SUZUKI PARASRAMPURIA SUITINGS PVT. LTD. versus THE OFFICIAL LIQUIDATOR OF MAHENDRA PETROCHEMICALS LTD. (IN LIQUIDATION) AND OTHERS on 8 October 2018

[2018] 12 S.C.R.

A SUZUKI PARASRAMPURIA SUITINGS PVT. LTD.

v.

THE OFFICIAL LIQUIDATOR OF MAHENDRAPETROCHEMICALS LTD. (IN LIQUIDATION) AND OTHERS

BOCTOBER 08, 2018

(Civil Appeal No. 10322 of 2018)

[RANJAN GOGOI, CJI, NAVIN SINHA ANDK.M. JOSEPH, JJ.]

Securitisation and Reconstruction of Financial Assets andCEnforcement of Securities Interest Act, 2002 –Company Petitionfiled for winding up of one M/s. MPL – M/s. MPL was also referredfor rehabilitation to the Board for Industrial and FinancialReconstruction (BIFR) – During pendency of the same, withoutpermission or knowledge of the BIFR, M/s. MPL entered into anDMOU with the sister concern of the appellant for leasing out itsproperties to the appellant for 20 years for repayment of its debt –Industrial Finance Corporation of India Ltd. (IFCI) was securedcreditor of M/s. MPL and held first charge over the assets ofM/s. MPL for outstandings of Rs.160 Crores – After the winding-uporder, IFCI assigned its dues to the appellant for a sum ofERs.85 lacs – Appellant filed Company Application for substitutionin place of IFCI as a secured creditor of M/s. MPL – CompanyJudge rejected the application on 31.07.2015 holding that theappellant was neither a Bank/Banking company/financial institution/securitization company/reconstruction company and therefore couldFnot be substituted in place of IFCI as secured creditor for the purposeof the SARFAESI Act– Challenged by appellant for recall/review ofsaid order contending that it never sought the status of a securedcreditor in lieu of the IFCI but had simply desired to be adjudged atransferee from IFCI of an actionable claim u/s.130 of the T.P. Act –Held: Appellant in Company Application specifically soughtGsubstitution in place of IFCI as a secured creditor consequent tothe deed of assignment in its favour from IFCI – After the claim ofthe appellant of being a secured creditor was rejected by theCompany Judge, and the appellant realised the unsustainability ofits claim in the law, it made a complete volte face from its earlierHstand, contrary to its own pleadings, and contended that it had SUZUKI PARASRAMPURIA SUITINGS P. LTD. v. OFFICIAL LIQUIDATOROF MAHENDRA PETROCHEMICALS LTD.

never sought the status of a secured creditor under the SARFAESI–Act – A litigant cannot take contradictory stands in the same case No merit in the appeal – Transfer of Property Act, 1882 – s.130.

Practice & Procedure – Inconsistent stands in the same case– Untenability of – Held: A party cannot be permitted to approbateand reprobate on the same facts and take inconsistent shifting stands.

Dismissing the appeal, the Court

HELD: 1.1 That the unregistered MOU was withoutpermission of the BIFR, it was not disclosed to the CompanyCourt till the winding-up order was passed on 19.04.2010, theassignment of debt of Rs.160 crores by IFCI for Rs.85 lacs areadmitted facts. The order passed by the Company Judge makesit very explicit that the appellant in Company Application hadspecifically sought substitution in place of IFCI as a securedcreditor holding first charge consequent to the deed of assignmentin its favour dated 28.07.2010 from IFCI. The submissions madebefore the Company Judge leaves no doubts that as an assigneeof debts from the IFCI, the appellant essentially soughtsubstitution as a secured creditor under the Securitisation andReconstruction of Financial Assets and Enforcement of SecuritiesInterest Act, 2002 (SARFAESI Act) and for that purpose soughtto draw sustenance from the provisions of Section 130 of theTransfer of Property Act. [Para 8] [910-G-H; 911-A-B]

1.2 The appellant initially took a conscious and consideredstand before the Company Judge, staking a claim for beingsubstituted as a secured creditor under the SARFAESI Actconsequent to the assignment of debt to it by the IFCI. That theclaim was not simply with regard to assignment of an actionableclaim under Section 130 of the T.P. Act is evident from its ownpleadings and the pursis filed by the IFCI before the DebtRecovery Tribunal. After the claim of the appellant of being asecured creditor was rejected by the Company Judge, and theappellant realised the unsustainability of its claim in the law, itmade a complete volte face from its earlier stand and surprisingly,contrary to its own pleadings, now contended that it had neversought the status of a secured creditor under the SARFAESIAct. [Para 10] [912-D-F]

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A1.3 A litigant can take different stands at different timesbut cannot take contradictory stands in the same case. A partycannot be permitted to approbate and reprobate on the samefacts and take inconsistent shifting stands. No merit is found inthe appeal. [Paras 12, 14] [913-C, G]

BAmar Singh v. Union of India (2011) 7 SCC 69 :[2011] 6 SCR 403 ;Joint Action Committee of Air LinePilots’ Assn. of India v. DG of Civil Aviation(2011) 5 SCC 435 : [2011] 5 SCR 1019 – relied on.

Case Law Reference

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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 10322of 2018D

From the Judgment and Order dated 02.09.2016 of the High Courtof Gujarat at Ahmedabad in O.J. Appeal No. 4 of 2016 in CompanyApplication No. 248 of 2014 in Company Petition No. 150 of 1996.

Harin P. Raval, Sr. Adv., Ms. Monisha Handa, Mohit D. Ram,EAdvs. for the Appellant.

Deepak Jain, Ms. Jaspreet Aulakh, Ms. Prabhleen Kaur, TanpreetGulati, Ms. A. Sumathi, Puneet Jain, Ms. Christi Jain, Abhinav Gupta,Harsh Jain, Ms. Vineeta, Anip Sachthey, Ms. Anjali Chauhan, Ms. RiaSachthey, Advs for the Respondents.

FThe Judgment of the Court was delivered by NAVIN SINHA, J. Leave granted.

2. The appellant is an assignee of debt by the Industrial FinanceCorporation of India Ltd. (hereinafter called as “IFCI”) for theGoutstandings of M/s. Mahendra Petrochemicals Ltd. (hereinafter referredto as “M/s. MPL”). It is aggrieved by the appellate order dated 02.09.2016in O.J. Appeal No.4 of 2016, declining to interfere with the orders of theCompany Judge dated 31.07.2015 in Company Application No.248 of2014, and also the order dated 07.09.2015, in OJMCA No.170 of 2015declining to recall/review the order dated 31.07.2015.

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3. It is not considered necessary to set out and deal with theentirety of the facts and circumstances of the case, except to the extentnecessary for the purposes of the present order, in the limited nature ofthe controversy arising in the present appeal.

4. Company Petition No.150 of 1996 was filed for winding up ofM/s. MPL. The company was also referred for rehabilitation to theBoard for Industrial and Financial Reconstruction (hereinafter referredto as “BIFR”) in Reference No.385 of 2000. During pendency of thesame, without permission or knowledge of the BIFR, M/s. MPL enteredinto an unregistered memorandum of understanding (hereinafter referredto as the ‘MOU’) with the sister concern of the appellant, M/s. SuzukiParasrampuria Suitings Pvt. Ltd. for leasing out its properties to theappellant for 20 years for repayment of its debts. The MOU was alsonot brought to the attention of the company court till the winding-uporder was passed on 19.04.2010. The IFCI, Bank of Baroda – respondentno.3 and the Punjab National Bank – respondent no.4 were securedcreditors, who had filed original applications against M/s. MPL forrecovery of their debts before the Debt Recovery Tribunal under theSecuritisation and Reconstruction of Financial Assets and Enforcementof Securities Interest Act, 2002 (hereinafter referred to as “SARFAESIAct”). IFCI held first charge over the assets of M/s. MPL foroutstandings of Rs.160 crores and the Bank of Baroda with anoutstanding of approximately Rs.4,68,00,000/- held second charge. On28.07.2010 after the winding-up order, IFCI assigned its dues to theappellant for a sum of Rs.85 lacs only and informed the official liquidatorthereafter.

5. The appellant then filed Company Application No.248 of 2014with a prayer for substitution in place of IFCI as a secured creditor ofM/s. MPL. The Company Judge rejected the application on 31.07.2015holding that the appellant was neither a Bank or Banking company or afinancial institution or securitization company or reconstruction companyand therefore could not be substituted in place of IFCI as a securedcreditor for the purpose of the SARFAESI Act. In the nature of therelief sought for substitution as a secured creditor under the SARFAESIAct, the Company Judge held that the appellant could not draw anybenefit for the purpose from Section 130 of the Transfer of PropertyAct. All other contentions were left open to be raised before theappropriate court/forum in appropriate proceedings. The appellant then A

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Afiled OJMCA No.170 of 2015 invoking the inherent powers of theCompany Court under Rule 9 of the Companies (Court) Rules, 1959 forrecall/review of order dated 31.07.2015 contending that the appellanthad never sought substitution as a secured creditor and simply desiredsubstitution as a transferee of an actionable claim under Section 130 ofthe Transfer of the Property Act (hereinafter referred to as “the T.P.BAct”). The recall/review application was rejected holding that an entirelynew case was sought to be made out in the application. The appealagainst the same has been rejected by the impugned order.

6. Shri Harin P. Raval, learned senior counsel for the appellant,assailing the impugned order dated 02.09.2016, contended that theCappellant had never sought the status of a secured creditor in lieu of theIFCI. The finding to that effect is erroneous and completely misconceived.The appellant had simply desired to be adjudged a transferee from IFCIof an actionable claim under Section 130 of the T.P. Act. The rights andclaims of the appellant under the latter was the only issue, and has notDbeen considered at all. The deed of assignment dated 28.07.2010 wassubsisting and was challenged by none. The lack of any status of theappellant under the SARFAESI Act was a wholly irrelevant considerationto reject its action for transfer of an actionable claim under Section 130of the T.P. Act. The inherent power of the Company Court under Rule9 of the Companies (Court) Rules was wrongly declined to be exercisedEin the facts of the case.

7. Learned counsel for the respondents opposed the applicationsubmitting that the appellant cannot be permitted to make a volte faceafter the rejection of its only claim by the Company Judge and takeshifting stands at different times according to its convenience in theFsame proceedings.

8. We have considered the submissions on behalf of the parties.That the unregistered MOU was without permission of the BIFR, it wasnot disclosed to the Company Court till the winding-up order was passedon 19.04.2010, the assignment of debt of Rs.160 crores by IFCI forGRs.85 lacs are admitted facts. The order dated 31.07.2015 passed bythe Company Judge makes it very explicit that the appellant in CompanyApplication No.248 of 2014 had specifically sought substitution in placeof IFCI as a secured creditor holding first charge consequent to thedeed of assignment in its favour dated 28.07.2010 from IFCI. In supportHof the relief sought, reliance was also placed on the pursis dated 21.11.2011

filed by IFCI in OA No.452 of 2000 before the Debt Recovery Tribunal,Ahmedabad reaffirming the assignment in favour of the appellant. Thesubmissions made before the Company Judge leaves no doubts that asan assignee of debts from the IFCI, the appellant essentially soughtsubstitution as a secured creditor under the SARFAESI Act and for thatpurpose sought to draw sustenance from the provisions of Section 130of the Transfer of Property Act. Therefore, the Company Judge opinedthat Section 130 of the Transfer of the Property Act was not applicablein the facts of the case leaving it open for the parties to take all availablecontentions before the appropriate court/forum in appropriateproceedings. In the nature of the controversy sought to be raised by theappellant in the present appeal we consider it proper to set out the followingextracts from the order of the Company Judge:

“23. The only question which is required to be considered in thisapplication is as to whether the applicant can be permitted to besubstituted for and in place of IFCI Limited as the secured creditorof the company in liquidation? For deciding this question, certainprovisions of the SARFAESI Act are required to be considered.

25. Thus, in view of the aforesaid provisions contained in theSARFAESI Act, I am of the view that when the applicant companyis not a bank or banking or financial institution or securitizationcompany or reconstruction company, the applicant cannot bepermitted to be substituted in place of IFCI as secured creditorfor the purpose of SARFAESI Act.

27. The aforesaid provisions of Section 130 of the Transfer ofProperty Act are not applicable to the facts of the present case asthe IFCI has transferred the debts of the company in liquidation infavour of the applicant by deed of assignment and therefore thecase of the applicant is that it may be permitted to proceed againstthe company in liquidation under the SARFAESI Act as securedcreditor. The applicant is not entitled to get any benefit under theSARFAESI Act and cannot be termed as secured creditor. Hencethe reliance placed by the learned advocate for the applicant onthe provisions of Section 130 of the Transfer of Property Act, ismisconceived.”

9. The relevant extract of the pleadings by the appellant inCompany Application No.248 of 2014 noticed by the Company Judge inhis order dated 07.09.2015 are also noticeable:

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A“8. I say and submit that earlier, IFCI also filed a purshis dated21.11.2011 before the Debts Recovery Tribunal, Ahmedabad inOriginal Application No.452 of 2000 reaffirming that the IFCILtd. Has assigned its dues in favour of the applicant. I beg toannex a copy of purshis dated 21.11.2011 filed before the DebtsRecovery Tribunal, Ahmedabad in Original Application No.452 ofB2000 at Annexure-III.

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10. I say and submit that apropos to the Deed of Assignment, theApplicant has become the secured creditor of the Company inLiquidation and all the rights of IFCI Ltd. in relation to the financialfacilities extended to the Company in Liquidation and the underlyingsecurity interests therein vests in the Applicant vis-à-vis theCompany in liquidation.”

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10. The appellant initially took a conscious and considered standbefore the Company Judge, staking a claim for being substituted as asecured creditor under the SARFAESI Act consequent to the assignmentDof debt to it by the IFCI. That the claim was not simply with regard toassignment of an actionable claim under Section 130 of the T.P. Act isevident from its own pleadings and the pursis filed by the IFCI beforethe Debt Recovery Tribunal. No material has been placed before uswith regard to the orders that may have been passed by the Tribunal onEsuch application. After the claim of the appellant of being a securedcreditor was rejected by the Company Judge, and the appellant realisedthe unsustainability of its claim in the law, it made a complete volte facefrom its earlier stand and surprisingly, contrary to its own pleadings, nowcontended that it had never sought the status of a secured creditor underthe SARFAESI Act.

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11. The contention of the appellant that it had never soughtsubstitution as a secured creditor under the SARFAESI Act is additionallybelied from the recitals contained in the order dated 07.09.2015. Timeand again this court has held that the recitals in the order sheet withregard to what transpired before the High Court are sacrosanct. TheGlearned Single Judge, in the review jurisdiction, has reiterated that thearguments addressed before him in Company Application No. 248 of2014 were made specifically under the SARFAESI Act observing asfollows:

SUZUKI PARASRAMPURIA SUITINGS P. LTD. v. OFFICIAL LIQUIDATOROF MAHENDRA PETROCHEMICALS LTD. [NAVIN SINHA, J.]

“It is also required to be noted that learned advocate for theapplicant in the said application, at the time of arguments, submittedthat the applicant be substituted as secured creditor and given thebenefit under the SARFAESI Act and therefore, learned advocateMr. Rao appearing for the Bank of Baroda submitted in detail,after relying upon the provisions contained in SARFAESI Act,that the applicant cannot be substituted as secured creditor andpermitted to proceed under the provisions of SARFAESI Act.”

12. A litigant can take different stands at different times but cannottake contradictory stands in the same case. A party cannot be permittedto approbate and reprobate on the same facts and take inconsistent shiftingstands. The untenability of an inconsistent stand in the same case wasconsidered in Amar Singh vs. Union of India, (2011) 7 SCC 69,observing as follows:

“50. This Court wants to make it clear that an action at law is nota game of chess. A litigant who comes to Court and invokes itswrit jurisdiction must come with clean hands. He cannotprevaricate and take inconsistent positions.”

13. A similar view was taken in Joint Action Committee of AirLine Pilots’ Assn. of India vs. DG of Civil Aviation, (2011) 5 SCC435, observing:

“12. The doctrine of election is based on the rule of estoppel—theprinciple that one cannot approbate and reprobate inheres in it.The doctrine of estoppel by election is one of the species ofestoppels in pais (or equitable estoppel), which is a rule in equity…..Taking inconsistent pleas by a party makes its conduct far fromsatisfactory. Further, the parties should not blow hot and cold bytaking inconsistent stands and prolong proceedings unnecessarily.”

14. Resultantly we find no merit in the appeal. The appeal isdismissed.

Divya Pandey

Appeal dismissed.

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