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Suzuki Parasrampuria... v. Official Liquidator ...
Factual and Procedural Background
M/s Mahendra Petrochemicals Ltd. (MPL) became the subject of winding-up proceedings in Company Petition No. 150 of 1996 and was also referred to the Board for Industrial and Financial Reconstruction (BIFR) in Reference No. 385 of 2000. During the pendency of the BIFR reference, MPL executed an unregistered memorandum of understanding with Suzuki Parasrampuria Suitings Pvt. Ltd.—a sister concern of the present appellant—leasing its properties for twenty years without BIFR’s permission and without disclosure to the Company Court.
Among MPL’s secured creditors were:
- Industrial Finance Corporation of India Ltd. (IFCI) – first charge, outstanding about Rs 160 crores.
- Bank of Baroda – second charge, outstanding about Rs 4.68 crores.
- Punjab National Bank and another bank (respondents before the Supreme Court).
After the Company Court passed a winding-up order on 19-4-2010, IFCI assigned its entire debt to the appellant on 28-7-2010 for Rs 85 lakhs and informed the Official Liquidator.
The appellant filed Company Application No. 248 of 2014 before the Company Court seeking substitution in place of IFCI as a secured creditor. On 31-7-2015 the Company Judge rejected the request (2015 SCC OnLine Guj 1017), holding that the appellant was not a bank, financial institution, securitisation company or reconstruction company, and therefore could not claim the benefits of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). A review/recall application (OJMCA No. 170 of 2015) was dismissed on 7-9-2015 (2015 SCC OnLine Guj 6301), and a further intra-court appeal failed on 2-9-2016 (2016 SCC OnLine Guj 2269).
The present Supreme Court proceeding challenges the appellate order of 2-9-2016.
Legal Issues Presented
- Whether the appellant, by virtue of an assignment deed executed by IFCI, is entitled to be substituted in place of IFCI as a “secured creditor” of MPL under the SARFAESI Act.
- Whether the appellant can rely on Section 130 of the Transfer of Property Act, 1882 to achieve such substitution despite not satisfying the statutory definition of a secured creditor under the SARFAESI Act.
- Whether the appellant is precluded from altering its stance in review and appellate stages after having unequivocally sought substitution as a secured creditor before the Company Court.
Arguments of the Parties
Appellant's Arguments
- It never sought the status of “secured creditor” under SARFAESI; it only sought recognition as an assignee of an actionable claim under Section 130 of the Transfer of Property Act.
- The Company Court erred by treating the application as one under SARFAESI and by ignoring the subsisting, unchallenged assignment deed dated 28-7-2010.
- The inherent powers under Rule 9 of the Companies (Court) Rules, 1959 should have been exercised to recall the earlier order.
Respondents' Arguments
- The appellant is attempting a “volte-face,” having earlier asserted a claim to secured-creditor status and now advancing a contradictory position.
- Such inconsistent stands should not be entertained in the same proceedings.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Amar Singh v. Union of India, (2011) 7 SCC 69 | A litigant cannot take inconsistent positions; the doctrine that parties must approach the court with clean hands. | Invoked to hold that the appellant cannot now disclaim its earlier plea for secured-creditor status. |
| Joint Action Committee of Air Line Pilots' Assn. of India v. DGCA, (2011) 5 SCC 435 | Doctrine of election / estoppel; a party cannot approbate and reprobate. | Reinforced the view that the appellant’s shifting stand is impermissible. |
Court's Reasoning and Analysis
The Supreme Court examined the Company Judge’s orders, the pleadings in Company Application No. 248 of 2014, and the pursis filed by IFCI before the Debt Recovery Tribunal. These materials demonstrated that the appellant had explicitly sought substitution as a secured creditor under the SARFAESI Act and had relied on Section 130 of the Transfer of Property Act only as ancillary support for that relief.
The Court noted that:
- The appellant’s pleadings referred to itself as having “become the secured creditor of the Company in Liquidation.”
- Arguments before the Company Judge were framed squarely under SARFAESI.
- Recitals in judicial orders are “sacrosanct”; they establish what transpired before the court and cannot be contradicted later.
Having lost on the secured-creditor claim, the appellant attempted to recast its case on review, claiming it never sought such status. The Court held that this was a contradictory stand barred by the principles discussed in Amar Singh and Joint Action Committee cases. A litigant cannot “blow hot and cold” within the same litigation.
Because the appellant is neither a bank, financial institution, securitisation company, nor reconstruction company, it falls outside the entities entitled to proceed under SARFAESI. Section 130 of the Transfer of Property Act could not override that statutory limitation. Consequently, the Company Judge was correct in denying substitution, and the appellate orders required no interference.
Holding and Implications
DISMISSED.
The Supreme Court affirmed all lower-court orders, leaving the appellant without the status of secured creditor and without any SARFAESI remedies against MPL. The decision reiterates the doctrine that parties cannot adopt inconsistent positions within the same litigation; however, it sets no new substantive precedent beyond reinforcing established principles of estoppel and election.
Navin Sinha, J.— Leave granted. The appellant is an assignee of debt by Industrial Finance Corporation of India Ltd. (hereinafter called as “IFCI”) for the outstandings of M/s Mahendra Petrochemicals Ltd. (hereinafter referred to as “M/s MPL”). It is aggrieved by the appellate order dated 2-9-2016 in Suzuki Parasrampuria Suitings (P) Ltd. v. Official Liquidator 2016 SCC OnLine Guj 2269, declining to interfere with the orders of the Company Judge dated 31-7-2015 in Suzuki Parasrampuria Suitings (P) Ltd. v. Official Liquidator 2015 SCC OnLine Guj 1017, and also the order dated 7-9-2015, in Suzuki Parasrampuria Suitings (P) Ltd. v. Official Liquidator 2015 SCC OnLine Guj 6301 declining to recall/review the order dated 31-7-2015 2015 SCC OnLine Guj 1017.
2. It is not considered necessary to set out and deal with the entirety of the facts and circumstances of the case, except to the extent necessary for the purposes of the present order, in the limited nature of the controversy arising in the present appeal.
3. Company Petition No. 150 of 1996 was filed for winding up of M/s MPL. The Company was also referred for rehabilitation to the Board for Industrial and Financial Reconstruction (hereinafter referred to as “BIFR”) in Reference No. 385 of 2000. During pendency of the same, without permission or knowledge of BIFR, M/s MPL entered into an unregistered memorandum of understanding (hereinafter referred to as “MoU”) with the sister concern of the appellant, Suzuki Parasrampuria Suitings Pvt. Ltd. for leasing out its properties to the appellant for 20 years for repayment of its debts. MoU was also not brought to the attention of the Company Court till the winding-up order was passed on 19-4-2010. IFCI, Bank of Baroda, Respondent 3 and Punjab National Bank, Respondent 4 were secured creditors, who had filed original applications against M/s MPL for recovery of their debts before the Debts Recovery Tribunal under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (hereinafter referred to as “the Sarfaesi Act”). IFCI held first charge over the assets of M/s MPL for outstandings of Rs 160 crores and Bank of Baroda with an outstanding of approximately Rs 4,68,00,000 held second charge. On 28-7-2010 after the winding-up order, IFCI assigned its dues to the appellant for a sum of Rs 85 lakhs only and informed the Official Liquidator thereafter.
4. The appellant then filed Company Application No. 248 of 2014 with a prayer for substitution in place of IFCI as a secured creditor of M/s MPL. The Company Judge rejected the application on 31-7-2015 2015 SCC OnLine Guj 1017 holding that the appellant was neither a bank or banking company or a financial institution or securitisation company or reconstruction company and therefore could not be substituted in place of IFCI as a secured creditor for the purpose of the Sarfaesi Act. In the nature of the relief sought for substitution as a secured creditor under the Sarfaesi Act, the Company Judge held that the appellant could not draw any benefit for the purpose from Section 130 of the Transfer of Property Act, 1882. All other contentions were left open to be raised before the appropriate court/forum in appropriate proceedings. The appellant then filed Ojmca No. 170 of 2015 invoking the inherent powers of the Company Court under Rule 9 of the Companies (Court) Rules, 1959 for recall/review of order dated 31-7-2015 2015 SCC OnLine Guj 1017 contending that the appellant had never sought substitution as a secured creditor and simply desired substitution as a transferee of an actionable claim under Section 130 of the Transfer of the Property Act (hereinafter referred to as “the TP Act”). The recall/review application was rejected holding that an entirely new case was sought to be made out in the application. The appeal against the same has been rejected by the impugned order 2016 SCC OnLine Guj 2269.
5. Shri Harin P. Raval, learned Senior Counsel for the appellant, assailing the impugned order dated 2-9-2016 2016 SCC OnLine Guj 2269, contended that the appellant had never sought the status of a secured creditor in lieu of IFCI. The finding to that effect is erroneous and completely misconceived. The appellant had simply desired to be adjudged a transferee from IFCI of an actionable claim under Section 130 of the TP Act. The rights and claims of the appellant under the latter was the only issue, and has not been considered at all. The deed of assignment dated 28-7-2010 was subsisting and was challenged by none. The lack of any status of the appellant under the Sarfaesi Act was a wholly irrelevant consideration to reject its action for transfer of an actionable claim under Section 130 of the TP Act. The inherent power of the Company Court under Rule 9 of the Companies (Court) Rules was wrongly declined to be exercised in the facts of the case.
6. The learned counsel for the respondents opposed the application submitting that the appellant cannot be permitted to make a volte face after the rejection of its only claim by the Company Judge and take shifting stands at different times according to its convenience in the same proceedings.
7. We have considered the submissions on behalf of the parties. That the unregistered MoU was without permission of BIFR, it was not disclosed to the Company Court till the winding-up order was passed on 19-4-2010, the assignment of debt of Rs 160 crores by IFCI for Rs 85 lakhs, are admitted facts. The order dated 31-7-2015 2015 SCC OnLine Guj 1017 passed by the Company Judge makes it very explicit that the appellant in Company Application No. 248 of 2014 had specifically sought substitution in place of IFCI as a secured creditor holding first charge consequent to the deed of assignment in its favour dated 28-7-2010 from IFCI. In support of the relief sought, reliance was also placed on the pursis dated 21-11-2011 filed by IFCI in OA No. 452 of 2000 before the Debts Recovery Tribunal, Ahmedabad reaffirming the assignment in favour of the appellant. The submissions made before the Company Judge leaves no doubts that as an assignee of debts from IFCI, the appellant essentially sought substitution as a secured creditor under the Sarfaesi Act and for that purpose sought to draw sustenance from the provisions of Section 130 of the Transfer of Property Act. Therefore, the Company Judge opined that Section 130 of the Transfer of the Property Act was not applicable in the facts of the case leaving it open for the parties to take all available contentions before the appropriate court/forum in appropriate proceedings.
8. In the nature of the controversy sought to be raised by the appellant in the present appeal we consider it proper to set out the following extracts from the order 2015 SCC OnLine Guj 1017 of the Company Judge: (SCC OnLine Guj paras 23, 25 & 27)
“23. The only question which is required to be considered in this application is as to whether the applicant can be permitted to be substituted for and in place of IFCI Ltd. as the secured creditor of the company in liquidation? For deciding this question, certain provisions of the Sarfaesi Act are required to be considered.
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25. Thus, in view of the aforesaid provisions contained in the Sarfaesi Act, I am of the view that when the applicant company is not a bank or banking or financial institution or securitisation company or reconstruction company, the applicant cannot be permitted to be substituted in place of IFCI as secured creditor for the purpose of the Sarfaesi Act.
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27. The aforesaid provisions of Section 130 of the Transfer of Property Act are not applicable to the facts of the present case as IFCI has transferred the debts of the company in liquidation in favour of the applicant by deed of assignment and therefore the case of the applicant is that it may be permitted to proceed against the company in liquidation under the Sarfaesi Act as secured creditor. The applicant is not entitled to get any benefit under the Sarfaesi Act and cannot be termed as secured creditor. Hence, the reliance placed by the learned advocate for the applicant on the provisions of Section 130 of the Transfer of Property Act, is misconceived.”
9. The relevant extract of the pleadings by the appellant in Company Application No. 248 of 2014 noticed by the Company Judge in his order dated 7-9-2015 2015 SCC OnLine Guj 6301 are also noticeable: (Suzuki Parasrampuria case 2015 SCC OnLine Guj 6301, SCC OnLine Guj para 14)
“14. … ‘8. I say and submit that earlier, IFCI also filed a purshis dated 21-11-2011 before the Debts Recovery Tribunal, Ahmedabad in Original Application No. 452 of 2000 reaffirming that IFCI Ltd. has assigned its dues in favour of the applicant. I beg to annex a copy of purshis dated 21-11-2011 filed before the Debts Recovery Tribunal, Ahmedabad in Original Application No. 452 of 2000 at Annexure III.
10. I say and submit that apropos to the deed of assignment, the applicant has become the secured creditor of the Company in Liquidation and all the rights of IFCI Ltd. in relation to the financial facilities extended to the Company in Liquidation and the underlying security interests therein vests in the applicant vis-à-vis the Company in Liquidation.’”
10. The appellant initially took a conscious and considered stand before the Company Judge, staking a claim for being substituted as a secured creditor under the Sarfaesi Act consequent to the assignment of debt to it by IFCI. That the claim was not simply with regard to assignment of an actionable claim under Section 130 of the TP Act is evident from its own pleadings and the pursis filed by IFCI before the Debts Recovery Tribunal. No material has been placed before us with regard to the orders that may have been passed by the Tribunal on such application. After the claim of the appellant of being a secured creditor was rejected by the Company Judge, and the appellant realised the unsustainability of its claim in the law, it made a complete volte face from its earlier stand and surprisingly, contrary to its own pleadings, now contended that it had never sought the status of a secured creditor under the Sarfaesi Act.
11. The contention of the appellant that it had never sought substitution as a secured creditor under the Sarfaesi Act is additionally belied from the recitals contained in the order dated 7-9-2015 2015 SCC OnLine Guj 6301. Time and again this Court has held that the recitals in the order-sheet with regard to what transpired before the High Court are sacrosanct. The learned Single Judge, in the review jurisdiction, has reiterated that the arguments addressed before him in Company Application No. 248 of 2014 were made specifically under the Sarfaesi Act observing as follows: (Suzuki Parasrampuria case 2015 SCC OnLine Guj 6301, SCC OnLine Guj para 15)
“15. It is also required to be noted that learned advocate for the applicant in the said application, at the time of arguments, submitted that the applicant be substituted as secured creditor and given the benefit under the Sarfaesi Act and therefore, learned advocate Mr Rao appearing for Bank of Baroda submitted in detail, after relying upon the provisions contained in Sarfaesi Act, that the applicant cannot be substituted as secured creditor and permitted to proceed under the provisions of Sarfaesi Act.”
12. A litigant can take different stands at different times but cannot take contradictory stands in the same case. A party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands. The untenability of an inconsistent stand in the same case was considered in Amar Singh v. Union of India (2011) 7 SCC 69, observing as follows:
“50. This Court wants to make it clear that an action at law is not a game of chess. A litigant who comes to court and invokes its writ jurisdiction must come with clean hands. He cannot prevaricate and take inconsistent positions.”
13. A similar view was taken in Joint Action Committee of Air Line Pilots' Assn. of India v. DGCA (2011) 5 SCC 435, observing:
“12. The doctrine of election is based on the rule of estoppel—the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estoppels in pais (or equitable estoppel), which is a rule in equity. … Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily.”
14. Resultantly we find no merit in the appeal. The appeal is dismissed.
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