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2021 (12) TMI 361 - HC - Companies LawOppression and mis-management - Sections 397, 398, 402 and 403 of the Companies Act, 1956 - HELD THAT - The exit scheme framed by CLB vide its order dated 13/08/2008 accepted by all the contesting parties and not challenged before the higher forum. What was challenged was the modification of the order dated 13/08/2008 pursuant to the applications filed by CG Holdings and O.R.E.Holdings. However, the error in the modified order dated 03/08/2009 was rectified and cured by the High Court in the appeals vide order dated 05.08.2011. As the result, true test should be is whether the execution order of CLB dated 31/12/2015 is in tune with the order of the High Court order dated 05/08/2011 which modified the CLB order in exercise of its power under Section 10F of the Companies Act. The discretionary power under Section 402 of the Companies Act are residuary in nature and in addition to the powers available to the CLB under Sections 397(2) and Section 398 (2) which permit the CLB to make such order as it thinks fit with a view to give quitus to the matters complainted. In the instant case, the oppressive conduct of the appellants against the Foreign investors namely ORE Holdings and Athappan well found and spoken aloud in the orders passed by CLB, High Court and the Supreme Court. This Court holds that, the functus officio argument of the appellants is baseless - this Court truly not able to find any question which satisfy the test. Most of the questions, does not beg for any answer since already duly answered by the Division Bench and the Supreme Court in the earlier round of litigation. The rest of the questions are not worth to interfere the well considered order of CLB. Appeal dismissed.
Issues Involved:
1. Allegations of oppression and mismanagement under Sections 397, 398, 402, and 403 of the Companies Act, 1956. 2. Execution of the Company Law Board (CLB) order regarding the return of investments and the conveyance of land. 3. Maintainability of appeals before the High Court under Section 10F of the Companies Act, 1956. 4. Application of Section 22(1) of the SICA Act, 1985. 5. Jurisdiction and powers of the CLB in execution proceedings. 6. Proportionality of the property value to the amount due. Issue-wise Detailed Analysis: 1. Allegations of Oppression and Mismanagement: The root of the dispute lies in two company petitions (C.P.No.65/2005 and C.P.No.76/2005) alleging oppression and mismanagement in Cheran Enterprises Private Limited (CEPL). The petitions were filed under Sections 397, 398, 402, and 403 of the Companies Act, 1956. The CLB framed an exit scheme, directing CEPL to return ?75 crores and ?4 crores invested by ORE Holdings and Nandakumar Athappan, respectively, with 8% interest. In case of failure, CEPL was to convey 17.15 acres and 7.80 acres of land to ORE and Athappan, respectively. 2. Execution of the CLB Order: The CLB's order dated 13/08/2008 was modified on 03/08/2009, and further clarified by the High Court on 05/08/2011. The CLB's execution orders dated 31/12/2015 declared ORE Trust and Athappan as the beneficial owners of the respective lands. The appellants challenged these orders, arguing that the CLB had become functus officio and that the execution orders were nullities. However, the High Court held that the CLB had the jurisdiction to enforce its order under Section 634A of the Companies Act, 1956, and that the execution orders were in line with the High Court's directions. 3. Maintainability of Appeals: The appellants argued that the appeals should be transferred to the Tribunal as per Section 434(1)(c) of the Companies Act, 2013. The High Court, however, held that Section 434(1)(b) of the new Act allows appeals against CLB orders passed before the constitution of NCLT to be filed in the High Court. The appeals were filed within the permissible period, and thus, the High Court retained jurisdiction. 4. Application of Section 22(1) of the SICA Act, 1985: VML argued that the execution proceedings should be stayed under Section 22(1) of the SICA Act, 1985, as an appeal was pending before AAIFR. The High Court dismissed this argument, noting that Section 22(1) does not provide blanket protection and should not be misused to torpedo judicial orders. The applications invoking Section 22(1) were found to be ill-motivated and filed after significant delay. 5. Jurisdiction and Powers of the CLB in Execution Proceedings: The appellants contended that the CLB lacked jurisdiction to modify its order and that the execution orders were beyond the scope of the original decree. The High Court rejected this, stating that the CLB's order dated 13/08/2008 was complete and composite, and the execution orders were necessary to enforce the decree in letter and spirit. The CLB acted within its jurisdiction under Section 634A of the Companies Act, 1956. 6. Proportionality of the Property Value to the Amount Due: The appellants argued that the value of the property was disproportionate to the amount due. The High Court noted that the proportionality was accepted by the parties when the CLB's order was passed and not challenged. The property was to be conveyed as consideration for the reduction of capital and surrender of shares, not merely for the repayment of the invested amount. The argument of proportionality was deemed untenable. Conclusion: The High Court dismissed the appeals, confirming the CLB's orders. The execution orders were found to be in accordance with the High Court's directions and necessary for enforcing the exit scheme. The appeals were deemed to be an act of oppression by the appellants to delay the inevitable. The High Court held that the appeals lacked merit and were legally unsustainable.
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