2005 (1) TMI 415 - HC - Companies Law

Issues Involved:
1. Challenge to the orders passed by the Company Law Board on 2-7-2004 and 13-9-2004.
2. Enforceability of the order dated 29-1-2004 under section 634A of the Companies Act, 1956.
3. Jurisdiction of the Company Law Board under section 10E of the Companies Act, 1956.

Issue-wise Detailed Analysis:

1. Challenge to the orders passed by the Company Law Board on 2-7-2004 and 13-9-2004:
The appeal was filed under section 10F of the Companies Act, 1956, challenging the Company Law Board's orders dated 2-7-2004 and 13-9-2004. The appellant contended that the order dated 29-1-2004 was legal, valid, binding, and enforceable under section 634A and that the Company Law Board failed to exercise its jurisdiction. The appellant argued that the Company Law Board's findings regarding the non-binding nature of the order on respondent No. 4 and other third parties were erroneous.

2. Enforceability of the order dated 29-1-2004 under section 634A of the Companies Act, 1956:
The central controversy revolved around whether the order dated 29-1-2004 was an enforceable order under section 634A. The Company Law Board held that the order was not enforceable as it was not signed by all affected parties and was merely a guideline for settlement. The appellant argued that the order was final and executable, citing judgments from the Madras and Delhi High Courts to support the enforceability of orders not signed by all parties. However, the court found that the order dated 29-1-2004 was not final or binding as it required further consent terms to be drawn up and signed by all affected parties, making it inchoate and incomplete.

3. Jurisdiction of the Company Law Board under section 10E of the Companies Act, 1956:
The respondent argued that the Company Law Board's jurisdiction under section 10E did not extend to private firms, trusts, and family properties. The court agreed, stating that the Company Law Board's powers pertain only to companies covered by the Companies Act, 1956, and not to other entities unless consent from all affected parties is obtained. The court emphasized that without such consent, the Company Law Board could not pass binding orders affecting the rights of third parties not present or represented before it.

Conclusion:
The court concluded that the order dated 29-1-2004 was not an enforceable order under section 634A. It was merely a guideline for settlement and required further consent terms to be finalized. The court also upheld the Company Law Board's jurisdiction limitations under section 10E, affirming that it could not extend to private firms, trusts, and family properties without the consent of all affected parties. Consequently, the court dismissed the appeals, finding the Company Law Board's orders dated 20-7-2004 and 13-9-2004 to be legal and valid.

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