TaxTMI 
TaxTMI 
2010 (2) TMI 966
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....re this court, final order is passed at the admission stage itself. 2. Before considering the contentions of the parties herein, brief reference to the facts are as follows. 3. The appellants herein presented a petition before the Company Law Board under sections 397, 398 and 402 of the Companies Act, 1956, read with regulations 13 and 14 of the Company Law Board Regulations, 1991, against the respondents herein. The first respondent is the asset management company of SREI Venture Capital Trust. The second respondent is a private company principally engaged in developing infrastructure in the seaport sector in India and overseas. Respondent Nos. 3 to 5 are the nominee directors of the second respondent-company. Respondent No. 6, SREI Infrastructure Finance Ltd., is in infrastructure financing business and in infrastructure project development. 4. The appellants herein, along with the first respondent-company, are the shareholders of the second respondent-company, having shareholding pattern at the ratio of 30 : 70. 5. In respect of certain disputes that arose between the parties, namely, the appellants and the first respondent, a memorandum of understanding was reached on 14-11....
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....4 Comp. Cas. 591 (CLB - Chennai) and came to the conclusion that the first respondent should transfer its shares and all other interests in the second respondent-company at a consolidated price of Rs. 52.50 crores, or at a fair value as at 31-3-2008, whichever is higher. The fair value was to be determined by an independent expert valuer to be appointed by the Bench. The second respondent was to exercise either of the options, by filing an appropriate affidavit before the Bench Officer within 30 days of the receipt of the copy of the order, so that there was due completion of the exit formalities of the first respondent from the second respondent-company. The Company Law Board, however, passed orders that respondent Nos. 1 and 3 to 6 shall ensure reimbursement in favour of the company, 30 per cent of all benefits enjoyed by the first respondent from and out of the Machilipatnam Port Project as at 31-3-2008, which shall be ascertained by the expert valuer. The Bench however, directed that the appellants shall reconstitute the board of directors of the company in exclusion of the nominees of the second respondent, upon which the company is at liberty to carry on its business, in term....
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....which require the appellants to act for the purpose of retaining the Subarnarekha Port Project with the Government of Orissa, all further acts of the appellants were directed to be kept in abeyance, till the formalities in respect of fixing the consideration for exit of the first respondent is fixed by the Company Law Board, as stated above, and the entire amount is paid to the first respondent; and (iv) the appellants shall continue to disclose any further developments and communications as to the affairs of the Subarnarekha Port Project as from 25-6-2009, by sending copies to the first respondent periodically once in a month commencing from the end of August, 2009 till the formalities for exit of the first respondent are completed in full and till such formalities are completed, respondent Nos. 1 and 3 to 5 shall be deemed to continue as the directors of the second respondent-company. Thus this court (directed the first respondent to move an application before the Company Law Board within a period of 30 days from the date of receipt of a copy of the order of this court for appointment of an independent expert valuer and decide about all the formalities in that regard. The appella....
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....nt herein within a period of seven days; to direct the appellants herein to disclose the particulars of all the assets and properties; for an order of injunction restraining the appellants to deal with, dispose of or encumber in any manner the assets and properties as mentioned in paragraph 11 of the affidavit and the assets and properties to be disclosed by them; an order of injunction restraining the appellants from dealing with, disposing of, encumbering in any manner any of the assets and properties of the appellants; upon default of making payment, a receiver and/or Special Officer be appointed to take possession of the assets and properties of the appellants as mentioned in paragraph 11 in the petition and the assets and properties to be disclosed by the appellants, sell the same by public auction or private treaty and to hand over the sale proceeds thereof to the first respondent herein in protanto satisfaction of its consideration to be paid by the appellants herein to the first respondent herein and to make over the sale proceeds thereof to the first respondent in protanto satisfaction of consideration liable to be paid by the appellants for acquisition of the shares and a....
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.... an order for payment of money. The Company Law Board pointed out that having regard to the doctrine of merger, which postulates that there cannot be more than one operative decree governing the same subject-matter at a given point of time, there was no merit in the plea of the appellants that it has become functus officio. Referring to the decision of the Apex Court in Chandi Prasad v. Jagdish Prasad [2004] 8 SCC 724, the Company Law Board pointed out that as per section 37 of the Civil Procedure Code, it is the court of first instance which has the jurisdiction to execute the decree. Consequently, it has every jurisdiction to execute the orders passed by the High Court, as an appeal is a continuation of the original cause. Referring to sections 634 and 634A of the Companies Act, the Company Law Board held that the jurisdiction of the Company Law Board under section 634A of the Companies Act is the same as that of an executing court. Pointing out to the inconsistent plea of the appellants on the consideration and the undertaking to make the payment, the Company Law Board pointed out that the appellants had no intention of implementing their undertaking and they were trying to frus....
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....pecific as regards the valuation to be done to arrive at the value of the shares to be transferred and there being no time-limit fixed in the order passed by this court, it is not open to the Company Law Board to fix the time-limit for compliance of the payment of Rs. 52.50 crores to the first respondent herein. In the circumstances, when this court has not fixed the time-limit within which the transfer of shares had taken place, with the default clause and the interests of the first respondent herein sufficiently safeguarded, even assuming that the Company Law Board is the executing court, it went beyond the terms of the order passed by this court; hence, the order has to be set aside. 16. Learned senior counsel appearing for the appellants pointed out that the Companies Act is a special enactment and it overrides the Civil Procedure Code, it being a general law. Pointing out to the scope of the provisions of sections 634 and 634A of the Companies Act, she pointed out that in the face of section 634 of the Companies Act, section 37 of the Civil Procedure Code has no relevance; that as regards the order passed by the High Court under section 10F of the Companies Act, an applicatio....
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....as a decree. It does not say or restrict by prescribing this court as the execution court for the purpose of enforcement of orders made by this court as an appellate court under the Companies Act. 19. He made a specific reference to the scope of appeal before the High Court under section 10F of the Act and in particular, the definition to section 2(11) as to 'Courts' and section 10 of the Companies Act on the 'jurisdiction of the courts' and pointed out that having regard to the law declared by the Apex Court in the decision in Stridewell Leathers (P.) Ltd. v. Bhankerpur Simbhaoli Beverages (P.) Ltd. [1994] 79 Comp. Cas. 139, that the original jurisdiction of the High Court in respect of matters under sections 397 and 398 of the Companies Act having stood transferred to the Company Law Board, the decree of the appellate court, namely, the High Court, has to be necessarily executed only before the Company Law Board. In this connection, he also referred to the decision Ramankutty Guptan v. Avara [1994] 2 SCC 642, as to the effect of an order passed by the appellate court and the execution of the same by the court of first instance. 20. Referring to rules 6 and 2(4) of the Companies....
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....ose of fixing the share value, the application under section 634A of the Companies Act is well maintainable legally as well as factually too. 22. When the first respondent had expressed its desire to accept the value of Rs. 52.50 crores as the value of the shares to be transferred; further in the light of the appellants' offer as to the value and taking note of this court's order in paragraph 20 clauses (iii) and (iv), rightly the Company Law Board passed the order in terms of Order 21, rule 32 of the Code of Civil Procedure, 1908. The offer to accept the price at Rs. 52.50 crores and the appellants not disputing the same, it being in the nature of a case of specific performance of sale of shares on receipt of money, the Company Law Board rightly ordered the application, including the default clause. 23. In substance, he defended the action of the respondents taking recourse to section 634A of the Companies Act and the jurisdiction of the Company Law Board in passing the order in terms of the directions issued by the High Court to complete the formalities on exit. He further submitted that the mere filing of the special leave petition before the Apex Court, per se, does not block....
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....r of the Company Law Board is liable to be set aside. 26. Heard learned senior counsel appearing for the appellants and learned senior counsel appearing for the first respondent. Except for the issue on the sale of shares, there are no other issues raised in the application before the Company Law Board for its consideration. Hence, the present appeal is only on the above subject. 27. A perusal of the order dated 28-8-2009, passed by this court in Probir Kumar Misra's case (supra) in the earlier round clearly shows that even though the question of oppression was found against the appellants, the said order was passed in terms of section 402 of the Companies Act. While considering the claim of sale of the shares at a price and the interim arrangement to be maintained till the consideration and other formalities for the exit of the first respondent are completed, this court passed the following order : "For the foregoing reasons, the appeals are partly allowed in the following terms : (i) the order of the Company Law Board in respect of relief granted under paragraph 9(i) is confirmed with a direction to the second respondent to transfer its shares and all other interest held in t....
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....her persistent argument is that given the fact that this court had not fixed any time-limit for making the payment, even assuming that the Company Law Board has the jurisdiction, it cannot fix the time-limit within which the amount has to be paid. In the circumstances, learned senior counsel appearing for the appellants submits that the order of the Company Law Board has to be set aside. 29. I am in entire agreement with the submissions of learned senior counsel appearing for the first respondent on the maintainability of the application by the respondents as to the jurisdiction of the Company Law Board under section 634A of the Companies Act. 30. A reading of section 634 of the Companies Act shows that the said provision is concerned as regards the mode of enforcement of orders of courts passed under the Companies Act. Before considering the contentions in this regard, it is necessary to extract sections 634 and 634A of the Companies Act : "634. Enforcement of orders of courts.-Any order made by a court under this Act may be enforced in the same manner as a decree made by the court in a suit pending therein. 634A. Enforcement of orders of Company Law Board.-Any order made by t....
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....fines "court" in two parts. The relevant sub-clause for our purpose is sub-clause (a). It defines "court" to mean the court having jurisdiction under the Act with respect to any matter relating to the company as provided in section 10 (other than matters relating to any offence against the Act). Section 10 of the Companies Act provides for the jurisdiction of courts as (i) the High Court, court having jurisdiction in relation to the place at which the registered office of the company is situate except to the extent to which jurisdiction is conferred on any District Court by virtue of any notification of the Central Government empowering any District Court to exercise all jurisdiction or any of the jurisdiction conferred upon the court by the Act. The conferment of jurisdiction under the notification shall not include matters falling under sections 237, 391, 394, 395 and 397 to 407 of the Companies Act, both inclusive and in respect of companies with a paid-up capital of not less than one lakh of rupees, by Part VII (sections 425 to 560) and other provisions of the Act relating to the winding up of the companies. Section 10F of the Companies Act is a specific provision dealing with ....
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.... the decree, which reads as follows : "37. Definition of court which passed a decree.-The expression 'court which passed a decree', or words to that effect, shall, in relation to the execution of decrees, unless there is anything repugnant in the subject or context, be deemed to include,- (a) where the decree to be executed has been passed in the exercise of appellate jurisdiction, the court of first instance, and (b) where the court of first instance has ceased to exist or to have jurisdiction to execute it, the court which, if the suit wherein the decree was passed was instituted at the time of making the application for the execution of the decree, would have jurisdiction to try such suit. Explanation.-The court of first instance does not cease to have jurisdiction to execute a decree merely on the ground that after the institution of the suit wherein the decree was passed or after the passing of the decree, any area has been transferred from the jurisdiction of that court to the jurisdiction of any other court, but, in every such case, such other court shall also have jurisdiction to execute the decree, if at the time of making the application for execution of the decree it....
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....e Court pointed out to section 28 of the Specific Relief Act that it should be "in the same suit" which means "in the suit itself and not in the execution proceedings". The Apex Court pointed out that after passing the decree for specific performance, the court does not cease to have any jurisdiction. The court retains control over the decree even after the decree had been passed. It was open to the court to exercise the power under section 28(1) of the Specific Relief Act either for extension of time or for rescinding the contract as claimed for. Since the execution application has been filed in the same court in which the original suit was filed, namely, the court of first instance, instead of treating the application on the execution side, it should have as well been numbered as an interlocutory application on the original side and disposed of according to law. 38. In so holding, the Supreme Court upheld the view of the Bombay High Court in Maruti Vishnu Kshirsagar v. Bapu Keshav Jadhav AIR 1970 Bom. 398 that the application, though made on the execution side, could be transferred to the original side or treated as an application made on the original side and time could be exte....
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....luer to fix the sale consideration for the shares to be sold by the first respondent. In the context of the order thus passed under sections 397 and 398 and this court under section 10F of the Companies Act, considering rule 6 of the Companies (Court) Rules, 1959, for all purposes and intent, under section 634A of the Companies Act, the Company Law Board has the jurisdiction to act as an executing court. Therefore, the Company Law Board, seisin of the matter, has the jurisdiction to act on the application filed under section 634A of the Companies Act, so that the exit formalities as ordered by this court get completed. If one is to accept the submission of the petitioner that the High Court is the only court to execute the order passed by this court and hence, the application under section 634A of the Companies Act has to be rejected, it would amount to mix up of the jurisdiction of this court to construe the order passed as one under section 10 and not under section 10F and that the directions issued by this court under section 10F of the Companies Act under paragraph 20 are of no consequence to anybody. As already pointed out, the jurisdiction of this court as an appeal court and....
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....ing a just and equitable relief, I do not find any justification in the submission of learned senior counsel appearing for the petitioner that the Company Law Board read more into the order of the High Court by fixing the time frame for payment and ordering sequestration of the assets. Apart from regulation 44 of the Company Law Board Regulations, 1991, the Company Law Board, as an executing court, has every jurisdiction to enforce compliance of the order which is practically in the nature of a consent order at least as regards the price for the shares to be paid by the appellants. The admitted price for the shares offered by the appellants and the acceptance by the first respondent thereby restricting its claim to Rs. 52.50 crores, practically makes the order more in the nature of a specific performance of the offer made by the appellants. 45. Considering the various clauses in the judgment of this court which are interconnected and interwoven, with the payment of Rs. 52.50 crores on the shares to be transferred to the appellants, the exit formalities to be completed, the need for maintaining the Subarnarekha Port Project and the Board consisting of respondent Nos. 3 to 5 to cont....
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....s that of an original jurisdiction that this court has under the other provisions of the Companies Act. 48. The decision in Coastal Roadways Ltd. v. Kanoi Plantation (P.) Ltd. [2006] 132 Comp. Cas. 503 (Cal.), relates to a petition under sections 433, 434 and 439 of the Companies Act and is not of any relevance to the case on hand. The Calcutta High Court, in the said decision, referred to the exclusive jurisdiction of the company court and the executability of the order by the company court alone. Hence, the said decision has to be read in the scheme of sections 433, 434 and 439 of the Companies Act. 49. Read in the background of the aforesaid provisions and the decisions referred to above, I agree with the submission of the respondents as to the jurisdiction of the Company Law Board to pass the order under section 634A of the Companies Act. Section 634 of the Companies Act does not, in any manner, curtail the scope of section 634A of the Companies Act. As already pointed out, section 634 of the Companies Act prescribes the procedure for enforcement of orders made by the court under the Companies Act as a decree made by the court in a suit pending therein. There is no scope for ....
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.... is no oppression as alleged by the appellants and the requirement for maintaining the Subarnarekha Port Project by performing the very vital acts alone are also important circumstances, which must be kept in mind while understanding the nature and the effect of clauses (iii) and (iv) in paragraph 20 of the judgment. Thus the retention of the Subarnarekha Port Project by the appellants and the continuance of respondent Nos. 3 to 6 in the second respondent-company as directors have to look upon the compliance of sub-clause (i) of paragraph 20 of the judgment, namely, fixing the value and the payment. Once that process is complete, thereby leading to the exit of the first respondent from the second respondent, sub-clauses (iii) and (iv) of paragraph 20 of the judgment also cease to have any enforceability at all. 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. ....