2016 (6) TMI 243 - HC - Companies Law

Scope of the court admitting an appeal under section 10F - interim order of CLB - Held that - It is the case of the appellant that the order has been passed in a cursory manner and the reason for stating this is, by that order the Company Law Board has in effect stopped the business of the appellant no.1. The appellant no.1 carries on business of development of land by constructing apartments on that and selling the apartments. Therefore, by way of impugned order, it is alleged, the appellant no.1 has been restrained from developing the land, stopped from constructing flats and from selling the flats. The board in paragraph 5 of the order dated 29th October, 2015 has only stayed alienation of land in question until the next date of hearing. The order has been passed on 29th October, 2015 and the next date of hearing was 4th December, 2015. The reason why this interim arrangement was also ordered can be found in the last paragraph of the order. It is because only respondent no.2, who is appellant no.2 herein, had filed the reply and appellant nos.1 and 3 herein had sought time to file reply. They were granted four weeks time to file the reply and the respondents, who are petitioners before the board were granted two weeks thereafter to file the rejoinder. On 14th December, 2015 the appellant nos.1 and 3 did not file any reply but sought extension by another four weeks to file the reply. The time was granted and consequently the respondents herein, i.e., petitioners before the Company Law Board were granted two weeks time to file rejoinder after receiving a copy of the reply. The matter is now stood over to 25th January, 2016 and the interim order is continued. The board has also noted that the reason why the alienation of land in question was stayed was because the counsel for the respondents viz., counsel for the appellants herein had accepted that no construction for flats has commenced and the site plan is awaiting sanction from the authorities. The order does not stop the appellants business of developing the land by constructing apartments. If according to the appellants now the site plans have been sanctioned, in other words, the circumstances have changed, it will be open to the appellants to move the Company Law Board for suitably altering the interim order and the Company Law Board may consider and decide the same on merits. Moreover, the proceedings before the Company Law Board is at a preliminary or introductory stage awaiting a final adjudication on merits following a full contest. The pleadings are incomplete as the appellants have infact sought further time to file a reply. The Company Law Board has only ensured a working arrangement, if one may call it, until the pleadings are complete and parties are heard. Further, do not find any perversity or arbitrariness in the order passed. Thus appeal is not maintainable.

Summary

Issues Involved:
1. Appeal against an interim order of the Company Law Board.
2. Scope of High Court's jurisdiction under Section 10F of the Companies Act.
3. Examination of whether the interim order was perverse or arbitrary.

Detailed Analysis:

1. Appeal against an Interim Order of the Company Law Board:
The appeal was filed against an interim order dated 29th October 2015 by the Company Law Board. The order restrained the respondents from alienating property situated in Bhandup, Taluka Kurla, District Bombay, to safeguard the petitioner's interests. The petitioner argued that their shareholding was restored to 33.3%, evidenced by gift and transfer deeds signed by the petitioner's father, respondent no.2. The main prayer was for rectification of the member's register.

2. Scope of High Court's Jurisdiction under Section 10F of the Companies Act:
Section 10F allows appeals to the High Court on any question of law arising from the Company Law Board's order. The court's jurisdiction is limited to questions of law, as established in the cases of Commissioner of Income-Tax vs. Scindia Steam Navigation Co. Ltd. and V.S. Krishnan & Ors vs. M/S Westfort HiTech Hospital. The High Court should not interfere with the Company Law Board's discretion unless it is exercised arbitrarily, capriciously, or perversely, as reiterated in Wander Ltd. vs Antox India P. Ltd.

3. Examination of Whether the Interim Order was Perverse or Arbitrary:
The appellant contended that the interim order was cursory and effectively halted their business of land development and apartment construction. However, the order only stayed the alienation of land until the next hearing date, allowing time for replies and rejoinders to be filed. The Company Law Board noted that no construction had commenced, and the site plan was awaiting sanction. The interim order was a working arrangement until the pleadings were complete and did not stop the appellant's business. The High Court found no perversity or arbitrariness in the order.

Conclusion:
The appeal was dismissed as not maintainable, with the High Court emphasizing that the Company Law Board's interim order was a preliminary measure pending a full adjudication on merits. The appellants were directed to pay Rs. 1 lakh as costs to the respondent. The High Court's decision aligns with the principles of judicial discretion and the limited scope of appellate jurisdiction under Section 10F.