchdirections or pass such orders as may be necessaryfor the ends of justice or to prevent abuse of theprocess of the Court. "

In terms of Rule-6 of the Companies (Court), Rules, 1959,the provisions of the Code of Civil Procedure, shall apply to allproceedings under the Companies Act and the rules made thereunder. Rule-9 confers an inherent power on the Company Court to give suchdirection or pass such order, as may be necessary for the ends ofjustice or to prevent abuse of the process of the Court. Both theabove rules, if read together, would indicate that the inherentpowers of the Company Court could be exercised in the mannerprovided under Section 151 of the Code of Civil Procedure except, in case, where the Companies Act and the Companies (Court) Rulesprovided otherwise. The provisions of Civil Procedure Code is alsoapplicable for the Company Court to invoke, wherever it isnecessary, particularly in dealing with application with specificprayer and the Civil Court will have no jurisdiction to grantrelief other than what is asked for.

Keeping the above rules in mind, if we approach the issue, it would be apparent that unless a specific application seeking foran order of assignment of a land measuring an extent of 0.75 Acressituate in Plot No.2, Dr. Vikram Sarabai Electronics Estate, Madras600 041, which was allotted on 09.10.1985 by way of an order ofallotment, is filed in terms of the provisions under Rule 9 of the Companies (Court) Rules, 1959, any direction issued for either suchassignment or execution of such sale deed cannot be brought underthe provisions of Rule 9 of the Companies (Court) Rules, 1959 andthe inherent power to give directions and pass orders cannot beextended to such relief.

That apart, such direction was issued without appreciationof the rival contentions particularly, without deciding theentitlement of the company as to the right to have a sale deed inrespect of such property in the wake of the objections raised bythe Department of Industries and Commerce. Therefore, on thisground also the direction in question is unsustainable.