2012 (8) TMI 293 - HC - Companies Law

Appeal u/s 10F of the Companies Act, 1956 against decision of CLB - CLB while disposing of petition made u/s 397 and 398 as also u/s 402, 403, 406 and 237 r/w Schedule XI imposed condition of creating charge on property - Held that - We find that the CLB in making such a condition had found that there was an understanding between the parties vis-a-vis the land, which was to be developed for the purpose of the business of the company and this factor weighed with the Board in imposing this condition. Even otherwise it is only the interim arrangement till the amount ascertained as payable to the 2nd respondent, is paid. There is no question of law which is required to be framed in an appeal u/s 10F which has been decided wrongly in the order of the CLB, which calls for correction or any gross injustice having occurred to the appellants to warrant interference in an appeal of this nature. Appeal dismissed

Summary

Issues: Appeal under Section 10F of the Companies Act, 1956 challenging the conditions imposed by the Company Law Board regarding compensation and property charge.

Analysis:

1. Issue of Illegal Actions and Relief Sought:
The petitioners filed a company petition under Sections 397 and 398 of the Companies Act, alleging illegal actions by respondents 2, 3, and 4, resulting in a reduction of the petitioners' shareholdings. The Company Law Board found the actions illegal and directed restoration of the petitioners' shareholding and removal of the concerned individuals from the company.

2. Compensation and Property Charge:
The Board, while acknowledging the 2nd respondent's past contributions, appointed an auditor to determine suitable compensation. The Board directed that the compensation amount, once ascertained, would constitute a charge on the petitioners' property until paid. This condition was challenged in the appeal under Section 10F of the Act.

3. Challenging the Condition Imposed:
The appellants contended that the condition of creating a charge on their property for compensating the 2nd respondent was unjustified and not enforceable under the law. They argued that any compensation should come from the company's funds and not burden their property.

4. Board's Justification for the Condition:
The Company Law Board justified the property charge condition based on an understanding between the parties regarding land development for the company's business. The Board viewed this as an interim arrangement until the compensation amount was paid to the 2nd respondent.

5. Dismissal of the Appeal:
The High Court dismissed the appeal, finding no legal question requiring correction in the Board's order. The Court noted that the appellants could raise objections to the valuation during the Commissioner's report submission to the Board, allowing them an opportunity to address any anomalies in the valuation process.

6. Reserving Liberty to Appeal:
While dismissing the appeal, the Court reserved the liberty for the appellants to approach the Company Law Board if needed, especially during the valuation report submission, to raise any objections or concerns regarding the valuation process.

In conclusion, the High Court upheld the Company Law Board's decision regarding the compensation and property charge, dismissing the appeal but allowing the appellants the opportunity to address any valuation discrepancies before the Board.