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  • sections 22 and 23(3) read with section 151 of the Code of Civil Procedure
  • provisions of sections 531-A and 536 of the Companies Act
  • section 23(3) of the Code of Civil Procedure
  • section 151 of the Code of Civil Procedure
  • section 22 of the Code of Civil Procedure.
  • SECTION 581 COMPANIES ACT
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Citation Codes
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citation codes
Case Number
Attorney(S)
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  • sections 22 and 23(3) read with section 151 of the Code of Civil Procedure
  • provisions of sections 531-A and 536 of the Companies Act
  • section 23(3) of the Code of Civil Procedure
  • section 151 of the Code of Civil Procedure
  • section 22 of the Code of Civil Procedure.
  • SECTION 581 COMPANIES ACT
Smart Summary

Judgment Summary — Ajit Singh Bains, J.

Factual and Procedural Background

The State Bank of India (the petitioner) applied under sections 22 and 23(3 read with section 151 of the Code of Civil Procedure for transfer of Suit No. 844 of 1972 pending before the Court of the Subordinate Judge 1st Class, Ballabgarh, to the Court of the Subordinate Judge at Allpore (Alipore), District 22 Parganas (West Bengal).

The Bank had advanced various loans totaling about Rs. 53 lakhs to Messrs Sakow Industries (Private) Limited (the said-Company) for industrial units in Calcutta (West Bengal) and Faridabad (Haryana). The loans were also advanced to concerns at Faridabad (Messrs Tochi and Asavari) owned by Shri S.P. Mehta (a Director of the said-Company) and were later taken over by the said-Company. The two directors Shri S.P. Mehta and Shrimati Nirmla Devi Mehta had personally guaranteed the loans. The said-Company had pledged/hypothecated goods, machinery, merchandise, bills and book debts in godowns at Rajput and Khaikhli (West Bengal) and at 36, Industrial-cum-Housing Estate, Faridabad, and agreed to mortgage lands and buildings at the Faridabad premises as security.

The Bank initially filed a suit in the Calcutta High Court (Suit No. 542 of 1972) for recovery (a sum alleged to be Rs. 53,05,463.02). The High Court appointed Receivers on 24 November 1972 who took possession of the Rajput godown but were not allowed possession of the Khaikhli godown and did not attempt possession at Faridabad. The Company had changed its registered office on 16 November 1972, raising territorial jurisdiction objections; the Bank withdrew the High Court suit on 18 December 1972 with liberty to file a fresh suit in a proper forum.

Between withdrawal and filing of the fresh suit, the Bank discovered that locks at the Khaikhli godown had been broken and replaced by locks of Messrs Sakow Trading and Industrial Corporation (a sister partnership), and that operations at the Faridabad unit were being carried on under the name Messrs Sakow Industries (Faridabad) Private Limited, allegedly to defraud the Bank. The Bank filed a fresh suit in the Alipore Court on 13 January 1973 against the said-Company, the guarantors, and the two new concerns who claimed to be lessees/owners of the securities. The Alipore Court appointed the same Receivers; attempts to take possession were resisted.

The plaintiff-Company (the Faridabad concern) filed Suit No. 844 of 1972 (now No. 63 of 1974) in the Court of the Subordinate Judge 1st Class, Ballabgarh, seeking a permanent injunction restraining the Bank from interfering with possession of the Faridabad premises, alleging a 20-year registered lease dated 11 July 1972 and purchase of machinery and rights for value.

The Bank filed a written statement on 21 April 1973 denying the plaint and alleging collusion and mala fides. The Bank also alleged that liquidation proceedings (Company Petition 88 of 1971) had been initiated against Sakow Industries (Private) Limited before the lease/transfers, culminating in a winding up order of the Calcutta High Court on 23 July 1973, rendering the lease and transfers void ab initio under provisions stated in the opinion (sections 531-A and 536 of the Companies Act as cited in the text).

The Bank obtained leave to amend its written statement (order dated 5 September 1975), filed an amended written statement and adjournment for replication and framing of issues was given. The Bank also filed a suit in the Calcutta High Court on 16 May 1975 for specific performance to create an equitable mortgage; that suit remained pending. The present transfer application was filed in this context.

Legal Issues Presented

  1. Whether the suit pending in the Court of the Subordinate Judge 1st Class, Ballabgarh (Suit No. 844 of 1972, now No. 63 of 1974) should be transferred to a court in Calcutta (Alipore/Allpore) under sections 22 and 23(3) read with section 151 of the Code of Civil Procedure, on grounds of common questions of law and fact and to prevent abuse of process.
  2. Whether the Bank had complied with the procedural requirement of service under section 22 of the Code of Civil Procedure prior to making the transfer application.
  3. Whether transfers/leases and asset dispositions made during liquidation proceedings (allegedly effected on 11 July 1972) were void ab initio under the Companies Act provisions cited (sections referred to in the opinion as 531-A, 536 and 581-A) and therefore indicative of mala fide conduct to defeat the Bank's rights.

Arguments of the Parties

Petitioner (State Bank of India) — Principal Arguments

  • The suits pending in Ballabgarh and in Calcutta/Alipore raise common questions of fact and law and are connected; transfer would avoid multiplicity and conflicting proceedings.
  • The entire loans were granted through the Bank's Ballygunge Branch at Calcutta, and most or all evidence is located in Calcutta.
  • The Ballabgarh suit was filed mala fide by the plaintiff-Company to harass the Bank and as a counterblast intended to prevent Receivers from taking possession of secured godowns and to frustrate the Bank's recovery.
  • The said-Company adopted evasive devices (breaking locks, substituting other entities and transferring assets) to delay and obstruct realization of the Bank's dues; directors of the various entities are inter-related.
  • Notice under section 22 of the Code of Civil Procedure had been served on the opposite party before moving the transfer application.

Respondent (Plaintiff-Company) — Principal Arguments

  • Section 22 is not strictly applicable because the plaintiff-Company could not have filed its suit in Calcutta.
  • Issues in the Ballabgarh suit had been framed earlier, and only additional issues remained to be framed, suggesting the transfer was inappropriate at that stage.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Progji Soorji and Co. of Bombay v. Kalu Mal Shori Mal and Co. of Amritsar, AIR 1924 Lah. 306 Illustrates that the inherent jurisdiction under section 151 CPC can be used to prevent or remedy grave abuses of process. The Court relied on this authority to support the proposition that it could invoke inherent jurisdiction to transfer the suit to prevent or remedy abuse and to meet the ends of justice.
Rao Yuvraj (Datt Singh) v. Tejdatt Singh, AIR 1934 All. 14 Affirms the same view that inherent jurisdiction under section 151 CPC may be used to prevent abuses of the court's process. The Court treated this decision as reinforcing the principle that inherent jurisdiction may justify transfer to avoid abuse and to secure justice in the peculiar facts of the case.

Court's Reasoning and Analysis

The Court examined the facts and submissions and proceeded in the following analytical steps (as recorded in the opinion):

  1. Assessment of the Bank's submissions: The Court found merit in the Bank's contention that common questions of fact and law arose in the Ballabgarh suit and the Calcutta/Alipore proceedings, and that most evidence and the origination of loans were connected to Calcutta.
  2. Findings on conduct and motive: The Court noted a pattern of conduct by the said-Company — breaking locks at Khaikhli, substituting locks and entities, and conducting operations via related or sister concerns — that demonstrated attempts to frustrate the Bank's recovery and delay proceedings. The inter-relationship of directors was not denied in the respondent's written return, and many denials were made merely for want of knowledge, which the Court described as evasive.
  3. Timing and legality of transfers: The Court observed that liquidation proceedings against the said-Company began prior to the alleged lease and transfers (lease dated 11 July 1972), and that transfers during liquidation were forbidden under the Companies Act provisions cited in the opinion (sections referred to as 531-A and 536, and as section 581-A elsewhere in the text). This supported the Bank's assertion that the transfers were void and mala fide.
  4. Procedural compliance: The Court recorded that notice required by section 22 CPC had been served on the opposite party before making the transfer application.
  5. Statutory/constitutional framework for transfer: The Court reproduced section 23(3) CPC and explained that a plain reading permits the High Court to order transfers even where subordinate courts are subordinate to different High Courts, thereby enabling transfer to a court in Calcutta. The Court also invoked section 151 CPC as conferring inherent jurisdiction to pass orders to meet the ends of justice and to prevent grave abuses.
  6. Precedential support: The Court cited authorities (Progji Soorji and Rao Yuvraj) holding that inherent jurisdiction under section 151 CPC may be exercised to prevent or remedy grave abuses of process. The Court relied on these authorities in the peculiar circumstances of the case to justify transfer.
  7. Conclusion from combined considerations: Given the magnitude of the Bank's claim (about Rs. 53 lakhs), the inter-relatedness of the parties, the alleged mala fide transfers during liquidation, the pendency of connected proceedings in Calcutta, and the service of notice under section 22, the Court concluded that transferring the Ballabgarh suit to the Calcutta court pending the connected case would meet the ends of justice and prevent abuse of the judicial process.

Holding and Implications

Core Ruling:

Petition allowed; Suit No. 844 of 1972 (now No. 63 of 1974) pending in the Court of the Subordinate Judge 1st Class, Ballabgarh, is transferred to the Court at Calcutta in which the connected case between the petitioner-Bank and the said company is pending.

Direct consequences specified by the Court:

  • The petition for transfer is allowed with costs.
  • Council fee recorded as Rs. 300/-. (The opinion records “Council fee—Rs. 300/-”.)

Implications beyond the parties: The opinion does not state that it sets a new legal precedent; rather, it applies existing statutory provisions (sections 22 and 23(3) CPC and section 151 CPC) and relies on cited authorities to justify the exercise of inherent jurisdiction to prevent abuse. The direct effect is the consolidation (by transfer) of the related proceedings in the Calcutta court to avoid multiplicity and to prevent obstruction of the Bank's recovery efforts.

This summary is based exclusively on the content of the provided opinion and does not add facts or inferences beyond the text of that opinion.

    State Bank Of India v. Messrs Sakow Industries, Faridabad (Pvt.) Ltd. .

    Ajit Singh Bains, J.:— The State Bank of India has filed the present application under sections 22 and 23(3) read with section 151 of the Code of Civil Procedure for transfer of Suit No. 844 of 1972 pending in the Court of the Subordinate Judge 1st Class, Ballabgarh, to the Court of the Subordinate Judge at Allpore, District 22 Parganas (West Bengal). It is alleged in the application that the petitioner-Bank through its Ballyguange Branch at Calcutta advanced to one Messrs Sakow Industries (Private) Limited (hereinafter referred to as the “said Company”) various types of loans amounting to about Rs. 53 lakhs for the Industrial units of the said-Company in Calcutta in the State of West Bengal and Faridabad in the State of Haryana. The said loans also included the loans advanced to Messrs Tochi and Asavari carrying on business at 36, Industrial-cum-Housing Estate, Faridabad. These concerns were owned by Shri S.P Mehta, who is Director of the said Company. All the liabilities of the loans were taken over by the said Company later on. It is also alleged in the petition that the loans advanced to the said-Company were personally guaranteed by its two Directors, namely, Shri S.P Mehta and Shrimati Nirmla Devi Mehta (wife of Shri S.P Mehta). The said-Company also pledged, hypothecated, charged its goods, machinery, produce, merchandise, bills and book debts etc. with the petitioner-Bank lying in the godowns or the said Company at Rajput and Khailkhli in the State of West Bengal and at 36, Industrial-cum-Housing Estate Faridabad, as security for the repayment of the loans. The said-Company also agreed to mortgage with the petitioner-Bank their lands and buildings at 36, Industrial-cum-Housing Estate, Faridabad as security. It was also agreed upon that if the said Company does not abide by the financial discipline regarding the repayment of the aforesaid loans, the petitioner Bank shall be entitled to call for the entire amount of loans including interest and other charges accrued there on and to take physical possession of all the goods, produce, stocks, merchandise etc. The whole amount advanced to the said-Company by the Petitioner-Bank amounted to about Rs. 53 lakhs. Not a single Penny out of the loans advanced was returned by the said-Compay in spite of persistent demands made by the petitioner Bank.

    2. In order to realise the loans, the petitioner-Bank filed a civil suit in the High Court at Calcutta in his ordinary civil jurisdiction for the recovery of a sum of Rs. 53,05,463,02 against the said-Company and the two guarantors, namely, Shri S.P Mehta and Mrs. Nirmla Devi Mehta (Suit No. 542 of 1972 State Bank of India v. Sakow Industries (Private) Limited . Suit No. 532 of 19.. The High Court appointed two Receivers on November 24, 1972, to take possession of the godowns of the said-Company. The Receivers succeeded in taking possession of the gowowns at Rajput but were not allowed to take possession of the godown at Khaikhli. They however, did not attempt to take possession of the godowns at Faridabad. The aforesaid suit was filed in the High Court at Calcutta on November 23, 1972, whereas the said-Company changed its registered office from 10, Middleton Row, Calcutta, to 13, Lower Range, Calcutta, on November 16, 1972. As the new registered office of the said-Company did not fall within the original side territorial jurisdiction of the Calcutta High Court, the said Company raised an objection regarding the jurisdiction of the Calcutta High Court and the petitioner-Bank, in view of the said objections withdrew the aforesaid suit from the Calcutta High Court with liberty to file a fresh suit on the same cause of action against the defendants in a proper forum vide order of the High Court dated December 18, 1972.

    3. During the interval that elapsed between the withdrawing of the suit from the High Court and filing of the fresh suit in the Alipore Court, it was found by the petitioner Bank that the said-Company had broken the locks of the petitioner-Bank from their godowns at Khaikhli in breach of loan agreements and put the locks of one Messrs Sakow Trading and Industrial Corporation, a sister partnership concern of the said Company having its Head Office at 10, Middleton Row, Calcutta. The persons interested in the said-Company started carrying on their unit at 36; Industrial cum Housing Estate, Faridabad, in a different name of Messrs Sakow Industries (Faridabad) Private Limited with a view to defraud the petitioner Bank of the huge amount due from the said Company. It is also alleged that the Directors of Sakow Industries (Faridabad) Private Limited are related to the Directors of the said-Company. This fact is not even denied in the written statement filed on behalf of the respondent in this application. A fresh suit was also filed by the petitioner-Bank in Alipore Court on January 13, 1973, against the said-Company, that is, Messrs Sakow Industries (Private) Limited, its two guarantors, namely, Shri S.P Mehta and Mrs. Nirmla Mehta, and the two new concerns, namely, Sakow Trading and Industrial Corporation and Sakow Industries (Faridabad) Private Limited who claimed themselves to be the lessees and owners of all the securities of the petitioner-Bank as mentioned above. The Alipore Court also appointed the same Receivers, who were earlier appointed by the Calcutta High Court as Receivers, in this case also. Both the Receives tried to take possession of the godowns at Khaikhli and also made an attempt to take possession of the godowns at Faridabad, but they were prevented to take possession by the plaintiff-Company and Messrs Sakow Trading and Industrial Corporation Messrs, Sakow Industries (Faridabad) Private Limited (hereinafter referred to as the ‘plaintiff-Company’ filed a suit in the Court on the Subordinate Judge 1st Class, Ballabgarh (Suit No. 844 of 1972, now No. 63 of 1974) for permanent injunction to the effect that the petitioner-Bank be restrained permanently from interfering in the peaceful possession of the premises mentioned in the plaint, that is 36, industrial-cum-Housing Estate, Faridabad. In the plaint, it is mentioned that the entire premises and buildings at 36, Industrial-Cum-Housing Estate have been taken by the plaintiff-Company on long lease for a period of twenty years through a registered lease deed dated July II, 1972 from the said-Company it is further averred that the plaintiff-Company has bought the machineries, manufacturing rights, fittings and fixtures from the previous owners for a valuable consideration.

    4. The petitioner Bank filed its written statement on April 21, 1973, and controverted all the allegations made in the plaint. It was specifically mentioned in the written statement that the present suit was filed in collusion with Messrs Sakow Industries Private) Limited with mala fide intentions to deprive the petitioner-Bank of its securities lying at 36, Industrial-cum Housing Estate Faridabad. It is also alleged by the petitioner-Bank that the liquidation proceedings were initiated against Messrs Sakow Industries (Private) Limited in the High Court at Calcutta being Company Petition 88 of 1971 and the said liquidation operations culminated in the winding up order passed by the Calcutta High Court on July 23, 1973. In view of the winding up order mentioned above, it was found that the lease granted in favour of the plaintiff-Company by Messrs Sakow Industries (Private) Limited and the transfer of all other machineries etc. in favour of the plaintiff-Company was viod abinito under the provisions of sections 531-A and 536 of the Companies Act as the liquidation proceedings were initiated much before the alleged lease and transfer of machineries etc. on July, 11, 1972, in favour of the plaintiff Company.

    5. In order to bring the aforesaid facts on record, the petitioner Bank then moved an application for an amendment of its written statement in the Court of the Subordinate Judge Ist Class, Ballabgarh, which was allowed by the Court vide its order dated September 5, 1975. The amended written statement was filed and the case was adjourned to December 8, 1975, for replication and framing of issues. The petitioner Bank also filed a suit against the said Company in liquidation for specific performance of the contract to create an equitable mortgage in favour of the petitioner-Bank on May 16, 1975 in the High Court at Calcutta and the suit is still pending there. It is in this situation that the present application has been filed.

    6. Mr. Chhibbar, the learned counsel far the petitioner Bank, has urged that the common questions of fact and law arise in both the cases—one pending in Ballabgarh Court and the other pending in Alipore Court; that the entire amount of loans were graned by the petitioner-Baak through its Ballyguange Branch at Calcutta; that the entire evidence to be led by both the parties is available at Calcutta only and that the Ballabgarh suit was filed by the plaintiff-Company mala fide to harass the petitioner-Bank as a counter blast and to prevent the receivers from taking possession of the godowns of the said-Company I find merit in what the counsel for the petitioner Bank states. About 53 lakhs of rupees are due from the said Company to the petitioner-Bank and the aforesaid facts reveal that the said Company is adopting one method or the other to delay the litigation and to prevent the Receivers from taking possession and the petitioner-Bank to realise its amount due and to hamper the realisation of the debts by the petitioner-Bank. The assets were transferred by the said Company to the plaintiff Company after its liquidation. The liquidation took place earlier. Admittedly, the notice in this case has also been served on the opposite party by the petitioner-Bank before moving the present application, as required under section 22 of the Code of Civil Procedure. Moreover, this application has also been moved before the ??? settlement of issues in the suit at Ballabgarh.

    7. Mr. Doabia, the learned counsel for the respondent Company states that section 22 is strictly not applicable in the present case as the plaintiff Company could not file the suit in Calcutta and that the issues were also framed earlier and now only additional issues are to be framed. I do not find any merit in either of these contentions. Although some preliminary issues were framed, but after the filing of the amended written statement, an opportunity was given to file the replication and it was only then that the final issues were to be framed. Strictly speaking, even if section 22 may not be applicable, it in a case where about fifty three lakhs of rupees are due from the said Company. The Directors of the said Company and of the plaintiff Company are inter related. This fact is not denied in their return. The reply given in the return is evasive with regard to the other allegations in the transfer application. Most of the facts are denied for want of knowledge. There is no clear-cut denial. Moreover, the assets of the said Company were leased to the plaintiff Company during liquidation proceedings which is forbidden under section 581-A of the Companies Act Winding up started somewhere in 1971 and the transfers were made to plaintiff Company in the year 1972 which clearly shows that it was all mala fide in order to create hinder nces for the petitioner Bank to realise debts and to delay the litigation also. The present suit seems to be filed by the plaintiff Company in connivance with the said Company and the purpose seems to be the same. In all the cases pending in Calcutta and Faridabad Courts, same questions of law and fact are involved parties are also the same, although a little different name is given but the name Sakow Industries is common in bath the suits and the Directors of both these Companies are in intimately related to each other, which fact is not denied as stated earlier. In such a situation, I find that it would be in the in the interest of justice if the case is transferred from the Court at Faridabad to the Court at Calcutta having jurisdiction in the matter. It is, however, pertinent to reproduce section 23(3) of the Code of Civil Procedure which is in the following terms:—

    “Where such Courts are subordinate to different High Courts, the application shall be made to the High Court within the local limits of whose jurisdiction the Court in which the suit is brought is situate.”

    8. The plain reading of this section shows that in a situation like the present. High Court can order transfer of the case to some other Court under the different High Court. Moreover under section 151 of the Code of Civil Procedure every Court has the inherent jurisdiction to pass any order to meet the ends of justice. In Progji Soorji and Co. of Bombay v. Kalu Mal Shori Mal and Co. of Amritsar . AIR 1924 Lah. 306., it has been been that the inherent section 151 of the Code of Civil Procedure can be used for the purpose of preventing or remedying grave abuses. Same view has been taken in ((Rao Yuvraj) Datt Singh v. Tejdatt Singh . AIR 1934 All. 14.. In the peculiar circumstances of the present case, as the facts enumerated reveal, it would meet the ends of justice and prevent the abuse of the process of the Court if the case pending in the Ballabgrah Court is transferred to the Court at Calcutta in which the connected matter is pending between the petitioner-Bank and the said Company.

    9. For the reasons recovered above, this petition is allowed with costs and suit No. 844 of 8972 (now No. 63 of 1974) pending in the Court of Subordinate Judge 1st Class, Ballabagarh, is transferred to the Court at Calcutta in which the connected case between the petitioner-Bank and the said company is pending. Council fee—Rs. 300/-

    10. Petition allowed.

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    State Bank Of India v. Messrs Sakow Industries, Faridabad (Pvt.) Ltd. .
    (May 10, 1976)