2001 (8) TMI 1301 - HC - Companies Law

Summary

Issues Involved:
1. Whether the order made by the Company Law Board (CLB) on 22-1-1999 is executable.
2. Whether the CLB had jurisdiction to make the order in question.
3. Whether the order is vitiated due to non-compliance with Order 23, Rule 3 of the Code of Civil Procedure.
4. Whether the agreement recorded by the CLB is binding on the parties.

Issue-wise Detailed Analysis:

1. Executability of the CLB Order:
The appellants argued that the order made by the CLB on 22-1-1999 is not executable. However, the court held that the order was indeed executable. The CLB had directed the appellants to comply with the terms of the order within 60 days, failing which the respondents could move the CLB for further orders under section 634A. The CLB's order was not challenged by the appellants at any point, and it was recorded as an agreement between the parties. The court emphasized that the appellants had derived significant advantage by making statements through their counsel and persuading the respondents to agree to the proposal, thus avoiding an investigation into the company's affairs.

2. Jurisdiction of the CLB:
The appellants contended that the CLB had no jurisdiction to make the order as the scope of the proceedings under section 235 of the Companies Act was limited to investigating the affairs of the company. The court rejected this submission, stating that while the proceeding was initiated under section 235, the CLB could make orders beyond the scope of section 235 if the parties agreed to such an order. The agreement recorded by the CLB was not against public policy, illegal, or violative of any provisions of the Act or any other law. Therefore, the CLB had the jurisdiction to record and enforce the agreement.

3. Compliance with Order 23, Rule 3 of the Code of Civil Procedure:
The appellants argued that the order was not binding as it was not in writing and signed by the parties, as required by Order 23, Rule 3 of the Code of Civil Procedure. The court noted that Order 23, Rule 3 does not apply in terms to proceedings before the CLB. The order recorded by the CLB was based on a voluntary agreement between the parties, and the appellants had no grievance regarding its accuracy or authenticity. The court held that the absence of signatures did not vitiate the order, as it embodied a properly arrived at compromise capable of being made into an executable decree.

4. Binding Nature of the Agreement:
The appellants attempted to avoid their obligations under the agreement by raising hypertechnical pleas. The court strongly decried this attempt, emphasizing that the appellants had made a solemn promise through their counsel to the CLB. The order recorded by the CLB was not disputed at any point, and the appellants had no right to play fraud on the court or the tribunal. The court held that the agreement recorded by the CLB was binding on the parties and that allowing the appellants to avoid their obligations would result in justice being defeated and fraud being perpetrated.

Conclusion:
The court dismissed the appeal with costs of Rs. 3,000, finding no merit in the appellants' arguments. The order made by the CLB on 22-1-1999 was held to be executable, within the jurisdiction of the CLB, and binding on the parties despite the absence of signatures. The appellants' attempt to avoid compliance with the order was strongly condemned as an attempt to perpetrate fraud on the tribunal.