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SC dismisses appeal in mill assets sale case

R.N. Sahai

THE minutes of the meeting held in the chamber of the Minister of Industries were made to be produced as desired by the appellant. It was found that the original minutes did not contain the signatures of either of the parties.

The witness of the appellant had, during his cross examination, admitted that apart from the minutes there was no other written agreement between the parties. It is also not the case of the appellant that the agreement arrived at in the meeting of Decemb er 29, 1978 had, thereafter, been approved or sanctioned either by the President or the Governor.

So even though there may have been some agreement, the same was not in compliance with the Constitutional requirement under Article 299.

As there was an issue pertaining to a notice under Section 80 of the Code of Civil Procedure, 1908, the trial court should have dealt with this aspect. The finding in the impugned judgment that the suit based on this claim was not maintainable is correct and requires no interference, because if a new cause of action is being introduced, a fresh notice under Section 80 CPC would be required to be given.

The High Court rightly found that the condition regarding withdrawal of the suit was a condition precedent. As the appellant did not withdraw the suit they could not be said to be ready and willing to perform their part of the agreement arrived at on Dec ember 29, 1978.

That was the judgment of the Supreme Court in Bishandayal & Sons vs. State of Orissa (Civil Appeal No. 2522 of 1992 decided on December 7, 2000) by a Division Bench comprising Mr Justice V.N. Khare and Mr Justice S.N. Variava. The appeal by the appellant - firm for specific performance of the supposed agreement to sell the Mills and land at the offered price was rejected both by the High Court and the Supreme Court.

The interesting facts of the matter are that the State of Orissa had purchased, for a sum of Rs 2.32 lakhs all the assets of a spinning & Weaving Mills including plant and machinery and land measuring AC, 419.14. It proposed to sell off the mill.

A partnership firm offered to purchase the Mill with all its assets for consideration of a sum of Rs. 2.31 lakhs. The State of Orissa then being under the President's Rule, the firm had a meeting with governor. It was asked to enhance the consideration. The firm conveyed its acceptance to purchase the mills with its assets for Rs. 2.32 lakhs.

By an internal communication, the Government's decision to sell the mill to the firm for Rs 2.32 lakhs was conveyed to the Director of Industries, who was asked to ensure that correct assessment of the land required to run the unit by the firm was to be made.

The firm, on its own wrote to the Governor that it had accepted the offer to purchase the mill at the cost of Rs 2.32 lakhs and sent a demand draft for Rs 1,32,000. It was then informed that the Government had approved the proposal to sell the mill to it and it would be allotted land actually required for running the mill.

The firm reacted by writing that it was surprised to learn that the land was to be allotted to the extent actually required. It insisted that the entire assets including the entire land was to be sold for Rs 2.32 lakhs.

The Government informed the firm that the Government was willing to sell the entire land provided the firm paid the full market value of the land, and entered into a lease and paid the premium, and abided by the terms of the lease. The firm agreed to do so in writing, but no agreement was finalised. The Government returned the Demand Draft of Rs 1.32 lakhs.

Ultimately, the firm gave a notice under section 80 of the Code of Civil Procedure, 1908 claiming that a complete contract had been arrived at.

It then filed a suit in the court of Sub-Judge, Cuttack, claiming that a concluded contract had been arrived to sell the mill and all its assets including AC 49.14 of land to the firm for a price of Rs 2.32 lakhs. It claimed that it had acquired valid ri ght and title to the properties of the mill.

After the suit was filed a meeting was held in the Chamber of Minister of Industries on December 29, 1978.

The minutes of the meeting of December 29, 1978, inter alia, recorded as follows:

After discussion these decisions were taken : (a) Bishandayal & Sons will pay the previously fixed price of Rs. 2.32 lakhs towards plant, machinery & building.

(b) They will be leased out an area of AC. 40 of land.

(c) They will pay premium at 1/3rd of the market value of land as prevailing in 1972.

(d) The suit will be withdrawn by the firm (e) After sale, the unit will be revived by the party.

Copy of those minutes were given to the firm. It amended the plaint in the suit on September 11, 1981. It was now claimed that a fresh agreement to sell had been arrived at on the basis of the decision taken in the meeting of December 29, 1978. The firm now sought specific performance of this agreement. The Government filed an additional Written Statement wherein it denied that there was any such agreement.

On March 19, 1982 the suit was decreed by the trial court. It was held by the trial court that there was a completed contract between the parties and that the firm had acquired rights over the mill and its lands.

Having come to that conclusion the trial court still directed the firm to pay for 40 acres of land at the rate of Rs. 300 per acre. The trial Court concluded that the firm was ready and willing to perform its part of the contract, and that the decision i n agreement arrived at on the meeting of December 29, 1978 were mere confirmations of the previous contract.

The trial court also held that the condition regarding withdrawal of suit was not a condition precedent, and that there was valid notice under Section 80 of the Code of Civil Procedure.

The State of Orissa filed appeal in the High Court. The appeal was allowed. The counsel of the firm fairly and correctly conceded that the prayers in the original plaint were not maintainable, and could not have been granted.

All the same, the firm finally came in appeal to the Supreme Court, which while refusing to interfere with the judgment of the High Court dismissed the appeal after considering full facts of the matter.

(By arrangement with Corporate Law Adviser, New Delhi.)