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TMI Blog2005 (1) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Company Law Board, New Delhi under sections 397 and 398 of the Companies Act, 1956 (hereinafter referred to as the said Act) inter alia alleging oppression and mismanagement in the company being company Petition No. 7 of 2002. Thereafter sometime in or about July 2002, another company petition was filed being Company Petition No. 43 of 2002 before the Company Law Board, New Delhi. It is an admitted position that the daughter of respondent No.1 namely, Mrs. Neha Agarwal is not a party to the Company Petition No. 2 of 2002 but is partly to the Company Petition No. 43 of 2002. On 28-11-2002, both the Company Petitions were listed for hearing before the Company Law Board. In the course of hearing a proposal for settlement was mooted. According to the appellants, at the said hearing, the Company Law Board directed the parties to prepare a chart indicating the shareholding pattern of the respondent Sunil Kumar Agarwal group. On 18-12-2002, a chart was produced indicating the said shareholding. However, there were disputes pertaining to the said shareholding pattern indicated by the appellant as the same was not acceptable by the Sunil Kumar Group. 6. On 29-1-2004 when the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized because of the objections raised by the various persons who are not parties to the proceedings. On 13-2-2004, the Advocate for the appellants drew up a formal draft agreement in terms of the agreed settlement and sent the same to the advocates of respondent No.1 for finalization. However, the same was rejected by the respondent herein. Accordingly, on 5-4-2004, the matter again appeared before the Company Law Board and the same was adjourned to 16-4-2004. 8. On 16-4-2004 the appellant herein filed two applications being company application No. 125 of 2004 and company application No.141 of 2004. The said applications were filed pursuant to the provisions of section 634A of the said Act which inter alia contemplates an enforcement of the order passed by the Company Law Board. The said provisions provide that the said order of the Company Law Board has to be enforced as if it is a decree made by the Court in a pending suit. This applications being No. 125 of 2004 and No. 141 of 2004 were thus contested by filing affidavit. By an order dated 20-7-2004, the Company Law Board heard the said application and has inter alia held that the said order dated 29-1-2004 is not an enf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant not only covered the assets and interest of the shareholders of the company which is the subject-matter of the proceedings but also covered the interest of the petitioners in other family firms and trusts in which other parties are also associated and those firms and trusts are not before the Court and, therefore, the order dated 29-1-2004 cannot be enforced as if it is final, binding and concluded settlement affecting the rights of not only of the parties to the said proceedings but even those who are not the parties thereto. It is these two orders dated 29-1-2004 and 13-9-2004 are subject-matter of challenge by filing the present appeal under section 10F of the said Act. 10. The learned counsel appearing for the appellant has vehemently contended that the order dated 29-1-2004 is legal, valid, binding and enforceable order under section 634A of the said act and the Company Law Board ought to have execute the same as if it is the decree of the Court in a suit. It has been therefore, contended that the Company Law Board has failed to exercise its jurisdiction under section 634 A of the said Act and, therefore, the orders passed by the Company Law Board are required to be qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso appearing for respondent Nos. 2, 3 and 4 and, therefore, the agreement accepted by the said Advocate representing the parties binds each of the said parties. It has been further contended by the learned counsel for the appellant that the order passed by the Company Law Board dated 29-1-2004 is erroneous and bad in law and, therefore, requires to be quashed and set aside. It has been contended by the learned counsel for the appellants that the law is well settled that the Court must support the settlement and seek to enforce the same as far as possible rather than permit the parties to wriggle out from the agreement. It has been further contended that the aim and object of the Court must be to bring the resolution of the dispute as quickly as possible and not to linger the same and, therefore, with the same aim and object the Company Law Board ought to have enforced the order dated 29-1-2004 and ought not to have permitted the respondents to back out therefrom. 11. On the other hand, the learned counsel for the respondent has contended that the order dated 29-1-2004 is not a valid executable order and, therefore, the application made for execution thereof under section 634A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e worked out as final and concluded settlement and, therefore, the said order is not conclusive order which can be executed as if it is a decree in the suit. It has been further contended by the learned counsel for the respondent that the order dated 29-1-2004 is not an executable order. It is only in the form of a broad proposal which was required to be further worked out in its details between the parties particularly in respect of distribution of the assets and properties of the companies, firms and family properties and the trusts. It has been contended by the learned counsel for the respondent company that the Company Law Board was right and justified in holding that the said settlement incorporated in order dated 29-1-2004 is not a binding and valid settlement which can be executed or enforced under section 634A of the Companies Act. It has been further contended by the learned counsel for the respondents that the finding of the Company Law Board that the parties who are likely to be affected being not present before the Court, the same cannot be taken into consideration as their rights cannot be affected without their consent or without they being heard is valid and justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Leather P. Ltd. v. T.N.K. Govindaraju Chettiar Co. [2002] 110 Comp. Cas.474 1 particularly paragraph which reads as under:- "The argument that the agreement would not bind as it was not signed by the parties presumes that order 23, rule 3 of the Code of Civil Procedure in all its rigour, applies to proceedings before the Company Law Board. While it is no doubt true that the safeguards in-built into this provision are meant to promote justice and to minimize possible challenges to the compromise recorded by the court, that provision cannot be read as laying down the only possible way in which the settlement agreed to between the parties should be recorded by the Company Law Board. It is not in dispute that order 23, rule 3 of the Code of Civil Procedure does not in terms apply to the proceedings before the Company Law Board. It is not the case of the appellants that the Board had wrongly recorded what it did record. The appellants had no grievance at all against the record made on that date and do not have any grievance even now with regard to its accuracy and authenticity. There is, therefore, no difficulty in proceeding on the basis that the order did record an agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 (Mad.)] held as follows : "... The submission that the Board had no jurisdiction at all to make the kind of order that was made on that date is also a submission which is required to be rejected. Counsel rightly does not dispute that the Company Law Board can direct the purchase of shares in proceedings under sections 397 and 398 of the Companies Act. While the proceedings that were initiated was one under section 235, that fact by itself is not to be regarded as placing an embargo on orders other than that warranted under section 235 being made, if parties to the proceedings agree to such an order, and such agreement is not against public policy, is not illegal and is not violative of any of the provisions of the Companies Act or any other law, and it is not an agreement which itself is beyond the competence of the Board to record under the provisions of the Companies Act. It is not the case of the appellants that the proceedings recorded on 22-1-1999, are against public policy or illegal or is an agreement which the Company Law Board is prohibited from recording under any of the provisions of the Companies Act or under any other law. The submission that the order is vitiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition that the order dated 29-1-2004 does not dispose of either of the company petitions No. 7 of 2002 or 43 of 2002 both these petitions are kept pending by the Company Law Board being conscious of the fact that the order dated 29-1-2004 is not final and/or finally decided the dispute yet it is only a mere guideline for the purpose of arriving at a settlement. If the order dated 29-1-2004 would have been final and binding on the parties, then the Company Law Board would have disposed of both the petitions in terms of the said order dated 29-1-2004. On the contrary, the order dated 29-1-2004 inter alia, contemplates a further drawing up of consent terms by and between the parties providing for various issues and assets and liabilities of various partnerships, firms, private trusts and other family properties. It further provides for consent of the various parties who are likely to be affected by the consent terms and that only after the said consent terms are drawn up in consultation by and between the parties that the said final settlement was required to be arrived at deciding the disputes between the parties finally. Admittedly, no such settlement has been arrived at by and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant that the third party share in the partnership firms would be enhanced and, therefore, they are not affected. Possibly, under the Deed of Partnership, with the enhancement of the share the liabilities also could be equally enhanced. If that is so, they are necessary and proper parties who should have been present before the Company Law Board before any order affecting their right is passed which can be made executable and final order. In my opinion, the order of 29-1-2004 itself on its own reading indicates that the same is only a broad guideline and is not a final and binding order. Apart therefrom, the order dated 12-3-2004 which has been reproduced hereinabove, makes it further clear that the matter is not finally concluded and, therefore, the order dated 29-1-2004 is not a final order but in the form of guidelines for preparing consent terms which were required to be drawn up for the purpose of disposing of the said petitions settling the disputes finally between the parties. In the light of the order dated 12-3-2004, it is not possible for me to accept that the order dated 29-1-2004 has conclusively decided the rights between the parties and, thus, the said order is not an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oard is invoked by virtue of the provisions of section 10E of the said Act. The provisions of section 10E (1A) specify the power of the Company Law Board which reads as under :- "(1A) The Company Law Board shall exercise and discharge such powers and functions as may be conferred on it before the commencement of the Companies (Second Amendment) Act, 2002 by or under this Act or any other law, and shall also exercise and discharge such other powers and functions of the Central Government under this Act or any other law as may be conferred on it before the commencement of the Companies (Second Amendment) Act, 2002 by the Central Government, by notification in the Official Gazette under the provisions of this Act or that other law." Thus, it is clear that the power of the Company Law Board pertains only in respect of the companies which are covered by the Companies Act, 1956 and it does not extend to the private firms, private trusts and other family properties. To extend such power it is imperative on the Company Law Board to at least have consent of the parties who are likely to be affected by virtue of such settlement which has been proposed and/or to be arrived at as contempla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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