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Sec.466 Company Act – permission of company court for eviction suit against a winding up company from a leased premises – earlier orders when not on merit – a subsequent order granting permission for filing eviction suit – Reversed by D.B. bench on the point of resjudicate – Apex court allowed the appeal and set aside the D.B. bench holding that there is no Res-judicata = Erach Boman Khavar … Appellant Versus Tukaram Shridhar Bhat and another …Respondents = Published in / Cited in / Reported in judis.nic.in/supremecourt/filename=41074

Sec.466 Company Act – permission of company court for eviction suit against a

 

English: The supreme court of india. Taken abo...

English: The supreme court of india. Taken about 170 m from the main building outside the perimeter wall (Photo credit: Wikipedia)

 

winding up company from a leased premises – earlier orders when not on merit – a subsequent order granting permission for filing eviction suit – Reversed by D.B. bench on the point of resjudicate – Apex court allowed the appeal and set aside the D.B. bench holding that there is no Res-judicata

 

 

 

This appeal, by special leave, is directed against  the  judgment  and

 

      order dated 23.6.2010 passed by the Division Bench of the  High  Court

 

      of Judicature at Bombay in  Appeal  No.  262  of  2007  reversing  the

 

      judgment and order passed by  the  learned  single  Judge  in  Company

 

      Application No. 720 of 2006  in  Company  Petition  No.  201  of  1994

 

      whereby the learned single Judge had granted leave to the appellant to

 

      institute a suit for eviction against the respondent therein. =

 

 

 

On 21.9.2005 the appellant terminated the tenancy  and  thereafter  on

 

      18.10.2005 filed CA No. 45 of 2006 before the  learned  Company  Judge

 

      under Section 446 of the 1956 Act seeking permission to file  eviction

 

      suit in the Small Causes Court as the respondent  –  Company  was  not

 

      entitled to protection under Maharashtra Rent Control Act,  1999  (for

 

      brevity “the 1999 Act”) in view of Section 3(1)(b) of the said Act. =

 

 

 

Had  the  learned   Company   Judge

 

      adjudicated  the  matter  on  merits,  the  matter  would  have   been

 

      absolutely different.  

 

He had, in fact, on the basis  of  a  statement

 

      made by the learned counsel for the third respondent, had not  dwelled

 

      upon the merits and, in that context, had granted liberty to applicant

 

      to apply, if necessary. 

 

 It is eminently so because the learned  Judge

 

      has also stated “it is not necessary  to  grant  the  present  Judge’s

 

      Summons”.  

 

Thus, the application for grant of  leave  was  really  not

 

      dealt with on merits and on the basis of a statement of respondent No.

 

      3 the learned Company Judge opined that it was not necessary  for  the

 

      present and in that  context  liberty  was  granted.   =     

 

 

 

 As is evident, there has been no advertence on merits and further  the

 

      learned Company Judge has guardedly stated two  facets,  namely,  “not

 

      necessary to grant present Judge’s Summons” and “liberty to  applicant

 

      to apply, if necessary”.

 

On a seemly reading of the order we have  no

 

      shadow of doubt that the same could not  have  been  treated  to  have

 

      operated as res judicata as has  been  held  by  the  Division  Bench.

 

     

 

Therefore, the irresistible conclusion is that the Division Bench  has

 

      fallen into serious error in dislodging the order  granting  leave  by

 

      the learned Company Judge to file a fresh suit.

 

 

 

  39. In view of the aforesaid analysis, we allow the appeal, set aside  the

 

      order passed by the Division Bench and restore  that  of  the  learned

 

      Company Judge.  The first respondent is directed to pay Rs.50,000/- to

 

      the appellant towards costs of the appeal.           

 

IN THE SUPREME COURT OF INDIA

 

CIVIL APPELLATE JURISDICTION

 

CIVIL APPEAL NO. 11005 OF 2013
(Arising out of SLP (Civil) No. 25369 of 2010)
Erach Boman Khavar … Appellant

 

Versus

 

Tukaram Shridhar Bhat and another …Respondents

 
J U D G M E N T
Dipak Misra, J.

 

Leave granted.

 

2. This appeal, by special leave, is directed against the judgment and
order dated 23.6.2010 passed by the Division Bench of the High Court
of Judicature at Bombay in Appeal No. 262 of 2007 reversing the
judgment and order passed by the learned single Judge in Company
Application No. 720 of 2006 in Company Petition No. 201 of 1994
whereby the learned single Judge had granted leave to the appellant to
institute a suit for eviction against the respondent therein.

 

3. The broad essential facts giving rise to the present appeal are that
on 17.6.1975 the father of the appellant entered into an agreement of
leave and licence with respondent No. 2 – Company, namely M/s. Poysha
Industrial Co. Ltd. in respect of a flat owned by him. As put forth
by the appellant, the licence expired by efflux of time but the
respondent No. 2 continued to pay the licence fee and the same was
accepted by the father of the appellant without prejudice. In the
year 1990 a suit for eviction was instituted by the predecessor-in-
interest of the appellant against respondent No. 2 and the sub-tenant
under the Bombay Rent Act, 1947. On 4.3.1997 the sub-tenant, the
first respondent herein, filed an application for impleading himself
as a party in the suit contending that he was the sub-tenant. It is
apt to note here that he was the Managing Director of the respondent
No. 2 – company. On 17.6.1997 the Small Causes Court allowed the
application and impleaded the respondent No. 1 as a defendant. While
the suit was in progress, on 9.1.1998 in a separate proceeding the
learned Company Judge passed a winding up order against the respondent
No. 2 – Company. At that stage, the landlord filed CA No. 731 of 1999
before the High Court seeking possession of the flat. On 14.2.2000,
the learned single Judge rejected the application opining that before
the premises could be returned, the rights of the person to occupy the
premises are required to be determined. It was observed that it was
only in the clear case where there is no valid or legal subsisting
tenancy or sub-tenancy that the premises could be returned to the
landlord. The said order was assailed before the Division Bench which
by order dated 22.8.2000 accepted the reasoning ascribed by the
learned single Judge and dismissed the appeal.

 

4. As the factual matrix would further undrape, the father of the
appellant filed an application for amendment of the plaint in the suit
for incorporation of the certain other grounds including the unlawful
subletting by the respondent-company to the first respondent and the
said amendment was sought to be made in terms of Section 3(1)(b) of
the Bombay Rent Act, 1947. Eventually, by order dated 9.11.2000 the
said application for amendment was rejected on the ground that the
Bombay Rent Act had been repealed on 31.3.2000. Thereafter, Suit No.
226/336 of 2001 was instituted in the Small Causes Court for eviction
on the ground of illegal subletting. As set forth, the said suit was
filed after obtaining leave from the Companies Court under Section 446
of the Companies Act, 1956 (for short “the 1956 Act”). On 2.1.2002 as
the original plaintiff, the father of the present appellant expired,
an application for substitution was filed and thereafter the legal
representatives including the appellant were brought on record vide
order dated 28.3.2002. As the factual matrix would unveil, the said
suit was withdrawn on 12.7.2004.

 

5. On 21.9.2005 the appellant terminated the tenancy and thereafter on
18.10.2005 filed CA No. 45 of 2006 before the learned Company Judge
under Section 446 of the 1956 Act seeking permission to file eviction
suit in the Small Causes Court as the respondent – Company was not
entitled to protection under Maharashtra Rent Control Act, 1999 (for
brevity “the 1999 Act”) in view of Section 3(1)(b) of the said Act.

 

6. The learned Company Judge on 23.2.2006, on the basis of a statement
made by the contesting respondent, granted permission for filing an
amendment subject to the rights and contentions of respondent No. 3
therein on merits. However, the Court observed that it was not
necessary to present Judge’s Summons and granted liberty to file
application, if necessary. Though such an order was passed, the
appellant did not file an application for amendment on the legal
advice and keeping in view the liberty granted by the learned single
Judge, filed CA No. 720 of 2006 for grant of leave to file the
eviction suit in terms of the provisions contained in the 1999 Act.
The learned single Judge vide order dated 27.7.2006 passed the
following order: –
“Perused the affidavit in support. Since the applicant has instituted
a Suit against the Company in Liquidation, seeking its eviction from
the premises, more particularly, described in the affidavit in support
and the Suit/Application is pending. Company Application is made
absolute in terms of prayer clause (a).

 

This order is passed without prejudice to the rights and
contentions of the Official Liquidator and it would be open for the
Liquidator to raise all such contentions as are permissible in law.”

 

7. Thereafter, an application for recall was filed contending, inter
alia, that the court was misguided as the order indicated that the
court was under an impression that the suit had already been
instituted earlier. The learned Company Judge, on perusal of the
Company Application No. 720 of 2006, found that the court was not
misguided as the said suit was mentioned as proposed suit in the
affidavit in support of the application. Being of this view, he
opined that the order dated 27.7.2006 did not require to be interfered
with. He further observed that as no provision of law had been shown
under which the proposed defendants to the suit were required to be
heard before leave was granted under Section 446 of the 1956 Act. He
also took note of the fact that the official liquidator in the earlier
proceedings had made a statement to the court that the suit premises
were not required by the liquidator for effective management of the
winding up proceedings and the order was passed without prejudice to
the rights and contentions of the official liquidator and further it
was observed that it would be open for the official liquidator to
raise all such contentions as permissible in law. The learned Company
Judge also took note of the fact that the tenancy right of the company
had not been disputed by the plaintiff and no decree could be passed
without a full-fledged trial in the suit. Being of this view, he
dismissed the application.

 

8. The said order came to be assailed in appeal No. 779 of 2006 before
the Division Bench which by order dated 7.11.2006, upon adumbration of
all the facts and delineation of the impugned orders, set aside the
orders dated 27.7.2006 and 28.9.2006 as the learned Company Judge had
not kept himself alive to Rule 117 of the Companies (Court) Rules,
1959 which envisages that an application under Section 446(1) for
leave of the Court to commence or continue in suit or proceedings
against the company shall be made upon notice to the official
liquidator and the parties to the suit or proceedings sought to be
commenced or continued and, accordingly, remitted the matter to the
learned Company Judge to hear and decide the application afresh in
accordance with law after affording opportunity to the sub-tenant
also.

 

9. After the remit, the learned Company Judge vide order dated 5.3.2007,
adverting to the submissions raised at the bar, came to hold that the
objection as regards the maintainability of the application raised by
the counsel on behalf of the sub-tenant that failure to obtain leave
prior to institution of the suit would debar the court from granting
leave was devoid of any substance; that the contention to the effect
that the order passed on 23.2.2006 debarred the applicant from moving
and prosecuting another application for grant of leave to file a fresh
suit under Section 41 of the Presidency Small Causes Court Act being
hit by principle analogous to doctrine of res judicata was untenable
inasmuch as on an earlier occasion the question of grant of leave had
not been decided on merits and further liberty was reserved in favour
of the applicant to apply; that the object behind Section 446 of the
1956 Act is to save the company which is being wound up from
unnecessary litigation and to protect the assets for equitable
distribution among its creditors and shareholders and the court, while
dealing with the question of grant of leave has to necessarily
consider the interest of the company and ordinarily leave should be
granted where the question at issue in such a situation cannot be gone
into and decided in the winding up proceedings as in the case at hand,
the tenancy rights of the company in the tenanted premises are not the
assets for the purpose of liquidation proceedings and merely because
the company is in liquidation and liquidator has been appointed, the
rights of the company vis-à-vis the landlord or tenants did not go
through any change; and that the official liquidator had no objection
for releasing the premises in favour of the landlord and as the sub-
tenant was the only contesting party, and accordingly granted leave.
Be it noted, the learned Company Judge while granting leave has opined
thus: –

 

“The issues involved in the suit and the reliefs claimed cannot be
adjudicated upon or decided by this Court in exercise of company
jurisdiction. That jurisdiction shall be with the court trying the
suit. The interest of the company in liquidation is not at all
involved in the said suit as already recorded hereinabove for the
reasons stated. Therefore, the question of invocation of jurisdiction
of the Small Causes Court either under Section 28 of the Bombay Rent
Act or under Section 33 of the Maharashtra Rent Act or under Section
41 of the Presidency Small Causes Court Act is not relevant for the
purpose of grant of leave because the question of jurisdiction of the
court will have to be decided on the basis of the plaint pleadings.

 

The small Causes Court would be well within its right to decide
its own jurisdiction. In the event; it comes to the conclusion that
it has no jurisdiction to try a suit under the Presidency Small Causes
Court Act, in that event, it would be open for that Court either to
return or reject the plaint or permit the conversion of the suit. All
these conflicting questions need not be gone into and adjudicated upon
by this Court at the stage of grant of leave. Only this Court has to
consider that the suit is not a frivolous suit, that the suit is not
such which is bound to fail for the reasons apparent on the face of
the record and the same is not going to create strain on the resources
of the Official Liquidator. At any stage the question raised in the
suit is arguable one.”

 

[Underlining is ours]

 

10. The legal substantiality of the aforesaid order was challenged in
Appeal no. 262 of 2007 and before the Division Bench it was contended
that the application for grant of leave had already been disposed by
refusing it vide order dated 23.2.2006 and granting permission to file
an application for amendment in the plaint in the Small Causes Court
and the concession given by the appellant not to oppose the same was
not availed of and hence, a second application seeking grant of the
same relief was not maintainable. It was further urged that TER Suit
No. 111/127 of 2006, the second suit, was instituted pursuant to leave
granted by the learned Company Judge vide order dated 27.7.2006 which
was revoked by order of the Division Bench in appeal and, therefore,
the learned Company Judge could not have granted leave to continue the
said suit. The grant of leave by the learned Company Judge was
criticized further on the ground that the earlier order dated
23.3.2006 was only for the limited purpose for seeking clarification
of the order and not for filing a fresh application seeking grant of
leave. The aforesaid submissions were resisted by the present
appellant on many a score including the interpretation of the earlier
order and how it would not operate as res judicata.

 

11. The Division Bench placed reliance on Arjun Singh v. Mohindra Kumar
and others[1] and came to hold that when the second application for
leave was filed, there was no change in the circumstances and in the
absence of any changed circumstances, the second application for leave
was not maintainable as it was barred by principles of res judicata
being a successive application in the same court on self-same facts.
It was further opined that it is open to the appellant to file an
application for review or to file an appeal against the said order and
as long as the said order remained alive, a fresh application could
not have been entertained by the learned Company Judge. To interpret
the term “grant of liberty” the Division Bench held that on the basis
of the grant of liberty the case could not have been reopened. For
the said conclusion reliance was placed on Kewal Chand Mimani v. S.K.
Sen and others[2]. The Division Bench, however, clarified that the
respondent No. 3 therein would be entitled to make an application for
grant of leave for instituting a fresh suit after taking recourse to
such remedy for annulment of the order dated 23.2.2006 passed in
Company Application No. 45 of 2006.

 

12. We have heard Mr. Shyam Divan, learned senior counsel appearing for
the appellant and Mr. Shekhar Naphade, learned senior counsel
appearing for the respondents.

 

13. The central issues that seems to be cemented by the verdict of the
Division Bench are that the order dated 23.2.2006 passed by the
learned single Judge in Company Application No. 45 of 2006 in Company
Petition No. 201 of 1994 operates as res judicata debarring the
appellant to file an application for grant of leave and further the
observation “liberty to applicant to apply” does not enable the
appellant to get out from that legal labyrinth because it does not
confer a right on a party to re-agitate the matter.

 

14. To appreciate the heart of the controversy, it is necessary to
reproduce the order dated 23.2.2006 in entirety: –

 

“Leave to amend the title in respect of Respondent No. 2 to read “The
Official Liquidator of M/s. Poysha Industrial Company Limited”.
Amendment to be carried out within two weeks from today.

 

2. Mr. Thakkar, the learned Senior Counsel appearing on behalf of
Respondent No. 3 states that in the event of the Petitioner
making an Application for amendment of the plaint in R.A.E. suit
No. 228/336 of 2001 on the basis of the averments made in the
present Judges Summons, Respondent No. 3 will not oppose the
same. In view thereof, it is not necessary to grant the present
Judges’ Summons.

 

3. Liberty to the Applicants to apply, if necessary. The
amendment, if granted, will however be subject to the rights and
contentions of Respondent No. 3 on merits.”

 

15. Criticizing the analysis and the conclusion of the Division Bench Mr.
Shyam Divan, learned senior counsel for the appellant, has submitted
that the said order goes against the spirit of Section 446 of the 1956
Act and further it would not remotely attract the doctrine of res
judicata in its conceptual essentiality, for none of the ingredients
on which the edifice of the said principle is built are attracted to
the facts of the case. It is his further submission that when there
had been no adjudication on merits by the learned Company Judge with
regard to grant or refusal of leave on earlier occasion, the
principles set out in the case of Arjun Singh (supra) would not be
attracted. That apart, contends Mr. Divan, that the words “liberty to
the applicants to apply, if necessary” are to be contextually
understood and regard being had to the backdrop of the application and
the delineation by the learned Company Judge and not to be put in a
straight-jacket formula and, in any case, the decision in Kewal Chand
Mimani (supra) is not applicable.

 

16. Mr. Nephade, learned senior counsel for the respondents, per contra,
would contend with emphasis that the order dated 23.2.2006 has been
appositely understood by the Division Bench and it has justifiably
been held to operate as res judicata debarring a party from filing a
successive application on self-same facts and hence, no fault can be
found with the decision rendered in appeal. He would further submit
that the learned Judges of the Division Bench have correctly
understood the observation of the learned Company Judge “liberty to
applicant to apply” and in law, no benefit did accrue to the appellant
to file another application in the said proceeding for grant of leave.
That apart, the appellant chose not to file amendment in the pending
suit which was conceded not to be opposed by the respondents but, on
some pretext or other he filed another application for grant of leave
to institute a suit under another enactment and, therefore, the
Division Bench has rightly unsettled and dislodged the order passed by
the learned Company Judge.

 

17. To appreciate the submissions in their proper perspective, we may
refer to Section 446 of the 1956 Act which reads as follows: –

 

“446. Suits stayed on winding up order. – (1) When a winding up order
has been made or the Official Liquidator has been appointed as
provisional liquidator, no suit or other legal proceeding shall be
commenced, or if pending at the date of the winding up order, shall be
proceeded with, against the company, except by leave of the Tribunal
and subject to such terms as the Tribunal may impose.

 

(2) Tribunal shall, notwithstanding anything contained in any other
law for the time being in force, have jurisdiction to entertain, or
dispose of-

 

(a) any suit or proceeding by or against the company;

 

(b) any claim made by or against the company (including claims by or
against any of its branches in India);

 

(c) any application made under section 391 by or in respect of the
company;

 

(d) any question of priorities or any other question whatsoever,
whether of law or fact, which may relate to or rise in course of
the winding up of the company,

 

whether such suit or proceeding has been instituted or is instituted
or such claim or question has arisen or arises or such application has
been made or is made before or after the order for the winding up of
the company, or before or after the commencement of the Companies
(Amendment) Act, 1960 (65 of 1960).

 

3. (omitted by Act 11 of 2003, sec. 61)

 

4. Nothing in sub-section (1) or sub-section (3) shall apply to any
proceeding pending in appeal before the Supreme Court or a High
Court.”

 

18. Reflecting on the said provision, this Court in Central Bank of India
v. M/s. Elmot Engineering Company and others[3] has ruled that it aims
at safeguarding the assets of a company in winding up against wasteful
or expensive litigation as far as matters which could be expeditiously
and cheaply decided by the company court are concerned. In granting
leave under the said provision, the court always takes into
consideration whether the company is likely to be exposed to
unnecessary litigation and cost.

 

19. In Ammonia Supplies Corporation (P) Ltd. v. Modern Plastic Containers
Pvt. Ltd. and others[4], while dealing with power under Section 446(1)
of the 1956 Act, it has been observed that in the said sub-section the
words used would indicate that the discretion to exercise such power
is with the company court.

 

20. In State of J&K v. UCO Bank and others[5], while interpreting Section
446(1) of the 1956 Act, the Court opined that a suit cannot be
instituted once a winding-up order is passed except by leave of the
court. The two-Judge Bench referred to the earlier decision rendered
in Bansidhar Shankarlal v. Mohd. Ibrahim[6], wherein the leave had
been obtained at the time of filing of the suit and the question was
whether fresh leave ought to be obtained before proceeding under
Section 446(1) of the 1956 Act before institution of execution
proceedings. The Court considered the contrary views expressed by
different High Courts on the effect and purport of Section 446(1) of
the 1956 Act and came to the conclusion that the view that failure to
obtain leave prior to institution of suit would not debar the court
from granting such leave subsequently and that the only consequence of
the same would be that the proceedings would be regarded as having
been instituted on the date on which the leave was obtained from the
High Court.

 

21. We have referred to the aforesaid decisions solely for the two
purposes. First, grant of leave of the court is not a condition
precedent for initiation of a civil action or the legal proceedings.
It is because the Section does not expressly provide for annulment of
a proceeding that is undertaken without the leave of the court. There
can be no shadow of doubt that leave of the winding up court can be
obtained even after initiation of the proceeding. The second, the
seminal object behind engrafting of the said provision is to see that
the interest of the company is safeguarded so that it does not face
deprivation of its right and claims are adjudicated without the
knowledge of the company court and further the court has a discretion
to see whether leave should be granted and, if so, with what
conditions or no condition. That apart, the court may grant leave if
it felt that the company should not enter into unnecessary litigation
and incur avoidable expenditure.

 

22. In the case at hand, the official liquidator had clearly stated that
the suit property was not the property of the company and, therefore,
the company should not enter into that kind of litigation. The
learned Company Judge has taken note of it and further granting all
protection to the official liquidator, has allowed the application for
seeking leave. However, as is seen, the Division Bench had dislodged
the order of the learned single Judge solely on the ground that the
earlier order dated 23.2.2006 stared at the face of the appellant and
operates as res judicata.

 

23. Presently we shall address to the issue whether the order which has
been construed operating as res judicata by the Division Bench, does
really come within the ambit and sweep of the principles of res
judicata or not.

 

24. In Satyadhyan Ghosal and others v. Smt. Deorajin Debi and another[7],
a three-Judge Bench adverted to the principle of res judicata and its
application as between two stages in the same litigation and opined
that when a Court at an earlier stage decided the matter in one way
will not allow the parties to re-agitate the matter again at a
subsequent stage of the same proceeding. The facts in the said case
are that the appellant-landlord who had obtained a decree for
ejectment against the tenant had not yet been able to get possession
in execution of the decree. The decree was obtained on February 10,
1949 and soon thereafter the Calcutta Thika Tenancy Act, 1949 came on
the statute book on March 3, 1949. The tenants made an application
under Order IX, Rule 13 of the Code of Civil Procedure for setting
aside the decree. The said application was dismissed on July 16,
1949. On 9.9.1949, an application was made by the tenant under
Section 28 of the Calcutta Thika Tenancy Act alleging that they were
Thika tenants and hence, the decree made against them may be
rescinded. After contest, the learned Munsif came to hold that
applicants were not Thika tenants within the meaning of Thika Tenancy
Act and accordingly declined to rescind the decree. The aforesaid
order was challenged in a revision under Section 115 of the Code of
Civil Procedure. At the time when the revision application was taken
up for hearing, the Calcutta Thika Tenancy Ordinance had come into
force on October 21, 1952 and thereafter the Calcutta Thika Tenancy
(Amendment) Act, 1953 came into force. The Amendment Act omitted
Section 28 of the original Act. In order to decide whether the
application under Section 28 was still alive, the High Court had to
consider the effect of Section 1(2) of the Amendment Act. The learned
Single Judge on interpretation of the provisions came to hold that
Section 1(2) of the Amendment Act did not affect the operation of
Section 28 of the original Act to the proceeding and on that basis
disposed of the application holding that Section 28 was applicable.
The High Court had also held that in view of the amended provision of
Section 28 of the Thika Act and the Ordinance which was recorded by
the learned Munsif, the revisionists before the High Court were Thika
tenants. Being of this view, he allowed the revision and set aside
the order of the Munsif by which he dismissed the application under
Section 28 and remanded the case to the Court of Munsif for disposal
in accordance with law. After the remand, the Munsif rescinded the
decree. The landlord preferred a revision under Section 115 of the
Code of Civil Procedure contending that Section 28 of the Act was not
applicable but the said submission was repelled by the learned Single
Judge holding that the said issue having been decided earlier was res
judicata between the parties. The said order passed in the revision
was the subject matter of appeal before this Court by special leave.
This Court stated the principle of res judicata which is based on the
need of giving finality to judicial decisions. The learned Judges
opined once a res is judicata, it shall not be adjudged again and it
primarily applies between past litigations and future litigations.
Further elucidating it was stated that when in a matter – whether a
question of fact or a question of law had been decided between the
parities in one suit or proceeding and the decision is final, either
because of an appeal was taken to a higher court or an appeal was
dismissed, or when no appeal lies, neither party will be allowed in a
future suit or proceeding between the same parties to canvass the
matter again. In that context, the Court addressed the applicability
of the principle of res judicata between two stages in the same
litigation and, eventually, ruled thus:-

 

“The principle of res judicata applies also as between two stages
in the same litigation to this extent that a court, whether the
trial court or a higher court having at an earlier stage decided a
matter in one way will not allow the parties to re-agitate the
matter again at a subsequent stage of the same proceedings.”

 

25. After discussing the law in the field it was ruled that there was no
reason to hold that the appellant was precluded from raising before
this Court the question about the applicability of Section 28 of the
1953 Act merely because he had not appealed from the High Court’s
order of remand, taking the view against him the Section was
applicable.

 

26. In the case of Arjun Singh (supra) the defendant had approached this
Court as his application under Order IX Rule 13 of the Code to set
aside an ex parte decree passed against him had been dismissed as
barred by res judicata. The question that basically arose before this
Court was when an application is made under Order IX Rule 7 of the
Code and the Court considers that there is not any good cause for the
previous non-appearance and proceeds further with the suits and
ultimately results in an ex parte decree, can a court in dealing with
applications to set aside the ex parte decree under Order IX Rule 13
reconsider the question as to whether the defendant had a sufficient
cause for non-appearance on the day in regard to which the application
under Order IX Rule 7 had been filed. The Court referred to the
decision in Satyadhyan Ghosal (supra) and quoted a passage from the
said decision and thereafter took note of two submissions advanced by
the learned counsel for the respondents therein which were to the
effect that (1) an issue of fact or law decided even in an
interlocutory proceeding could operate as res judicata in a later
proceeding, and (2) in order to attract the principle of res judicata
the order or decision first rendered and which is pleaded as res
judicata need not be capable of being appealed against. Dealing with
the same the Court observed thus: –

 

“We agree that generally speaking these propositions are not open to
objection. If the court which rendered the first decision was
competent to entertain the suit or other proceeding, and had therefore
competency to decide the issue or matter, the circumstance that it is
a tribunal of exclusive jurisdiction or one from whose decision no
appeal lay would not by themselves negative the finding on the issue
by it being res judicata in later proceedings. Similarly, as stated
already, though S. 11 of the Civil Procedure Code clearly contemplates
the existence of two suits and the findings in the first being res
judicata in the later suit, it is well established that the principle
underlying it is equally applicable to the case of decisions rendered
at successive stages of the same suit or proceeding. But where the
principle of res judicata is invoked in the case of the different
stages of proceedings in the same suit, the nature of the proceedings,
the scope of the enquiry which the adjectival law provides for the
decision being reached, as well as the specific provisions made on
matters touching such decision are some of the material and relevant
factors to be considered before the principle is held applicable.”

 

27. After so stating the three-Judge Bench proceeded to deal with
different kinds of interlocutory orders and, in that context, observed
that interlocutory orders are of various kinds; some like orders of
stay, injunction or receiver are designed to preserve the status quo
pending the litigation and to ensure that the parties might not be
prejudiced by the normal delay which the proceedings before the court
usually take. They do not, in that sense, decide in any manner the
merits of the controversy in issue in the suit and do not, of course,
put an end to it even in part. Such orders are certainly capable of
being altered or varied by subsequent applications for the same
relief, though normally only on proof of new facts or new situations
which subsequently emerge. As they do not impinge upon the legal
rights of parties to the litigation the principle of res judicata does
not apply to the findings on which these orders are based, though if
applications were made for relief on the same basis after the same has
once been disposed of the court would be justified in rejecting the
same as an abuse of the process of Court. There are other orders
which are also interlocutory, but would fall into a different
category. These are not directed to preserve the property pending the
final adjudication, but are designed to ensure the just, smooth,
orderly and expeditious disposal of the suit. They are interlocutory
in the sense that they do not decide any matter in issue arising in
the suit, nor put an end to the litigation.

 

28. In Prahlad Singh v. Col. Sukhdev Singh[8] an ex-parte decree passed in
a petition for eviction based on ground of default in payment of rent
was set aside on the finding that the landlord had agreed to withdraw
the petition and accept rent from the tenant. After the decree was
set aside the petition for eviction was once again ordered on the
ground of default of payment of rent for the same period. The
submission of the tenant that the eviction petition could not be
allowed to continue and deserved to be dismissed on the finding of the
court in the proceeding for setting aside the ex parte order was
negatived by the High Court on the ground that those findings were
made in the context of setting aside the ex parte order and not in the
context of deciding the main petition for eviction. This Court, in
appeal by special leave preferred by the tenant, observed that the
view of the High Court was not right, for the decision given by a
court at earlier stage of a case is binding at a later stage and for
the said purpose reliance was placed on the pronouncement in
Satyadhyan Ghosal (supra). While dislodging the order of the High
Court this Court stated thus: –

 

“In the present case, in the proceeding to be set aside an ex parte
order, the Court recorded an express finding that the landlord had
agreed to withdraw the suit and receive the rent from the tenant.
That was a finding which was binding on the landlord at later stages
of the proceeding. He could have questioned the finding before the
appellate authority and the High Court in the appeals preferred by the
tenant. He did not choose to do so. In fact he could not do so as he
had earlier thought it prudent not to enter the witness box though he
put the question in issue in the proceeding to set aside the ex parte
order by contesting the statement of the tenant.”

 

29. We have referred to the said decision for the purpose that the Court
took note of the express finding recorded by the trial court while
passing the ex parte decree. There was an expression of an opinion.

 

30. In C.V. Rajendran and another v. N.M. Muhammed Kunhi[9] the question
arose for consideration whether the order of remand passed by the Rent
Control Appellate Authority, Payyannur, dated November 25, 1988,
holding that the second eviction petition (R.C.P. No. 13/87) filed by
the respondent against the appellants under sub-section (3) of Section
11 of the Kerala Buildings (Lease and Rent Control) Act, 1965, is not
barred by Section 15 of the Act, can be permitted to re-agitate in a
proceeding arising from the order passed by the Rent Controller
pursuant to the order of remand. Be it noted, in the said case,
learned Rent Controller had declined to grant relief to the respondent
on the ground that under Section 15(3) of the Act the eviction
petition was not maintainable. On appeal being preferred the
appellate authority remanded the matter to the Rent Controller for
fresh disposal. After remand, the Rent Controller found that the need
of the respondent was bona fide and alternative accommodation in the
area was available and, accordingly, allowed the eviction petition.
The same was affirmed by the Rent Control Appellate Authority. On a
civil revision being preferred the High Court opined that the earlier
order of the appellate authority holding that Section 15 of the Act
does not bar the eviction proceeding against the tenant, had become
final and could not be re-agitated. However, the High Court recorded
a finding that Section 15 of the Act did not bar the subsequent
eviction petition and being of that view dismissed the revision
petition. A contention was raised before this Court that order passed
by the appellate authority holding that the eviction petition was
maintainable and Section 15 of the Act was not a bar, does not operate
as res judicata. In that context, this Court observed as follows: –

 

“In the light of the above discussion we hold that as the question
whether S. 15 of the Act bars the present eviction petition, was
decided against the appellants by the appellate authority at the
earlier stage of the suit and it was allowed to become final, it is
not open to the appellants to reagitate the same at the subsequent
stage of the suit. In this view of the matter, we do not find any
illegality in the order under appeal to warrant any interference.”

 

31. From the aforesaid decision it is clear that this Court concurred with
the view of the High Court as a finding was returned that the
proceeding was not barred by Section 15 of the Kerala Buildings (Lease
and Rent Control) Act, 1965 and thereafter the matter was remanded by
the appellate court. Thus, on earlier occasion there was an
expression of an opinion. In this context, we may fruitfully
reproduce a passage from Arukkani Ammal v. Guruswamy[10]: –

 

“It is also difficult to appreciate the view taken by the District
Munsif that ex parte decree cannot be considered to be ‘full decree on
merits’. A decree which is passed ex parte is as good and effective
as a decree passed after contest. Before the ex parte decree is
passed, the court has to hold that the averments in the plaint and the
claim in the suit have been proved. It is, therefore, difficult to
endorse the observation made by the Principal District Munsif that
such a decree cannot be considered to be a decree passed on merits.
It is undoubtedly a decree which is passed without contest; but it is
only after the merits of the claim of the plaintiff have been proved
to the satisfaction of the trial court, that an occasion to pass an ex
parte decree can arise.”

 

32. The aforesaid passage was approved by this Court in Saroja v.
Chinnusamy (Dead) by LRs and another[11]. The purpose of citing the
said authority is that though an ex parte decree is passed without
contest but it is passed only after the merits of the claim of the
plaintiff have been proved to the satisfaction of the trial court.

 

33. In this regard, the pronouncement in Y.B. Patil and others v. Y.L.
Patil[12] is worth referring to. In that case the High Court in the
writ petition preferred on earlier point of time had recorded a
finding and gave directions to the tribunal not to reopen the question
of fact in revision and the tribunal complied with those directions of
the High Court. This Court opined that the appellants therein were
bound by the judgment of the High Court and it was not open to them to
go behind the judgment earlier passed by the High Court as they had
not preferred any appeal against the said judgment and it had attained
finality. The Court observed that it is well settled that principle
of res judicata can be invoked not only in separate subsequent
proceedings, they also got attracted in subsequent stage of the same
proceeding. The aforesaid decision has noted the fact that in the
earlier writ petition the High Court has clearly stated that the
tribunal shall not reopen the question of fact in revision. It is
manifest that, this Court has taken note of the fact that there was an
expression of opinion by the High Court that facts need not be
adverted to again by the tribunal and that attracted the principle of
res judicata.

 

34. From the aforesaid authorities it is clear as crystal that to attract
the doctrine of res judicata it must be manifest that there has been
conscious adjudication of an issue. A plea of res judicata cannot be
taken aid of unless there is an expression of an opinion on the
merits. It is well settled in law that principle of res judicata is
applicable between the two stages of the same litigation but the
question or issue involved must have been decided at earlier stage of
the same litigation. In the case at hand, as the order dated
23.2.2006 would show that a statement was made by the counsel for the
third respondent that in the event of the petitioner’s making an
application for amendment of the plaint in the pending suit on the
basis of the averments made in the summons issued, he would not oppose
the same. The learned Company Judge recorded the same and opined that
it is not necessary to grant the present Judge’s Summons. Thereafter,
the learned Company Judge has observed “liberty to applicant to apply,
if necessary”. The Division Bench, after relying on the decision in
Kewal Chand Mimani’s case, has opined that grant of liberty is adopted
by the court to obliterate any confusion or any difficulty being
experienced in the matter but the said grant of liberty does not
confer any right on the party to agitate the matter further nor does
it confer any jurisdiction on the court to further probe the
correctness of the decision arrived at. To appreciate the correctness
of the said conclusion it is imperative to appreciate the verdict in
Kewal Chand Mimani (supra). In the said case, an appeal was preferred
against an order passed by the learned single Judge in the writ
petition. The appeal was heard from time to time and the hearing was
concluded but before the judgment could be pronounced, one of the
Judges hearing the appeal was transferred as a consequence of which
the judgment could not be pronounced. At that stage, the respondents
7 to 10, after expiry of about 9 years, filed an application for being
transposed as appellants to conduct the pending appeal and the
Division Bench allowed the application for transposition, however,
stating that the said transposition was without prejudice to the
rights of the complainant to contest the appeal as appellant.
Subsequently, the appeal was reheard by a reconstituted Division Bench
of the High Court and the judgment was reserved by the Bench. During
the pendency of the pronouncement of the judgment the appellant
therein moved this Court under Article 136 against the order of
transposition and this Court had passed an order to the following
effect: –

 

“The order against which the SLP has been filed is an order on
transposition as appellants. The order itself indicates that the
petitioners are at liberty to raise all the objections. We see that
even including the transposition and their right to contest in the
capacity as appellants also is left open.

 

The petitioners are at liberty to have the matter adjudicated.”

 

35. Thereafter, the High Court decided the appeal by delivering a judgment
on 21.5.1997. A direction was issued to the State Government and the
Municipal Corporation to restore the possession of the property to the
owner and/or the occupier, as the case may be, within seven days from
the date of the judgment. However, the Division Bench had stated
“liberty to mention” the matter. Shortly thereafter, the matter was
taken up by the concerned Collector to which certain objections were
raised. In the said case, as the factual matrix would unfurl, on
23.5.1997 the matter was mentioned before the Appellate Bench by the
learned advocate for the State arguing for extension of time for
making over possession in terms of the order and the High Court
thereupon extended the time. However, it directed the matter to
appear on a particular day. Subsequently, a formal application was
filed by the owners for a direction to restore the possession of the
premises in question to the owners as the appellants, as alleged, were
not the owners. It was on the state of facts the second judgment was
pronounced by the Appellate Bench which directed making over of
possession to the owners without prejudice to the rights and
contentions of the parties and without prejudice to the rights of the
lessee to file a suit for appropriate proceedings for recovery or
otherwise and/or to enforce an agreement for purchase of the
properties in accordance with law. The High Court allowed 48 hours
time from the date of the communication of the order and by reason
wherefor a notice was sent to the owners requiring them to be present
to receive the possession of the land. The Mimanis being grieved by
the said order moved this Court and maintenance of status quo was
directed without creation of any third party interest. The Court,
apart from other issues, addressed to the submission as raised by the
learned counsel for the appellants therein to the effect of liberty
granted to mention the matter after the judgment was delivered. It
was urged that by the judgment directions were issued and it connoted
a final disposal and specifically determined the issue raised in the
matter. It was canvassed that when the High Court had recorded that
though many other points were argued and several case laws were cited,
but it was not necessary for deciding those points as the appeal
succeeded on the point of order of requisition not been continued on
the basis of a lapsed statute and the appeal got disposed of, shelter
or aid could not have been taken to “liberty to mention” for reopening
the whole issue. In that context, this Court observed thus: –

 

“Be it noted, however, that the words “liberty to mention” have been
as a matter of fact a phraseology which did not come through judicial
process without any definite legal sanction for the purpose of
clarification, if needed, but not otherwise. It is a legal process
which has been evolved for convenience and for shortening the
litigation so that the parties are not dragged into further and
further course of litigation, and it is in this context that the
submissions of Mr. Gupta, that the Court has no jurisdiction to reopen
the issue on the ground of availability of the legal phraseology of
liberty to mention cannot be brushed aside. As noticed hereinbefore,
the insertion of the above-noted legal phraseology is to obliterate
any confusion or any difficulty being experienced in the matter – it
does not give the right anew to the party to agitate the matter
further nor does it confer jurisdiction on the court itself to further
probe the correctness of the decision arrived at: review of a judgment
cannot be had on the basis of this liberty. The circumstances under
which review can be had are provided under Order 47 of the Code of
Civil Procedure. In any event, law is well settled on this score that
the power to review is not any inherent power and it must be conferred
by law either specifically or by necessary implication.”

 

36. After so stating the Court referred to the decision in State of U.P.
v. Brahm Datt Sharma[13] wherein it has been held that when
proceedings stand terminated by final disposal of writ petition it is
not open to the court to reopen the proceedings by means of a
miscellaneous application in respect of a matter which provided a
fresh cause of action, for if the said principle is not followed,
there would be confusion and chaos and the finality of the proceedings
would cease to have any meaning.

 

37. Coming to the case at hand, the Division Bench, after reproducing
paragraph 19 of the judgment in Kewal Chand Mimani’s case, held that
the liberty granted by the learned single Judge to file an application
was not maintainable, for the liberty granted by the learned single
Judge cannot be used to seek from him orders which are contrary to his
principal order rejecting the company application for grant of leave.
On a studied scrutiny of the order passed by the learned single Judge
on 23.2.2006, we find that the Division Bench has committed three
fundamental errors, namely (i) that the learned single Judge had
rejected the application; (ii) that liberty granted could only mean
the parties to seek further direction pursuant to the said order; and
(iii) that the liberty granted by the learned single Judge could not
be used to seek from him any relief which is contrary to the main
order.

 

38. It is clear to us that the learned single Judge had not dealt with the
application for grant of leave on merits; that the application was
disposed of on the basis of a submission made by the third respondent
that if an application for amendment is filed in the pending suit, he
would not oppose the same; that the learned Company Judge on the basis
of the statement recorded that it was not necessary to grant the
present Judge’s Summons; and that liberty was granted to the applicant
to apply if necessary. The Division Bench, we are disposed to think,
has erroneously opined that the learned single Judge in the main part
of the order having rejected the application could not have granted
liberty to apply for filing of another application. As we notice, the
Division Bench has not appositely appreciated the ratio laid down in
Kewal Chand Mimani (supra) wherein the High Court had pronounced a
judgment and, as a matter of practice, has stated “liberty to mention”
and in that context, this Court stated that that did not confer
jurisdiction on the High Court to dwell upon a different issue in a
disposed of case. In fact, in the said case the order passed by this
Court on earlier occasion has been reproduced wherein liberty was
granted to get the matter adjudicated which, in the context, simply
conveyed that as the controversy relating to transposition therein was
pending before the High Court and the order indicated that the
applicants were at liberty to raise all objections including the
transposition and the right to contest in the capacity as appellants.
When this Court said “liberty was granted to get the matter
adjudicated”, it meant that it was open to the petitioner in the SLP
to raise all contentions before the High Court as the High Court
itself had granted liberty in the order which was the subject-matter
of challenge and the matter was sub-judice. We are only analyzing on
this score to highlight that words, namely, “grant of liberty” are to
be understood, regard being had to the context in which they are used.
Context is really material. Had the learned Company Judge
adjudicated the matter on merits, the matter would have been
absolutely different. He had, in fact, on the basis of a statement
made by the learned counsel for the third respondent, had not dwelled
upon the merits and, in that context, had granted liberty to applicant
to apply, if necessary. It is eminently so because the learned Judge
has also stated “it is not necessary to grant the present Judge’s
Summons”. Thus, the application for grant of leave was really not
dealt with on merits and on the basis of a statement of respondent No.
3 the learned Company Judge opined that it was not necessary for the
present and in that context liberty was granted. The principles
stated in Arjun Singh (supra), Satyadhyan Ghosal (supra) and the other
authorities clearly spell out that principle of res judicata operates
at the successive stages in the same litigation but, the basic
foundation of res judicata rests on delineation of merits and it has
at least an expression of an opinion for rejection of an application.
As is evident, there has been no advertence on merits and further the
learned Company Judge has guardedly stated two facets, namely, “not
necessary to grant present Judge’s Summons” and “liberty to applicant
to apply, if necessary”. On a seemly reading of the order we have no
shadow of doubt that the same could not have been treated to have
operated as res judicata as has been held by the Division Bench.
Therefore, the irresistible conclusion is that the Division Bench has
fallen into serious error in dislodging the order granting leave by
the learned Company Judge to file a fresh suit.

 

39. In view of the aforesaid analysis, we allow the appeal, set aside the
order passed by the Division Bench and restore that of the learned
Company Judge. The first respondent is directed to pay Rs.50,000/- to
the appellant towards costs of the appeal.

 

……………………………….J.
[Anil R. Dave]

 
……………………………….J.
[Dipak Misra]

 

New Delhi;
December 12, 2013.
ITEM NO.1A COURT NO.10
SECTION IX

 

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

 

Petition(s) for Special Leave to Appeal (Civil) No(s).25369/2010

 

(From the judgement and order dated 23/06/2010 in CP No.201/1994,CA
No.720/2006,AN No.262/2007 of The HIGH COURT OF BOMBAY)

 

ERACH BOMAN KHAVAR Petitioner(s)

 

VERSUS

 

TUKARAM SRIDHAR BHAT & ORS. Respondent(s)

 

Date: 12/12/2013 This Petition was called on for Judgment today.

 

For Petitioner(s) Ms. Surekha Raman, Adv.
for M/S. K.J. John & Co.

 

For Respondent(s) Mr. E.C. Agrawala, Adv.

 

Hon’ble Mr. Justice Dipak Misra pronounced the Judgment of the Bench
comprising Hon’ble Mr. Justice Anil R. Dave and His Lordship.
Leave granted.
The Civil Appeal is allowed.
|(Jayant Kumar Arora) | |(Sneh Bala Mehra) |
|Sr. P.A. | |Assistant Registrar |

 

(Signed reportable Judgment is placed on the file)
———————–
[1] AIR 1964 SC 993
[2] (2001) 6 SCC 512
[3] (1994) 4 SCC 159
[4] (1998) 7 SCC 105
[5] (2005) 10 SCC 331
[6] (1970) 3 SCC 900
[7] AIR 1960 SC 941
[8] AIR 1987 SC 1145
[9] AIR 2003 SC 649
[10] (1987) 100 LW 707
[11] (2007) 8 SCC 329
[12] (1976) 4 SCC 66
[13] (1987) 2 SCC 179

 

———————–
18

 

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