Translate
Text Highlighter

Bookmark

PDF

Share

Report a problem
AMICUS AI
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • P.C. Sen
  • for Appellant: S.K. Kapur with Sudipta Sarkar
Judges
  • Sabyasachi Mukharji
  • C.K Banerji, JJ.
Acts
Are you a practicing lawyer?
Enhance your digital presence and reach by creating a Casemine profile.
Upload pleading to use the new AI search
Click here to upload
Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • P.C. Sen
  • for Appellant: S.K. Kapur with Sudipta Sarkar
Judges
  • Sabyasachi Mukharji
  • C.K Banerji, JJ.
Acts
See more information ...
Smart Summary

Opinion Summary: Appeal concerning suit against Ruby General Insurance Co. (Sabyasachi Mukharji, J.)

Factual and Procedural Background

The plaintiff/appellant instituted a suit on 18 September 1975 against "Ruby General Insurance Company Limited" as described in the cause-title, which stated that the management of the company was vested in the Government of India under the General Insurance (Emergency Provisions) Act, 1971. The plaint also alleged that, for convenience, Ruby General Insurance Co. Ltd. had been functioning and being managed by Messrs National Insurance Company and/or was a unit of the latter.

By operation of the National Insurance Company Limited (Merger) Scheme, 1973 (which came into force on 1 January 1974 and was published in December 1973), and under the statutory scheme's provisions (including a provision that a merged company shall stand dissolved under the relevant section), Ruby General Insurance Co. Ltd. had stood dissolved since that date.

The National Insurance Company Ltd. made an application under Order VII Rule 11, Civil Procedure Code (C.P.C.), seeking dismissal of the suit on the ground that it was instituted against a dissolved company and was therefore incompetent. The learned trial Judge (Ajay K. Basu, J.) dismissed the suit by order and judgment dated 1 June 1976. The plaintiff appealed; the appeal was heard by Sabyasachi Mukharji, J., who ultimately dismissed the appeal with costs. C.K. Banerji, J. concurred.

There were also parallel/arising arbitration-related steps: the plaintiff attempted arbitration and appointed an arbitrator; the respondent appointed its arbitrator while reserving the objection to jurisdiction. An order of this Court dated 11 September 1975 (Mr. Justice Salil K. Roy Chowdhury) revoked the authority of the arbitrators. The Court considered the arbitration/limitation point but held that determination on the dissolution point made further adjudication unnecessary.

Legal Issues Presented

  1. Whether the plaintiff's description of the defendant in the cause-title amounted to a mere misdescription that could be corrected by amendment, or whether the suit was, in truth, instituted against a company that had been dissolved and therefore incompetent and liable to be dismissed under Order VII Rule 11, C.P.C.
  2. Whether the presence of references to statutory vesting (management vested in the Government of India under the General Insurance (Emergency Provisions) Act, 1971 and its amendments) changed the character of the defendant such that the suit could be maintained or amended.
  3. Whether, alternatively, the dispute was precluded from suit by an arbitration clause (and whether repudiation of claim placed the matter outside arbitral reference), and whether the claim was barred by limitation — although the Court declined to decide this point after resolving the dissolution/misdescription issue.

Arguments of the Parties

Appellant's Arguments

  • The cause-title and the plaint showed only a misdescription of the defendant; it did not show that the suit was instituted against a non-existent (dissolved) company.
  • There was no question of the respondent being taken by surprise; the plaint ought to be permitted to be amended (an oral prayer for amendment was made before the trial Judge).
  • The suit referred to the Government being mentioned as a party as a result of vesting; the appellant suggested this was a misdescription and not an indication of a dissolved company.
  • Because arbitration proceedings had been initiated (plaintiff appointed an arbitrator; respondent appointed its arbitrator subject to jurisdictional objection) and the authority of arbitrators was later revoked by this Court (order dated 11 Sept. 1975), the appellant contended that the claim could not be held ex facie barred by limitation under Order VII Rule 11 without consideration of those arbitration proceedings.

Respondent's Arguments

  • The suit was instituted against a company that had stood dissolved by operation of the National Insurance Company Limited (Merger) Scheme, 1973 and relevant statutory provisions; a suit against a dissolved company is incompetent and should be dismissed under Order VII Rule 11, C.P.C.
  • The cause-title indicated clearly that the defendant was a dissolved company and that the management vested in Government by statute — this was not a mere misdescription susceptible to amendment.
  • The arbitration clause was limited in scope and did not make a repudiation of claim subject to arbitration; accordingly, the dispute (or at least the question of repudiation) was not necessarily referable to arbitration and limitation might bar the suit — though the Court did not decide the limitation point after disposing of the dissolution issue.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Narendra Bahadur v. Shanker Lal, AIR 1980 SC 575 After a company is dissolved, the liquidator cannot thereafter claim to represent the company; once dissolved the company ceases to exist and becomes a non-existing company. Cited to support the proposition that a dissolved company ceases to exist and thus cannot be the proper defendant to a suit; used as authority for treating a suit by or against a dissolved company as incompetent.
Malhati Tea Syndicate v. Revenue Officer, Jalpaiguri, AIR 1973 Cal 78 An appeal (or by analogy a suit) purported to have been filed by a dissolved company (one not on the Register) is incompetent because it is an appeal/suit by a non-existent person; reference also to s.23(3) Companies Act, 1956 on change of name (discussed in the case). Relied upon to hold that an appeal/suit by a dissolved company is incompetent; applied as analogous authority to the present suit situation and to support dismissal under Order VII Rule 11.
Modi Sugar Mills v. Union of India, 1978 Tax LR 673 (All) Under civil law, an order against a dead person is a nullity; principle extended in that case to proceedings against a dissolved company (assessment against a dissolved company held to be nullity). Cited to reinforce the proposition that proceedings against a non-existent (dissolved) entity are void/null and cannot be maintained.
Hiralal v. Kali Nath, AIR 1962 SC 199 The Court lacks inherent jurisdiction if the suit is against a person who was dead at the time of institution of the suit (suit against dead person is a nullity). Used by analogy to support the proposition that a suit against an entity that does not exist (dissolved company) is a nullity and that the court lacks jurisdiction to proceed in such cases.
C. Muttu v. Bharat Match Works, AIR 1964 Mys 293 There is no scope for amending a plaint where the Court has no jurisdiction; a proceeding that is a nullity cannot be cured by amendment. Relied on to support the conclusion that, because the suit was incompetent (a nullity) being against a dissolved company, amendment of the plaint was not permissible and the suit had to be dismissed.

Court's Reasoning and Analysis

The Court began by examining the cause-title and pleading which expressly referenced the General Insurance (Emergency Provisions) Act, 1971 (and the Amendment Act of 1972) and the National Insurance Company Limited (Merger) Scheme, 1973. The Court noted that the scheme came into force on 1 January 1974 and, by its terms (including Sec. 8A as described in the opinion), the merged company stood dissolved without winding up on the specified day.

Because the suit was instituted on 18 September 1975 (after dissolution), the Court accepted the submission that the action had been brought against an entity that had ceased to exist. The Court invoked established authority for the legal proposition that a company ceases to exist on dissolution and cannot be treated as a party to subsequent proceedings. The cited authorities (including Narendra Bahadur and Malhati Tea Syndicate) were used to show that proceedings instituted by or against a non-existent/dissolved company are incompetent or a nullity.

The appellant's contention that the naming in the cause-title was a mere misdescription was considered and rejected. The Court reasoned that the cause-title unequivocally indicated that the suit was against a dissolved company; that the assets and liabilities of Ruby had vested in a Government company (a separate legal entity) and not directly in the Government of India; and that a Government company is a different entity from the Government of India. Thus, the Court found that the plaint did not present a curable misdescription but a substantive defect going to jurisdiction/competency.

The Court also addressed the arbitration/limitation contention raised by the appellant: while the appellant contended that arbitration steps and the subsequent revocation of arbitrators meant the claim could not be held ex facie barred by limitation under Order VII Rule 11, the Court observed there was substance in the respondent's contention on limitation but held that, having decided the primary issue of incompetency (dissolution), it was unnecessary to adjudicate further on arbitration or limitation.

The Court therefore endorsed the view of the learned trial Judge that the suit was incompetent and properly dismissed under Order VII Rule 11, C.P.C., and it refused to permit amendment which would attempt to cure a jurisdictional nullity, following the authorities it cited.

Holding and Implications

Holding: The appeal is dismissed and the judgment and order of the trial Court dismissing the suit under Order VII Rule 11, C.P.C. is affirmed. (The Court ordered the appeal dismissed with costs.)

Implications: The direct effect is that the plaintiff's suit, having been instituted after the merger scheme had taken effect and the company had stood dissolved, could not be maintained and was rightly dismissed as incompetent. The Court relied on established principles that a dissolved company ceases to exist and that proceedings by or against a non-existent entity are nullities; accordingly, amendment to cure the defect was not permitted. The opinion does not purport to establish a new legal precedent beyond applying existing authorities to the facts of this case.

Disposition: Appeal dismissed. (C.K. Banerji, J. concurred.)

Show full summary ...

    Shree Choudhary Cold Storage (1972) v. Ruby General Insurance Co. Ltd. .

    Sabyasachi Mukharji, J.:— This is an appeal from an order and judgment passed by Ajay K. Basu, J., dated 1st June 1976 dismissing the suit on an application made by National Insurance Co. Ltd. under O. 7 R. 11 of C.P.C It appears, that a suit was instituted by the plaintiff/appellant against Ruby General Insurance Company Limited. In view of the contentions raised it would be appropriate to set out the description of the defendant in the cause-title which reads as follows:—

    “Ruby General Insurance Company Limited of which the management is vested in the Government of India by the provisions of the General Insurance (Emergency Provisions) Act 17 of 1971 having its registered office at Ruby House at 6, India Exchange Place, Calcutta-1 within the aforesaid jurisdiction.”

    2. The cause-title indisputably mentions the provisions of General Insurance (Emergency Provisions) Act 17 of 1971. The suit in question was filed on the 18th Sept. 1975. In para 2 of the plaint it has been stated that the defendant, a public limited company carrying on business in General Insurance, was taken over and its management was vested in the Government of India by virtue of the provisions of the General Insurance (Emergency Provisions) Act 17 of 1971 as amended by the General Insurance (Emergency provisions) Amendment Act 27 of 1972. Since then for the purpose of convenience the aforesaid Ruby General Insurance Company Ltd., thereafter referred to as the “Insurance Company,” was functioning and was being managed by Messrs National Insurance Company and/or was a unit of the latter.

    3. It appears that the National Insurance Company Limited (Merger) Scheme, 1973 came into force, under Sec. 1, sub-sec. (2), on the 1st of Jan. 1974 and in that scheme, which was published in the Government of India Gazette Extraordinary on the 21st Dec. 1973, there is a definition of the Act which means the General Insurance Business (Nationalisation) Act 1972 and under Sec. 8A merged company shall on the specified day stand dissolved without winding up. Therefore, the Ruby General Insurance Co. Ltd. by virtue of the aforesaid provisions has stood dissolved since that date. As we have mentioned before the suit was filed in Sept. 1975. The main point that was urged in this application and which found favour with the learned trial Judge was that the suit being against a dissolved company was an incompetent suit and liable to be dismissed under the provisions of O. 7, R. 11, C.P.C On behalf of the appellant/plaintiff it was urged that the cause-title clearly indicated that this was a mere misdescription of the defendant. It was emphasised that there was no question of the present applicant being taken by surprise and if it was misdescription the plaint should be allowed to be amended on an oral prayer which was made at the time of hearing of the application before the learned trial Judge. The question, therefore, is whether the description of the defendant in the cause-title was a mere misdescription or was against a dissolved company. It is well settled that a company ceases to exist on dissolution. For this proposition reliance was placed on the observations of the Supreme Court in the case of Narendra Bahadur v. Shanker Lal, AIR 1980 SC 575 where the Supreme Court observed that after a company was dissolved the liquidator could not thereafter claim to represent the company and execute a registered deed of sale. Once the company was dissolved it ceased to exist and the company became a non-existing company.

    4. In this connection reference was made to the observations of the Division Bench of this Court in the case of Malhati Tea Syndicate v. Revenue Officer, Jalpaiguri, AIR 1973 Cal 78 where at para 20 at p. 83 of the report the Court observed as follows:—

    “There can be no doubt that on the day on which the appeal was filed, there was no company in existence by the name of Malhati Tea Syndicate Ltd. and the appeal purported to have been filed by a company which was not on the Register of Joint Stock Companies, and had therefore no existence in accordance with the provisions of the Companies Act, 1956, cannot but be held to be incompetent. Learned Advocate for the applicant contended that the appeal was competent by reason of the provisions in sub-s. (3) of S. 23, Companies Act, 1956. That sub-section runs as follows:—

    “The change of name shall not affect any rights or obligations of the company or render defective any legal proceedings by or against it; and any legal proceedings which might have been continued or commenced by or against the company by its former name may be continued by or against the company by its new name.”

    There the Court was dealing with an appeal preferred by the dissolved company. It was held, an appeal filed by the dissolved company would mean an appeal by non-existent person. The same principle would be applicable in respect of a suit initiated by a dissolved company. Our attention was also drawn to the observations of the Division Bench of the Allahabad High Court in the case of Modi Sugar Mills v. Union of India, 1978 Tax LR 673 (All) where at page 675 of the report the Allhabad High Court observed that under civil law it was well known that an order against the dead person was a nullity. The Allahabad High Court applied this principle in the case of an assessment against the dissolved company. Counsel for the respondent also drew our attention to the decision in the case of Hiralal v. Kali Nath AIR 1962 SC 199. There, at p. 200 of the report, the Supreme Court observed that the Court was lacking inherent jurisdiction, if the suit was against a person, who was dead at the time of the institution of the suit. The same principle that a suit against a dead person is a nullity was reiterated by the Division Bench of Mysore High Court in the case of C. Muttu v. Bharat Match Works, AIR 1964 Mys 293. In that case, the Mysore High Court reiterated that there was no scope for amending the plaint where the Court has no jurisdiction. Because of it being a nullity, there is no scope for making an application for amendment. In this case the suit indisputably, as the cause title of the defendant indicates, was against the dissolved company and, as such, was incompetent. Learned counsel for the appellant contended that the Government was mentioned as a party and this was misdescription. That even was incorrect. The Ruby General Insurance Co. did not vest in the Government. The assets and liabilities of the company had vested in a company, which was a Government company. A Government company is a different entity from the Government of India. As such, this contention on behalf of the appellant also cannot be accepted. In view of the framing of the suit, in the description of the cause title, we are unable to accept the contention that it was a misdescription. Therefore we are on this aspect of the matter in agreement with the view taken by the learned trial Judge.

    5. It was contended that in this case, in any event, in view of the arbitration clause which indicated that the claim had to be instituted in terms of cl. 19 of the arbitration agreement where it was stipulated that the company should not be liable for any loss or damages after the expiry of 12 months from the happening of loss or damages unless the claim was the subject matter of pending arbitration clause. In this case an attempt was made for the arbitration on behalf of the plaintiff. But there (as?) was clear from the affidavit, it was contended on behalf of the respondent, by the letter dated 21st March, 73 which was reiterated on 9th July, 1973 and 27th Aug. 1973 there was total repudiation of the claim and the question of the right of repudiation could, in any event, be not subject matter of arbitration because the arbitration clause covered only a limited dispute and that clause provided, inter alia, as follows:—

    “If any difference arises as to the amount of any loss or damage such difference shall independently of all other questions be referred to the decision of an arbitrator, to be appointed in writing by the parties in difference, or, if they cannot agree upon a single arbitrator, to the decision of two disinterested persons as arbitrators, of whom one shall be appointed in writing by each of the parties within two calendar months after having been required so to do in writing by the other party. In case either party shall refuse to appoint an arbitrator within two calendar months after receipt of notice in writing requiring an appointment the other party shall be at liberty to appoint a sole arbitrator; and in case of disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings. The death of any party shall not revoke or affect the authority or powers of the arbitrator; arbitrators or umpire respectively and in the event of the death of an arbitrator or umpire, another shall in each case be appointed in his stead by the party or arbitrators (as the case may be) by whom the arbitrator or umpire so dying was appointed. The costs of the reference and of the award shall be in the discretion of the arbitrator, arbitrators or umpire making the award. And it is hereby expressly stipulated and declared that it shall be a condition precedent to any right or action or suit upon this Policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained.”

    But in this case the repudiation could not be the subject matter of the arbitration at all. In this case the plaintiff had made an attempt to refer the matter to arbitration and had appointed its arbitrator. The respondent also had appointed its arbitrator without prejudice to its contention that this was wholly without jurisdiction. Thereafter the arbitration did not proceed and by an order of this Court dated the 11th Sept. 1975 of Mr. Justice Salil K. Roy Chowdhury the authority of the arbitrators was revoked. It was, therefore, contended on behalf of the appellant that in view of these proceedings it could not be said ex facie under O. 7 R. 11 that the claim was barred by limitation and was not maintainable. Though we are inclined to think that there is good deal of substance in the contention raised on behalf of the respondent that the claim was barred on this score also, in the view we have taken on the first aspect of the matter it is not necessary to adjudicate on this aspect of the matter.

    6. In the premises, the appeal fails and is accordingly dismissed with costs.

    C.K Banerji, J.:— I agree.

    Appeal dismissed.

    Use AI to get other relevant cases.
    Try AI Pro free for 7 days Upgrade to AI Pro

    Comments

    Shree Choudhary Cold Storage (1972) v. Ruby General Insurance Co. Ltd. .
    (Aug 6, 1981)