2022 (10) TMI 209 - HC - Companies Law

Oppression and Mismanagement - Enforceability and validity of family settlement agreement entered upon - existence of concluded agreement capable for specific performance - powers of the NCLT in a Petition for Oppression and Mismanagement - Section 242 of Companies Act - HELD THAT - Under Section 424 the NCLT has all the powers of a civil court under the CPC while not being strictly bound by it. Read together this meant that the MOD could be recorded as a compromise by - and only by - the NCLT; assuming that both sides saw it as capable of being recorded as a compromise. If the Sanghvis repudiated it by word or deed then what remained was the undoubted power of the NCLT in the O M proceeding one that the civil court did not have. Merely demanding specific performance did not give the MOD a colour or a character it did not possess nor did it vest the civil court with a jurisdiction that stood most emphatically ousted. This is not a question of a specific performance being granted by the NCLT but whether the MOD was meant only to compromise the NCLT O M proceedings or whether the compromise was an incident or a consequence of a larger overall settlement. He maintains that the MOD was only to compromise the NCLT proceedings. If that be so then surely one would expect to find a reference to the NCLT proceedings in the MOD. Other than the last seven words of the MOD i.e. the withdrawal of the Company Petition there is no mention in the MOD of the O M Petition. But there is a more telling or important clue that the settlement proposed in the MOD was well beyond the Oppression and Mismanagement Petition. The tabulation of the settlement amount payable to the Kamdars clearly includes amounts that are outside even AMPL the company itself. They include personal obligations of the Sanghvi families. This could never therefore have been a proposal only to settle the Oppression and Mismanagement Petition. It is no answer to say that other matters were also being settled but all that was being compromised was the NCLT Petition. The MOD attempted to put a quietus to all disputes by separating out the Kamdar family. The settlement of the NCLT is only one part - and perhaps not even a significant part - of what was decided in the MOD. The MOD contains internal evidence that the settlement was overall and was of an independent valuation agreed by the parties by which the Kamdars were to be separated for an agreed valuation of their share at Rs. 245 crores. On a fair assessment of the record we find that it was the Kamdars who attempted to resile from this position. Appeal dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Civil Court vs. NCLT
2. Nature and Binding Nature of the Minutes of Discussion (MOD)
3. Specific Performance of the MOD
4. Repudiation of the MOD
5. Delay and Prejudice in Seeking Relief

Detailed Analysis:

1. Jurisdiction of the Civil Court vs. NCLT:
The primary issue was whether the Civil Court had jurisdiction to entertain the suit, given the provisions of Section 430 of the Companies Act, which ousts the jurisdiction of Civil Courts in matters that the NCLT is empowered to determine. The court held that while the NCLT has extensive powers under Section 242 of the Companies Act, it does not have the jurisdiction to decree specific performance of a contract. The court emphasized that the ouster of Civil Court jurisdiction must be narrowly construed. The Civil Court has the exclusive jurisdiction to determine whether the MOD is a concluded agreement capable of specific performance.

2. Nature and Binding Nature of the Minutes of Discussion (MOD):
The court examined whether the MOD was merely an agreement to enter into an agreement or a binding family settlement. The MOD, dated 14th June 2019, involved a settlement amount payable to the Gujarat family and other terms for the demerger of the company. The court found that the MOD was a binding family settlement, not just a tentative agreement. The MOD was signed by representatives of the three families and outlined specific obligations and commitments, indicating a concluded contract.

3. Specific Performance of the MOD:
The plaintiffs sought specific performance of the MOD, arguing that it was a valid, subsisting, and binding family settlement. The court held that the MOD was capable of specific performance as it contained all the substantive and commercial terms agreed upon by the parties. The detailed understanding and mechanics to be documented later did not make the MOD non-binding. The court noted that family settlements are approached with less technical rigor compared to commercial contracts, emphasizing the need to put an end to long-standing disputes.

4. Repudiation of the MOD:
The Kamdars argued that the Sanghvis had repudiated the MOD through their conduct and filings before the NCLT. The court found no evidence of repudiation by the Sanghvis. On the contrary, the Sanghvis had acted in furtherance of the MOD by taking steps such as buying back shares from third parties and addressing the change of name for the resultant entity. The court concluded that the Kamdars were attempting to escape the implementation of the MOD by seeking a fresh valuation and other reliefs inconsistent with the MOD.

5. Delay and Prejudice in Seeking Relief:
The Kamdars contended that the plaintiffs delayed seeking relief, causing severe and irreparable prejudice to them. The court rejected this argument, noting that the plaintiffs filed the suit for specific performance promptly after the Kamdars indicated their unwillingness to execute the formal family settlement agreement. The court found that the interim relief sought by the plaintiffs was necessary to prevent the Kamdars from acting contrary to the MOD and defeating the plaintiffs' rights under the MOD.

Conclusion:
The court upheld the impugned order granting interim relief to the plaintiffs, restraining the Kamdars from acting contrary to the MOD. The court found that the MOD was a binding family settlement capable of specific performance and that the Civil Court had jurisdiction to entertain the suit. The appeal was dismissed, and the court emphasized that the principles governing appellate interference with interlocutory orders were not met in this case.