2007 Supreme(Bom) 1630

IN THE HIGH COURT OF BOMBAY
DR.D.Y.CHANDRACHUD, J.
Delta Distilleries Limited, Petitioner
versus
Shaw Wallace & Company Ltd. Respondents
ARBITRATION PETITION NO.377 OF 2007
Decided on November 27, 2007.

Headnote:Civil Procedure Code, 1908 - Order XXII, Rule 10-Arbitration and Conciliation Act, 1996, Section 34-Trial of suit-Devolution of interest of a party to suit-Provisions of CPC not attracted to arbitral proceedings-On principles analogous to those of Order XXII, Rule 10, An Arbitrator was within exercise of jurisdiction in permitting successor entity to be brought on record as a result that had taken place after filing of statement of claim.-Consequently, the learned Arbitrator was not in error in allowing the application for bringing the third respondent on the record. The interest of the second claimant to the arbitral proceedings has devolved upon the third respondent in pursuance of the orders passed by this Court sanctioning the two schemes of amalgamation under Sections 391 and 394 of the Companies Act, 1956. The concept of abatement is not attracted to a situation where as a result of a scheme of alalgamation, the corporate personality of the claimant has ceased to exist, there being a devolution of interest upon the transferee. Upon a devolution of interest the transferee upon whom the interest is devolved is entitled to be impleaded. Indeed the transferee in this case would also be liable to be impleaded to the counter claim, which has also been done. These steps have to be taken and have been taken prior to the conclusion of the proceedings. Strictly speaking, the provisions of the Code of Civil Procedure, 1908 do not apply to arbitral proceedings, but even on principles analogous to those of Order XXII, Rule 10, the Arbitrator was within the exercise of jurisdiction in permitting the third respondent as the successor entity to be brought on the record as a result of the events that had taken place after the statement of claim was filed.

       Companies Act, 1956 - Sections 391 and 394-Amalgamation scheme-Effect of-Amalgamation of two companies into one-Transferor company ceasing to have its business, loses its entity-Respective rights or liabilities determined under scheme of amalgamation-Corporate entity of transferor company ceases to exist w.e.f. date of amalgamation made effective.-The effect of a scheme of amalgamation, as held by the Supreme Court in Singer India Ltd. v. Chander Mohan Chadha, (2004) 7 SCC 1, is that as a result of amalgamation of two companies into one "the transferor company loses its entity as it ceases to have its business". The respective rights or liabilities are determined under the scheme of amalgamation but the corporate entity of the transferor company ceases to exist with effect from the date the amalgamation is made effective. The concept of abatement is inapposite where a merger takes place in the course of a scheme of amalgamation in pursuance of a sanction received from the Company Court. The transferor in such a case merges with the transferee who becomes the successor-in-interest of the assets, liabilities and business to the extent contemplated in the scheme. There is in other words a devolution of interest. In law, what takes place in the course of a scheme of amalgamation is the devolution of the interest of the transferor upon the transferee.

       Civil Procedure Code, 1908 - Order XXII, Rule 10 - Trial of suit - Devolution of interest of a party to suit - A successor can be brought on record - Though the period of limitation for an application under Order XXII, Rule 3 of CPC elapsed - Successor, upon whom interest devolved can be brought on record at any time before passing of final decree. - Where a devolution of interest within the meaning of Order XXII, Rule 10 has taken place, a successor can be brought on the record notwithstanding the fact that the period of limitation for an application under Order XXII, Rule 3 had elapsed. The reason for that is that such an application is obviously not one under Order XXII, Rule 3 of the Code of Civil Procedure, 1908. Several High Courts have consistently followed the position that where a devolution of interest within the meaning of Order XXII, Rule 10 of the Code of Civil Procedure, 1908, has taken place no period of limitation is prescribed and the successor upon whom the interest has devolved can be brought on the record at any time before a final decree is passed.

       Civil Procedure Code, 1908 - Order XXII, Rule 10 - Trial of a suit - Devolution of interest of party to suit - Trial of suit not get disbanded merely as a result of a devolution of interest of a party upon another during pendency of suit. - Rule 10 of Order XXII contemplates that in other cases of an assignment, 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. The principle which underlies Order XXII, Rule 10 is that the trial of a suit does not get disbanded merely as a result of a devolution of the interest of a party to the proceedings upon another during the pendency of the suit.