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Issues Involved:
1. Enforceability of the Memorandum of Understanding (MoU) 2. Jurisdiction of the Company Law Board (CLB) to review its orders 3. Date of valuation of shares 4. Release of personal guarantees Issue-wise Detailed Analysis: 1. Enforceability of the Memorandum of Understanding (MoU): The primary dispute arose between two groups, referred to as the "Goyal group" and the "Jain group," over the control and management of M/s. Himalaya Communications Ltd. A MoU was signed on September 18, 2002, where the Goyal group agreed to exit the company by transferring their shares to the Jain group for Rs. 4.5 crores. The CLB, in its order dated November 7, 2003, noted that the MoU was privately entered into and not enforceable by the Board. The Board stated, "The memorandum of understanding was privately entered into by the parties, the enforcement of specific performance of which lies in a civil court." This decision was upheld by the High Court and the Supreme Court, affirming that the CLB could not enforce the MoU. 2. Jurisdiction of the Company Law Board (CLB) to Review its Orders: The Goyal group challenged the CLB's jurisdiction to review its earlier order dated July 26, 2004, which directed the Jain group to release the Goyal group's personal guarantees within a month. The CLB, in its order dated October 5, 2004, reviewed and modified this direction, stating that the release of guarantees required the consent of the banks. The High Court held that "no court or Tribunal has the power of reviewing its orders unless such power is conferred upon it by law." The court cited the Supreme Court's decision in Grindlays Bank Ltd. v. Central Government Industrial Tribunal, which distinguished between procedural and substantive reviews. The High Court concluded that the CLB's review was not procedural but substantive, thus setting aside the order dated October 5, 2004, for lack of jurisdiction. 3. Date of Valuation of Shares: The Jain group argued for the valuation date to be March 31, 2004, citing the company's worsened financial condition. However, the High Court upheld the CLB's decision that the valuation date should be March 31, 2002, as it was proximate to the date of the petition filed on May 27, 2002. The court observed that the Jain group took over the company based on the MoU and subsequent orders but failed to pay the agreed amount for the shares. The court stated, "If the financial position of the company has worsened, the Goyal group cannot be put at a disadvantage." Thus, the valuation date remained March 31, 2002. 4. Release of Personal Guarantees: The CLB's order dated July 26, 2004, directed the Jain group to release the Goyal group's personal guarantees within a month. This was later reviewed and modified by the CLB on October 5, 2004, stating that the release required bank consent. The High Court reinstated the original order, directing the Jain group to take immediate steps to release the Goyal group's guarantees by substituting them with their own within one month. The court noted, "The banks are only interested in securing their loans and in case members of the Jain group provide adequate security, the banks should have no objection in releasing the bank guarantees." Conclusion: The High Court allowed Company Appeal No. 8 of 2004, setting aside the CLB's order dated October 5, 2004, and upheld the valuation date as March 31, 2002. Company Appeal No. 2 of 2005, which sought to change the valuation date to March 31, 2004, was dismissed. The Jain group was directed to substitute the personal guarantees of the Goyal group within one month.
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