2004 (2) TMI 715 - Board - Companies Law

CLB rules on res judicata, clarifies affidavit requirement, orders respondents to file counter

Duroflex Limited Versus Mr. Johnny Mathew

The Company Law Board (CLB) found the Company's arguments regarding res judicata unconvincing, stating that previous petitions were not decided on merits ... - Issues Involved:1. Maintainability of the Company Petition under Sections 397 and 398 of the Companies Act, 1956.2. Application of the principles of res judicata.3. Allegations of forum shopping and suppression of material facts.4. Requirement of an affidavit to support the statement of objections.Issue-wise Detailed Analysis:1. Maintainability of the Company Petition under Sections 397 and 398 of the Companies Act, 1956:The Company questioned the maintainability of the petition filed by the petitioner under Sections 397 and 398, alleging acts of oppression and mismanagement. The Company argued that similar allegations had been made in previous petitions, specifically CP No. 68 of 2000, which was disposed of with a consent order. The petitioner had also filed earlier petitions, which were either withdrawn or dismissed on technical grounds, without any liberty to refile. The Company contended that the current petition was an attempt to re-litigate the same issues and should be dismissed.2. Application of the principles of res judicata:The Company argued that the principles of res judicata barred the current petition, as the issues raised had been previously adjudicated in CP No. 68 of 2000. The Company's counsel cited the decision in *Shankar Sitaram Sontakke v. Balkrishna Sitaram Sontakke* to support the claim that a consent decree is binding and has the force of res judicata. The petitioner, however, contended that the consent order in CP No. 68 of 2000 did not bind him as he was not a party to that petition. The petitioner also argued that the previous petitions were dismissed on technical grounds and not on merits, thus res judicata did not apply.3. Allegations of forum shopping and suppression of material facts:The Company accused the petitioner of forum shopping by filing multiple petitions on the same grounds and suppressing material facts, including the pendency of CP No. 15 of 2003. The Company claimed that the petitioner approached the Company Law Board (CLB) with unclean hands, which should disentitle him from any equitable relief. The petitioner countered that the previous petitions were withdrawn or dismissed due to technical objections raised by the respondents and that the current petition raised new issues not covered in the earlier petitions.4. Requirement of an affidavit to support the statement of objections:The Company argued that the petitioner's statement of objections was not supported by an affidavit as required under Regulation 23 read with Regulation 22 and 14(5) of the Company Law Board Regulations, 1991. The petitioner maintained that the Regulations did not mandate an affidavit for replies to interim applications and that this was a technicality that could be condoned by the CLB.Judgment:The CLB considered the arguments from both sides and concluded that the matter directly and substantially in issue in CP No. 68/2000 was not finally decided on merits but settled amicably. The CLB noted that the petitioner was not a party to CP No. 68/2000 and that his application for impleadment was dismissed. The first Company Petition was withdrawn before registration, and CP No. 18/2003 was dismissed for non-compliance with procedural requirements, not on merits. Therefore, the principles of res judicata did not apply.The CLB also addressed the issue of the affidavit, stating that the statement of objections should be accompanied by an affidavit as per the Regulations. However, the various proceedings were matters of record, and the decision on the maintainability of the petition did not rely on the statement of objections.The CLB directed the respondents to file a counter by 31.03.2004 and the petitioner to file a rejoinder by 15.04.2004. The petition was scheduled for a hearing on 24.04.2004 at 2.30 p.m.