# 17 S.C.R. 1055 ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR BHAT AND ANOTHER

- **Citation:** [2013] 17 S.C.R. 1055
- **Court:** Supreme Court of India
- **Decided:** 2013-12-12
- **Case number:** Civil Appeal No. 11005 of 2013
- **Bench:** Anil R. Dave, Dipak Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/17-s-c-r-1055-erach-boman-khavar-v-tukaram-shridhar-bhat-and-another-29084
- **Pages:** 32

## Headnote

COMPANIES ACT, 1956:
A
B
s.446 - Application by landlord for leave to file eviction c
suit against company in liquidation - Held: Grant of leave of
the court u/s 446 is not a condition precedent for initiation of
a civil action or the legal proceedings - Leave of the winding
up court can be obtained even after initiation of the
proceeding - Court may grant leave if it felt that the company· D
should not enter into unnecessary litigation and incur
avoidable expenditure - In the case at hand, offiCial liquidator
had clearly stated that the suit property was not the property
of the company and, therefore, company should not eRter into
that kind of litigation - Company Judge,granting all protection
E
to official liquidator, has rightly allowed the application for
seeking leave - Maharashtra Rent Control Act, 199.9 - Costs.
Res judicata - Company in liquidation - Application by
landlord uls 446 of Companies Act - Permission granted to
file amendment in suit - Liberty granted to file application, if
F
necessary - Subsequent application for leave to file eviction
suit under Maharashtra Rent Control Act - Allowed by
Company Judge - Division Bench setting aside the order on
the ground of res judicata - Held: Fa attract the doctrine of
res judicata it must be manifest that there has been conscious
G
adjudication of an issue - A plea of res judicata cannot be
taken aid of unless there is an expression of an opinion on
the merits - Company Judge had not dealt with the earlier
application for grant of ieave on merits and it was disposed
1055
H
1056
SUPREME COURT REPORTS
[2013) 17 S.C.R.
A of on the basis of a submission made by third respondent that
if an application for amendment is filed in the pending suit,
he would not oppose the same - Division Bench, has
erroneously opined that Company Judge in the main part of
the order having rejected the application could not have
B granted liberty to apply for filing of another application - It
could not have been treated to have operated as res judicata
- Therefore, Division Bench has fallen into serious error in·
dislodging the order granting leave by Company Judge to file
a fresh suit - Order passed by Division Bench is set aside
c and that of Company Judge restored - Companies Act, 1956 ·
- s.446 - !vfaharashtra Rent Control Act, 1999.
'
The father of the appellant entered into an agreement
of leave and licence with respondent No. 2- Company, in
respect of a flat owned by him. He filed an eviction suit
D against respondent No. 2. While the suit was in progress,
on 9.1.1998 in a separate proceeding the Company Judge
·,passed a winding up order against respondent No. 2Company. The appellant filed CA No. 45 of 2006 uls 446
of the Companies Act, 1956 in Company Petition No. 201
E of 1994 seeking permission -to file eviction suit in the
Small Causes Court. The Company Judge on 23.2.2006,
granted permission to file amendment and also granted
liberty to file application, if necessary. The appellant filed
CA No. 720 of 2006 for grant of leave to file an eviction
F suit under the Maharashtra Rent Control Act, 1999. The
Company Judge, ultimately, by order dated 5.3.2007,
granted leave. The said order was challenged in appeal
and the Division Bench held that in the absence of any
changed circumstances, the second application for leave
G was not maintainable as it was barred by principles of res
judicata being a successive application in the same court
on self-same facts. It was further opined that it was open
to the appellant to file an application for review or to file
an appeal against the order dated 23.2.2006; and as long
H as the said order remained alive, a fresh application could
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1057
BHAT
not have been entertained by the Company Judge and
A
on the basis of the grant of liberty, the case could not
have been reopened.
Allowing the appeal, the Court
B
HELD: 1.1. Grant of leave of the court u/s 446 of the
Companies Act, 1956 is not a condition precedent for
in

## Text

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(2013) 17 S.C.R. 1055
ERACH BOMAN KHAVAR
v.
TUKARAM SHRIDHAR BHAT AND ANOTHER
(Civil Appeal f'!o. 11005 of 2013)
DECEMBER 12, 2013
[ANIL R. DAVE AND DIPAK MISRA, JJ.)
COMPANIES ACT, 1956:
A
B
s.446 - Application by landlord for leave to file eviction c
suit against company in liquidation - Held: Grant of leave of
the court u/s 446 is not a condition precedent for initiation of
a civil action or the legal proceedings - Leave of the winding
up court can be obtained even after initiation of the
proceeding - Court may grant leave if it felt that the company· D
should not enter into unnecessary litigation and incur
avoidable expenditure - In the case at hand, offiCial liquidator
had clearly stated that the suit property was not the property
of the company and, therefore, company should not eRter into
that kind of litigation - Company Judge,granting all protection
E
to official liquidator, has rightly allowed the application for
seeking leave - Maharashtra Rent Control Act, 199.9 - Costs.
Res judicata - Company in liquidation - Application by
landlord uls 446 of Companies Act - Permission granted to
file amendment in suit - Liberty granted to file application, if
F
necessary - Subsequent application for leave to file eviction
suit under Maharashtra Rent Control Act - Allowed by
Company Judge - Division Bench setting aside the order on
the ground of res judicata - Held: Fa attract the doctrine of
res judicata it must be manifest that there has been conscious
G
adjudication of an issue - A plea of res judicata cannot be
taken aid of unless there is an expression of an opinion on
the merits - Company Judge had not dealt with the earlier
application for grant of ieave on merits and it was disposed
1055
H
1056
SUPREME COURT REPORTS
[2013) 17 S.C.R.
A of on the basis of a submission made by third respondent that
if an application for amendment is filed in the pending suit,
he would not oppose the same - Division Bench, has
erroneously opined that Company Judge in the main part of
the order having rejected the application could not have
B granted liberty to apply for filing of another application - It
could not have been treated to have operated as res judicata
- Therefore, Division Bench has fallen into serious error in·
dislodging the order granting leave by Company Judge to file
a fresh suit - Order passed by Division Bench is set aside
c and that of Company Judge restored - Companies Act, 1956 ·
- s.446 - !vfaharashtra Rent Control Act, 1999.
'
The father of the appellant entered into an agreement
of leave and licence with respondent No. 2- Company, in
respect of a flat owned by him. He filed an eviction suit
D against respondent No. 2. While the suit was in progress,
on 9.1.1998 in a separate proceeding the Company Judge
·,passed a winding up order against respondent No. 2Company. The appellant filed CA No. 45 of 2006 uls 446
of the Companies Act, 1956 in Company Petition No. 201
E of 1994 seeking permission -to file eviction suit in the
Small Causes Court. The Company Judge on 23.2.2006,
granted permission to file amendment and also granted
liberty to file application, if necessary. The appellant filed
CA No. 720 of 2006 for grant of leave to file an eviction
F suit under the Maharashtra Rent Control Act, 1999. The
Company Judge, ultimately, by order dated 5.3.2007,
granted leave. The said order was challenged in appeal
and the Division Bench held that in the absence of any
changed circumstances, the second application for leave
G was not maintainable as it was barred by principles of res
judicata being a successive application in the same court
on self-same facts. It was further opined that it was open
to the appellant to file an application for review or to file
an appeal against the order dated 23.2.2006; and as long
H as the said order remained alive, a fresh application could
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1057
BHAT
not have been entertained by the Company Judge and
A
on the basis of the grant of liberty, the case could not
have been reopened.
Allowing the appeal, the Court
B
HELD: 1.1. Grant of leave of the court u/s 446 of the
Companies Act, 1956 is not a condition precedent for
initiation of a civil action or the legal proceedings. It is
because the Section does not expressly provide for
annulment of a proceeding that is undertaken without the
leave of the court. Leave of the winding up court can be
C
obtained even after initiation of the proceeding. Further,
the seminal object behind engrafting the said provision
is to see that the interest of the company is safeguarded
so that it does not face deprivation of its right and claims
are adjudicated without the knowledge of the company
D
court and further the court has a discretion to see
whether leave should be granted and, if so, with what
conditions or no condition. That apart, the court may
grant leave if it felt that the company should not enter into
unnecessary litigation and incur avoidable expenditure.
[para 21] [1072-A-D]
E
Central Bank of India v. Mis. Elmot Engineering
Company and others (1994) 4 SCC 159; Ammonia Supplies
Corporation {P) Ltd. v. Modern Plastic Containers Pvt. Ltd. and
others 1998 (1) Suppl. SCR 413:: (1998) 7 SCC 105; State
F
of J&K v. UCO Bank and others (2005) 10 SCC 331;
Bansidhar Shankarlal v. Mohd. Ibrahim 1971 (2) SCR 476 =
(1970) 3 sec 900 - referred to.
1.2. In the case at hand, the official ·liquidator had
G
, clearly stated that the suit property was not the property
of the company and, therefore, the company should not
enter into that kind of litigation. The Company Judge has
taken note of it and further granting all protection to the
_., ·' .
H
1058
SUPREME COURT REPORTS
[2013] 17 S.C.R.
A official liquidator, has allowed the application for seeking
leave. [para 22] [1072-D-E]
2.1. To attract the doctrine of res judicata it must be·
manifest that there lias been conscious adjudication of
B an issue. A plea of res judicata cannot be taken aid of
unless there is an expression of an opinion on the merits.
Principle of res judicata is applicable between the two
stages of the same litigation bu~ the question or issue
involved must have been decided at earlier stage of the
C same litigation. [para 34] [1080-F-G; 1081-A-C]
Satyadhyan Ghosal and others v. Smt. Deorajin Debi.
and another 1960 SCR 590 =AIR 1960 SC 941 - relied on.
Arjun Singh v. Mahindra Kumar and others 1964
D SCR 946 =AIR 1964 SC 993 - referred to.
.
2.2. It is clear that the Company Judge had not dealt
with the application for grant of leave on merits and it was
disposed of on the basis of a submission made by the
third respondent that if an application for amendment is
E filed in the pending suit, he would not oppose the same;
· that the Company Judge on the basis of the statement
recorded that it was not necessary to grant the Judge's
Summons; and that liberty was granted to the applicant
· to apply if necessary. [para 3B] [1084-G; 1085-A, Bl
F
. Prahlad Singh v. Col. Sukhdev Singh AIR 1987 SC
1145; C. V Rajendran and another v. N. M. Muhammed Kunhi
2002 (2) Suppl. SCR 390 = AIR 2003 SC 649; Arukkflni
Ammal v. Guruswamy (1987) 100 LW 707; Saroja v:
G Chinnusamy (Dead) by LRs and another2007 (9) SCR 304
= (2007) 8 SCC 329; Y.B. p.atil and others v. Y.L. Patil 1977
(1) SCR 320 = (1976) 4 SCC 66 - referred to.
2.3. The .Division Bench has erroneously opined that
the Company Judge in the main part of the order having
H
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1059
BHAT
rejected the application could not have granted liberty to
A
apply for filing of another application. The Division Bench
has not appositely appreciated the ratio laid down in
Ke·wal Chand Mimani. The words, namely, "grant of
liberty" are to be understood, regard being had to the
context in which they are used. Context is really material.
B
Had the Compa·ny Judge adjudicated the matter on
merits, the matter would have been absolutely different.
He had, in fact, on the basis of a statement made by the
•
counsel for the third respondent, not dwelt upon the
merits and, in that context, had granted liberty to C
. applicant to apply, if necessary;. It is eminently so
because the Judge has also stated "it is not necess-ary
to grant the present Judge's Summons". Thus; the
application for grant of leave was really not dealt with on
·merits and on the basis of a statement of respondent No.
D
3, the ~ompany Judge opined that it was not necessary
for the present and in that context liberty was granted.
[para ?III [1086-A, B]
Kewal Chand Mimani v. S.K. Sen and others 2001 (3)
SCR 1056 = (2001) 6 SCC 512; State of U.P. v. Brahm Datt
E
Sharma 1987 (2) SCR 444 = (1987) 2 SCC 179 - referred
to.
2.4, The princip1es .stated in Arjun Singh, Satyadhyan
Ghosal and the other authorities. clearly spell out that
principle of res judicata operates at the. successive
. stages in the same litigation but, the basic foundation of
F
res judicata rests on d_elineation of merits and it has at
least an expression of an opinion for rejection of an
application. As is evident, there hai; been no advertence
G
on merits and further the Company Judge has guardedly
stated two facets, namely, "not necessary to grant
present.Judge's Summons" and "liberty· to applicant to
apply, if necessary". On
1a-seemly reading of the order, It
leaves no doubt that the same_ could not have been
H
1060
SUPREME COURT REPORTS
[2013) 17 S.C.R.
A treated to have operated as res judicata. Therefore, the
irresistible conclusion is that the Division Bench has
fallen into serious error in dislodging the order granting
leave by the Company Judge to file a fresh suit. [para 38)
[1085-8-C, F-H; 1086-A-B]
B
c
D
E
F
G
3. The order passed by the Division Bench is set
aside and that of the Company Judge restored.
[para
39) [1086-F]
Case Law Reference:
1964 SCR 946
referred to
para 11
2001 (3) SCR 1056
referred to
para 11
(1994) 4 sec 159
referred to
para 18
1998 (1) Suppl. SCR 413 referred to
para 19
2005 (10)-SCC 331
referred to
para 20
1971 (2) SCR 476
referred to
para 20
1960 SCR 590
relied on
para 24
1987 AIR 1145
ref~r~ed to
para 28
2002 (2) Suppl. SCR 390 referred to
para 30
(1987) 100 LW 707
referred to
para 31
2007 (9) SCR 304
referred to
para 32
1977 (1) SCR 320
referred to
para 33
1987 (2) SCR 444
referred to
para 36
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
11005 of 2013.
From the Judgment and Order dated 23.06.2010 of the
. High Court of Bombay in Appeal No. 262 of 2007 in Company
Application No. 720 of 2006 in Company Petition No. 201 of
H 1994.
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1061
BHAT
Shyam Divan, Pratap Venugopal, Nainesh, Meenalshi
A
Chauhan (for K.J. John & Co.) for the Appellant.
Shekhar Naphade, Jagdish A. Karia, E.C. Agrawala, for
the Respondents.
The Judgment of the Court was delivered by
DIPAK MISRA, J. 1. Leave granted.
8
2. This appeal, by special leave, is directed against the
judgment and order dated 23.6.2010 passed by the Division c
Bench of the High Court of Judicature at Bombay in Appeal No.
262 of 2007 reversing the judgment and order passed by the
learned single Judge in Company Application No. 720 of 2006
in Company Petition No. 201 of 1994 whereby the learned
single Judge had granted leave to the appellant to institute a
0
suit for eviction against the respondent therein.
3. The broad essential facts giving rise to the present
appeal are that on 17 .6.1975 the father of the appellant entered
into an agreement of leave and licence with respondent No. 2
- Company, namely Mis. Poysha Industrial Co. Ltd. in respect
E
of a flat owned by him. As put forth by the appellant, the licence
expired by efflux of time but the. respondent No. 2 continued to
pay the licence fee and the same was accepted by the father
of the appellant without prejudice. In the year 1990 a suit for
eviction was instituted by the predecessor-in-interest of the
appellant against respondent No. 2 and the sub-tenant under
F
the Bombay Rent Act, 1947. On 4.3.1997 the sub-tenant, the
first respondent herein, filed an application for impleading
·himself as a party in the suit contending that he was the subtenant. It is apt to note here that he was the Managing Director
G
of the respondent No. 2 - company. On 17.6.1997 the Small
Causes Court allowed the application and impleaded the
respondent No. 1 as a defendant. While the suit was in
progress, on 9.1.1998 in a separate proceeding the l~arned
Company Judge passed a winding up order again'st the
H
1062
SUPREME COURT REPORTS
(2013] 17 S.C.R.
A respondent No. 2 - Company, At that stage, the landlord filed
CA No. 731 of 1999 before the High Court seeking possession
of the flat. On 14.2.2000, the learned single Judge rejected the
application opining that before the premises could be returned,
the rights of the person to occupy the premises are required
B to be determined. It was observed that it was only in the clear
case where there is no valid or legal subsisting tenancy or subtenancy that the premises could be returned to the landlord. The
said order was assailed before the Division Bench which by
order dated 22.8.2000 accepted the reasoning ascribed by the
c learned single Judge and dismissed the appeal.
4 .. As the factual matrix wou!d further undrape, the father
of the appellant filed an application for amendment of the plaint
in the suit for incorporation of the certain other grounds including
the unlawful subletting by the respondent-company to the first
D respondent and the said amendment was sought to be made
in terms of Section 3(1)(b) of the Bombay Rent Act, 1947.
Eventually, by order dated 9.11.2000 the said application for
amendment was rejected on the ground that the Bombay Rent
Act had been rep~aled on 31.3.2000. Thereafter, Suit No. 226/
E 336 of 2001 was instituted in the Small Causes Court for
eviction on the ground of illegal subletting. As set forth, the said
suit was filed after obtaining leave from the Companies Court
under Section 446 of the Companies Act, 1956 (for short "the
1956 Act"). On 2.1.2002 as the original plaintiff, the father of
F the present appellant expired, an application for substitution
was filed and thereafter the legal representatives including the
appellant were brought on record vide order dated 28.3.2002.
As the factual matrix would unveil, the said suit was withdrawn
on 12.7.2004.
G
H
5. On 21.9.2005 the appellant terminated the tenancy and
thereafter on 18.10.2005 filed CA ·No. 45 of 2006 before the
learned Company Judge under Section 446 of the 1956 Act
seeking permission to file eviction suit in the Small Causes
Court as the respondent - Company was not entitled to
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1063
BHAT [DIPAK MISRA, J.]
protection under Maharashtra Rent Control Act, 1999 (for brevity
A
"the 1999 Act") in view of Section 3(1)(b) of the said Act.
6. The learned Company Judge on 23.2.2006, on the
basis of a statement made by the contesting respondent,
granted permission for filing an amendment subject to the rights
B
and contentions of respondent No. 3 therein on merits. However,
the Court observed that it was not necessary to present Judge's
Summons and granted liberty to file application, if necessary.
Though such an order was passed, the appellant did not file
an application for amendment on the legal advice and keeping
C
in view the liberty granted by the learned single Judge, filed CA
No. 720 of 2006 for grant of leave to file the eviction suit in
terms of the provisions contained in the 1999 Act. The learned
single Judge vide order dated 27.7.2006 passed the following .
order: -
·
D
"Perused the affidavit in support. Since the applicant has
instituted a Suit against the Company in Liquidation,
seeking its eviction from the premises, more particularly,
described in the affidavit in support and the Suit!
Application is pending. Company Application is made
E
absolute in terms of prayer clause (a).
·
This order is passed without prejudice to the rights and
contentions of the Official Liquidator and it would be open
for the Liquidator to raise all such contentions as are
permissible in law. "
7. Thereafter, an application for recall was filed contending,
inter alia, that the court was misguided as the order indicated
F
that the court was under an impression that the suit had already
been instituted earlier. The learned Company Judge, on peru&al
G
of the Company Application No. 720 of 200.6, found that the
court was not misguided as the said suit was mentioned as
proposed suit in the affidavit in support of the application. Being
of this view, he opined that the order dated 27.7.2006 did not
require to be interfered with. He further observed that as no
H
1064
SUPREME COURT REPORTS
[2013) 17 S.C.R.
A provision of law had been shown under which the proposed
defendants to the suit were required to be heard before leave
was granted under Section 446 of the 1956 Act. He also took
note of the fact that the official liquidator in the earlier
proceedings had made a statement to the court that the suit
a premises were not required by the liquidator for effective
management of the winding up proceedings and the order was
passed without prejudice to the rig!its and contentions of the
official liquidator and further it was observed that it would be
open for the official liquidator to raise ail such co:i;·o;;:liors as
c permissible in law. The learned Company Judge also took note
of the fact that the tenancy right of the company had not been
disputed by the plaintiff anc1 no decree could be passed without
a full-fledged trial in the suit. Being of this view, he dismissed
the application.
D
8. The said order came to be assailed in appeal No. 779
of 2006 before the Division Bench which by order dated
7 .11.2006, upon adumbration of all the facts and delineation
of the impugned orders, set aside the orders dated 27.7.2006
and 28 9.2006 as the learned Company Judge had not kept
E himself alive to Rule 117 of the Companies (Court) Rules, 1959
which envisages that an application under Section 446(1) for
leave of the Court to commence or continue in suit or
proceedings against the company shall be made upon notice
to the official liquidator and the parties to the suit or
F proceerJings sought to be commenced or continued and,
accordingly, remitted the matter to the learned Company Judge
to hear and decid& the application afresh in accordance with
law after affording opportunity to the sub-tenant also.
G
H
9. After the remit, the learned Company Judge vide order
dated 5.3.2007, adverting to the submissions raised at the bar,
came to hold that the objection as regards the maintainability
of the application raised by the counsel on behalf of the subtenant that failure to obtain leave prior to institution of the suit
would debar the court from granting leave was devoid of any
ERACH BOMAN KHAVAR v. TU KARAM SHRIDHAR 1065
BHAT [DIPAK MISRA, J.)
substance; that the contention to the effect that the order
passed on 23.2.2006 debarred the applicant from moving and
prosecuting another application for grant of leave to file a fresh
suit under Section 41 of the Presidency Small Causes Court
Act being hit by principle analogous to doctrine of res judicata
was untenable inasmuch as on an earlier occasion the question
of grant of leave had not been decided on merits and further
liberty was reserved in favour of the applicant to apply; that the
object behind Section 446 of the 1956 Act is to save the
company which is being wound up from unnecessary litigation
and to protect the assets for equitable distribution among its
creditors and shareholders and the court, while dealing with
the question of grant of leave has to necessarily consider the
interest of the company and ordinarily leave should be granted
where the question at issue in such a situation cannot be gone
into and decided in the winding up proceedings as in the case
at hand, the tenancy rights of the company in the tenanted
premises are not the assets for the purpose of liquidation
proceedings and merely because the company is in liquidation
and liquidator has been appointed, the rights of the company
vis-a-vis the landlord or tenants did not go through any change;
and that the official liquidator had no objection for releasing
the premises in favour of the landlord and as the sub-tenant
was the only contesting party, and accordingly granted leave.
Be it noted, the learned Company Judge while granting leave
has opined thus: -
"The issues involved in the suit and the reliefs claimed
cannot be adjudicated upon or decided by this Court in
exercise of company jurisdiction. That jurisdiction shall
A
B
c
D
E
F
be with the court trying the suit. The interest of the
company in liquidation is not at all involved in the said
G
suit as already recorded hereinabove for the reasons
stated. Therefore, the question of invocation of
jurisdiction of the Small Causes Court either under
Section 28 of the Bombay Rent Act or under Section 33
of the Maharashtra Rent Act or under Section 41 of the
H
A
B
c
D
E
1066
SUPREME COURT REPORTS
[2013) 17 S.C.R.
Presidenc;.y Small Causes Court Act is not relevant for
the purpose of grant of leave because the question of
jurisdiction of the court will have to be decided on the
basis of the plaint pleadings.
The small Causes Court would be well within its right to
decide its own jurisdiction. In the event; it comes to the
conclusion that it has no jurisdiction to try a suit under
the Presidency Small Causes Court Act, in that event, it
would be open for that Court either to return or reject the
plaint or permit the conversion of the suit. All these
conflicting questions need not be gone into and
adjudicated upon by this Court at the stage of grant of
leave. Only this Court has to consider that the suit is no(
a frivolous suit, that the suit is not such which is bound
to fail for the reasons apparent on the face of the record
and the same is not going to create strain on the
resources of the Official Liquidator. At any stage the
question raised in the suit is arguable one. "
[Underlining is ours)
10. The legal substantiality of the aforesaid order was
challenged in Appeal no. 262 of 2007 and before the Division
Bench it was contended that the application for grant of leave
had already been disposed by refusing it vide order dated
23.2.2006 and granting permission to file an application for
F amendment in the plaint in the Small Causes Court and the
concession given by the appellant not to oppose the same was
·not availed of and hence, a second application seeking grant
of the same relief was not maintainable. It was further urged
that TER Suit No. 1111127 of 2006, the second suit, was
G instituted pursuant to leave granted by the learned Company
Judge vide order dated 27.7.2006 which was revoked by order
of the Division Bench in appeal and, therefore, the learned
Company Judge could not have granted leave to continue the
said suit. The grant of leave by the learned Company Judge
H was criticized further on the ground that the earlier order dated
I
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1067
BHAT [DIPAK MISRA, J.]
23.3.2006 was only for the limited purpose for seeking
A
clarification of the order and not for filing a fresh application
seeking grant of leave. The aforesaid submissions were
resisted by the present appellant on many a score including the
interpretation of the earlier order and how it would not operate
as res judicata.
B
11. The Division Bench placed reliance on Arjun Singh
v. Mahindra Kumar and others' and came to hold that when
the second application for leave was filed, there was no change
in the circumstances and in the absence of any changed
circumstances, the second application for leave was not
C
maintainable as it was barred by principles of res judicata
being a successive application in the same court on self-same
facts. It was further opined that it is open to the appellant to file
an application for review or to file an appeal against the. S<!.id
order and as long as the said order remained alive, a fresh
D
application could not have been entertained by the learned
Company Judge. To interpret the term "grant of .liberty" the
Division Bench held that on the basis of the grant of liberty the
case could not have been reopened. For the said conclusion
reliance was placed on Kewal Chand Mimani v. S.K. Sen and
E
others2 • The Division Bench, however, clarifi'ed that the
· respondent No. 3 therein would be entitled to make an
application for grant of leave for instituting a fresh suit after
taking recourse to such remedy for annulment of the order dated
23.2.2006 passed in Company Application No. 45 of 2006.
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12. We have heard Mr. Shyam Divan, learned senior
counsel appearing for the appellant and Mr. Shekhar Naphade,
learned senior counsel appearing for the respondents.
13. The central issues that seems to be cemented by the
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verdict of the Division Bench are that the order dated 23.2.2006
1.
AIR 1964 SC 993.
2.
c2001) a sec s12.
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(2013] 17 S.C.R.
A passed by the learned single Judge in Company Application
No. 45 of 2006 in Company Petition No. 201 of 1994 operates
as res judicata debarring the appellant to file an application for
grant of leave and further the observation "liberty to applicant
to apply'' does not enable the appellant to get out from that legal
s labyrinth because it does not confer a right on a party to reagitate the matter.
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14. To appreciate the heart of the controversy, it is
necessary to reproduce the order dated 23.2.2006 in entirety:-
"Leave to amend the title in respect of Respondent No.
2 to read "The Official Liquidator of Mis. Poysha
Industrial Company Limited". Amendment to be carried
out within two weeks from today.
2. Mr. Thakkar, the learned Senior Counsel appearirig
on behalf of Respondent No. 3 states that in the event
of the Petitioner making an Application for amendment
of the plaint in R.A.E. suit No. 2281336 of 2001 on the
basis of the averments made in the present Judges
Summons, Respondent No. 3 will not oppose the same.
In view thereof, it is not necessary to grant the present
Judges' Summons.
3. Liberty to the Applicants to apply, if necessary. The
amendment, if granted, will however be subject to the
rights and contentions of Respondent No. 3 on merits. "
15. Criticizing the analysis and the conclusion of the
Division Bench Mr. Shyam Divan, learned senior counsel for
the appellant, has submitted that the said order goes against
G the spirit of Section 446 of the 1956 Act and further it would
not remotely attract the doctrine of res judicata in its conceptual
essentiality, for none of the ingredients on which the edifice of
the said principle is built are attracted to the facts of the case.
It is his further submission that when there had been no
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ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1069
BHAT [DIPAK MISRA, J.]
adjudication on merits by the learned Company Judge with
A
regard to grant or refusal of leave on earlier occasion, the
principles set out in the case of Arjun Singh (supra) would not
be attracted. That apart, contends Mr. Divan, that the words
"liberty to the applicants to apply, if necessary" are to be
contextually understood and regard being had to the backdrop
B
of the. application and the delineation by the learned Company
Judge and rrorto be put in a straight-jacket formula and, in any
case, the decision in Kewal Chand Mimani (supra) is not
applicable.
16. Mr. Nephade, learned senior counsel for the
respondents, per contra, would contend with emphasis that the
order dated 23.2.2006 has been appositely understood by the
Division Bench and it has justifiably been held to operate as
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res judicata debarring a party from filing a successive
application on self-same facts and hence, no fault can be found
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with the decision rendered in appeal. He would further submit
that the learned Judges of the Division Bench have correctly
understood the observation of the learned Company Judge
"liberty to applicant to apply" and in law, no benefit did accrue
E
to the appellant to file another application in the said
proceeding for grant of leave. That apart, the appellant chose
not to file amendment in the pending suit which was conceded
not to be opposed by the respondents but, on some pretext or
other he filed another application for grant of leave to institute
a suit under another enactment and, therefore, the Division
Bench has rightly unsettled and dislodged the order passed by
. the learned Company Judge.
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17. To appreciate. the submissions in their proper
perspective, we may refer to Section 446 of the 1956 Act which
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reads as follows: -
"446. Suits stayed on winding up order. - (1) When a
Winding up order has been made or the Official Liquidator
has been appointed as provisional liquidator, no suit or
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[2013) 17 S.C.R.
other legal proceeding shall be commenced, or if
pending at the date of the winding up order, shall be
proceeded with, against the company, except by leave
of the Tribunal and subject to such terms as the Tribunal
· may impose.
(2) Tribunal shall, notwithstanding anything contained in
any other law for the time being in force, have jurisdiction
to entertain, or dispose of- ·
(a)
any suit or proceeding by or against the company;
(b)
any craim made by or against the company
(including claims by or against any of its branches
in India);
(c)
any application made under section 391 by or in
respect of the company;
-
(d)
any question of priorities or any other question
whatsoever, whether of law or fact, which may relate
. to or rise in course of the winding up of the
company,
whether such suit or proceeding has been instituted or
is instituted or such claim or question has arisen or arises
or such application has been made or is made before
or after the order for the winding up of the company, or
before or after the commencement -of the Companies
(Amendment) Act, 1960 (65 of 1960).
3. (omitted by Act 11 of 2003, sec. 6!)
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4. Nothing in sub-section (1) or sub-section (3) shall
apply to any proceeding pending in appeal before the
Supreme Court or a High Court."
.
18. Reflecting on the said provision, this Court in Central
Bank of India v. Mis. Elmot Engineering Company and
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ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1071
BHAT [DIPAK MISRA, J.]
others" has ruled that it aims at safeguarding the assets of a
company in winding up against wasteful or expensive litigation
as far as matters which could be expeditiously and cheaply
decided by the company court are concerned. In granting leave
under the said provision, the court always takes into
consideration whether the company is likely to be exposed to
unnecessary litigation and cost.
19. In Ammonia Supplies Corp·oration (P) Ltd. v. Modern
Plastic Containers Pvt. Ltd. and others• , while dealing with
power under Section 446(1) of the 1956 Act, it has been
observed that in the said sub-section the words used would
indicate that the discre.tion to exercise such power is with the
company court.
20. In State of J&K v. UCO Bank and others5 , while
interpreting Section 446(1) of the 1956 Act, the Court opi!Jed
· that a suit cannot be instituted once a winding-up order is
passed except by !eave of the court. The two-Judge Bench
referred to the earlier decision rendered in Bansidhar
Shankarlal v. ·Mohd. lbrahim 6 , wherein the leave had been
obtained at the time of filing of the suit and the question was
whether fres~ leave ought to be obtained before proceeding
under Section 446(1) of the 1956 Act before institution of
execution proceedings. The Court considered the contrary
views expressed by different High Courts on the effect and
purport of Section 446(1) of the 1956 Act and came to the
conclusion that the view that failure to. obtain leave prior to
institution of suit would not debar the court from granting such
leave subsequently and.that the only consequence of the same
would be that the proceedings 'Would be regarded as having
been instituted on the date on which the leave was obtained
from the High Court.
3.
(1994) 4 SCC' 159.
4.
(1998) 1 sec 105.
5. · (2oosi 10 sec 331.
e.
(1970) 3 sec 900.
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21. We have referred to the aforesaid decisions solely for
the two purposes. First, grant of leave of the court is not a
condition precedent for initiation of a civil action or the legal
proceedings. It is because the Section does not expressly
provide for annulment of a proceeding that is undertaken
B without the leave of the court. There can be no shadow of doubt
that leave of the winding up court can be obtained even after
initiation of the proceeding. The second, the seminal object
behind engrafting of the said provision is to see that the interest
of the company is safeguarded so that it does not face
C deprivation of its right and claims are adjudicated without the
knowledge of the company court and further the court has a
discretion to see whether !eave should be granted and, if so,
with what conditions or no condition. That apart, the court me1y
grant leave if it felt that the company should not enter into
unnecessary litigation and incur avoidable expenditure.
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22. In the case at hand, the official liquidator had clearly
stated that the suit property was not the property of the company
and, therefore, the company should not enter into that kind of
litigation. The learned Company Judge has taken note of it and
E further granting all protection to the official liquidator, has
allowed the application for seeking leave. However, as is seen,
the Division Bench had dislodged the order of the learned
single Judge solely on the ground that the earlier order dated
23.2.2006 stared at the face of the appellant and operates as
F res judicata.
G.
23. Presently we shall address to the issue whether the
order which has been construed operating as res judicata by
the Division Bench, does really come within the ambit and
sweep of the principles of res judicata or not.
24. In Satyadhyan Ghosal and others v. Smt. Deorajin
Debi and another', a three-Judge Bench adverted to the
H 7.
AIR 1960 SC 941.
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1073
BHAT [DIPAK MISRA, J.]
principle of res judicata and its application as between two
A
stages in the same litigation and opined that when a Court at
an earlier stage decided the matter in one way will not allow
the parties to re-agitate the matter again at a subsequent stage
of the same proceeding. The facts in the said case are that the
appellant-landlord who had obtained a decree for ejectment
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against the tenant had not yet been able to get possession in
execution of the decree. The decree was obtained on February
10, 1949 and soon thereafter the Calcutta Thika Tenancy Act,
1949 came on the statute book on March 3, 1949. The tenants
made an application under Order IX, Rule 13 of the Code of c
Civil Procedure for setting aside the decree. The said
application was dismissed on July-16, 1949. On 9.9.1949, an
application was made by:fhe tenant under Section 28 of the
Calcutta Thika Tenancy Act alleging that they were Thika
tenants and hence, the decree made against them may be
0
rescinded. After contest, the learned Munsif came to hold that
applicants were not Thika tenants within the meaning of Thika
Tenancy Act and accordingly declined to rescind the decree.
The aforesaid order was challenged in a revision under Section
115 of the Code of Civil Procedure. At the time when the
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revision application was taken up for hearing, the Calcutta Thika
Tenancy Ordinance had come into force op October 21, 1952
and thereafter the Calcutta Thika Tenancy (Amendment) Act,
1953 came into force. The Amendment Act omitted Section 28
of the original Act. In order to decide whether the application
under Section 28 was still alive, the High Court had to consider
the effect of Section 1 (2) of the Amendment Act. The learned
Single Judge on interpretation of the provisions cameto hold
that Section 1 (2) of the Amendment Act did not affect the
operation of Section 28 of the original Act to the proceeding
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and on that basis disposed of the application holding that
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Section 28 was applicable. The High Court had also held that ·
in view of the amended provision of Section 28 of the Thika
Act and the Ordinance which was recorded by the learned
Munsif, the revisionists before the High Court were Thika
tenants. Being of this view, he allowed the revision and set
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[2013) 17 S.C.R.
A aside the order of the Munsif by which he dismissed the
application under Section 28 and remanded the case to the
Court of Munsif for disposal in accordance with law. After the
remand, the Munsif rescinded the decree. The landlord
preferred a revision under Section 115 of the Code of Civil
B Procedure contending that Section 28 of the Act was not
applicable but the said submission was repelled by the learned
Single Judge holding that the said issue having been decided
earlier was res judicata between the parties. The said order
passed in the revision was the subject matter of appeal before
c this Court by special leave. This Court stated the principle of
res judicata which is based on the need of giving finality to
judicial decisiors. The learned Judges opined once a res is
judicata, it shall not be adjudged again and it primarily applies
between past litigations and future litigations. Further
D elucidating it was stated that when in a matter - whether a
question of fact or a question of law had been decided between
the parities in one suit or proceeding and the decision is final,
either because of an appeal was taken to a higher court or an
appeal was dismissed, or when no appeal lies, neither party
E will be allowed in a future suit or proceeding between the same
parties to canvass the matter again. In that context, the Court
addressed the applicability of the principle of res judicata
between two stages in the same litigation and, eventually, ruled
thus:-
F
"The principle of res judicata applies also as between two
stages in the same litigation to this extent that a court,
whether the trial court or a higher court having at an
earlier stage decided a matter in one way will not allow
the parties to re-agitate the matter again at a subsequent
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stage of the same proceedings."
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25. After discussing the law in the field it was ruled that
there was no reason to hold that the appellant was precluded
from raising before this Court the question about the
applicability of Section 28 of the 1953 Act merely because he
ERACH BOMAN KHAVAR v. TUKARAM SHRIDHAR 1075
BHAT [DIPAK MISRA, J.]
had not appealed from the High Court's order of remand, taking
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the view against him the Section was applicable.
26. In the case of Arjun Singh (supra) the defendant had
approached this Court as his application under Order IX Rule
13 of the Code to set aside an ex parte decree passed against
him had been dismissed as barred by res judicata. The
question that basically arose before this Court was when an
application is made under Order IX Rule 7 of the Code and the
Court considers that there is not any good cause for the
previous non-appearance and proceeds further with the suits
and ultimately results in an ex parte decree, can a court in
dealing with applications to set aside the ex parte decree under
Order IX Rule 13 reconsider the question as to whether the
defendant had a sufficient cause for non-appearance on the day
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in regard to which the application under Order IX Rule 7 had
been filed.