Company's Name Change Cannot Defeat Execution Of Decree Against It: Karnataka High Court

The Karnataka High Court has recently held that a change in a company's name does not affect the enforceability of a decree, holding that procedural law cannot be used to defeat substantial rights.

Justice Lalitha Kanneganti made the observation while dismissing a writ petition filed by Lilly Labels challenging execution proceedings in a money recovery case brought by Sajawat Industries Ltd.

“A change in the name of a company does not result in the creation of a new Juristic entity. The legal identity of the company remains unchanged. The alteration is merely in its corporate name. All properties, rights, obligations, liabilities, contracts, decrees and legal proceedings continue to vest in and bind the same corporate body notwithstanding the change of name,” the Court held.

The dispute traces back to a money recovery suit filed by Sajawat Industries against Lilly Labels before the City Civil and sessions judge, Bengaluru. The suit was decreed on October 26, 2011. Lilly Labels filed an appeal before the High Court, which was dismissed for non-prosecution on August 16, 2022.

Meanwhile, Sajawat Industries changed its name to Anthem Cellutions (India) Ltd. pursuant to a special resolution dated June 18, 2007. The change was not intimated to the City Civil and Sessions Judge, and the decree was passed in the company's former name.

The company subsequently changed its name to Anthem Cellutions (India) Pvt. Ltd. on December 13, 2011, and later amalgamated with Anthem Biosciences Pvt. Ltd. under a scheme confirmed on November 30, 2017.

The execution petition, however, was filed in the name of Sajawat Industries Ltd. Lilly Labels contended that Sajawat Industries was no longer in existence and that the person representing it lacked authorisation. It also challenged the transfer of the execution proceedings to Tiruppur and an attachment order issued against it. Lilly Labels further contended that the order had been passed without hearing it and in violation of natural justice.

The respondent argued that since the execution petition had already been transferred to Tiruppur, Lilly Labels could raise its objections before the transferee court.

The court rejected the objection that the change in the company's corporate name rendered the execution proceedings non-maintainable. The Court noted that it was not the judgment debtor's case that the decree had been assigned to another entity or that a different company had instituted the execution proceedings. Rather, the objection was that the company had changed its corporate name.

“Such an objection relates to the description of the decree holder and not to its legal entity. The Executing Court is concerned with the enforceability of the decree and not with technical objections relating to nomenclature; particularly, the identity of the decree holder remains unchallenged,” the Court held.

The court also referred to Section 23(3) of the Companies Act, 1956, which provides that a change of name does not affect the company's rights or obligations or render defective legal proceedings by or against it.

It further held that the transferee court, exercising jurisdiction under Section 42 of the Code of Civil Procedure, was bound to execute the decree as if it had itself passed it. The Court said that even if the former corporate name appeared in the execution petition, it would constitute only a curable misdescription and would not affect the maintainability of the execution proceedings.

The court observed that procedural law is intended to advance justice and not defeat substantial rights. It also noted that Lilly Labels had neither pleaded nor established any prejudice arising from the change of name.

The court further noted that the judgment and decree had attained finality after the appeal was dismissed on August 16, 2022, while the execution petition was filed on March 18, 2023, within seven months. It held that no notice was required to the judgment debtor at that stage.

Finding no grounds to quash or set aside the execution proceedings, the court dismissed Lilly Labels' writ petition.