2008 (9) TMI 549 - SC - Companies Law

Whether the learned Single Judge was right in making a wholesale remand? Whether the parties hereto were bound by the terms of compromise, which have been affirmed by the CLB? Held that - It would be open for the High Court to go into the question as to whether the parties hereto were bound by the terms of compromise, which have been affirmed by the CLB. That the Single Judge will now take up all the three appeals filed by the parties against the order of the CLB and dispose of the same in the light of the observations made by us. This shall be done within six (6) months from the date of this order reaches the High Court. All the other contentions would be allowed to be raised and considered except the question of tenability of the petition under sections 397 and 398, which has been finally decided by this Court in the earlier round of litigation. The parties are also permitted to raise the questions regarding the subsequent developments directly in accordance with law and only if they are germane to the matter in question.

Summary

Issues Involved:
1. Maintainability of the petition under Sections 397 and 398 of the Companies Act.
2. Valuation of shares.
3. Consent for settlement and its implications.
4. Authority of the trustee to file the petition.
5. Subsequent developments and their impact on the case.

Detailed Analysis:

1. Maintainability of the Petition:
The primary issue was whether the petition filed under Sections 397 and 398 of the Companies Act was maintainable. The respondents contended that the petitioners did not hold the requisite 10% of the share capital as mandated by Section 399 of the Act. The Company Law Board (CLB) initially dismissed the petition on this ground, but the Supreme Court later held that the petition was maintainable. The Court found that the third appellant, Mrs. Nini Srivastava, had the necessary authority to file the appeal on behalf of the Trust, and the Trust, along with Mrs. Nini Srivastava, held more than 10% of the share capital.

2. Valuation of Shares:
The valuation of the shares was another significant issue. The parties had agreed to sell the petitioners' shares to the respondents at a value determined by a valuer appointed by the CLB. The Chartered Accountants, M/s. Thakur Vaidyanathan Iyer & Company, initially valued the shares at Rs. 6,340 per equity share. However, the CLB later fixed the value at Rs. 6,000 per equity share. The respondents had reservations about the valuation, but the CLB rejected their objections, holding that the valuation process was fair and binding.

3. Consent for Settlement:
The CLB recorded that the parties had consented to settle the disputes amicably, with the petitioners agreeing to sell their shares to the respondents. The CLB held that once the parties consented to certain terms of settlement recorded by a judicial forum, they were bound by those terms. The respondents' contention that the settlement should include other family disputes was rejected, as there was no such reference in the consent order dated 10-6-1996.

4. Authority of the Trustee to File the Petition:
The respondents challenged the authority of Mrs. Nini Srivastava to file the petition on behalf of the Trust. The CLB initially found that the petitioners did not have the requisite authority, leading to the dismissal of the petition. However, the Supreme Court later held that Mrs. Nini Srivastava had the necessary authority, and the petition was maintainable.

5. Subsequent Developments:
The learned Single Judge remanded the matter to the CLB, noting that subsequent events had taken place during the litigation. The CLB was directed to consider the entire record and subsequent developments while deciding the matter afresh. The Supreme Court upheld this approach, allowing the parties to raise questions regarding subsequent developments if they were relevant to the case.

Conclusion:
The Supreme Court directed the learned Single Judge to take up all three appeals filed by the parties against the CLB's order and dispose of them within six months. The Court clarified that all contentions could be raised and considered except the question of the petition's maintainability under Sections 397 and 398, which had been finally decided. The appeals were disposed of with no orders as to costs.