2011 (12) TMI 295 - HC - Companies Law

Appeal u/s 10F - It is evident that during the pendency of the company petition, after hearing the counsel for the parties on 14.7.2009, learned Chairman (Mr. S. Balasubramanian) of the Company Law Board passed an order on 16.7.2009 - Learned counsel appearing for the appellants-Company has vehemently argued that even if the impugned order dated 6.10.2010 is regarded as an interlocutory order, the same is covered under the ambit of Section 10-F of the Companies Act, 1956 - Even if there could be a review in the event of an order sought to be reviewed suffers from some mistake or error apparent on the face of the record but in the instant matter no such mistake or error is apparent on the face of the record - decree is without jurisdiction if the court passing the decree usurps a jurisdiction which it did not have and which could not be waived by the parties - Held that the order dated 16.7.2009 is a consent order and it is binding upon the parties to the lis unless it is challenged and the same is interfered with by the Courts above - If the valuation report was objected to by the parties, the objections could have been referred to the valuer for giving valuation report, including valuation of shares afresh, upon considering the objections or any other independent valuer could be appointed for furnishing valuation report - Appeal is allowed

Issues Involved:
1. Whether the order dated 16.7.2009 was a consent order and binding upon the parties.
2. Whether the order dated 16.7.2009 could be reviewed by the Member of the Company Law Board by the impugned order dated 6.10.2010.
3. Whether the Company Law Board was required to pass a final order in the Company Petition No. 129/2007 in terms of the valuation report of the valuer.

Detailed Analysis:

Issue 1: Whether the order dated 16.7.2009 was a consent order and binding upon the parties.
The court examined whether the order dated 16.7.2009, passed by the Chairman of the Company Law Board (CLB), was a consent order. The order stated that the petitioners would exit the company upon receiving fair value for their shares determined by an independent valuer and upon the return of their unsecured loans. The court noted that both parties had agreed to appoint M/s Ernst & Young to determine the fair value of the shares. The court referenced the Supreme Court decision in Manish Mohan Sharma v. Ram Bahadur Thakur Ltd., which emphasized that a consent decree is both a contract and a command, binding the parties unless challenged on grounds such as fraud or coercion. The court concluded that the order dated 16.7.2009 was indeed a consent order and binding upon the parties.

Issue 2: Whether the order dated 16.7.2009 could be reviewed by the Member of the Company Law Board by the impugned order dated 6.10.2010.
The court analyzed whether the Member of the CLB had the authority to review the consent order dated 16.7.2009. The appellants contended that the CLB lacked the power to review its own orders, as the power of review was omitted from the CLB Regulations in 1992. The court agreed that the CLB, being a quasi-judicial authority, did not have the power to review the consent order unless it was shown to be affected by fraud, coercion, or mistake. The court found that the impugned order dated 6.10.2010, which directed the hearing of the company petition on merits, effectively reviewed the consent order without any such grounds being established. Therefore, the court held that the Member of the CLB acted beyond their jurisdiction in reviewing the consent order.

Issue 3: Whether the Company Law Board was required to pass a final order in the Company Petition No. 129/2007 in terms of the valuation report of the valuer.
The court considered whether the CLB was obligated to pass a final order based on the valuation report submitted by the independent valuer, M/s Ernst & Young. The court noted that the valuation report was contested by both parties, with objections raised regarding the actual paid-up capital and shareholding. The court held that the CLB should address these objections but within the framework of the consent order. The court suggested that the CLB could either refer the objections back to the valuer or appoint a new independent valuer to provide a fresh valuation report. However, the court emphasized that the consent order should remain intact and not be reviewed or set aside.

Conclusion:
The court allowed the appeal, setting aside the impugned order dated 6th October 2010. The CLB was directed to pass an appropriate order in Company Petition No. 129/2007 in accordance with the consent order dated 16.7.2009. The court suggested that the CLB could direct the valuer to consider the objections and submit a fresh valuation report or appoint another independent valuer if necessary. The court reiterated that the consent order was binding and should not be reviewed.

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