Holding

The ex‑parte decree is set aside and the suit revived because the successor corporation and the State of Orissa were not impleaded as parties, as required by the amalgamation order, and therefore cannot be bound by the decree.

Summary

Ashok Transport Agency filed a money suit against Mis OMC Alloys Ltd, a government company, which was dismissed for default. While the suit was pending restoration, the Government of India issued an amalgamation order under Section 396 of the Companies Act, 1956, merging the company with Orissa Mining Corporation Ltd and dissolving the former. The plaintiff obtained an ex‑parte decree, which remained unsatisfied, and sought execution against the dissolved company, the successor corporation and the State of Orissa. The Executing Court and the Orissa High Court held the decree enforceable against the corporation and the State as successors‑in‑interest. On appeal, the Supreme Court held that because the corporation and the State were not impleaded in the suit, they could not challenge the decree but also could not be bound by it; the amalgamation order required the plaintiff to implead them before proceeding. Consequently, the ex‑parte decree was set aside, the suit revived and remitted to the trial court for a fresh trial with the corporation, the State and TISCO added as parties.

Issues considered

Whether an ex‑parte decree against a dissolved government company is enforceable against its statutory successor and the State of Orissa.
Whether the corporation and the State, not being impleaded in the original suit, can challenge the executability of the decree.
Whether the amalgamation order under Section 396 of the Companies Act, 1956, imposes a duty on the plaintiff to implead the successor corporation and the State before proceeding.
Whether the provisions of Order XXII Rule 10, CPC and Section 146 CPC permit execution against persons claiming under the judgment debtor without being parties to the suit.

Legislation cited

Code of Civil Procedure, 1908s. 115, s. 146
Companies Act, 1956s. 396

Subjects

AmalgamationSuccessor-in-interestEx parte decreeExecution of decreeImpleaderGovernment companyCompanies Act 396CPC 115CPC 146Statutory dissolution

Judgment

GOVERNMENT OF ORISSA A
v.
M/S. ASHOK TRANSPORT AGENCY AND ORS.

NOVEMBER 5, 2004

[R.C. LAHOTI, CJ., G.P. MA THUR AND B
P.K. BALASUBRAMANYAN, JJ.]
' ,;.

Code of Civil Procedure, 1908; O. lX R. 9; O.XX/l R. l O; Ss.115 and 146/
Companies Act, 1956; Section 396:
c
Recovery Suit against a Government company filed by a claimant/
creditor-Dismissed by trial Court-Application for restoration of the suit-
lssuance of Amalgamation order by the Central Government merging the
company with State-Corporation, allowing creditors to enforce their claims
against the company-Suit restored and decreed ex-parte--Decree not satisfied D
by the judgment debtors-E.xecuting Court held the decree executable as against
the Corporation and the State Government-Challenge to-Dismissed by High
Court--On appeal, Held: Since judgment debtors did not prosecute a defence
against execution of the decree by getting themselves impleaded in the suit, it
is not open to them to challenge the executability of the decree-As all the
parties not impleaded before proceeding in the suit, ex-parte decree set aside E
and the suit revived and remitted to the trial Court for disposal afresh in
accordance with law-Orissa Mining Corporation Limitation (Amalgamation)
Order, 1991; Clauses 7 and 12-Constitution of India, 1950-Article 2d(J).

Respondent, a transport Agency (creditor) filed a recovery suit
against a Government company. The suit was dismissed for default by F
,) the trial Court. Respondent filed an application for restoration of the suit,
which was heard by the Court, but order was not pronounced. In the
meantime, Government of India issued an Amalgamation order merging
the Government Company with the Orissa Mining Corporation Limited,
a Government of Orissa Company. In terms of the order, the rights and G
obligations of the Government Company were also taken over by the
Corporation with liberty given to claimants to continue prosecution of
their suits. Later, the Government of Orissa in exercise of powers
conferred under Article 213(1) of the Constitution got the company

1081 H
1082 SUPREME COURT REPORTS [2004) SUPP. 5 S.C.R.

A transferred and vested in itself and later sold it to Tata Iron & Steel
Company.

The Court restored and decreed the suit ex-parte. The decree having
not been satisfied, Respondent filed an Execution Petition against the
Judgment debtors, viz. the Company, the Corporation and the State
B Government. The Executing Court held that the decree was executable
as against the Corporation and the State government as they were
successor-in-interest of the judgment debtor. Revision Petition filed by
':;,,,_,
the aggrieved parties was dismissed by the High Court. Hence the present
appeal. The appeal was heard by a Division Bench of the Supreme Court.
There arose a difference of opinion and the matter was referred to the
c present Bench of three Judges.

Allowing the appeal, the Court

HELD: 1.1. It was for the Corporation, and subsequently for the
State of Orissa, to get themselves impleaded in the suit and to prosecute
D
a defence, not inconsistent with the defence already set up by the defendant
in its written statement. Neither the Corporation nor the Government of
Orissa took that step. In such a situation, normally, it is not open to the
Corporation or the Government of Orissa to challenge the executability
of the decree as against them. (1087-D-E]
E
1.2. By virtue of Clause 12 of the Amalgamation order, a dissolution
of the defendant-company was brought about and it was provided that
no person shall make, assert or take any claims demand or proceedings
against the dissolved company, but claimants like the appellant and other
creditors were not deprived of their right to proceed with the enforcement
F of their claims against the dissolved company in terms of the Order. The
appellant was given the right to proceed with the suit as against the
·~
Corporation in terms of Clause 7 of the Order and also an obligation was
cast on the appellant to implead the Corporation as well in the suit, and
to proceed with the same. [1087-G; 1088-BI
G
1.3. On the terms of the Amalgamation Order, the claimant did have
the right to proceed with the pending application for restoration and the
suit as against the Corporation by taking appropriate steps in that behalf.
It was the plain duty of the Company to bring to the notice of the Court
the fact of promulgation of the Amalgamation order so as to enable the /I
H Court to pass appropriate orders regarding the continuance of the
GOVf. OFORISSA v. ASHOK TRANSPORT AGENCY [BALASUBRAMANYAN, J.] 1083
.- i
proceeding before it. All the same, that can only be a reason for the A
claimant not having taken the requisite steps at the relevant time.
However, in the face of the Order, it was necessary for the claimant to
have brought on record the Corporation and the State Government before
proceeding with its suit and the search for a decree in its favour. The
terms of the Order has not been properly appreciated by the Executing B
Court and the High Court when they allowed thP. claimant to proceed with
the execution of the decree. [1088-D, El

1.4. In the facts and circumstances of the case, the proper order to
be passed in the interest of justice is to accede to the plea of the appellant
to give it a chance to defend the suit especially in view of the relevant C
clauses of the Order, by setting aside the orders impugned in this appeal

- and also by setting aside the ex-parte decree and reviving the suit and by
directing the trial Court to try and dispose of the same afresh and in
accordance with law, after bringing on record the Corporation, the
Government of Orissa and TISCO, since the State had subsequently sold
the assets to TISCO, and after giving the newly added defendants an D
opportunity to file their written statements, not inconsistent with the one
already filed by the defendant and then it will be for the Court to proceed
with the trial and dispose of the suit in accordance with law. Hence, the
orders of the Executing Court and the High Court are set aside on the
objections raised by the appellant. In the interest of justice, the ex-parte E
decree in money suit is set aside and the suit is remitted to the trial Court
for a fresh trial and disposal. [1088-G-H; 1089-A-B, CJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3209 of
2002.
F
From the Judgment and Order dated 19.7.2002 of the Orissa High
Court in G.R. No. 117 of 1998.

Altaf Ahmad and Ms. Kirti Mishra, with him for the Appellant.

Subhash Sharma, Anukul Ch. Pradhan and Shiv Sagar Tiwari for the G

- Respondents.

The Judgment of the Court was delivered by

P.K. BALASUBRAMANYAN, J. M/s Ashok Transport Agency,
...- Respondent No. I herein [hereinafter referred to as the 'plaintiff], filed a suit H
1084 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A against Mis O.M.C. Alloys Limited, a Government Company, [hereinafter
referred to as the 'defendant'], for recovery of a sum of Rs.3,90,210/- with
interest thereon. The suit was filed on 1.8 .. 1986. The defendant filed a written
statement on 14.10.1987. On 29.08.1990, the suit was dismissed for default.
On 20.09.1990, the plaintiff filed an application under Order IX Rule 9 of the
B Code of Civil Procedure for restoration of the suit. On 03.08.1991, the
defendant filed a memo substantially submitting that it was not opposing the
restoration of the suit. The application for restoration was heard and posted
for orders to 17 .8.1991. On that date, orders were not pronounced and the
pronouncement of orders was adjourned to 02.09.1991.

C On 30.08.1991, the Ministry of Law, Justice and Company Affairs,
Government of India, issued a Notification S.O. 562 (E) in exercise of the
powers conferred under sub-Sections (1) and (2) of Section 396 of the
Companies Act, 1956, called the OMC Alloys Limited and the Orissa Mining
Corporation Limited (Amalgamation) Order, 1991. It provided for the
amalgamation of the defendant with the Orissa Mining Corporation Limited
D [hereinafter referred to as the 'Corporation'], a Government ofOrissa company
incorporated under the Companies Act. In addition to providing for the
amalgamation of the two companies and for transfer of all rights and properties
of the defendant and the vesting of the same in the Corporation in accordance
with law, by clause 12, it provided for the dissolution of the Company.
E Clause 12 reads:

"12. Dissolution of the Mis OMC Alloys Limited Subject to the
other provisions of this order, as from the appointed day, Mis Of llC
Alloys Limited shall be dissolved and no person shall make, assert or
take any claims demand or proceedings against the dissolved company
F or against a director or an officer thereof in his capacity as such
director or officer, except in so far as may be necessary for enforcing
the provisions of this order."

Clause 7 thereof made provision for saving of legal proceedings. It
reads:-"
G
7. Saving of legal proceeding.- If on the appointed day, any suit,
prosecution, appeal or other legal proceedings or whatever nature by
or against the dissolved company be pending, the same shall not
abate or be discontinued, or be any way prejudicially affected by
reason of the transfer to the resulting company of the undertaking of
H dissolved company or of anything contained in his order. But the suit,
GOVT. OF ORISSA v. AS HOK TRANSPORT AGENCY [BALASUBRAMANYAN, J.] 1085

prosecution, appeal or other legal proceeding may be continued, A
prosecuted and enforced or against the resulting company in the same
manner and to the same extent as it would or may be continued,
prosecuted and enforced by or against the dissolved company, if this
order had not been made."

By definition, the resulting Company is the Corporation. B
Thus, by virtue of the above Order issued under Section 396 of the
Companies Act, the rights and obligations of the defendant were taken over
by the Corporation with a liberty given to claimants like the plaintiff to
continue the prosecution of their suits against the Corporation.
c
It is seen that the defendant, who was represented by counsel and who
had filed a written statement in the suit, did not bring to the notice of the
Court that the defendant had got amalgamated with the Corporation, that it
stood dissolved and that it was necessary to implead the Corporation before
proceeding further with the suit. The plaintiff also did not take any steps to D
implead the Corporation as a defendant in the suit either due to ignorance or
due to want of care.

On 02.09.1991, with only the defendant on the party array, the
application for restoration of the suit was allowed, the suit was restored and
adjourned to 31.10.1991. Meanwhile, on 24.09.1991, the Government of E
Orissa promulgated ordinance No.8 of 1991 in exercise of powers conferred
under Article 213(1) of the Constitution of India and issued a Notification
dated 24.09.1991 whereby the Charge Chrome Division originally known as
OMC Alloys Limited of the Corporation stood transferred and vested in the
Government of Orissa. On 27.09.1991, the Government of Orissa sold what
had vested in it, to Tata Iron and Steel Company (TISCO). It is seen that the F
defendant did not take further part or interest in the litigation and this resulted
in Money Suit No.491 of 1986 being decreed ex parte on 12.11.1991. The
defendant did not accede to the demand of the plaintiff for satisfying the
decree. The plaintiff came to know of the Government Notification and the
subsequent developments and issued a notice to the Secretary, Department of G
... Steel and Mines demanding payment of the decretal dues. The decree having
not been satisfied, the plaintiff filed an Execution Petition on 24. l 0.1994
impleading the defendant as judgment debtor No. I, the Corporation as
judgment debtor No.2 and the State Government of Orissa as judgment debtor
No.3. In other words, the plaintiff, the decree holder, sought to execute the
decree not only against the defendant-judgment debtor, but also against the H
1086 SUPREME COURT REPORTS [2004] SUPP. 5 S.C.R.

A statutory transferees. The Corporation filed an objection objecting to the
executability of the decree as against it. The Government of Orissa also filed
an objection objecting to the executability of the decree as against it. Both
took the stand that not being parties to the decree, they were not bound by
it. Thus, the question arose in execution whether the decree obtained by the
B plaintiff against the defendant was capable of being enforced against the
Corporation and the State of Orissa. The Executing Court held that the decree
was executable as against the Corporation and the State of Orissa since they
were successors-in-interest of the judgment debtor and hence bound by the
decree. Their objection was thus overruled. The Corporation and the
Government of Orissa challenged the order of the Executing Court before the
C High Court of Orissa in Revisions under Section 115 of the Code of Civil
Procedure. The High Court of Orissa after considering the relevant aspects
and relying on the decision of this Court in State of Orissa v. Klockner and
Co., (1996] 8 SCC 377, held that the Executing Court was right, since the
Corporation and the State Government were only successors-in-interest of
the defendant-judgment debtor and it was not open to them to challenge the
D decree as a nullity or as one unenforceable against them. Thus the revisions
were dismissed. The dismissal of its revision, Civil Revision No. 117 of
1998, is challenged in this appeal by the Government of Orissa.

This appeal was heard by two learned Judges of this Court. One learned
E Judge came to the conclusion that the decree could not be enforced against
the appellant and the appellant was entitled in execution to successfully raise
the objection of non-executability of the decree as against it. The other
learned Judge took the view that the decree was enforceable against the
Corporation and also the Government of Orissa, though they were not
impleaded in the suit, since they were successors-in-interest of the judgment
F debtor. It is seen that the essential difference in approach between the two
learned Judges was as to whether it was for the plaintiff to have taken steps
to bring on record the Corporation and the State of Orissa as parties to the
suit before proceeding with it and obtaining a decree, or whether it was for
the successors-in-interest of the defendant, if they wanted it, to seek to come
G on record by themselves so as to defend that suit. Anyway, the two learned
Judges thus differed. Jn view of this, their Lordships referred the appeal to
a larger bench for decision by order dated 30.04.2004. That is how, this
appeal has come up before a bench of three Judges.

Normally, in a case covered by Order XXll Rule I 0 of the Code of
H Civil Procedure where rights are derived by an assignee or a successor-in-
GOVf. OF ORISSA v. ASHOK TRANSPORT AGENCY (BALASUBRAMANYAN, J.] } 087

interest pending a litigation, it is for that assignee or transferee to come on A
record if it so chooses and to defend the suit. It is equally open to the
assignee to trust its assignor to defend the suit properly, but with the
consequence that any decree against the assignor will be binding on it and
would be enforceable against it. Equally, in tenns of Section 146 of the Code
of Civil Procedure, a proceeding could be taken against any person claiming B
under the defendant or the judgment debtor. Similarly, a person claiming

.. under the defendant or the judgment debtor could seek to challenge the
decree or order that may be passed against the defendant, by way of appeal
or otherwise, in the appropriate manner. But, it would not be open to it to
challenge the decree as void or unenforceable in execution in the absence of
any specific provision in that regard in the statute or order bringing about C
such a transfer or assignment. Going by these general principles, it is possible
to argue that it was for the Corporation, and subsequently for the State of
Orissa, to get themselves impleaded in the suit and to prosecute a defence,
not inconsistent with the defence already set up by the defendant in its written
statement. Neither the Corporation nor the Government of Orissa took that
step. In such a situation, nonnally, one would be inclined to the view that it D
is not open to the Corporation or to the Government of Orissa to challenge
the executability of the decree as against them. It is in this context that the
impact of Amalgamation Order has to be considered.

There is no dispute that the companies concerned were Government E
companies and that under Section 396 of the Act, the Central Government
had the power to provide for amalgamation of the companies in national
interest. It was in exercise of that power, that Notification S.O. 562(E) dated
30.08.1991 providing for amalgamation of the defendant and the Corporation
was issued. The said Order, in addition to providing for amalgamation of the
two companies, also made two important provisions in Clauses 7 and 12. By F
virtue of Clause 12, a dissolution of the defendant was brought about and it
was provided that no person shall make, assert or take any claims demand or
proceedings against the dissolved company, but claimants like the plaintiff
and other creditors were not deprived of their right to proceed with the
enforcement of their claims against the dissolved company in tenris of the G

.. Order. Clause 7, which we have quoted above, provided that any suit,
prosecution, appeal or other legal proceeding by or against the dissolved
company pending on the appointed day, shall not abate or be discontinued or
be any way prejudicially affected by reason of the transfer to the resulting
company, the Corporation, of the undertaking of the dissolved company or
of anything contained in the Amalgamation Order. But it was specifically H
1088 SUPREME COURT REPORTS [2004) SUPP. 5 S.C.R.

A provided that the suit, prosecution, appeal or other legal proceeding may be
continued, prosecuted and enforced against the resulting company, namely,
" "'.

the Corporation, in the same manner and to the same extent as it would or
may be continued, prosecuted and enforced by or against the dissolved
company, if the order of amalgamation had not been made. In other words,
a claimant like the present plaintiff, was given the right to proceed with the
B

..
suit as against the Corporation in terms of Clause 7. On the wording of clause
7, an obligation was cast on the plaintiff to implead the Corporation as a
defendant in the suit and to proceed with the same. It may be noted that at
the relevant time, the suit stood dismissed for default and the same had not
been. restored though the application for restoration of the suit was pending. ..
c The suit was got restored after the amalgamation took place and the
consequences as set out therein followed. On the terms of the Amalgamation
Order, the plaintiff did have the right to proceed with the application for
restoration and the suit as against the Corporation by taking appropriate steps
•
in that behalf. We must also notice that it was the plain duty of the defendant
and its counsel, to bring to the notice of the Court the fact of promulgation
D of the Amalgamation Order so as to enable the Court to pass appropriate
orders regarding the continuance of the proceeding before it. All the same,
r
that can only be a reason for the plaintiff not having taken the requisite steps
at the relevant time. In the face of the Amalgamation Order, we are of the
view that it was necessary for the plaintiff to have brought on record the
E Corporation and the State Government before proceeding with its suit and the
search for a decree in its favour. The terms of the Amalgamation Order has
.
not been properly appreciated by the Executing Court and the High Court
when they allowed the plaintiff to proceed with the execution as against the
Corporation and as against the Government of Orissa.

F Thus, we are inclined to the view that the Corporation and the State of
Orissa should have been impleaded in the suit prior to the decree on the
terms of the Amalgamation Order. Learned counsel for the appellant submitted
1.
that the appellant only wanted an opportunity to defend the suit consistent
with the stand adopted in the written statement filed by the defendant subject
to any additional pleas that may be available to be raised by the appellant.
G We think that in this case, the proper order to be passed, in the interests of
justice is to accede to the plea of the appellant to give it a chance to defend
the suit especially in view of the relevant clauses of Amalgamation Order,
1991, by setting aside the orders impugned in this appeal and also by setting
aside the ex parte decree and reviving the suit and by directing the trial court
H to try and dispose of the same afresh and in accordance with Jaw, after ...
GOVT. OFORISSA v. ASHOK TRANSPORT AGENCY [BALASUBRAMANYAN, J.) } 089

bringing on record the Corporation, the Government of Orissa and TISCO, A
since the State had subsequently sold the assets to TISCO, and after giving
the newly added defendants an opportunity to file their written statements,
not inconsistent with the one already filed by the defendant. After giving of
such an opportunity to the newly added defendants, it will be for that Court
to proceed with the trial and disposal of the suit in accordance with law.
B
We therefore allow this appeal. We set aside the orders of the Executing
Court and the High Court on the objections raised by the appellant. We close
the Execution Petition. In the interests of justice, we set aside the ex parte
decree in Money Suit No. 49 l of 1986 on the file of the Civil Judge, Senior
Division, Bhubaneswar and remand that suit to the Court of the subordinate C
Judge of Bhubaneswar for a fresh trial and disposal as indicated above. The
parties would appear before that Court on 14.12.2004 to take further orders
regarding the posting of the suit. Learned Senior Counsel for the appellant
has submitted before us that appearance would be entered on behalf of the
Corporation and the Government of Orissa. The trial court will direct the
plaintiff to take out summons to TISCO and also to the Corporation and the D
Government of Orissa if they do not appear before it on 14.12.2004. Since
defendant No.I was already on the party array and had appeared in the suit,
no fresh notice to it will be necessary. We have been assured on behalf of
the Government of Orissa that it will appear in the trial court on the date
fixed. After the appearance of the Corporation and the Government of Orissa E
... or after service of summons on them and TISCO, the trial court will proceed
with the suit and dispose of the suit in accordance with law and in the light
of the directions as above.

The parties are directed to suffer their respective costs.

S.K.S. F
Appeal allowed.