05 November 2004
Supreme Court


Case number: C.A. No.-003209-003209 / 2002
Diary number: 3492 / 2001



CASE NO.: Appeal (civil)  3209 of 2002



DATE OF JUDGMENT: 05/11/2004




                M/s Ashok Transport Agency, Respondent No.1 herein [hereinafter  referred to as the ’plaintiff’], filed a suit against M/s O.M.C. Alloys  Limited, a Government Company, [hereinafter referred to as the  ’defendant’], for recovery of a sum of Rs.3,90,210/- with interest thereon.   The suit was filed on 1.8..1986.  The defendant filed a written statement  on 14.10.1987.  On 29.08.1990, the suit was dismissed for default.  On  20.09.1990, the plaintiff filed an application under Order IX Rule 9 of the  Code of Civil Procedure for restoration of the suit.  On 03.08.1991, the  defendant filed a memo substantially submitting that it was not opposing  the restoration of the suit.  The application for restoration was heard and  posted for orders to 17.8.1991.  On that date, orders were not pronounced  and the pronouncement of orders was adjourned to 02.09.1991.   

                On 30.08.1991, the Ministry of Law, Justice and Company Affairs,  Government of India, issued a Notification S.O. 562 (E) in exercise of the  powers conferred under sub-Sections (1) and (2) of Section 396 of the  Companies Act, 1956, called the OMC Alloys Limited and the Orissa  Mining Corporation Limited (Amalgamation) Order, 1991.  It provided  for the amalgamation of the defendant with the Orissa Mining  Corporation Limited [hereinafter referred to as the ’Corporation’], a  Government of Orissa company incorporated under the Companies Act.   In addition to providing for the amalgamation of the two companies and  for transfer of all rights and properties of the defendant and the vesting of  the same in the Corporation in accordance with law, by clause 12, it  provided for the dissolution of the Company.  Clause 12 reads:         "12. Dissolution of the M/s OMC Alloys Limited \026  Subject to the other provisions of this order, as from the  appointed day, M/s OMC Alloys Limited shall be dissolved  and no person shall make, assert or take any claims demand  or proceedings against the dissolved company or against a  director or an officer thereof in his capacity as such director  or officer, except in so far as may be necessary for enforcing  the provisions of this order."  

Clause 7 thereof made provision for saving of legal proceedings.  It  reads:-         "7. Saving of legal proceeding.- If on the appointed  day, any suit, prosecution, appeal or other legal proceedings  or whatever nature by or against the dissolved company be  pending, the same shall not abate or be discontinued, or be  any way prejudicially affected by reason of the transfer to the  resulting company of the undertaking of dissolved company



or of anything contained in his order.  But the suit,  prosecution, appeal or other legal proceeding may be  continued, prosecuted and enforced or against the resulting  company in the same manner and to the same extent as it  would or may be continued, prosecuted and enforced by or  against the dissolved company, if this order had not been  made."

       By definition, the resulting Company is the Corporation.

       Thus, by virtue of the above Order issued under Section 396 of the  Companies Act, the rights and obligations of the defendant were taken  over by the Corporation with a liberty given to claimants like the plaintiff  to continue the prosecution of their suits against the Corporation.

       It is seen that the defendant, who was represented by counsel and  who had filed a written statement in the suit, did not bring to the notice of  the Court that the defendant had got amalgamated with the Corporation,  that it stood dissolved and that it was necessary to implead the  Corporation before proceeding further with the suit.  The plaintiff also did  not take any steps to implead the Corporation as a defendant in the suit  either due to ignorance or due to want of care.   

       On 02.09.1991, with only the defendant on the party array, the  application for restoration of the suit was allowed, the suit was restored  and adjourned to 31.10.1991.  Meanwhile, on 24.09.1991, the  Government of Orissa promulgated ordinance No.8 of 1991 in exercise of  powers conferred under Article 213(1) of the Constitution of India and  issued a Notification dated 24.09.1991 whereby the Charge Chrome  Division originally known as OMC Alloys Limited of the Corporation  stood transferred and vested in the Government of Orissa.  On  27.09.1991, the Government of Orissa sold what had vested in it, to Tata  Iron and Steel Company (TISCO).  It is seen that the defendant did not  take further part or interest in the litigation and this resulted in Money  Suit No.491 of 1986 being decreed ex parte on 12.11.1991.  The  defendant did not accede to the demand of the plaintiff for satisfying the  decree. The plaintiff came to know of the Government Notification and  the subsequent developments and issued a notice to the Secretary,  Department of Steel and Mines demanding payment of the decretal dues.   The decree having not been satisfied, the plaintiff filed an Execution  Petition on 24.10.1994 impleading the defendant as judgment debtor  No.1, the Corporation as judgment debtor No.2 and the State Government  of Orissa as judgment debtor No.3.  In other words, the plaintiff, the  decree holder, sought to execute the decree not only against the  defendant-judgment debtor, but also against the statutory transferees.  The  Corporation filed an objection objecting to the executability of the decree  as against it.  The Government of Orissa also filed an objection objecting  to the executability of the decree as against it.  Both took the stand that  not being parties to the decree, they were not bound by it.  Thus, the  question arose in execution whether the decree obtained by the plaintiff  against the defendant was capable of being enforced against the  Corporation and the State of Orissa.  The Executing Court held that the  decree was executable as against the Corporation and the State of Orissa  since they were successors-in-interest of the judgment debtor and hence  bound by the decree.  Their objection was thus overruled.  The  Corporation and the Government of Orissa challenged the order of the  Executing Court before the High Court of Orissa in Revisions under  Section 115 of the Code of Civil Procedure.  The High Court of Orissa  after considering the relevant aspects and relying on the decision of this  Court in State of Orissa vs. Klockner & Co. [1996 (8) SCC 377], held  that the Executing Court was right, since the Corporation and the State  Government were only successors-in-interest of the defendant-judgment  debtor and it was not open to them to challenge the decree as a nullity or  as one unenforceable against them.  Thus the revisions were dismissed.  



The dismissal of its revision, Civil Revision No. 117 of 1998, is  challenged in this appeal by the Government of Orissa.

       This appeal was heard by two learned Judges of this Court.  One  learned Judge  came to the conclusion that the decree could not be  enforced against the appellant and the appellant was entitled in execution  to successfully raise the objection of non-executability of the decree as  against it.    The other learned Judge took the view that the decree was  enforceable  against  the Corporation  and  also the  Government of  Orissa, though they were not impleaded in the suit, since they were  successors-in-interest  of the judgment debtor.    It is seen that the  essential   difference in  approach  between  the two  learned Judges was  as to whether it was for the  plaintiff to  have taken steps to bring on  record the Corporation and the State of Orissa as parties to the suit before  proceeding with it and obtaining a decree, or whether it was for the  successors-in-interest of the defendant, if they wanted it, to seek to come  on record by themselves so as to defend that suit.  Anyway, the two  learned Judges thus differed.  In view of this, their Lordships referred the  appeal to a larger bench for decision by order dated 30.04.2004.  That is  how, this appeal has come up before a bench of three Judges.

       Normally, in a case covered by Order XXII Rule 10 of the Code of  Civil Procedure where rights are derived by an assignee or a successor-in- interest pending a litigation, 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.  Equally, in terms of Section 146 of the  Code of Civil Procedure, a proceeding could be taken against any person  claming under the defendant or the judgment debtor.  Similarly, a person  claiming under the defendant or the judgment debtor could seek to  challenge the decree or order that may be passed against the defendant, by  way of appeal or otherwise, in the appropriate manner.  But, it would not  be open to it to challenge the decree as void or unenforceable in execution  in the absence of any specific provision in that regard in the statute or  order bringing about such a transfer or assignment.   Going by these  general principles, it is possible to argue that it was for the Corporation,  and subsequently for the State of Orissa, to get themselves impleaded in  the suit and to prosecute a defence, not inconsistent with the defence  already set up by the defendant in its written statement.  Neither the  Corporation nor the Government of Orissa took that step.  In such a  situation, normally, one would be inclined to the view that it is not open  to the Corporation or to the Government of Orissa to challenge the  executability of the decree as against them.  It is in this context that the  impact of Amalgamation Order has to be considered.

       There is no dispute that the companies concerned were Government  companies and that under Section 396 of the Act, the Central Government  had the power to provide for amalgamation of the companies in national  interest.  It was in exercise of that power, that Notification S.O. 562(E)  dated 30.08.1991 providing for amalgamation of the defendant and the  Corporation was issued.  The said Order, in addition to providing for  amalgamation of the two companies, also made two important provisions  in Clauses 7 and 12.  By virtue of Clause 12, a dissolution of the  defendant was brought about and it was provided that no person shall  make, assert or take any claims demand or proceedings against the  dissolved company, but claimants like the plaintiff and other creditors  were not deprived of their right to proceed with the enforcement of their  claims against the dissolved company in terms of the Order.  Clause 7,  which we have quoted above, provided that any suit, prosecution, appeal  or other legal proceeding by or against the dissolved company pending on  the appointed day, shall not abate or be discontinued or be any way  prejudicially affected by reason of the transfer to the resulting company,  the Corporation, of the undertaking of the dissolved company or of



anything contained in the Amalgamation Order.  But it was specifically  provided that the suit, prosecution, appeal or other legal proceeding may  be continued, prosecuted and enforced against the resulting company,  namely, the Corporation, in the same manner and to the same extent as it  would or may be continued, prosecuted and enforced by or against the  dissolved company, if the order of amalgamation had not been made.  In  other words, a claimant like the present plaintiff, was given the right to  proceed with the suit as against the Corporation in terms of Clause 7.  On  the wording of clause 7, an obligation was cast on the plaintiff to implead  the Corporation as a defendant in the suit and to proceed with the same.  It  may be noted that at the relevant time, the suit stood dismissed for default  and the same had not been restored though the application for restoration  of the suit was pending.   The suit was got restored after the amalgamation  took place and the consequences as set out therein followed.  On the terms  of the Amalgamation Order, the plaintiff did have the right to proceed  with the application for restoration and the suit as against the Corporation  by taking appropriate steps in that behalf.  We must also notice that it was  the plain duty of the defendant and its counsel, to bring to the notice of the  Court the fact of promulgation of the Amalgamation Order so as to enable  the Court to pass appropriate orders regarding the continuance of the  proceeding before it.  All the same, that can only be a reason for the  plaintiff not having taken the requisite steps at the relevant time.  In the  face of the Amalgamation Order, we are of the view that it was necessary  for the plaintiff to have brought on record the Corporation and the State  Government before proceeding with its suit and the search for a decree in  its favour.  The terms of the Amalgamation Order has not been properly  appreciated by the Executing Court and the High Court when they  allowed the plaintiff to proceed with the execution as against the  Corporation and as against the Government of Orissa.

Thus, we are inclined to the view that the Corporation and the State  of Orissa should have been impleaded in the suit prior to the decree on the  terms of the Amalgamation Order.  Learned counsel for the appellant  submitted that the appellant only wanted an opportunity to defend the suit  consistent with the stand adopted in the written statement filed by the  defendant subject to any additional pleas that may be available to be  raised by the appellant.  We think that in this case, the proper order to be  passed, in the interests of justice is to accede to the plea of the appellant to  give it a chance to defend the suit especially in view of the relevant  clauses of Amalgamation Order, 1991, by setting aside the orders  impugned in this appeal and also by setting aside the ex parte decree and  reviving the suit and by directing the trial court to try and dispose of the  same afresh and in accordance with law, after bringing on record the  Corporation, the Government of Orissa and TISCO, since the State had  subsequently sold the assets to TISCO, and after giving the newly added  defendants an opportunity to file their written statements, not inconsistent  with the one already filed by the defendant.  After giving of such an  opportunity to the newly added defendants, it will be for that Court to  proceed with the trial and disposal of the suit in accordance with law.

We therefore allow this appeal.  We set aside the orders of the  Executing Court and the High Court on the objections raised by the  appellant.  We close the Execution Petition.  In the interests of justice, we  set aside the ex parte decree in Money Suit No. 491 of 1986 on the file of  the Civil Judge, Senior Division, Bhubaneswar and remand that suit to the  Court of the subordinate Judge of Bhubaneswar for a fresh trial and  disposal as indicated above.  The parties would appear before that Court  on 14.12.2004 to take further orders regarding the posting of the suit.   Learned Senior Counsel for the appellant has submitted before us that  appearance would be entered on behalf of the Corporation and the  Government of Orissa.  The trial court will direct the plaintiff to take out  summons to TISCO and also to the Corporation and the Government of  Orissa if they do not appear before it on 14.12.2004.  Since defendant  No.1 was already on the party array and had appeared in the suit, no fresh



notice to it will be necessary.  We have been assured on behalf of the  Government of Orissa that it will appear in the trial court on the date  fixed.  After the appearance of the Corporation and the Government of  Orissa or after service of summons on them and TISCO, the trial court  will proceed with the suit and dispose of the suit in accordance with law  and in the light of the directions as above.   

The parties are directed to suffer their respective costs.