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2022 (7) TMI 151 - HC - Companies LawOppression and Mismanagement - Seeking temporary injunction restraining the Defendant Nos. 1 and 2, their servants/agents or any other person directly or indirectly acting for or on behalf of Defendant Nos. 1 and 2 from taking any steps which would defeat the Applicants rights under the agreement - whether the Minutes of Discussion is in fact a family settlement agreement which is valid and subsisting? - HELD THAT - The present Suit seeking specific performance of the Minutes of Discussion was filed subsequent to the Company Petition having been filed by the Defendants before the NCLT under Section 241, 242 and 244 of the Companies Act, 2013 which sought to restrain the alleged oppressive acts of the Plaintiffs against Defendant Nos. 1 and 2. The said Company Petition is at the stage of hearing and final disposal subsequent to the orders passed by the NCLT as well as by the NCLAT and the Supreme Court. However, a determination of the issue as to the Minutes of Discussion being a family settlement is an issue which arises before this Court having jurisdiction and for considering whether interim relief is to be granted in the Interim Application such a prima facie determination would be necessary. It is to be noted that the Minutes of Discussion has admittedly been executed by the Plaintiffs and the Defendant Nos. 1 and 2. It had been executed after rounds of negotiations spanning a few years and the Minutes of Discussion was arrived at in order to settle the disputes between what is described in the Minutes of Discussion as disputes between three families, namely the Gujarat family, Maharashtra family and Andhra Pradesh/Telangana family - It would be necessary to advert to the concluding paragraph in the Minutes of Discussion which comes after Clauses 1 to 9 thereof have been executed by the Plaintiffs and Defendant Nos. 1 and 2. The concluding paragraph which has been further executed by these parties has been differently interpreted by Mr. Virag Tulzapurkar and Mr. Ravi Kadam in their oral arguments on behalf of the Plaintiffs and Defendant Nos. 1 and 2 respectively. The Minutes of Discussion cannot be contemplated to be a mere compromise of the proceedings before the NCLAT. The Minutes of Discussion is a contract in the nature of a family settlement and it is clear from the Minutes of Discussion that the Defendant No. 3 Company is considered to be a family run company, as the three divisions described as families, namely Gujarat Division, the Maharashtra Division, Andhra Pradesh/Telangana Division had run the Defendant No. 3 Company, as a family venture. It is clear from the Minutes of Discussion that the settlement arrived was among these three families/divisions. The Minutes of Discussion also records that the mechanics of the family settlement agreed to between the participants are provided for in the Minutes of Discussion. Thus, the Minutes of Discussion cannot be contemplated merely as a compromise of the NCLT proceedings and in fact, categorically records a settlement amount payable to the Gujarat family. The disputes in the Minutes of Discussion which have been settled are the only disputes among the three families. The submission of Mr. Ravi Kadam that this is not in the nature of family settlement deciding all disputes between the family, cannot be accepted. The Minutes of Discussion inspite of its nomenclature, is a full and final family settlement among the three families of the pending issues. Delay in filing of the Suit and seeking interim relief - HELD THAT - The delay by itself is no ground to deny the relief. In the facts of the present case, no prejudice has been caused to Defendant Nos. 1 and 2 by such alleged delay. There has been no attempt made by the Defendants to show any prejudice caused to them on account of the delay in filing of the present Suit and seeking interim relief - there has been no right which has accrued to the Defendants by reason of alleged delay in filing the captioned Suit and seeking interim relief. Considering that the Minutes of Discussion which amounts to a family settlement was being implemented in its true spirit and intent as well as the fact that it was in September 2020 that the Defendant Nos. 1 and 2 in correspondence chose not to execute the formal family settlement agreement and scheme of arrangement (demerger) as borne out from the correspondence, the Plaintiffs had no choice but to take steps in filing the present Suit on 25th January 2021 seeking specific performance of the Minutes of Discussion - no case has been made out on behalf of the Defendants that the alleged delay in filing the present Suit and seeking interim relief would disentitle the Plaintiffs from being granted the interim relief sought. The Minutes of Discussion is a family settlement and requires to be specifically performed, the relief sought for by the Applicants/Plaintiffs to restrain the Defendant Nos. 1 and 2 from taking any steps which would defeat the Applicants rights under the Minutes of Discussion and/or relief prayed for in the captioned Suit are required to be granted. This, particularly considering the fact that the Defendants are acting contrary to the Minutes of Discussion by seeking relief of buyout and sellout on fresh valuation of shares and other assets before the NCLT. Defendant Nos. 1 and 2, their servants/agents or any other person directly or indirectly acting for or on behalf of Defendant Nos. 1 and 2 are restrained by temporary injunction from acting in any manner contrary to the Minutes of Discussion and/or defeating the Applicants rights under the Minutes of Discussion and/or the reliefs prayed for in the captioned Suit - Application disposed off.
Issues Involved:
1. Temporary injunction restraining the Defendants from actions that would defeat the Plaintiffs' rights under the agreement. 2. Specific performance of the "Minutes of Discussion" dated 14th June 2019. 3. Jurisdiction of the High Court versus NCLT in granting specific performance and related reliefs. 4. Validity and binding nature of the "Minutes of Discussion" as a family settlement. Detailed Analysis: 1. Temporary Injunction: The Plaintiffs sought a temporary injunction to prevent Defendants from taking steps that could defeat their rights under the "Minutes of Discussion" and from proceeding with the valuation or buy-out of shares in Defendant No. 3. The court granted this injunction, restraining Defendants from acting contrary to the Minutes of Discussion and from taking steps that would undermine the Plaintiffs' rights. 2. Specific Performance of the "Minutes of Discussion": The Plaintiffs filed a suit seeking specific performance of the "Minutes of Discussion" dated 14th June 2019. They argued that this document constituted a valid, subsisting, enforceable, and binding family settlement. The court found that the "Minutes of Discussion" was indeed a concluded contract, not merely a preliminary agreement, and thus enforceable. The court noted that the document was executed after several rounds of negotiations and included essential terms agreed upon by the parties. 3. Jurisdiction of the High Court versus NCLT: The Defendants argued that the National Company Law Tribunal (NCLT) had exclusive jurisdiction over the matter, citing Section 430 of the Companies Act, 2013. They contended that the NCLT could determine whether a valid compromise had been reached and had the power to enforce such agreements. However, the court held that the NCLT does not have the jurisdiction to grant specific performance of contracts, as this power is not explicitly conferred by the Companies Act. The court referenced the Supreme Court's ruling in Embassy Property Developments Pvt. Ltd., which clarified that Sections 420 and 424 of the Companies Act indicate procedural guidelines rather than jurisdictional powers. Therefore, the High Court maintained its jurisdiction to entertain the suit for specific performance. 4. Validity and Binding Nature of the "Minutes of Discussion": The court examined whether the "Minutes of Discussion" constituted a valid and binding family settlement. It was determined that the document was indeed a family settlement, as it aimed to resolve disputes among the three family groups involved in Defendant No. 3. The court emphasized that family settlements are governed by special equity principles, as established in cases like Kale Vs. Dy. Director of Consolidation and Hari Shankar Singhania. The court rejected the Defendants' argument that the "Minutes of Discussion" was merely an agreement to agree, noting that it contained essential terms and was intended to be binding. The court also addressed the Defendants' contention that the Plaintiffs had repudiated the agreement by filing applications before the NCLT and referring to the "Minutes of Discussion" as a "settlement proposal." The court found that these references were related to the formal documentation process and did not constitute a repudiation of the agreement. The court further noted that the Defendants had acted in furtherance of the "Minutes of Discussion" by approving a buy-back of shares, which increased their shareholding. Conclusion: The court granted the Plaintiffs' request for a temporary injunction, restraining the Defendants from taking actions that would defeat the Plaintiffs' rights under the "Minutes of Discussion." The court held that the "Minutes of Discussion" was a valid and binding family settlement and that the High Court had jurisdiction to entertain the suit for specific performance, as the NCLT was not empowered to grant such relief. The interim application was disposed of in favor of the Plaintiffs, with no order as to costs.
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