Gloster Limited Vs. Fort Gloster Industries Limited and Another - Court Judgment

Excerpt:
sanjib banerjee, j. nearly two decades after the sanction of a scheme of arrangement, the transferee company has come to court complaining of a mistake on the court’section part in the drawn-up order sanctioning the scheme not specifically including a jute mill that it says stood transferred to and vested in it under the scheme. to boot, the applicant claims that it discovered such mistake consequent upon a recent order passed by this court on a request made by it for the constitution of an arbitral tribunal under section 11 of the arbitration and conciliation act, 1996. the transferor company is equivocal in its stand, but that may have little impact on how the application is decided. a non-party, which was not involved in the scheme and has not been impleaded by the applicant herein, had obtained leave to intervene in the present proceedings by an order made at an earlier stage. however, the order permitting such non-party to participate in the proceedings was not unreserved; it was made without prejudice to the applicant’section contention: the intention of the court at such stage being to postpone a decision on the desirability of the non-party being heard in course of the present application to the final stage. the scheme of arrangement, sanctioned by an order of may 31, 1993 provided for, inter alia, certain properties of fort gloster industries limited being parked with gloster limited (then known as gloster jute mills limited). the property which is relevant for the purpose of the present application is known as the north mill and is referred to as such herein. at the time that the scheme was sanctioned, or even when the first application to ultimately obtain the sanction of the scheme of arrangement was lodged in court, possession of the north mill had been made over by fort gloster to one hooghly mills company limited under an agreement for sale and a substantial part of the consideration received by fort gloster. the agreement for sale required certain statutory formalities – primarily, permission under the urban land (ceiling and regulation) act, 1976 - being obtained. it is not in dispute that such formalities were not complied with within any reasonable time of the agreement for sale being executed, though hooghly mills is said to have transferred possession of the north mill and its rights under the agreement for sale to bowreah jute mill limited. bowreah jute had obtained conditional leave to intervene in this application, but at the final hearing it was found that such non-party had no right to come in or be heard in course of these proceedings since, even if this application were to be allowed, its rights would not be compromised as bowreah jute would have a chance to have its say if the order allowing this application is made the basis for any future action against it. at any rate, even if this application were to be allowed, bowreah jute’s interest, if any, in the north mill would remain unaffected since its alleged possession thereof and any interest therein does not fall within the ambit of the assessment that the court is called upon to make now. bowreah jute has already instituted a suit in this court against, inter alia, hooghly mills, fort gloster and the applicant herein, seeking specific performance of its agreement with hooghly mills. at the time that the scheme of arrangement was propounded, the two companies involved therein had a common management or, in any event, the two belonged to the same business family. it is not uncommon for divisions in the family business being effected by a scheme of arrangement, though the applicants in such cases in the yesteryears were known to be much more secretive of the real intention than they are now. the obvious benefit of having a family division implemented through a scheme of arrangement was to obtain a single window clearance and the seal of the court thereon. the third and, until recently, the most compelling reason to cause the transfer of any company’section assets by way of a scheme was to avoid the payment of any stamp duty for the transfer; as the view long held in this court was that such transfer was involuntary and only consequent upon the order sanctioning the scheme which did not make it exigible to stamp duty. upon the position at law now being otherwise, the most lucrative of the reasons to seek the transfer of immovable properties standing in the names of companies by way of a scheme is gone and there are fewer schemes of such nature being filed in court. the applicant lodged a request under section 11 of the 1996 act by way of ap no. 211 of 2010 asserting an arbitration agreement of march 24, 1988 and claiming that, despite the applicant’s effort, the mechanism for securing a reference under the arbitration agreement had failed. the applicant asserted that it was entitled to have the arbitral tribunal put in place by the chief justice of this court or his designate. the eo nomine parties to the march 24, 1988 matrix contract which contained the arbitration clause were fort gloster and hooghly mills. the applicant herein claimed in the request under section 11 of the 1996 act that the north mill, which was the subject of the agreement for sale of march 24, 1988, stood transferred to and vested in the applicant in pursuance of the scheme of arrangement that was subsequently sanctioned by the order of may 31, 1993. the applicant asserted, or should be understood to have asserted, that upon the north mill being vested in it, the rights and obligations of fort gloster qua hooghly mills in the agreement of march 24, 1988 stood transferred by operation of law to the applicant. it claimed, in course of the request under section 11 of the 1996 act, that disputes had arisen between it and hooghly mills in respect of the north mill and such disputes were covered by the arbitration clause contained in the agreement for sale. in course of such matter, it came to light that hooghly mills claimed to have made over possession and transferred its rights relating to the north mill to bowreah jute. a point also arose as to whether the applicant herein had stepped into the shoes of fort gloster. notices were required to be issued to both fort gloster and bowreah jute. the order dated december 16, 2010 declining the applicant’s request under section 11 of the 1996 act recorded that fort gloster went unrepresented, but bowreah jute participated in the proceedings. it is necessary that the order dated december 16, 2010 be referred to in some detail to ascertain whether it was permissible for the applicant herein to carry the present application upon its request under section 11 of the 1996 act having been dismissed on the premise that the north mill did not pass to the applicant under the scheme. such order recorded that it was the applicant’s case that it was a party to the agreement of march 24, 1988; that it invoked the arbitration clause therein by requiring the arbitrator named in the clause to take up the reference; that the named arbitrator refused to take up the matter; that the applicant called upon hooghly mills to concur in the appointment of one of the two names suggested by the applicant as the arbitrator; and, that hooghly mills’ response thereto was that it was not a party to the arbitration agreement asserted by the applicant. the order of december 16, 2010 noted that the refusal of hooghly mills to submit to arbitration was more elaborately stated in its affidavit: the moot point urged by hooghly mills was that the scheme of demerger did not result in the north mill being transferred to the applicant; that the schedule of assets accompanying the order sanctioning the scheme did not mention the north mill or any right relating thereto vesting in the applicant; and, that hooghly mills had, in any event, assigned its rights under the agreement of march 24, 1988 in favour of bowreah jute on january 12, 2009. the issue that arose for consideration in the order of december 16, 2010 was framed as follows: “the only question in this application is whether the north mill was transferred to the petitioner.” the order then proceeded to examine the scheme which was schedule a to the order made on may 31, 1993, the definition of “jute division” in the scheme and the clause under which the “jute division” was to stand transferred to and vested in the transferee company under the scheme. such vesting clause recorded, in its material part, that “the jute division of the said transferor company with all its properties, rights and interests of the said transferor company and specified in the first, second and third parts of the schedule b hereto be transferred from the said transfer date and be vested without further act or deed to the said transferee company…” the order rejecting the applicant’section request under section 11 of the 1996 act noticed that the relevant schedule did not refer to the north mill but it included “a part of the properties of the jute division” and specified such properties. the order of december 16, 2010 then proceeded to consider whether the order sanctioning the scheme as drawn up implied the transfer and vesting of only such of the properties that were included in the schedule. form 42 of the companies (court) rules, 1959 and rule 84 thereof were referred to and it was observed that “these orders are submitted in draft to the court by the applicant…” the order found that schedule b to the scheme provided a detailed description of the properties transferred thereunder but did not include the north mill. it then held as follows: “in my opinion, the description of the schedule as assets of the jute division settles the above problem in interpretation. the schedule plainly clarified that the properties mentioned in that schedule were the properties of the jute division that were to vest in the petitioner. therefore, although there is a lot of ambiguity in paragraph 1 of the order of this court as discussed above, this problem is resolved by the statement made at the top of the schedule. therefore, the jute division described in para 1 of the scheme which is schedule ‘a’ to the order relates to the properties in schedule ‘b’ only. only those properties have vested in the petitioner by the scheme of de merger as confirmed by this court.” (emphasis as in the order.) it is, thus, plain to see that the applicant herein asserted in the previous proceedings that it was a party to the agreement of march 24, 1988 consequent upon the scheme of arrangement having been sanctioned under which the north mill and all rights pertaining thereto allegedly passed from fort gloster to the applicant. it is also evident from the stand taken by hooghly mills that it squarely denied that the north mill passed to the applicant herein upon the sanction of the scheme. it was, then, open to the applicant to either pursue its case that the north mill stood transferred to and vested in it by the order sanctioning the scheme on the basis of what was apparent from the order sanctioning the scheme as drawn up; or, urge the point that it has now: that the order sanctioning the scheme ought to have specifically referred to the north mill either in the body of the scheme or in the schedule forming a part of the order as drawn up and it was a mistake that it did not. it was not as if the order sanctioning the scheme had not been drawn up when the issue arose in course of the previous proceedings or that no copy of the drawn-up order was available with the applicant at such stage. the applicant did not, despite being put on notice by hooghly mills that the north mill did not pass to the applicant pursuant to the order sanctioning the scheme, regard the order sanctioning the scheme as drawn up to be mistaken. the applicant stuck to its guns and went ahead full-steam with its assertion that the north mill did pass to it. this, the applicant proclaimed on the basis of the order sanctioning the scheme as drawn up and despite it being in a seemingly unsatisfactory form. in choosing such course of action, the applicant made conscious decision. the applicant did not consider then that the order sanctioning the scheme as drawn up contained any mistake. it is irrelevant today, upon a decision having been rendered on an issue that squarely arose in the previous proceedings, as to whether there was, indeed, a mistake in the order sanctioning the scheme as drawn up. quite apart from the minor points of prejudice that it is a long-standing practice in this court that advocates representing the companies which are parties to the scheme hand over a draft of the order sanctioning the scheme as it is to be drawn up or, at any rate, are present to settle the drawn-up order and, ordinarily, there is no adversarial flavour in course of the drawing up of an order sanctioning scheme of merger or demerger, upon the issue arising in the previous proceedings as to whether the north mill had passed to the applicant or not under the scheme, the applicant was put on specific notice that the answer to the question hinged on the interpretation of the order sanctioning the scheme as drawn up. if there was any mistake in such order as drawn up or if the applicant perceived that there was such a mistake, it was then that the applicant ought to have stopped the progress of the section 11 proceedings in its tracks and sought leave to urge what it perceived and returned to the section 11 proceedings upon such perception being validated. in the applicant not having exercised the option that it certainly had, or even attempted to exercise it, as to whether there is a mistake or not in the order sanctioning the scheme as drawn up is a closed chapter and not amenable to be urged, at any rate, by the applicant. the applicant has sought to put a date to its discovery of the mistake. it insists that the realization that the order sanctioning the scheme as drawn up bore a mistake dawned on the applicant only upon the order declining its request under section 11 of the 1996 act interpreting the order sanctioning the scheme as drawn up to not mandate the north mill being transferred to or vesting in the applicant. the applicant needed to assign a date to the discovery of the mistake in view of the law of limitation. it now presents a red herring in its argument that a mistake of court can be corrected at any time. such contention only skirts the issue. there are precedents legion that espouse the principle that a mistake of court can be corrected at any stage or at any time. equally, the corollary to the principle cannot be lost sight of: that a right of a person to apply to have the mistake corrected has a sell-by date. it is impermissible under the prescription of limitation for a person to be aware of a mistake in a court order to sleep over the matter and apply at distant date after the detection of the mistake on the strength of the judicially accepted principle that a mistake of the court can and ought to be corrected at any point of time. the principle is subject to the right of the applicant to apply not having been extinguished by the law of limitation or by the applicant’s previous conduct. the applicant herein insists that if it is to be hanged it must only be on a legal peg. the applicant says that the doctrine of res judicata does not apply here in terms. the applicant urges that since the question of mistake had never been urged or considered, there is no issue estoppel. the applicant asserts that no element of acquiescence or waiver or estoppel or such other tenuous concept would apply for its present request to be stultified. the applicant exhorts that for a person carrying a grievance to a court, particularly that such person has been prejudiced by an act of court, the court will not shut its doors on the applicant on any judicial perception or suspicion that the applicant is not entitled to urge the ground without assessing the merits of the matter. if the principles of res judicata and issue estoppel do not apply in terms to the matter, the applicant submits, there cannot be any estoppel against a mistake of the court, or any element of the applicant acquiescing in such a mistake, or any deemed waiver of its right to bring such mistake to the notice of the court. nebulous as the principles analogous to res judicata or issue estoppel or waiver or acquiescence or estoppel may appear to the applicant, there is also a cardinal rule that a party may not approbate and reprobate. in the applicant having insisted in the previous proceedings that it was a party to the agreement of march 24, 1988 by operation of law consequent upon the sanction of the scheme of arrangement, the applicant asserted – or should be seen to have contended – that its rights qua the north mill were embodied in the order sanctioning the scheme as drawn up. in having taken such stand the applicant is precluded from turning around and changing tack to now suggest that the order sanctioning the scheme was erroneously drawn up. never mind that it would have been of little inconvenience to the applicant to urge the point of mistake that it now asserts when its request under section 11 of the 1996 act was live and yet undecided, for the necessary application had to be made before the same bench (arbitration and company matters have, for years, been allotted to the same judge in this court until as recently as a couple of weeks), in the applicant not having raised the subject of a mistake in the order sanctioning the scheme as drawn up at such stage, it stands condemned by its conduct. after all, the order rejecting the applicant’s request under section 11 of the 1996 act did not introduce the mistake in the order sanctioning the scheme as drawn up. the mistake, if any, existed since the day that the order sanctioning the scheme was drawn up. it would have been permissible for the applicant to urge the argument of mistake even today had the proceedings and the order on the proceedings under section 11 of the 1996 act not intervened. it is also altogether irrelevant that a petition for special leave to appeal from the order dated december 16, 2010 rejecting the applicant’s request under section 11 of the 1996 act has been summarily dismissed. the applicant seeks to cling on to a last straw that the present application was made prior to the institution of the petition for special leave to appeal to the supreme court or, at any rate, prior to the supreme court’s rejection thereof. it hardly makes a difference. this application was not filed prior to the rejection of the applicant’s request under section 11 of the 1996 act; it was made only after the issue that arose in those proceedings had been conclusively answered. the matter can be viewed from another perspective. if the applicant’section present essay were to succeed, it would imply that the north mill passed to the applicant under the order sanctioning the scheme and, as a corollary, the applicant would be deemed to have stepped into the shoes of fort gloster in the agreement for sale of march 24, 1988. such success would then give the applicant a toehold to assert that it is a party to the arbitration clause contained in the agreement of march 24, 1988 and entitled to a reference thereunder. it would then undo, almost by a side-wind, the exercise undertaken by a competent forum in adjudicating a matter and reaching a conclusion thereon. that would be clearly impermissible and, more importantly, opposed to the public policy that the apparently imprecise shades of the aforesaid principles profess to serve. even though the primary legal mooring of this order is in the conduct of the applicant and the principle – hazy, as the applicant may reckon – that a party may not approbate and reprobate, an ancillary juridical ground may exist that would warrant that the present application does not progress to the merits but is nipped in the bud. for the doctrine of res judicata or the principle of issue estoppel or any legal ground analogous thereto to be attracted (though the applicant maintains that there is only the direct application of either principle and there can be no judicial invention of any analogous premise), the scope of the previous proceedings and the parties thereto are, ostensibly, of crucial import in evaluating whether a matter can no longer be urged by a party. it is now recognised that a judicial function is discharged in weighing a request under section 11 of the 1996 act. the scope of the previous proceedings, therefore, included an assessment of whether the applicant herein was a party to the agreement of march 24, 1988 consequent upon the sanction of the scheme of demerger. the answer to the issue that arose in the previous proceedings lay in whether the north mill had passed under the order sanctioning the scheme to the applicant. the order rejecting the request under section 11 of the 1996 act found that it had not. as to whether the north mill had passed to the applicant under the sanctioned scheme was integral to the issue that arose in the previous case and was necessary to be adjudicated upon. it was not merely the reason for the decision, but central to and an inseparable part of the decision. the first limb of the rule in res judicata is fulfilled; whether the other limb – pertaining to the identity of the parties – is also satisfied has next to be seen. fort gloster was not a party to the previous proceedings, as hooghly mills is not a party herein; and it is irrelevant that fort gloster was issued notice by court in the previous proceedings and bowreah jute has now ambled into court proclaiming to be the present torchbearer of the rights of hooghly mills under the agreement of march 24, 1988. the primary advantage of effectuating the transfer of any property under a scheme sanctioned by court under chapter v of part vi of the companies act is that upon the imprimatur of the court being obtained it binds the entire world as an order sanctioning such a scheme operates in rem. it would be interesting to digress at this stage and assess whether any stand taken by fort gloster, the other party to the subject scheme, would impact the evaluation of the applicant’section plea on merits. it is possible in a particular case, as in the present, that the two original parties to a scheme may have fallen out subsequently. it is equally possible for the eo nomine parties to a scheme of such nature to jointly petition to the court that sanctioned the scheme that there was a mistake in the order as drawn up; the common intention either being bona fide or even a veiled attempt to prejudice some other. it would matter little, then, as to the stand taken by an eo nomine party to the scheme upon the other making an assertion as this applicant has. the assessment in such a case would be confined to the records pertaining to the scheme and the papers filed in course thereof. a subsequent agreement between the parties to the scheme or a disagreement between them as to what passed thereunder would scarcely weigh with the court on receiving an application to correct a mistake said to have been committed by the court in how the order sanctioning the scheme had been drawn up. it would then follow that an issue is sometimes capable of being decided irrespective of the stand of the other party to the proceedings and despite it. as a corollary, the identity of the parties to the two actions may not be an absolute imperative for the operation of the underlying sentiment embodied in the rule in res judicata. it is possible that a decision on an issue in a particular matter may not operate as res judicata in a subsequent matter, on the perception of the dissimilarity in the scopes of the two sets of proceedings; but if the order of the proceedings were to be reversed, a decision on an issue in the one would operate as res judicata in the other. what is incidental in the light of the scope of a particular matter may be central to the scope of a subsequent matter; a decision on such incidental issue in the previous matter may not operate as res judicata in the subsequent matter. but if an issue which is central to a particular matter is finally decided one way, it cannot be reopened in a subsequent matter if the other conditions as to the applicability of the doctrine are satisfied. there are many facets to a legal principle. but the applicant appears to be right in its assertion that the principle of res judicata would not apply in terms to this matter on the basis of the decision rendered in its failed request under section 11 of the 1996 act; and there is no virtue in flogging a dead horse. in the light of the view taken here, the judicial precedents referred to by the applicant are of no relevance. a judgment reported at 1995 supp. (3) scc 541 (induben ashokrao nalvade v. dhirajlal shivlal surati), relied upon by the applicant for the proposition that a later inaccuracy as to the description of a property under a document cannot whittle down what was intended to pass thereunder, pertains to the merits of the matter which, for the reasons indicated above, cannot be gone into. for the same reason, the judgment reported at (2010) 5 scc 306 (indowind energy ltd v. wescare i ltd) on the merits of the applicant’section claim is irrelevant in the present context. a decision reported at (1865) 11 hlc 375 (west v. lawbay) on the rules as to the construction of a document is an authority for what the applicant has canvassed on merits; and need not be looked into. the applicant has referred to five other judgments in support of its assertion that the principle of res judicata does not directly apply merely on the basis of the judicial pronouncement on the applicant’s earlier request under section 11 of the 1996 act. since it has been held that the principle of res judicata would not apply in terms to this case, the judgments reported at (1970) 1 scc 613 (mathura prasad bajoo jaiswal v. dossibai n b jeejeebhoyf); (1971) 3 scc 983 (chandra bhal v. the state of u.p.); (2005) 5 scc 390 (shakuntala devi v. kamla); (2010) 8 scc 383 (meghmala v. g narasimha reddy); and, (1994) 2 cal lj 278 (howrah trading company p. ltd v. smt. pramila jalan) need not be noticed in any great detail. it must, however, be said that it was possible for the applicant to prosecute its request under section 11 of the 1996 act with a caveat, that the order sanctioning the scheme as drawn up carried a mistake in the north mill not having been specifically included in the schedule to the scheme, on the argument that, despite such mistake, the surrounding circumstances made it obvious that such property had passed to the applicant under the sanctioning order. the order on the request under section 11 of the 1996 act may then have been without prejudice to the applicant’s contention that the order sanctioning the scheme was mistaken or left unaffected the applicant’s right to urge such ground at a subsequent stage. only then would the present application and the plea urged by the applicant have been maintainable despite the rejection of the request under section 11 of the 1996 act. upon the applicant not having requested a postponement of the decision on its request under section 11 of the 1996 act till its plea as to mistake was assessed, which petition the applicant might and ought to have made then since the order sanctioning the scheme as drawn up existed in the same form then as it does now, the applicant has to be seen to have burnt its bridges and cannot now be heard to say that the perceived mistake ought to be corrected. alternatively, upon the applicant not having ensured that its request under section 11 of the 1996 act was decided with its reservation that the order sanctioning the scheme may have been mistaken, it is now precluded from making out the case that it has attempted to in the present proceedings. once the applicant had asserted its right to the north mill on the basis of the order sanctioning the scheme as drawn up, and failed; it was no longer open to it to claim that the order was erroneously drawn up in the north mill not being included in the schedule thereto. a mistake of court in an order that operates in rem may be corrected at the instance of any person demonstrating to be prejudiced thereby; but the right of such person may not be recognised any longer if he has stood by and allowed a previous opportunity to pass when he ought to have asserted the mistake and attempted to have it rectified, particularly if such conduct has resulted in a right having accrued to any other. ca no 145 of 2011 fails. the consequence may be harsh and may confer an undeserving windfall on another. but the ethos of the applicable principles in matters of public policy demands that the applicant be left to its fate for a course of conduct that it consciously charted for itself at an earlier point of time. there will be no order as to costs. urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.

Judgment:

SANJIB BANERJEE, J.

Nearly two decades after the sanction of a scheme of arrangement, the transferee company has come to court complaining of a mistake on the court’Section part in the drawn-up order sanctioning the scheme not specifically including a jute mill that it says stood transferred to and vested in it under the scheme. To boot, the applicant claims that it discovered such mistake consequent upon a recent order passed by this court on a request made by it for the constitution of an arbitral tribunal under Section 11 of the Arbitration and Conciliation Act, 1996.

The transferor company is equivocal in its stand, but that may have little impact on how the application is decided. A non-party, which was not involved in the scheme and has not been impleaded by the applicant herein, had obtained leave to intervene in the present proceedings by an order made at an earlier stage. However, the order permitting such non-party to participate in the proceedings was not unreserved; it was made without prejudice to the applicant’Section contention: the intention of the court at such stage being to postpone a decision on the desirability of the non-party being heard in course of the present application to the final stage. The scheme of arrangement, sanctioned by an order of May 31, 1993 provided for, inter alia, certain properties of Fort Gloster Industries Limited being parked with Gloster Limited (then known as Gloster Jute Mills Limited). The property which is relevant for the purpose of the present application is known as the North Mill and is referred to as such herein. At the time that the scheme was sanctioned, or even when the first application to ultimately obtain the sanction of the scheme of arrangement was lodged in court, possession of the North Mill had been made over by Fort Gloster to one Hooghly Mills Company Limited under an agreement for sale and a substantial part of the consideration received by Fort Gloster. The agreement for sale required certain statutory formalities – primarily, permission under the Urban Land (Ceiling and Regulation) Act, 1976 - being obtained. It is not in dispute that such formalities were not complied with within any reasonable time of the agreement for sale being executed, though Hooghly Mills is said to have transferred possession of the North Mill and its rights under the agreement for sale to Bowreah Jute Mill Limited. Bowreah Jute had obtained conditional leave to intervene in this application, but at the final hearing it was found that such non-party had no right to come in or be heard in course of these proceedings since, even if this application were to be allowed, its rights would not be compromised as Bowreah Jute would have a chance to have its say if the order allowing this application is made the basis for any future action against it. At any rate, even if this application were to be allowed, Bowreah Jute’s interest, if any, in the North Mill would remain unaffected since its alleged possession thereof and any interest therein does not fall within the ambit of the assessment that the court is called upon to make now. Bowreah Jute has already instituted a suit in this court against, inter alia, Hooghly Mills, Fort Gloster and the applicant herein, seeking specific performance of its agreement with Hooghly Mills.

At the time that the scheme of arrangement was propounded, the two companies involved therein had a common management or, in any event, the two belonged to the same business family. It is not uncommon for divisions in the family business being effected by a scheme of arrangement, though the applicants in such cases in the yesteryears were known to be much more secretive of the real intention than they are now. The obvious benefit of having a family division implemented through a scheme of arrangement was to obtain a single window clearance and the seal of the court thereon. The third and, until recently, the most compelling reason to cause the transfer of any company’Section assets by way of a scheme was to avoid the payment of any stamp duty for the transfer; as the view long held in this court was that such transfer was involuntary and only consequent upon the order sanctioning the scheme which did not make it exigible to stamp duty. Upon the position at law now being otherwise, the most lucrative of the reasons to seek the transfer of immovable properties standing in the names of companies by way of a scheme is gone and there are fewer schemes of such nature being filed in court.

The applicant lodged a request under Section 11 of the 1996 Act by way of AP No. 211 of 2010 asserting an arbitration agreement of March 24, 1988 and claiming that, despite the applicant’s effort, the mechanism for securing a reference under the arbitration agreement had failed. The applicant asserted that it was entitled to have the arbitral tribunal put in place by the Chief Justice of this court or his designate. The eo nomine parties to the March 24, 1988 matrix contract which contained the arbitration clause were Fort Gloster and Hooghly Mills. The applicant herein claimed in the request under Section 11 of the 1996 Act that the North Mill, which was the subject of the agreement for sale of March 24, 1988, stood transferred to and vested in the applicant in pursuance of the scheme of arrangement that was subsequently sanctioned by the order of May 31, 1993. The applicant asserted, or should be understood to have asserted, that upon the North Mill being vested in it, the rights and obligations of Fort Gloster qua Hooghly Mills in the agreement of March 24, 1988 stood transferred by operation of law to the applicant. It claimed, in course of the request under Section 11 of the 1996 Act, that disputes had arisen between it and Hooghly Mills in respect of the North Mill and such disputes were covered by the arbitration clause contained in the agreement for sale. In course of such matter, it came to light that Hooghly Mills claimed to have made over possession and transferred its rights relating to the North Mill to Bowreah Jute. A point also arose as to whether the applicant herein had stepped into the shoes of Fort Gloster. Notices were required to be issued to both Fort Gloster and Bowreah Jute. The order dated December 16, 2010 declining the applicant’s request under Section 11 of the 1996 Act recorded that Fort Gloster went unrepresented, but Bowreah Jute participated in the proceedings.

It is necessary that the order dated December 16, 2010 be referred to in some detail to ascertain whether it was permissible for the applicant herein to carry the present application upon its request under Section 11 of the 1996 Act having been dismissed on the premise that the North Mill did not pass to the applicant under the scheme. Such order recorded that it was the applicant’s case that it was a party to the agreement of March 24, 1988; that it invoked the arbitration clause therein by requiring the arbitrator named in the clause to take up the reference; that the named arbitrator refused to take up the matter; that the applicant called upon Hooghly Mills to concur in the appointment of one of the two names suggested by the applicant as the arbitrator; and, that Hooghly Mills’ response thereto was that it was not a party to the arbitration agreement asserted by the applicant. The order of December 16, 2010 noted that the refusal of Hooghly Mills to submit to arbitration was more elaborately stated in its affidavit: the moot point urged by Hooghly Mills was that the scheme of demerger did not result in the North Mill being transferred to the applicant; that the schedule of assets accompanying the order sanctioning the scheme did not mention the North Mill or any right relating thereto vesting in the applicant; and, that Hooghly Mills had, in any event, assigned its rights under the agreement of March 24, 1988 in favour of Bowreah Jute on January 12, 2009. The issue that arose for consideration in the order of December 16, 2010 was framed as follows:

“The only question in this application is whether the North Mill was transferred to the petitioner.”

The order then proceeded to examine the scheme which was schedule A to the order made on May 31, 1993, the definition of “jute division” in the scheme and the clause under which the “jute division” was to stand transferred to and vested in the transferee company under the scheme. Such vesting clause recorded, in its material part, that “the Jute Division of the said transferor company with all its properties, rights and interests of the said transferor company and specified in the first, second and third parts of the schedule B hereto be transferred from the said transfer date and be vested without further act or deed to the said transferee company…” The order rejecting the applicant’Section request under Section 11 of the 1996 Act noticed that the relevant schedule did not refer to the North Mill but it included “a part of the properties of the jute division” and specified such properties. The order of December 16, 2010 then proceeded to consider whether the order sanctioning the scheme as drawn up implied the transfer and vesting of only such of the properties that were included in the schedule. Form 42 of the Companies (Court) Rules, 1959 and Rule 84 thereof were referred to and it was observed that “these orders are submitted in draft to the court by the applicant…” The order found that schedule B to the scheme provided a detailed description of the properties transferred thereunder but did not include the North Mill. It then held as follows:

“In my opinion, the description of the schedule as assets of the jute division settles the above problem in interpretation. The schedule plainly clarified that the properties mentioned in that schedule were the properties of the jute division that were to vest in the petitioner. Therefore, although there is a lot of ambiguity in paragraph 1 of the order of this court as discussed above, this problem is resolved by the statement made at the top of the schedule. Therefore, the jute division described in para 1 of the scheme which is schedule ‘A’ to the order relates to the properties in schedule ‘B’ only. Only those properties have vested in the petitioner by the scheme of de merger as confirmed by this court.” (Emphasis as in the order.)

It is, thus, plain to see that the applicant herein asserted in the previous proceedings that it was a party to the agreement of March 24, 1988 consequent upon the scheme of arrangement having been sanctioned under which the North Mill and all rights pertaining thereto allegedly passed from Fort Gloster to the applicant. It is also evident from the stand taken by Hooghly Mills that it squarely denied that the North Mill passed to the applicant herein upon the sanction of the scheme. It was, then, open to the applicant to either pursue its case that the North Mill stood transferred to and vested in it by the order sanctioning the scheme on the basis of what was apparent from the order sanctioning the scheme as drawn up; or, urge the point that it has now: that the order sanctioning the scheme ought to have specifically referred to the North Mill either in the body of the scheme or in the schedule forming a part of the order as drawn up and it was a mistake that it did not. It was not as if the order sanctioning the scheme had not been drawn up when the issue arose in course of the previous proceedings or that no copy of the drawn-up order was available with the applicant at such stage.

The applicant did not, despite being put on notice by Hooghly Mills that the North Mill did not pass to the applicant pursuant to the order sanctioning the scheme, regard the order sanctioning the scheme as drawn up to be mistaken.

The applicant stuck to its guns and went ahead full-steam with its assertion that the North Mill did pass to it. This, the applicant proclaimed on the basis of the order sanctioning the scheme as drawn up and despite it being in a seemingly unsatisfactory form. In choosing such course of action, the applicant made conscious decision. The applicant did not consider then that the order sanctioning the scheme as drawn up contained any mistake. It is irrelevant today, upon a decision having been rendered on an issue that squarely arose in the previous proceedings, as to whether there was, indeed, a mistake in the order sanctioning the scheme as drawn up. Quite apart from the minor points of prejudice that it is a long-standing practice in this court that advocates representing the companies which are parties to the scheme hand over a draft of the order sanctioning the scheme as it is to be drawn up or, at any rate, are present to settle the drawn-up order and, ordinarily, there is no adversarial flavour in course of the drawing up of an order sanctioning scheme of merger or demerger, upon the issue arising in the previous proceedings as to whether the North Mill had passed to the applicant or not under the scheme, the applicant was put on specific notice that the answer to the question hinged on the interpretation of the order sanctioning the scheme as drawn up. If there was any mistake in such order as drawn up or if the applicant perceived that there was such a mistake, it was then that the applicant ought to have stopped the progress of the Section 11 proceedings in its tracks and sought leave to urge what it perceived and returned to the Section 11 proceedings upon such perception being validated. In the applicant not having exercised the option that it certainly had, or even attempted to exercise it, as to whether there is a mistake or not in the order sanctioning the scheme as drawn up is a closed chapter and not amenable to be urged, at any rate, by the applicant.

The applicant has sought to put a date to its discovery of the mistake. It insists that the realization that the order sanctioning the scheme as drawn up bore a mistake dawned on the applicant only upon the order declining its request under Section 11 of the 1996 Act interpreting the order sanctioning the scheme as drawn up to not mandate the North Mill being transferred to or vesting in the applicant. The applicant needed to assign a date to the discovery of the mistake in view of the law of limitation. It now presents a red herring in its argument that a mistake of court can be corrected at any time. Such contention only skirts the issue. There are precedents legion that espouse the principle that a mistake of court can be corrected at any stage or at any time. Equally, the corollary to the principle cannot be lost sight of: that a right of a person to apply to have the mistake corrected has a sell-by date. It is impermissible under the prescription of limitation for a person to be aware of a mistake in a court order to sleep over the matter and apply at distant date after the detection of the mistake on the strength of the judicially accepted principle that a mistake of the court can and ought to be corrected at any point of time. The principle is subject to the right of the applicant to apply not having been extinguished by the law of limitation or by the applicant’s previous conduct.

The applicant herein insists that if it is to be hanged it must only be on a legal peg. The applicant says that the doctrine of res judicata does not apply here in terms. The applicant urges that since the question of mistake had never been urged or considered, there is no issue estoppel. The applicant asserts that no element of acquiescence or waiver or estoppel or such other tenuous concept would apply for its present request to be stultified. The applicant exhorts that for a person carrying a grievance to a court, particularly that such person has been prejudiced by an act of court, the court will not shut its doors on the applicant on any judicial perception or suspicion that the applicant is not entitled to urge the ground without assessing the merits of the matter. If the principles of res judicata and issue estoppel do not apply in terms to the matter, the applicant submits, there cannot be any estoppel against a mistake of the court, or any element of the applicant acquiescing in such a mistake, or any deemed waiver of its right to bring such mistake to the notice of the court.

Nebulous as the principles analogous to res judicata or issue estoppel or waiver or acquiescence or estoppel may appear to the applicant, there is also a cardinal rule that a party may not approbate and reprobate. In the applicant having insisted in the previous proceedings that it was a party to the agreement of March 24, 1988 by operation of law consequent upon the sanction of the scheme of arrangement, the applicant asserted – or should be seen to have contended – that its rights qua the North Mill were embodied in the order sanctioning the scheme as drawn up. In having taken such stand the applicant is precluded from turning around and changing tack to now suggest that the order sanctioning the scheme was erroneously drawn up. Never mind that it would have been of little inconvenience to the applicant to urge the point of mistake that it now asserts when its request under Section 11 of the 1996 Act was live and yet undecided, for the necessary application had to be made before the same Bench (arbitration and company matters have, for years, been allotted to the same judge in this court until as recently as a couple of weeks), in the applicant not having raised the subject of a mistake in the order sanctioning the scheme as drawn up at such stage, it stands condemned by its conduct. After all, the order rejecting the applicant’s request under Section 11 of the 1996 Act did not introduce the mistake in the order sanctioning the scheme as drawn up. The mistake, if any, existed since the day that the order sanctioning the scheme was drawn up. It would have been permissible for the applicant to urge the argument of mistake even today had the proceedings and the order on the proceedings under Section 11 of the 1996 Act not intervened. It is also altogether irrelevant that a petition for special leave to appeal from the order dated December 16, 2010 rejecting the applicant’s request under Section 11 of the 1996 Act has been summarily dismissed.

The applicant seeks to cling on to a last straw that the present application was made prior to the institution of the petition for special leave to appeal to the Supreme Court or, at any rate, prior to the Supreme Court’s rejection thereof. It hardly makes a difference. This application was not filed prior to the rejection of the applicant’s request under Section 11 of the 1996 Act; it was made only after the issue that arose in those proceedings had been conclusively answered.

The matter can be viewed from another perspective. If the applicant’Section present essay were to succeed, it would imply that the North Mill passed to the applicant under the order sanctioning the scheme and, as a corollary, the applicant would be deemed to have stepped into the shoes of Fort Gloster in the agreement for sale of March 24, 1988. Such success would then give the applicant a toehold to assert that it is a party to the arbitration clause contained in the agreement of March 24, 1988 and entitled to a reference thereunder. It would then undo, almost by a side-wind, the exercise undertaken by a competent forum in adjudicating a matter and reaching a conclusion thereon. That would be clearly impermissible and, more importantly, opposed to the public policy that the apparently imprecise shades of the aforesaid principles profess to serve.

Even though the primary legal mooring of this order is in the conduct of the applicant and the principle – hazy, as the applicant may reckon – that a party may not approbate and reprobate, an ancillary juridical ground may exist that would warrant that the present application does not progress to the merits but is nipped in the bud. For the doctrine of res judicata or the principle of issue estoppel or any legal ground analogous thereto to be attracted (though the applicant maintains that there is only the direct application of either principle and there can be no judicial invention of any analogous premise), the scope of the previous proceedings and the parties thereto are, ostensibly, of crucial import in evaluating whether a matter can no longer be urged by a party. It is now recognised that a judicial function is discharged in weighing a request under Section 11 of the 1996 Act. The scope of the previous proceedings, therefore, included an assessment of whether the applicant herein was a party to the agreement of March 24, 1988 consequent upon the sanction of the scheme of demerger. The answer to the issue that arose in the previous proceedings lay in whether the North Mill had passed under the order sanctioning the scheme to the applicant. The order rejecting the request under Section 11 of the 1996 Act found that it had not. As to whether the North Mill had passed to the applicant under the sanctioned scheme was integral to the issue that arose in the previous case and was necessary to be adjudicated upon. It was not merely the reason for the decision, but central to and an inseparable part of the decision. The first limb of the rule in res judicata is fulfilled; whether the other limb – pertaining to the identity of the parties – is also satisfied has next to be seen. Fort Gloster was not a party to the previous proceedings, as Hooghly Mills is not a party herein; and it is irrelevant that Fort Gloster was issued notice by court in the previous proceedings and Bowreah Jute has now ambled into court proclaiming to be the present torchbearer of the rights of Hooghly Mills under the agreement of March 24, 1988.

The primary advantage of effectuating the transfer of any property under a scheme sanctioned by court under Chapter V of Part VI of the Companies Act is that upon the imprimatur of the court being obtained it binds the entire world as an order sanctioning such a scheme operates in rem. It would be interesting to digress at this stage and assess whether any stand taken by Fort Gloster, the other party to the subject scheme, would impact the evaluation of the applicant’Section plea on merits. It is possible in a particular case, as in the present, that the two original parties to a scheme may have fallen out subsequently. It is equally possible for the eo nomine parties to a scheme of such nature to jointly petition to the court that sanctioned the scheme that there was a mistake in the order as drawn up; the common intention either being bona fide or even a veiled attempt to prejudice some other. It would matter little, then, as to the stand taken by an eo nomine party to the scheme upon the other making an assertion as this applicant has. The assessment in such a case would be confined to the records pertaining to the scheme and the papers filed in course thereof. A subsequent agreement between the parties to the scheme or a disagreement between them as to what passed thereunder would scarcely weigh with the court on receiving an application to correct a mistake said to have been committed by the court in how the order sanctioning the scheme had been drawn up. It would then follow that an issue is sometimes capable of being decided irrespective of the stand of the other party to the proceedings and despite it. As a corollary, the identity of the parties to the two actions may not be an absolute imperative for the operation of the underlying sentiment embodied in the rule in res judicata.

It is possible that a decision on an issue in a particular matter may not operate as res judicata in a subsequent matter, on the perception of the dissimilarity in the scopes of the two sets of proceedings; but if the order of the proceedings were to be reversed, a decision on an issue in the one would operate as res judicata in the other. What is incidental in the light of the scope of a particular matter may be central to the scope of a subsequent matter; a decision on such incidental issue in the previous matter may not operate as res judicata in the subsequent matter. But if an issue which is central to a particular matter is finally decided one way, it cannot be reopened in a subsequent matter if the other conditions as to the applicability of the doctrine are satisfied. There are many facets to a legal principle. But the applicant appears to be right in its assertion that the principle of res judicata would not apply in terms to this matter on the basis of the decision rendered in its failed request under Section 11 of the 1996 Act; and there is no virtue in flogging a dead horse.

In the light of the view taken here, the judicial precedents referred to by the applicant are of no relevance. A judgment reported at 1995 Supp. (3) SCC 541 (Induben Ashokrao Nalvade v. Dhirajlal Shivlal Surati), relied upon by the applicant for the proposition that a later inaccuracy as to the description of a property under a document cannot whittle down what was intended to pass thereunder, pertains to the merits of the matter which, for the reasons indicated above, cannot be gone into. For the same reason, the judgment reported at (2010) 5 SCC 306 (Indowind Energy Ltd v. Wescare I Ltd) on the merits of the applicant’Section claim is irrelevant in the present context. A decision reported at (1865) 11 HLC 375 (West v. Lawbay) on the rules as to the construction of a document is an authority for what the applicant has canvassed on merits; and need not be looked into. The applicant has referred to five other judgments in support of its assertion that the principle of res judicata does not directly apply merely on the basis of the judicial pronouncement on the applicant’s earlier request under Section 11 of the 1996 Act. Since it has been held that the principle of res judicata would not apply in terms to this case, the judgments reported at (1970) 1 SCC 613 (Mathura Prasad Bajoo Jaiswal v. Dossibai N B Jeejeebhoyf); (1971) 3 SCC 983 (Chandra Bhal v. The State of U.P.); (2005) 5 SCC 390 (Shakuntala Devi v. Kamla); (2010) 8 SCC 383 (Meghmala v. G Narasimha Reddy); and, (1994) 2 Cal LJ 278 (Howrah Trading Company P. Ltd v. Smt. Pramila Jalan) need not be noticed in any great detail.

It must, however, be said that it was possible for the applicant to prosecute its request under Section 11 of the 1996 Act with a caveat, that the order sanctioning the scheme as drawn up carried a mistake in the North Mill not having been specifically included in the schedule to the scheme, on the argument that, despite such mistake, the surrounding circumstances made it obvious that such property had passed to the applicant under the sanctioning order. The order on the request under Section 11 of the 1996 Act may then have been without prejudice to the applicant’s contention that the order sanctioning the scheme was mistaken or left unaffected the applicant’s right to urge such ground at a subsequent stage. Only then would the present application and the plea urged by the applicant have been maintainable despite the rejection of the request under Section 11 of the 1996 Act. Upon the applicant not having requested a postponement of the decision on its request under Section 11 of the 1996 Act till its plea as to mistake was assessed, which petition the applicant might and ought to have made then since the order sanctioning the scheme as drawn up existed in the same form then as it does now, the applicant has to be seen to have burnt its bridges and cannot now be heard to say that the perceived mistake ought to be corrected. Alternatively, upon the applicant not having ensured that its request under Section 11 of the 1996 Act was decided with its reservation that the order sanctioning the scheme may have been mistaken, it is now precluded from making out the case that it has attempted to in the present proceedings. Once the applicant had asserted its right to the North Mill on the basis of the order sanctioning the scheme as drawn up, and failed; it was no longer open to it to claim that the order was erroneously drawn up in the North Mill not being included in the schedule thereto. A mistake of court in an order that operates in rem may be corrected at the instance of any person demonstrating to be prejudiced thereby; but the right of such person may not be recognised any longer if he has stood by and allowed a previous opportunity to pass when he ought to have asserted the mistake and attempted to have it rectified, particularly if such conduct has resulted in a right having accrued to any other.

CA No 145 of 2011 fails. The consequence may be harsh and may confer an undeserving windfall on another. But the ethos of the applicable principles in matters of public policy demands that the applicant be left to its fate for a course of conduct that it consciously charted for itself at an earlier point of time.

There will be no order as to costs.

Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.