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1984 Supreme(All) 584
IN THE HIGH COURT OF ALLAHABAD
N. N. SHARMA
STATE OF U.P. - Appellant
Versus
JAYA SHREE TEXTILE AND INDUSTRIES LTD. - Respondents
CIV. REVN. 307 Of 1981
Decided On : 12/19/1984
JAGDISH SVARUP, M.N.B.SINGH, S.C.AGARWAL, VINOD SWARUP
A suit against a defunct company is not necessarily a nullity, and the court may allow an amendment to the plaint to add the legal representatives of the deceased defendant if the plaintiff was not aware of the company's dissolution and the suit was filed within the limitation period.
Headnote:
AMENDMENT OF PLAINT - SUIT AGAINST DEFUNCT COMPANY - LEAVE TO AMEND - JURISDICTION OF COURT - COMPANIES ACT, 1956, SS. 394(2), 560 - CIVIL P. C., 1908, O. 1, R. 10(2), O. 6, R. 17 - LIMITATION ACT, 1963, S. 21 - INTERPRETATION.
Fact of the Case:
Plaintiffs, State of U. P. and U. P. State Textile Corporation Ltd., filed a suit against defendant, M/s. Jaya Shree Textile and Industries Ltd., for recovery of Rs. 5,62,558.53p. Defendant supplied staple yarn to the plaintiff corporation and received excess payments. Plaintiffs sought to amend the plaint to add Indian Rayon Corporation Ltd. as a defendant, alleging that M/s. Jaya Shree Textile and Industries Ltd. had been amalgamated with Indian Rayon Corporation Ltd. and stood dissolved. The trial court rejected the application for amendment, holding that the suit against a defunct company was a nullity and no amendment could be allowed.
Finding of the Court:
The court held that the trial court erred in rejecting the application for amendment. The court noted that the plaintiff was not a party to the amalgamation of the company and was not informed about it until after the suit was filed. The court also noted that the liability of the defendant was contractual, not tortious, and that equitable considerations should be taken into account. The court further held that the defendant, as a transferee company, had a statutory obligation to wipe out the liability of the transferor company and that its objection to the joinder of the transferee company was dishonest and unjust.
Issues: 1. Whether a suit against a defunct company is a nullity and no amendment can be allowed? 2. Whether the court has jurisdiction to allow an amendment to the plaint to add a defendant who was not a party to the original suit? 3. Whether equitable considerations should be taken into account when deciding an application for amendment of the plaint?
Ratio Decidendi: 1. A suit against a defunct company is not necessarily a nullity. If the plaintiff was not aware of the company's dissolution and the suit was filed within the limitation period, the court may allow an amendment to the plaint to add the legal representatives of the deceased defendant. 2. The court has jurisdiction to allow an amendment to the plaint to add a defendant who was not a party to the original suit, if the presence of that defendant is necessary to enable the court to effectually and completely adjudicate upon and settle all the questions in suit. 3. Equitable considerations should be taken into account when deciding an application for amendment of the plaint, especially when the plaintiff was not blameworthy and the defendant's conduct was dishonest or unjust.
Final Decision: The court allowed the revision petition and set aside the trial court's order rejecting the application for amendment. The court granted leave to the plaintiff to amend the plaint on payment of Rs. 1000/- as costs to the contesting defendant.
( 1 ) THIS is a plaintiffs revision directed against order dt. 4-4-1981 by Sri Kripa Shankar III Addl. Civil Judge Kanpur in Original Suit No. 144 of 1977 by which he rejected the application paper No. 22 Kha 1 of plaintiffs under O. 6, R. 17 of the Civil P. C. for amendment of the plaint and upheld the objection of respondents paper No. 24 C2.
( 2 ) SUIT No. 144 of 1977 was filed in the court concerned on 31-3-1977. The plaintiffs were State of U. P. and U. P. State Textile Corporation Ltd.
( 3 ) DEFENDANT was M/s. Jaya Shree Textile and Industries Ltd. having its registered office at Rishra, district-Hooghly, West Bengal.
( 4 ) THE suit was for recovery of Rs. 5,62,558. 53p. together with interest pendente lite and future at 12 per cent per annum. Costs of the suit were also claimed.
( 5 ) IT was alleged that State of U. P. had appointed plaintiff No. 2 its nominee for the supplies of Staple Fibre Yarn by the manufacturers against the allotment and had made various allotments in their favour.
( 6 ) DEFENDANT M/s Jaya Shree Textile and Industries Ltd. from 3-8-1974 to 21-10-1974 had supplied to the U. P. State Textile Corporation Ltd. applicant No. 2 certain quantities of staple yarn and applicant No. 2 made payments on the basis of the bills submitted to them by defendant.
( 7 ) SUBSEQUENTLY it transpired that the defendant had realised from applicant-plaintiff No. 2 several lacs of rupees in excess which was not at all due to it.
( 8 ) CONSEQUENTLY, a notice demanding the excess along with interest was sent to M/s Jaya Shree Textile and Industries Ltd. at their registered office and address and the same was duly served but since no payment was made so the suit was filed in the court of learned IInd Civil Judge, Kanpur.
( 9 ) PENDING the suit an application was made by M/s Indian Rayon Corporation Ltd. alleging that the said Jaya Shree Textile and Industries Ltd. had been amalgamated with the Indian Rayon Corporation Ltd. under the orders of Calcutta High Court on 21st July 1976 and the Gujarat High Court at Ahmedabad on 13-7-1976 and the said M/s. Jaya Shree Textile and Industries Ltd. stood dissolved by the order of the Calcutta High Court with effect from 18-10-1976 and consequently there was no surviving legal entity and in fact Jaya Shree Textile and Industries Ltd. ceased to exist in the eye of law with effect from 18-10-1976 and the suit filed against the defendant was simply a nullity and liable to be dismissed.
( 10 ) ON learning about these facts plaintiff sought leave to amend the plaint paper No. 22 Kha 1 under O. 6, R. 17, C. P. C. , on 20-1-1979 by which it was prayed that the liability of defendant related to the period when it was not amalgamated. However, in order to avoid legal complication plaintiffs sought addition of Indian Rayon Corporation Ltd. also as defendant to the suit. This prayer was opposed by defendant on the ground that the suit was filed in the name of non-entity and amounted to a nullity and so no question of any amendment arose.
( 11 ) LEARNED trial Judge found that after the amalgamation of the Company under S. 394 sub-cl. (2) of the Companies Act and S. 92 sub-cl. (2) of the Companies Act the transferee Company would be liable for all the liabilities of the transferor Company. As the suit was filed initially against a dead Company so such leave to amend could not be allowed.
( 12 ) AGGRIEVED by this decision this revision has been filed.
( 13 ) I have heard learned counsel for the parties and perused the record.
( 14 ) ON behalf of the revisionists it was pointed out that assuming for the sake of argument that the suit was filed against a dead person but when the plaintiff was kept in dark about the order of amalgamation and was no party to the proceedings under S. 394 (2) of the Companies Act he had a good case to seek the proposed leave.
( 15 ) IN this connection reliance was placed upon Karimullah Khan v. Bhanu Pratap Singh reported in AIR 1938 Nag 458 which posited:
