1998 (2) TMI 615 - Board - Companies Law

Summary

Issues Involved:
1. Validity of the consent terms agreed upon by the parties.
2. Whether the consent terms should be modified or recalled.
3. Whether the amount of Rs. 50 lakhs deposited should be paid to the petitioner.

Detailed Analysis:

1. Validity of the Consent Terms:
The petition was filed under Section 397/398 of the Companies Act, 1956, concerning Indo Saudi Travels Private Limited. During the proceedings, the parties agreed to a settlement where the petitioner would sell her group's shares to respondent No. 2 or his nominees or to the company for Rs. 2.3 crores. This agreement was reached on July 8, 1997, in the presence of the Company Law Board (CLB) and was documented and signed by both parties and their counsel. However, respondent No. 2 later sought to incorporate additional terms into the consent order, arguing that the Rs. 2.3 crores was agreed upon under the impression that certain dues payable by the petitioner to the company and respondents would be adjusted against this amount.

2. Modification or Recall of Consent Terms:
Respondent No. 2 filed applications (C.A. No. 196 of 1997 and C.A. No. 202 of 1997) seeking to modify the consent terms, arguing that the terms were not binding as they did not reflect the complete understanding between the parties. He contended that the payment of Rs. 2.3 crores without adjustment of dues was unconscionable and not in the interest of the company. He further argued that the parties were not ad idem (in agreement) when the consent terms were signed and that the compromise should not be imposed on an unwilling party.

The petitioner opposed these applications, stating that the consent terms were agreed upon after detailed discussions and should stand as they are. The petitioner argued that the CLB does not have the power to review its own orders unless both parties agree to the modification, which was not the case here. The petitioner cited various legal precedents to support this argument, including S. C. Nandy v. G. M. Bhattacharjee, AIR 1951 Cal 507 and B.G. Maikap v. Janaki Dei, AIR 1980 Orissa 108.

The CLB considered the arguments and found that the consent terms were agreed upon willingly by both parties and that there was no indication of any additional understanding at the time of agreement. The CLB concluded that it did not have the power to review its own order unless both parties agreed to the modification. Therefore, the applications for modification or recall of the consent terms were dismissed.

3. Payment of Rs. 50 Lakhs Deposited:
The respondent-company had deposited Rs. 50 lakhs in the name of the petitioner to establish bona fides for an amicable settlement. The CLB noted that this amount was deposited without prejudice to the contentions of both parties and that it was not recorded as being towards the first installment of the Rs. 2.3 crores. The CLB decided not to order the payment of this amount to the petitioner, especially since the Bombay High Court had undertaken that the company would not make any payment to the petitioner in terms of the compromise. Thus, any payment to the petitioner in terms of the consent by the company became a subject matter of the suit in the Bombay High Court, and both parties would have to abide by the decision of the Bombay High Court.

Conclusion:
The CLB dismissed all applications and directed that the consent terms, as recorded in the order dated August 14, 1997, be acted upon. The parties were bound by the consent terms, subject to any order passed by the Bombay High Court. The CLB also noted that it did not have the power to review its own orders unless both parties agreed to the modification. The request for payment of the Rs. 50 lakhs deposited by the respondent-company was also denied, considering the undertaking recorded by the Bombay High Court.