1995 (1) TMI 408 - HC - Companies Law

Company Law Board's Jurisdiction Upheld for Property Transfer Orders under Companies Act

Prakash Timbers Pvt. Ltd. and others, Versus Smt. Sushma Shingla and another

The court affirmed the Company Law Board's jurisdiction to order property transfer under Sections 397 and 398 of the Companies Act without requiring a ... - Issues Involved:1. Jurisdiction of the Company Law Board under Sections 397 and 398 of the Companies Act.2. Validity and enforceability of the compromise scheme.3. Requirement of a deed of conveyance for property transfer under the compromise scheme.4. Registration of the Company Law Board's order.Detailed Analysis:1. Jurisdiction of the Company Law Board under Sections 397 and 398 of the Companies Act:The appellants challenged the jurisdiction of the Company Law Board (CLB) to order the transfer of property under Sections 397 and 398 of the Companies Act. They contended that the CLB lacked the authority to effectuate property transfers without a proper deed of conveyance and registration. The court, however, held that Sections 397, 398, and 402 of the Companies Act grant the CLB wide powers to make orders to end matters of oppression and mismanagement, including the transfer of property. The court emphasized that the CLB's orders are meant to be effective immediately and do not require compliance by the parties accused of oppression and mismanagement.2. Validity and enforceability of the compromise scheme:The respondents raised a preliminary objection, asserting that no appeal lies against a consent order. The court referred to the case of Bryam Pestonji Gariwala v. Union Bank of India, which dealt with the authority of counsel to compromise on behalf of a client, and clarified that an appeal can lie if the jurisdiction of the authority is challenged. The court found that the CLB's order was in terms of the compromise scheme agreed upon by the parties, and thus, the appeal was maintainable.3. Requirement of a deed of conveyance for property transfer under the compromise scheme:The appellants argued that a proper deed of conveyance was necessary to effectuate the property transfer. They referred to clause 3.2 of the compromise scheme, which mentioned the liberty to register the CLB's order with the Sub-Registrar. The court clarified that this clause did not imply that a deed of conveyance was required. The court held that the compromise scheme and the CLB's order were sufficient to transfer the property without the need for additional documentation.4. Registration of the Company Law Board's order:The court addressed the appellants' contention that the absence of a provision similar to Section 394(2) in Sections 397, 398, or 402 of the Companies Act implied that the CLB's order could not effectuate property transfer. The court noted that Section 394 deals with the reconstruction and amalgamation of companies and includes a specific provision for property transfer by virtue of the court's order. However, the court held that the broad and absolute powers granted to the CLB under Sections 397 and 398 include the implicit authority to transfer property without requiring registration or execution of a deed of conveyance.Conclusion:The court concluded that the CLB had the jurisdiction to pass the order transferring property as part of the compromise scheme. The order did not require the execution of a deed of conveyance or registration to be effective. Consequently, the appeal was dismissed with costs, affirming the CLB's order dated 15th September 1994. The court emphasized that the powers of the CLB are intended to provide immediate and effective remedies for oppression and mismanagement within companies.