2010 (2) TMI 966 - HC - Companies Law

Company Law Board empowered to set payment terms and compliance conditions under Companies Act, Appellate Court affirms decision

Ramani Ramaswamy Versus SREI Venture Capital Ltd.

The High Court upheld the Company Law Board's jurisdiction under section 634A of the Companies Act, allowing it to fix a payment time frame and impose ... Jurisdiction of the Company Law Board to act under section 634A of the Companies Act - WHhether Company Law Board has overstepped its jurisdiction in reviewing the order of this court and thereby modifying the terms of the order of this court by prescribing the time-limit for payment? Held that:- the decree passed by an appellate civil court confirming, modifying or reversing the decision of the originating court has to necessarily to get back to the original court for execution, so too in the case of an order passed on appeal under section 10F of the Companies Act, in a matter relating to an order passed by the Company Law Board under sections 397 and 398 of the Companies Act and in the nature of the order passed, the parties to the proceedings must get back to the Company Law Board under section 634A of the Companies Act for execution of the order passed under the provisions of the Companies Act. In so executing the order, the Company Law Board rightly took note of Order 21, rule 32 of the Code of Civil Procedure, 1908, to protect the interest of the first respondent herein. In adopting such a course, there is no re-writing of the order passed by this court under section 10F of the Companies Act, implementing the directions given by this court. The directions given by the Company Law Board are only for effectuating the order passed by this court. Hence, I reject the plea of the appellants that the Company Law Board exceeded its jurisdiction in going beyond the terms of this court's order. Taking note of the inconsistency in the submission of the appellants as noted in the Company Law Board's order in paragraph 15, the Company Law Board thought it fit that it should grant the respondents' prayer seeking sequestration of assets as a justifiable one. Hence, I do not find any justification to read clause (iii) of paragraph 20 of the judgment as a default clause. Appeal dismissed. Issues Involved:1. Jurisdiction of the Company Law Board under section 634A of the Companies Act.2. Validity of the Company Law Board's order fixing a time frame for payment.3. Execution of the High Court's order by the Company Law Board.4. Alleged overstepping of jurisdiction by the Company Law Board.Issue-Wise Detailed Analysis:1. Jurisdiction of the Company Law Board under section 634A of the Companies Act:The appellants challenged the Company Law Board's jurisdiction to act under section 634A of the Companies Act. They argued that the Board could not execute the High Court's order, which should be executed by the High Court itself. The High Court, however, disagreed, stating that section 634A provides the Company Law Board with the same jurisdiction as an executing court. The court emphasized that the Board's jurisdiction under section 634A is to enforce its orders in the same manner as a decree made by a court in a suit pending therein. The High Court concluded that the Company Law Board has the jurisdiction to act as an executing court, thereby rejecting the appellants' contention.2. Validity of the Company Law Board's order fixing a time frame for payment:The appellants argued that the Company Law Board overstepped its jurisdiction by fixing a time frame for payment, which was not specified by the High Court. The High Court found this argument unconvincing, stating that the Company Law Board, as an executing court, has the authority to enforce compliance with the order, including fixing a time frame for payment. The High Court noted that the appellants had agreed to the consideration amount of Rs. 52.50 crores, making the order more akin to a specific performance decree. Therefore, the Company Law Board's action in fixing a time frame was justified and within its jurisdiction.3. Execution of the High Court's order by the Company Law Board:The High Court addressed the argument that the order passed under section 10F of the Companies Act should be executed by the High Court itself. It clarified that the High Court's jurisdiction under section 10F is appellate, limited to questions of law, and not original. The High Court emphasized that the execution of its order, passed in appellate jurisdiction, should be carried out by the Company Law Board under section 634A. The court referred to relevant legal provisions and precedents, including section 37 of the Civil Procedure Code, which defines the court that passed the decree to include the court of first instance when the decree is passed in appellate jurisdiction.4. Alleged overstepping of jurisdiction by the Company Law Board:The appellants contended that the Company Law Board exceeded its jurisdiction by imposing conditions for compliance and ordering sequestration of assets. The High Court rejected this argument, stating that the Board's actions were in line with the directions given by the High Court and necessary to enforce the order. The High Court noted that the Company Law Board's order was aimed at ensuring compliance with the agreed consideration for the transfer of shares and the completion of exit formalities. The court found no justification for the appellants' claim that the Board overreached its jurisdiction.Conclusion:The High Court upheld the Company Law Board's jurisdiction to act under section 634A of the Companies Act, including fixing a time frame for payment and imposing conditions for compliance. The court rejected the appellants' arguments regarding the execution of the High Court's order and the alleged overstepping of jurisdiction by the Company Law Board. The appeal was dismissed, and the Company Law Board's order was confirmed.