{"id":131041,"date":"2002-07-23T00:00:00","date_gmt":"2002-07-22T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/sh-satbir-singh-vs-major-s-c-bugg-and-ors-on-23-july-2002"},"modified":"2017-04-27T00:43:28","modified_gmt":"2017-04-26T19:13:28","slug":"sh-satbir-singh-vs-major-s-c-bugg-and-ors-on-23-july-2002","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/sh-satbir-singh-vs-major-s-c-bugg-and-ors-on-23-july-2002","title":{"rendered":"Sh. Satbir Singh vs Major S.C. Bugg And Ors. on 23 July, 2002"},"content":{"rendered":"
Delhi High Court<\/div>\n
Sh. Satbir Singh vs Major S.C. Bugg And Ors. on 23 July, 2002<\/div>\n
Equivalent citations: 2003 114 CompCas 473 Delhi<\/div>\n
Author: A Sikari<\/div>\n
Bench: S Sinha, A Sikri<\/div>\n<\/p>\n
<\/pre>\n
JUDGMENT<\/p>\n
 A.K. Sikari, J.  <\/p>\n
 1. This appeal is directed against the judgment
\ndated 13th November, 1980 passed by the learned Company
\nJudge in CA No. 138\/78. The learned Company Judge has,
\nin the aforesaid judgment, narrated the facts in
\nsubstantial details, and therefore, it may not be
\nnecessary to repeat the same all over again. To
\nunderstand the controversy, only material facts may be
\nnoted.\n<\/p>\n
 2. The appellant, Sh. Satbir Singh, a former ruler
\nof the erstwhile State of Jind and the respondent No. 2
\nSmt. Inder Bir Kaur were husband and wife. The
\nappellant had an estate at Bhimtal near Nainital. The
\nestate comprised of a villa, a Site Bungalow
\ncalled Rosery Cottage, Barracks and about 7 acres of
\nland. The appellant and his wife Inder Bir Kaur formed
\nthe respondent No. 3 company, called Rajbir Industrial
\nFarms (Pvt.) Limited. As it was a husband and wife
\ncompany and they were to be the beneficiaries in the
\nevent of success of the enterprise, the appellant gave
\nlicense of 7 acres land for development of orchard and
\nthe barracks for setting up the factory and Rosery
\ncottage for being used by the Manager of the company
\nwho was called Administrator. Major S.C. Bugg who was
\nthe father of Smt. Inder Bir Kaur and father-in-law of
\nthe appellant was appointed as the Administrator and he
\nwas to use the Rosery Cottage for his residence as the
\nAdministrator. The object of the company was to
\ndevelop an orchard in the said 7 acres of land and to
\nset up a canning factory in the barracks by adjusting
\nthe barracks as a factory building and installing and
\nrunning machinery.\n<\/p>\n
 3. It is in the balance sheet and
\nDirector’s report that the factory was set up and
\norchard was planted and grown to maturity. There were
\nmatrimonial disputes between the husband and the wife.
\nA winding up petition was filed by Smt. Inder Bir Kaur
\nand the company was ordered to be wound up. The
\nappellant, during the pendency of the winding up
\npetition, sold the entire estate comprising of the
\nVilla, Rosery Cottage, Barracks, factory and 7 acres of
\norchard land to Lakhanis (Sh. Mohan S. Lakhani and his
\nwife Smt. Sati S. Lakhani) being respondents 4 and 5.\n<\/p>\n
 4. Subsequently, Smt. Inder Bir Kaur and Major
\nS.C. Bugg filed a petition under Sections 542, 543, 531
\nand 531-B of the Companies Act being CA No. 138\/78 for
\nsetting aside the sale made on 15th April, 1972 and
\nother reliefs.\n<\/p>\n
 5. While disposing of this application by reason
\nof impugned judgment, the learned Company Judge gave
\nthe following directions:\n<\/p>\n
 (a) Satbir Singh is accountable to the company to
\nthe extent of Rs. 1,10,000\/- besides interest
\non the amount at 10% p.a. from April 1, 1972,
\ntill the date of payment or the amount at
\nwhich the claim of creditors, other than
\nSatbir Singh, may be settled by the official
\nLiquidator, whichever of the two is lesser;\n<\/p>\n
 (b) Satbir Singh would pay to the company within 4
\nweeks a sum of Rs. 50,000\/- received by him
\nfrom Lakhanis on behalf of the company. The
\nbalance amount would be paid by Satbir Singh
\nwithin 4 weeks of requisition by the Official
\nLiquidator, after the claims have been
\nsettled;\n<\/p>\n
 (c) In case the claim of the creditors is settled
\nat an amount which is less than Rs. 50,000
\nSatbir Singh would be entitled to refund of
\nbalance;\n<\/p>\n
 (d) Satbir Singh would furnish within 4 weeks a
\nsecurity to the satisfaction of the Joint
\nRegistrar (Appellate) to the effect that he
\nwould make the payment of the balance on a
\nrequisition from the Official Liquidator;\n<\/p>\n
 (e) Lakhanis would be entitled to deal with the
\nEstate including the machinery, fixtures and
\nfittings purchased both by the sale deed,
\nsubject however to be payment of Rs. 50,000\/-
\nby Satbir Singh in terms of direction (b)
\nabove. If Satbir Singh fails to make the
\npayment it would be open to Lakhanis to make
\nthe payment in which event, Lakhanis would be
\nentitled to claim the amount from Satbir
\nSingh;\n<\/p>\n
 (f) The claims of the creditors of the company
\nincluding Bugg, on account of arrears or so in
\nthe loan account would be settled by the
\nOfficial Liquidator in accordance with law
\nwithin 3 months.\n<\/p>\n
 6. It may be noted at the outset that under
\nSection 543 of the Companies Act, such an application
\nas filed by the respondent No. 1 herein before the
\nlearned Company Judge, i.e. CA No. 138\/78 can be filed
\nby the Official Liquidator as well as any creditor or
\ncontributory (shareholders) of the company. The
\nOfficial Liquidator had also moved an application which
\nwas registered as CA No. 583\/79 mention to which is made
\nin the very first paragraph and the reading of the
\nimpugned order clearly indicates that this application
\nis also decided Along with CA No. 138\/78 and it is also
\nspecifically mentioned in the last paragraph of the
\nimpugned order.\n<\/p>\n
 7. It appears that no appeal is filed against CA
\nNo. 583\/79. In view thereof, learned counsel for
\nrespondents 1 and 2 raised a preliminary objection by
\nsubmitting that the result of not filling an appeal in
\nthe application of the Official Liquidator would be
\nthat some directions of the learned Company Judge in CA
\nNo. 583\/79 have become final and thus the present appeal
\nwould be inconsequential and appellant would not be
\nentitled to challenge the order even in CA No. 138\/78.
\nThere appears to be some before in this argument of
\nMr. P.C. Khanna, learned senior counsel appearing for
\nrespondents 1 and 2. Nonetheless, as appeal is filed
\nagainst the same directions in CA No. 138\/78 which was
\nadmitted in the year 1981 and since we heard the matter
\non merits in detail, we deem it proper to dispose of
\nthis appeal on merits as well.\n<\/p>\n
 8. Mr. Sanjiv Anand, learned counsel appearing for
\nthe appellant made the following submissions
\nchallenging the impugned order.\n<\/p>\n
 9. a) The entire estate was owned by the
\nappellant who incorporated the company in question in
\nthe year 1964. It was given as irrevocable license in
\nrespect of property in question under the Easement Act.
\nIn the impugned order, the learned company Judge has
\nnot set aside the entire sale. No license was granted
\nby the appellant to the company and no improvement was
\nmade. In fact no structure have came up. No building
\nerected and no work of permanent nature executed. In
\nview thereof finding to the effect that the appellant
\nwas accountable to the company to the extent of
\nRs. 1,10,000\/- besides interest was uncalled for and
\ndirections for payment could not be made.\n<\/p>\n
 10. b) Challenging the direction of payment of
\nRs. 50,000\/- by the appellant to the company, it was
\nsubmitted that the learned Company Judge ignored the
\nfact that the machinery in question remained with the
\nrespondents 4 and 5 who should have been held liable
\nfor making this payment and not the appellant. It was
\nfurther submitted that no compensation was payable when
\nno consideration, having regard to the provisions of
\nSections 60 & 64 of the Easement Act.\n<\/p>\n
 11. c) It was further contended that even the case
\nof the respondents was that the company had been
\ntransferred. Thus, there was no question of any
\nlicense coming into existence.\n<\/p>\n
 12. d) The learned counsel further submitted that
\nfindings of the learned Company Judge at page 21 of the
\nimpugned order to the effect that the respondent No. 1
\nwas in possession of the cottage as employee of the
\ncompany was clearly fallacious as there was no evidence
\nto support this finding.\n<\/p>\n
 e) Since 1971, there was deadlock in the
\ncompany and thus no possibility of revival, and
\ntherefore, there was no loss suffered by the company
\nand on this ground also the learned Company Judge
\nshould not have made any direction for payment of the
\namount.\n<\/p>\n
 13. f) Challenging the manner in which the
\ndirections were made in penultimate para of the
\nimpugned order, it was submitted that although the
\ndirection given in para (f) stipulated that claims of
\nthe creditors of the company would be settled by the
\nOfficial Liquidator, when the Official Liquidator was
\nyet to go into that exercise in the first instance,
\nthere could not be a direction to the appellant to pay
\nthe amount as contained in paras (a) & (b).\n<\/p>\n
 14. Mr. P.C. Khanna, learned senior counsel
\nappearing for the respondents 1 and 2, on the other
\nhand, relying heavily on the reasonings given by the
\nlearned Company Judge in the impugned order submitted
\nthat the arguments of the appellant were contrary to
\nrecord and founded on wrong and factually incorrect
\npremise. He referred to various passages from the
\nimpugned order as well as provisions of law to buttress
\nhis submission that the directions given by the learned
\nCompany Judge were equitable and just as well as in
\naccordance with law.\n<\/p>\n
 15. After considering the submissions of both the
\ncounsel and perusing the record, we are inclined to
\naccept the submissions of learned senior counsel for
\nrespondents 1 and 2 and in view of this, we do not find
\nany merit in this appeal.\n<\/p>\n
 16. It may be seen in the first instance that the
\nlearned Company Judge has observed in the impugned
\norder that:\n<\/p>\n
  “In reply to the Application
\nC.A. No. 138\/75 Shri Satbir Singh has
\nadmitted that he had “promoted the
\ncompany for the purpose of developing an
\norchard on the aforesaid land and to set
\nup a canning factory in the Barracks and
\nthat he had allowed the company to
\ndevelop the orchard and to set up the
\nfactory in one of the barracks. It was
\nalso not disputed that the factory
\nconsisted of machinery, plant, fixtures
\nand fittings belonged to the company…”\n<\/p>\n
 17. In view of the aforesaid findings recorded on
\nthe basis of undisputed facts, it does not lie in the
\nmouth of the appellant now to contend that there was no
\nlicense granted by the appellant or that there was no
\nstructure of permanent nature existing. The learned
\nCompany Judge has, after discussing the material on
\nrecord in great extenso, arrived at a finding of fact
\nthat the appellant had in fact granted the license and
\nthere is no reason to upset this finding. The learned
\nCompany Judge has observed that additions and
\nalterations were made in the barracks to make it
\nsuitable for factory and similarly the orchard was
\ndeveloped by years of work on it. To quote the learned
\nCompany Judge:\n<\/p>\n
  “It is difficult to resist the conclusion
\nthat Satbir Singh had granted a license
\nto the company to develop an orchard on
\nthe land and to set up a canning factory
\nin the out-house and that pursuant to it,
\nthe company entered upon the land and the
\nbuilding and some work of development of
\norchard and installation of factory,
\nfittings and fixtures had been done
\nduring the material period. The mere
\nfact that the Estate exclusively belonged
\nto Satbir singh and the company was
\npromoted by him for the purpose…would
\nnot make any difference to the
\nrelationship between the Corporation Body
\non the one hand and Satbir Singh on the
\nother in relation to the Estate.”\n<\/p>\n
 18. Section 64 of the Easement Act provides:\n<\/p>\n
  “The grant of license may be express or
\nimplied from the conduct of the
\ngrantor.”\n<\/p>\n
 19. Further, Section 60(b) of the Easement Act
\nstipulates that a license may be revoked by the
\nguarantor unless the licensee acting upon the license
\nhas executed a work of permanent character and incurred
\nexpenses in the execution. In the present case, the
\nfactory was set up and expenses were incurred in the
\nprocess by conversion of the building and by
\ninstallation of machinery etc. and it can be termed as
\na work of permanent character.\n<\/p>\n
 20. Dealing with the contention of the appellant
\nbefore the learned Company Judge to the effect that no
\nexpenditure was incurred other than salary paid on the
\nfarm workers, the learned company Judge observed:\n<\/p>\n
  “It is true that the substantial part of
\nthe expenditure on the development of the
\norchard is capitalisation of the salaries
\npaid from time to time including the
\nwages of farm workers and the
\nAdministrator but that, to my mind, would
\nnot make any difference. That is part of
\nthe input in the development of an
\norchard and the orchard in fact was
\ndeveloped during the years. It could not
\nbe said that no work was executed on the
\nland. Similarly, the installation of the
\nmachinery and plant and other fittings and
\nfixtures in the barracks is clearly
\nbrought in the balance sheet as well as
\nthe Director’s report.”\n<\/p>\n
 21. The learned Company Judge had even relied
\nupon the balance sheet and profits and loss account in
\nsupport of its finding and relevant portion of the
\njudgment to this effect is in the following terms:\n<\/p>\n
  “According to the Balance Sheet and
\nProfit & Loss Account for the year 69-70
\nthe fixed assets of the company were
\nvalued at a little over Rs. 1 lakh and
\ncomposed of Rs. 98427\/- on account of
\nplant and machinery; Rs. 2571\/- on
\naccount of electric installations and
\nRs. 992.72 on account of furniture and
\nfixture.”\n<\/p>\n
 22. It is clear from the impugned order that total
\nexpenses on fixed assets incurred by the company,
\nacting upon the license granted by the appellant was,
\nRs. 98,427\/-. The learned Company Judge has reduced
\nthis amount to Rs. 60,000\/- after allowing depreciation
\nto the tune of Rs. 38,427\/-. The learned Company Judge
\nhas further found from the balance sheet that the
\ndevelopment expenditure on orchard was Rs. 50,000\/-. It
\nis in this manner that the figure of Rs. 1,10,000\/- was
\narrived at and because of this reason the learned
\nCompany Judge recorded the finding in paragraph 25 (a)
\nof the impugned order that the appellant was
\naccountable to the company to the extent of
\nRs. 1,10,000\/-. Inspite thereof, the learned Company
\nJudge has still not held that this finding was
\nconclusive and left the matter to the Official
\nLiquidator as is clear from the directions contained in
\npara 25 (a) & (f). It is, thus, clear that in so far
\nas amount of Rs. 1,10,000\/- is concerned, since this was
\nfound to be payable by the appellant on the basis of
\nmaterial produced before the learned Company Judge, in
\norder to secure this amount to the company, direction
\nfor payment of this amount by the appellant to the
\ncompany was made. We do not find any error in these
\ndirections given in aforesaid circumstances. The
\nlearned company Judge, in order to do complete justice
\nin the matter, had discretion to give such directions
\nand sitting in appeal, it would not be proper or
\nappropriate in the facts and circumstances of this case
\nto interfere with the said discretion when the matter
\nis still at large and is to be finally decided by the
\nOfficial Liquidator.\n<\/p>\n
 23. We also do not agree with the contention of
\nthe appellant that there was no consideration for
\nlicense and compensation is not payable if there was no
\nconsideration. In this context, we find force in the
\nfollowing submissions made by the learned senior
\ncounsel for respondents 1 and 2 viz. Firstly, no
\nconsideration is required in a license. Secondly,
\nthere was no question of payment of compensation.\n<\/p>\n
 24. The question was whether Sh. Satbir Singh, who
\nterminated the license was, in view of the bar imposed
\nby Clause (b) of Section 60 of the Easement Act (which
\nprovides that the license could not be terminated where
\nthe licensee acting upon the license has executed a
\nwork of permanent character and incurred expense in the
\nexecution), liable to the company. The learned Company
\nJudge was entitled to cancel the contract under
\nSection 542 and 543 of the Companies Act, as also
\nunder Section 531 and 531-A of the said Companies Act.
\nHowever, the learned Company Judge instead of
\ncancelling the agreement of sale by Sh. Satbir Singh
\nwith the Lakhanis only directed Sh. Satbir Singh to pay
\ncompensation equivalent to the claims of the creditors,
\nnot exceeding Rs. 1,10,000\/- with interest at the rate
\nof 10 per cent from the date of winding up. The
\nliability under Section 60(b) is of the licensor.
\nSh. Satbir Singh, besides being licensor was director of
\ncompany. Therefore, liability against him could be
\nenforced instead of filing a suit under Section 452
\nands 543 of the Companies Act. The learned Company
\nJudge had the additional power under Section 531-A to
\ncancel the transaction as the company had been ordered
\nto be wound up.\n<\/p>\n
 25. The contention of the appellant to the effect
\nthat a license is a matter of contract and there was no
\ncontract in this case as there was no license is
\nequally misconceived in view of the provisions of
\nSection 52 as well as Section 54 of the Easement Act
\nwhich are to the following effect:\n<\/p>\n
  “Section 52: Where one person grants to
\nan another, or to a definite number of
\nother persons, a right to do or continue
\nto do, in or upon the immovable property
\nof the grantor, something which would, in
\nthe absence of such right, be unlawful,
\nand such right does not amount to an
\neasement or an interest in the property,
\nthe right is called a license.\n<\/p>\n
 Section 54: The grant of a license may be
\nexpress or implied from the conduct of
\nthe grantor, and an agreement which
\npurports to create an easement, but is
\nineffectual for the purpose, may operate
\nto create a license.”\n<\/p>\n
 26. Thus, the license may be inferred even from
\nthe conduct of the grantor.\n<\/p>\n
 27. The contention of the appellant regarding no
\nenquiry of Official Liquidator and no material on
\nrecord for arriving at a finding is also misplaced
\ninasmuch as already noted above, even the Official
\nLiquidator had filed CA No. 583\/79 pointing out the same
\nfacts and bringing the material on record.\n<\/p>\n
 28. The contention of the appellant that Major
\nBugg was not being paid any salary is defied by the
\nBalance Sheet of the company as Major Bugg’s salary was
\nbeing shown therein as Rs. 27,100\/- while he was
\nclaiming Rs. 39,500\/-. The claim for advance given by
\nhim was Rs. 66,000\/-. The relevant portion of the
\nimpugned judgment on this aspect is as under:\n<\/p>\n
  “According to the balance sheet the claim
\nof Bugg was put at Rs. 27,100\/- on account
\nof salary and advances to the company.
\nIn the statement of affidavit Bugg
\nclaimed Rs. 66,000\/- on account of arrears
\nof salary and a sum of Rs. 39,500\/- on
\naccount of advances made to the company.
\nThere two amounts apparently included
\nRs. 27,100\/- which is reflected in the
\nBalance sheet.”\n<\/p>\n
 29. The learned senior counsel also submitted that
\nit cannot be said that the amount shown in the balance
\nsheet was towards advances which the appellant had made.
\nto the company. The Official Liquidator has to
\ndetermine this question. Out of Rs. 1,10,000\/-
\nSh. Satbir Singh had received Rs. 50,000\/- from Lakhani
\nfor the machinery and his real liability is only
\nRs. 60,000\/- out of total amount of Rs. 1,10,000\/-.\n<\/p>\n
 30. It is trite now that a company incorporated
\nunder the Indian Companies Act is a district entity
\nseparate from its members, ,
\nThe Tata Engineering and Locomotive Co. Ltd. v. The
\nState of Bihar and Ors.<\/a> 2.  (1998) 93 Company Cases 201
\n(Del.),  H.C. Shastri v. Dolphin Canpack (P) Ltd. and
\nOrs.  and  3. (1984) 55 Company Cases 737 (Cal.),   Purna
\nInvestment Ltd. v. Bank of India Ltd. and Ors.\n<\/p>\n
 31. Thus, we do not find any merit in this appeal
\nwhich is dismissed accordingly with costs.\n<\/p>\n
 32. Counsel’s fee is fixed at Rs. 5,000\/-.<\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court Sh. Satbir Singh vs Major S.C. Bugg And Ors. on 23 July, 2002 Equivalent citations: 2003 114 CompCas 473 Delhi Author: A Sikari Bench: S Sinha, A Sikri JUDGMENT A.K. Sikari, J. 1. This appeal is directed against the judgment dated 13th November, 1980 passed by the learned Company Judge in CA […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-131041","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nSh. Satbir Singh vs Major S.C. 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