2007 (1) TMI 256 - HC - Companies Law

Summary

Issues Involved:
1. Whether the Company Law Board (CLB) erred in not passing a final order based on the valuation report.
2. Whether the majority shareholders can object to the valuation report after agreeing to it.
3. The enforceability of the CLB's orders under section 634A of the Companies Act.

Summary:

1. Error in Not Passing Final Order Based on Valuation Report:
The appellant contended that the CLB committed an error by not passing a final order based on the valuation report submitted by M/s. Billimoria and Company, Chartered Accountants. The appellant argued that the CLB was legally bound to pass orders on the valuation report as per the orders dated 3-2-1998 and 5-2-1998, which fall u/s 402(b) of the Companies Act and are enforceable u/s 634A of the Companies Act. The Court agreed with the appellant, stating that the CLB should have passed final orders based on the valuation report and cannot abdicate its statutory duty.

2. Objection to Valuation Report by Majority Shareholders:
The respondents (majority shareholders) contended that they were not accepting the valuation report and thus, the CLB should hear the application u/s 397 of the Act. They argued that the orders dated 3-2-1998, 5-2-1998, and 11-3-1998 lost their value due to a subsequent offer by the minority shareholders to sell their shares for Rs. 30 lakhs. The Court rejected this argument, stating that after agreeing to purchase the minority shares based on the valuation report, the majority shareholders cannot wriggle out of their agreement.

3. Enforceability of CLB's Orders u/s 634A:
The Court emphasized that the CLB has wide powers u/s 402 to pass appropriate orders to bring about an amicable settlement of disputes. The Court referred to several precedents, including the Supreme Court's decision in Manish Mohan Sharma v. Ram Bahadur Thakur Ltd., which held that consent orders can be executed by the CLB u/s 634A. The Court concluded that the orders passed by the CLB on 3-2-1998 and 5-2-1998 are final orders in terms of section 402(b) and are executable u/s 634A.

Conclusion:
The appeal was allowed, and the order passed by the CLB on 3-5-2000 was set aside. The CLB was directed to pass orders on the valuation report after hearing all parties, and such an order is executable u/s 634A of the Companies Act.