TaxTMI 
TaxTMI 
2019 (5) TMI 606
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....uation Report dated 20.07.2012, which had been received. The NCLT rejected the objections raised by the original Petitioners to the Valuation Report and directed the Petitioners to sell their entire shareholding held by them in original Respondent No.1 Company as on the date of filing of the Petition to the Respondents jointly or severally at the fair price of Rs. 10.35 per share as arrived at by the Independent Valuer appointed by consent by CLB. The NCLT also directed that the fair value of the shares should be paid along with interest calculated at 9% per annum (simple interest) from 01.04.2007 till actual date of payment. The present Appeal has been filed by the Company seeking setting aside and modification of the Order passed by the NCLT to the limited extent of grant of interest. A Few Facts 2. The Respondents - original Petitioners filed the Company Petition on 14.03.2007 making grievances of oppression and mismanagement against the Appellant and other 8 Respondents arrayed in the Company Petition. The Petition was filed before the Company Law Board. It appears that after some hearings, on 1st April, 2011, CLB passed the following order:- "In the facts and circumstances....
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....ntire shareholding to the Respondents or to their nominees." 5. Present Respondents - original Petitioners filed Reply to such Application which was seeking final directions and raised various objections to the Valuation Report. Copy of the same is at Page - 350 of the Appeal. The original Petitioner No.1 who signed the Reply made following prayer:- "In view of the submissions made above, it is prayed that the Hon'ble Board may be pleased to: (i) reject the valuation of Rs. 10.35/- ("Ten rupees and forty-four paise") (sic) made by the valuer, S.C. Vasudeva & Co., and approve the fair value worked out by the petitioner through a professional Chartered Accountant, having regard to the prevailing market rates of real assets (land), as well as machinery and structures, and direct the company accordingly. (ii) In the alternative, direct the respondents to transfer the shares of all the other shareholders to the petitioners at the share price worked out by S.C. Vasudeva & Co. (iii) Pass orders for any other relief the Hon'ble Board deems appropriate in the facts and circumstances of the case." 6. The Impugned Order shows that when these developments were taking place in the CLB....
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....t. In this connection, this Tribunal would once again wish to refer to the decision of Hon'ble Supreme Court passed in the matter of Dr. Renuka Datla v. Solvay Pharmaceuticals B.V. cited earlier and be guided by it particularly paragraph 19 which is extracted hereunder: "19. In the result, IAs Nos. 2 to 4 of 2002 are liable to be rejected. However, there is one direction concerning interest which we consider appropriate to give in the given facts and circumstances of the case. Though the grant of interest, as prayed for by the petitioners, from 31.05.2002 -the stipulated date of submission of valuation report - is not called for, we feel that the ends of justice would be adequately met if the respondents concerned are directed to pay the interest at the rate of 9 per cent on 8.24 crores, which is the value of shares fixed by the valuer, for a period of twelve months. True, the petitioners contested the valuation and thereby delayed the implementation of settlement. However, having regard to the bona fide nature of the dispute and the fact that the respondents have retained the money otherwise payable to the petitioners during this period of twelve months and could have profitably....
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....ubstituting S.C. Vasudeva as Valuer in place of S.S. Kothari Mehta & Co. took place, but other terms of the Order dated 01.04.2011 were directed to continue to be in operation. It is claimed that when the Valuer prepared draft Valuation Report, the original Petitioners - present Respondents did not object and the Report came to be finalized and was filed in NCLT. The present Appellant filed CA 405/2012 for execution of the Valuation Report and the original Petitioners for the first time filed Reply raising objections and made various grievances. It is claimed that as per Section 634-A of the Companies Act, 1956 ('old Act', in brief), any Order passed by CLB was in the nature of a decree and thus NCLT could not have given any direction which was not included in the original Order. According to the Counsel, the Orders dated 01.04.2011 and 11.08.2011 should be treated as final Orders. Unlike Section 31 of the Arbitration and Conciliation Act, 1996 in the Companies Act, there is no provision for grant of interest on valuation fixed for the shares to be transferred in the Companies Act. It has been argued that in the Reply, which was filed by the original Petitioners - present Responden....
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.... in NCLT to demonstrate that the objections raised by the Respondents (Petitioners) were valid objections and the Valuer had not given basis for the valuation and thus, the Respondents were objecting. It is argued that as the present Impugned Order accepted the Valuation Report but granted interest which compensated the Respondents and thus, though Respondents were aggrieved by the acceptance of the Valuation Report, they have not filed the Appeal and only because they have not filed the Appeal cannot be calculated as acceptance that the objections raised by them were not valid. It has been submitted by the learned Counsel for the Respondents that copies of the orders filed by the Appellant to show that delay was because of the Respondents in NCLT, has no substance as out of the 13 Orders referred, in 8 of the Orders, it can be seen that the Respondents were not responsible for the adjournments. The Counsel at the time of arguments put on record copies of other 12 Orders passed in NCLT during the relevant time to show that even the Appellant did take adjournments and that the delay occurred sometime to accommodate the original Respondents, sometime due to the Petitioners and at som....
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....ers to pass suitable Orders including directions to pay interest. The learned Counsel stated that the Respondents wanted to end the litigation and although the Valuation amount as has been recorded by the Valuer is less, the Respondents decided to be content with the interest granted and thus, did not file Appeal. The money to which the Respondents were entitled was used for commercial purposes by the Company and thus that the interest awarded is justified. The Counsel for Respondents - Petitioners has also relied on certain Judgements to support the grant of interest by NCLT. 14. Learned Counsel for the Appellant relied on Judgement in the matter of "Manish Mohan Sharma and Others versus Ram Bahadur Thakur Ltd. and Others" reported as (2006) 4 SCC 416 and Judgement in the matter of "Byram Pestonji Gariwala versus Union Bank of India and Others" reported as (1992) 1 SCC 31 to submit that in view of Section 634-A as was existing under the old Act, NCLT could not go beyond the said order and which, according to the Appellant, was a consent order. Judgement in the matter of Manish Mohan Sharma was with reference to Section 634-A as was existing in the old Act. In the new Act of 2013,....
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.... and the Transfer Document. The interim orders passed relating to joint management were therefore directed to be continued until such time. 26. Significantly, the Company Law Board in the order dated 19-8-1999 had itself recorded that if there was any difficulty in the implementation of the order "the parties shall be at liberty to apply to us for implementation of this order". Yet when the application was made for such implementation, the Company Law Board did not abide by its own direction." 15. In this context, Hon'ble Supreme Court referring to Section 634-A observed that CLB when it deals with an application under Section 634-A sits as an executing Court and is subject to all the limitations to which the Court executing a decree is subject. The Hon'ble Supreme Court first found that the CLB and High Court in that matter had erred in refusing to execute the Order dated 19.08.1999. 16. Judgement in the matter of Byram Pestonji (supra) was referred to by learned Counsel for Appellant to submit that Hon'ble Supreme Court observed in para - 43 that a Judgement by consent is intended to stop litigation between the parties just as much as a Judgement resulting from a decision of ....
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.... Court has no power to enlarge the decree. 18.1 Perusal of that Judgement shows that it was a service matter and the UP Public Service Tribunal had passed the following Order:- "The petition is partly allowed. The OPs Nos. 1 and 2 are directed to consider the confirmation of the petitioner on Group 1 post and consequent promotion to Class II and Class I post from the date on which his junior Sri Ram Niwas was promoted to such post with all consequential benefits of seniority, salary, pension etc., arising therefrom." At the time of execution, the Executing Court in addition to the salary, gratuity and pension, awarded interest at 12% per annum from the date of the execution till the date of the Order. This was challenged and the High Court observed in that matter that the Executing Court had no power to enlarge the decree. In SLP to the Supreme Court, Hon'ble Supreme Court observed that it is well settled legal position that an executing Court cannot travel beyond the Order or decree under execution. 19. Counsel for Appellant relied on the Judgement in the matter of "Shivshankar Gurgar versus Dilip" reported as (2014) 2 SCC 465. That was the matter under the MP Accommodation C....
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.... in the absence of pleadings and directions in the Judgement or Decree which is under execution, it is not open to the executing Court to award interest. 22. Reliance is placed by the Appellant on Judgement in the matter of "State of Orissa and Another versus Mamata Mohanty" Reported in (2011) 3 SCC 436 to buttress the argument that without there being pleadings, relief could not be granted. It was a service matter relating to Lecturers and the High Court had in some of the matters granted benefit of UGC scale w.e.f. 01.06.1984 which was a date prior to 01.01.1986 which could not be granted, being beyond the recommendations of the UGC relied on. 23. In the matter of "Messrs. Trojan & Company versus RM. N.N. Nagappa Chettiar" reported in 1953 SCR 789, on which Appellant relied, the amount of Plaintiff therein had been credited in the sum of Rs. 6762-8 on account of purchase of the shares. The Plaintiff had pleaded that the transaction was not authorized by him and it had been made in contravention of his instructions and he claimed compensation on the ground of breach of instructions. In the alternative, he did not claim ground of failure of consideration. The High Court had found....
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....o the valuation by filing IA Nos.2, 3 and 4 of 2002 wherein a prayer was made to submit the supplementary valuation report for reasons as mentioned in the para. Petitioners submitted before the Hon'ble Supreme Court that notwithstanding the finality attached to the decision of the Valuer, the Court can intervene if the valuation was made on a fundamentally erroneous basis or a patent mistake has been committed by the Valuer. Hon'ble Supreme Court observed that even accepting the principle, it was unable to hold that the valuation in that matter, was vitiated by a demonstrably wrong approach or a fundamental error going to the root of the valuation. The Hon'ble Supreme Court after considering the Report in that matter, concluded that the Valuer approached the question of valuation having due regard to the terms of settlement and applying standard methods of valuation and that the valuation had been considered from all appropriate angles. Para - 20 and 21 of the Judgement read as under:- "20. In the result IA Nos. 2 to 4/2002 are liable to be rejected. However, there is one direction concerning the interest which we consider it appropriate to give in the given facts and circumstanc....
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....s Act; (iii) where the company is run by the members of the family or between close friends and relatives, the partnership principles thereby applicable for dissolution of a partnership, shall equally apply for winding up of the affairs of the company ; and (iv) the complete lack of transparency and systematic disposal of the assets of the company without involving the shareholders in the decision making would constitute oppression and mismanagement." The learned Counsel for the Respondents relied on the above para of the Judgement to submit that the Company Court had powers to take note of subsequent events to give directions and thus, according to the Counsel, NCLT rightly exercised its powers to give directions for payment of interest. 27. Reliance was then placed by the Respondents on the Judgement in the matter of "Rakhra Sports Private Ltd. and others Vs. Khraitilal Rakhra and others" Reported as MANU/KA/0068/1993: ILR 1993 KARNATAKA 920. In that matter, the Company Judge had directed the Respondents to pay Petitioners Rs. 600 per share subject to further valuation. In Appeal, the Hon'ble High Court further took into consideration value of goodwill, reputation and assets of....
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....eme Court observed:- "26. Section 144 of the C.P.C. is not the fountain source of restitution; it is rather a statutory recognition of a pre-existing rule of justice, equity and fair play. That is why it is often held that even away from Section 144 the Court has inherent jurisdiction to order restitution so as to do complete justice between the parties." Thus, apart from Section 144 of CPC, the source of restitution is rule of justice, equity and fair play. 29. Counsel for Respondents relied on Judgement in the matter of "Arcelor Mittal India Private Limited Vs. Satish Kumar Gupta and Ors." reported in MANU SC 1123/2018: 2018 (13) SCALE 381 and referred to para - 83 of the Judgement to refer to the principle that the act of Court shall harm no man is a maxim firmly rooted in our jurisprudence. It is further argued by the Counsel for Respondents that under the Companies Act, the Court has wide powers to grant interest. The Counsel referred to the Judgement in the matter of "Syed Mahomed Ali Vs. M. R. Sundaramurthy and Ors." reported as MANU/TN/0089/1958 where in para - 3, the Hon'ble Supreme Court referring to Section 402 and 406 of the Indian Companies Act, 1956 had observed t....
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....are willing to go out of the Company on receipt of the fair valuation. In fact, except for the initial part of such willingness of the original Petitioners, rest of the Order shows that the parties were not even on Board even as to the name of Valuer and CLB proceeded to take up the name from the list of 3 Valuers referred to by the Petitioners. The CLB recorded that the original Respondents have not provided the CLB with any list, nor are they willing to provide one. The CLB then proceeded to record that S.S. Kothari Mehta & Co. have consented to take up valuation on record and thus proceeded to appoint the said CAs directing "valuer to determine the fair value of the shares of R-1 Company as on 14.03.2007 (the date of filing of the petition) within a period of 30 days". The Order of 01.04.2011 does not record that the original Petitioners and/or Respondents had agreed to such date of 14th March, 2007 for the purpose of valuation. Thus, we find it difficult to treat this Order as a consent Order of both parties which left only execution to be done. It was an Order passed on the bare basis that Respondents - Petitioners had expressed willingness to go out of the Company on receipt ....
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....sions of this section shall not apply on and after the commencement of the Companies (Second Amendment) Act, 2002" Now the Tribunal while dealing with a Company Petition complaining oppression and mismanagement covered in Section 241 read with Section 242 of the new Act, Section 242 has wide enough powers to pass Orders with regard to any matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made. In fact, although the Counsel for Appellant stressed that Order dated 01.04.2011 was consent Order and that it was a final Order which required to be implemented as it is, the record shows that this very Order on 11.08.2011 (Page - 68 of the Appeal) underwent a change when CLB modified this Order dated 01.04.2011 to the extent that it changed the Valuer so as to then appoint S.C. Vasudeva in place of S.S. Kothari Mehta & Co. This Order changing the Valuer does not say that the change of Valuer was consented by the parties. In fact, although the Order dated 01.04.2011 had fixed the date of valuation as on 14.03.2007, the Report of the Valuer (Page - 17) shows that the Valuer himself changed the date of valuation to 31st March, 2007. This can b....
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.... Petitioners in NCLT claimed that the draft Report was finalized without taking into account views of the Respondents - Petitioners. They claimed that they were able to get the copy of the final report only from the CLB. (It needs to be recalled that the Order dated 01.04.2011 had specifically directed the Valuer to give copy of the Valuation Report to R-1 Company and the Petitioner and the CLB). The Reply filed by original Petitioners then raised disputes regarding the valuation done and other comments on various aspects. The Reply sought rejection of the valuation of Rs. 10.35 and requested to approve fair value obtained by the original Petitioners through CA having regard to prevailing market rates of several assts. The Impugned Order passed by NCLT shows that it went into various details to discard the objections raised by the original Petitioners and rejected their request that they could not avail opportunities to raise objections prior to the filing of final report. This part of the Impugned Judgement of NCLT has become final as the original Petitioners have not challenged the Impugned Order. However, we have referred to the above aspects from the limited point of view to s....
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....st which was claimed by the Petitioners from 31.05.2002 - the stipulated date of submission of Valuation Report, but did not grant the same from that date and found that the ends of justice would be adequately met if the Respondents were directed to pay interest @ 9% on 8.25 Crores which was the value of shares fixed by the Valuer, for a period of 12 months. The learned Counsel for the Appellant submitted that in this matter, the Hon'ble Supreme Court granted interest but it was only for 12 months. The submission which was made in alternative by the Counsel for Appellant is that if at all interest is to be granted, it should be only for 12 months. Going through the Judgement in the matter of "Renuka Datla", we find that it can be compared with the facts in the present matter. As regards 12 months mentioned in para - 20 of that Judgement, what appears to us is that in that matter, the Valuation Report was dated 28.09.2002 and the Judgement in the matter of "Renuka Datla" was passed on 30th October, 2003 which was period of 13 Months. 12 Months stated by Hon'ble Supreme Court were not mentioned giving any reason. Thus, it was a matter based on its facts, Hon'ble Supreme Court gave di....
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....se it is a Court query raised by us on the basis of record. 39. Going through the Impugned Order as a whole and the final Order, which has been passed by the learned NCLT, which we have reproduced in this Judgement - para -7 (supra), it is clear that the learned NCLT was not articulate when it directed the Petitioners to sell their entire shareholding held in the Respondent No.1 Company to "the Respondents". It was necessary for NCLT to clearly identify the Respondents as Respondent No.1 was a Company and the other Respondents were shareholders. Rights and Procedure for Company to buy back its shares and Rights and Procedure for sale of shares inter-se shareholders are different. The Impugned Order nowhere even slightly or in the passing indicates that the learned NCLT had in its mind to order buy back of shares by the Company. Learned Counsel for both the sides tell us that in a case of oppression and mismanagement, NCLT has a right to even direct buy back of shares without the powers being circumscribed to rely on decisions of the Company in that regard. We have no doubt that in the facts of a given matter when case of oppression and mismanagement is there and NCLT finds it just....
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.............. 33. Power of Court of Appeal.-The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection [and may, where there have been decrees in cross-suits or where two or more decrees are passed in one suit, be exercised in respect of all or any of the decrees, although an appeal may not have been filed against such decrees:]" Relying on the above provisions of CPC, it is argued that these provisions have been interpreted by the Hon'ble Supreme Court and Hon'ble High Courts in various Judgements as under:- "i) Karan Singh Sobti and Anr. Vs. Sri Pratap Chand and Anr. AIR 1964 SC 1305 (Paragraph 23) ii) Ratan Lal Shah Vs. Firm Lalmandas Chhadammalal and Anr. 1969 (2) SCC 70 (Paragraph 3) iii) Chandramohan Ramchandra Patil And Ors. Vs. Bapu Koyappa Patil (Dead) Through Lrs....
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....se its own shares or other specified securities by way of buy back under Section 68 of the Companies Act, 2013. When the NCLT directs the Company to buy back shares and when the NCLT directs the shareholders to buy out each other, these are two distinct factors giving rise to different reasons for being aggrieved by the Orders. Thus, an appeal by the Company that it could not have been directed to buy back, would not be on the same ground as that of a shareholder. However, in the present mater, as we have mentioned, it was not a case of buy back which has by error crept in the Impugned Order. 45. In the circumstances of the present matter, although only the Company filed this Appeal and did not even claim to say that it was on behalf of the other Respondents, although we are proceeding to find that the directions of buy back shares are not the direction to the Appellant Company, still we propose to amend the Impugned Order so as to make it clear. We need not resort to Order XLI of CPC. It is settled law when a matter is before NCLT or before this Appellate Tribunal, arising under Sections 241 and 242 of the new Act, read with Rule 11, irrespect....