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TMI Blog2012 (5) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... unded on the principles of justice and equity- If, according to the CLB, the issues that arose in the company petition had already been conclusively decided in previous proceedings for the principles of res judicata or constructive res judicata or issue estoppel to apply, it flies in the face of reason and logic that the CLB would still grant permission or leave to the petitioners before it to resurrect a matter that had already been previously concluded against them - The respondent no.1 will pay costs assessed at 3000 GM to the appellants - matter will now be heard by the CLB afresh open to arrive at the same conclusion as in the impugned order on the objection pertaining to the appellants' share qualification but with cogent reasons in support thereof - APO NO. 370 OF 2011 AND ACO NOS. 74 and 150 OF 2011 - - - Dated:- 19-4-2012 - SANJIB BANERJEE, J. ORDER The Court : Though this appeal under Section 10F of the Companies Act, 1956 appears to be only another round of skirmish between two opposing groups in a matter pertaining to the control of a company, there are certain other striking features that engage the attention beyond the theatre of conflict between the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst the appellants, they say that the CLB erred in law in failing to appreciate the scope of the other proceedings involving some or all of the parties herein and the judgment impugned betrays complete ignorance of the principles referred to therein. 4. The disputes are between the appellant Godha group and the respondent Kala group. Though any reference to facts has to be kept to the barest minimum in the context of the present appeal, a summary may be culled out from the list of dates prepared by the contesting respondents. 5. The company, Universal Paper Mills Limited, was incorporated in 1972 and it established a paper mill in Jhargram. In or about 1988-89, the first appellant, Dharam Godha, and his associates and concerns owing allegience to him came to control the company. Within a year of the first appellant coming to the helm of the company, its net-worth turned negative and a reference relating to the company was made to the Board for Industrial and Financial Reconstruction under the Sick Industrial Companies (Special Provisions) Act, 1985. In June, 1997 the company's paper mill was devastated by a fire. A claim was made by the company but it was rejected by the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had apparently been made to other creditors of the company. 8. The proceedings under Sections 397 and 398 of the Companies Act were initiated in February, 2007. It was stated in the petition that the original suit instituted by the petitioners before the CLB, CS No.37 of 2004, would be withdrawn since the matters covered by such previous suit had been incorporated in the petition before the CLB. The second suit was filed by the appellants subsequent to the institution of the CLB proceedings and such suit remains pending though its continuation has been arrested since the writs of summons therein were not served on the defendants in the suit within any reasonable time of the institution of the action. 9. It is necessary to now refer to the proceedings before the Debts Recovery Tribunal (DRT), the National Consumer Disputes Redressal Commission (NCDRC) and the Board for Industrial and Financial Reconstruction (BIFR) since the orders passed in such proceedings weighed with the CLB in passing the impugned order. As noticed above, an initial order was made by the appropriate DRT on the application of a secured creditor that restrained, inter alia, the alienation of the fixed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der was passed by the BIFR on September 5, 2008 where the Board noticed that the company which was the subject of the reference before it had sold its assets, including its factory. The Board observed that the sale of the company's factory had been made prior to an order dated March 8, 2007 issued under Section 22A of the said Act of 1985 to restrain the company from disposing of its assets without the approval of the Board. The Board also observed that upon the sale of the manufacturing facility of the company, it had lost its industrial character and, as a consequence, the company was no longer amenable to the provisions of the said Act of 1985. 12. The BIFR order of September 5, 2008 was carried in appeal in the name of the company but with the Godha group seeking to espouse the company's cause. The Appellate Authority for Industrial and Financial Reconstruction (AAIFR) passed an order on January 14, 2010 which is of some relevance. As usual, the disputes between the two groups as to the control of the company took centrestage in the proceedings before the AAIFR and much of the order dated January 14, 2010 was devoted to such disputes. Paragraphs 20 and 27 of the AAIFR order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of the BIFR. The AAIFR, thus, did not recognise the transfer of the management of the company to the Kala group, accepted that the Godha group was entitled to the management of the company and gave further directions for the revival of the manufacturing unit of the sick industrial company by brushing aside the suggestion that the factory of the company had been transferred in the interregnum to an apparent outsider. 14. Two sets of proceedings arose from the AAIFR order of January 14, 2010. The Godha group instituted proceedings under Article 226 of the Constitution of India before the Delhi High Court complaining of the AAIFR having failed to pass further orders as sought. No meaningful order was passed on such petition and it is unclear whether it remains pending. The Kala group carried the AAIFR order to this Court by way of a writ petition complaining of the impropriety thereof. On the writ petition filed in this Court, an ad interim order was passed requiring status quo to be maintained or, in other words, the management of the company to remain with the Kala group. Such order was carried in appeal. The Appellate Court retained the Trial Court order but made some key ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, rather than reinstating the Godha group, the AAIFR recognised that only the Godha group could be legally in control of the management of the company. The AAIFR also understood it to be within its domain to undo a transaction of alienation of the company's manufacturing facility during the pendency of a reference under the said Act of 1985. 16. It must also be appreciated that though there is an ad interim order passed in proceedings under Article 226 of the Constitution of India arising out of the AAIFR order of January 14, 2010, the AAIFR order has not been altogether obliterated nor has the appellate order of March 2, 2010 to be seen as a complete substitute for the AAIFR order. The position is to be decided only after the writ petition is conclusively disposed of. It is only an ad interim order that governs the field. 17. CP No. 201 of 2007 had been taken up for final hearing in the year 2009 and judgment reserved at the conclusion of the hearing. It transpires, however, that the then Chairman or officiating Chairman of the CLB demitted office without delivering the final judgment. In course of the CLB proceedings, upon the sum of Rs. 5 crore being deposited with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erious questions of law arose in such appeal and obtained an order that the application in the nature of demurrer had to be considered first by the CLB. The present appellants did not relent, but carried the Section 10F order by way of a special leave petition to the Supreme Court. The special leave petition was not entertained and was summarily dismissed but the Supreme Court observed, in the order dated May 4, 2011, as follows: "However, we direct the Company Law Board to expeditiously hear and dispose of pending Company Petition No.201 of 2007, preferably by 30th June 2011." 19. Whatever may have been the effect of the order passed by this Court under Section 10F of the Companies Act for the demurrer application to be heard out first, it is evident that the entire proceedings were directed by the Supreme Court to be disposed of by June 30, 2011. The CLB, however, considered only the demurrer application and rendered judgment thereon on June 30, 2011, the very last date of the deadline set by the Supreme Court. 20. The appellants suggest that the CLB misdirected itself and it is apparent from the face of the order impugned that the principles as to res judicata, issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable on a point of law, in the sense that such assertion is utterly unsustainable in any circumstances, the assessment of the qualification, and the consequent right of the party to institute the proceedings for oppression and mismanagement as a shareholder of the company, has to be based on an investigation into the facts pleaded in support of the qualification. Notwithstanding the view taken by the concerned member of the CLB in the Khanna case having been set aside, the legal basis of such overruled order has been reiterated without any application of mind in the judgment impugned in the present proceedings. 22. Upon considering the brief facts pertaining to the disputes between the two sets of parties and the several proceedings referred to hereinabove, the CLB rendered its substantive findings at paragraphs 28 and 29 of the report that need to be reflected herein in some detail, if only to demonstrate how every sentence and the next therein cannot be supported on the basis of elementary legal principles and the most rudimentary judicial acumen : "28. When C.A. No. 210/11 was mentioned on 13.04.2011 the date on which the matter was fixed for final hearing, on the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qua the issues in challenge in the C.P. But the Respondents/Petitioners being dominus litus have made their election - they have chosen their fora and have been pursuing and insisting on the same reliefs which are sought in the C.P. on the same cause of action challenging all the issues. In 2004 suit they challenge one issue, they fail to get relief, try their luck by filing Company Petition No. 201/2007, but decide not to mention the C.P. for 10 months and file another suit in 2007 challenging the remaining issues, do not disclose filing of Suit of 2007 to the CLB when they inform withdrawing of Suit of 2004 requesting CLB to proceed with the matter, Suit of 2007 is filed prior to mentioning of the C.P. No. 201/07. CLB is not informed, nor do they inform the Hon'ble High Court at Calcutta that there is a prior Suit pending. It is not a case of prior suit(s) alone. There are parallel proceedings. There are other proceedings as well. All proceedings have not been disclosed. If this is not abuse of the process of the court, what else is abuse of the process of the Court? What if the CLB had disposed of the C.P. during the pendency of the self same grounds in other proceeding arriving ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 113/07 only since Suit No. 37/04 stands withdrawn without liberty to file a fresh suit, in any case a fresh suit has also been instituted) are prior in time. Continuation of the Suit and agitating of the issues before different fora including the AAIFR of the same issue which are in the C.P. has not been discontinued by withdrawing those proceedings. The Respondents/Petitioners have pursued and are pursuing parallel proceedings before BIFR/AAIFR, Civil Suits in Hon'ble High Court, DRT, NCDRC, Writ Petitions for the same cause of action, seeking same reliefs, calling upon every Court to adjudicate upon same issues. There is multiplicity of proceedings which would result in conflicting orders gravely impairing the sanctity of orders by different fora. Whenever there are parallel proceedings before concurrent judicial authorities, one proceedings is stayed in order to avoid conflicting orders, but there is no bar on instituting such proceedings except where such proceedings are instituted with a view to abuse the process of Courts. This is clearly an abuse of the process of the Court as rightly contended by R-25. Abuse of process does not depend upon success or failure, it depends up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that betray, unfortunately, a complete ignorance of the member as to the matters that were being considered, if the other sinister insinuation made by the appellants is to be disregarded. There is a line in paragraph 28 where the member says, "( t )here is no quarrel as to what the ingredients of res judicata and issue estoppel are " However, the member does not elaborate on the ingredients of such legal principles. 25. If the NCDRC did not decide the issue as to which group was entitled to the management of the company, if the AAIFR order as it now stands modified by the appellate order of March 2, 2010 has expressly left the CLB free to decide all matters before it and if the DRT order refused to go into Godha's allegation that the only meaningful asset of the company had been alienated despite the DRT injunction thereon, it is baffling that the CLB abdicated an authority vested in it by law in referring to some doctrines without the least indication of any comprehension thereof and throwing out a matter that it was statutorily obliged to consider. 26. There is a further line in paragraph 28 of the impugned judgment to the effect that " (t) here are parallel proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been directed to consider CP No.201 of 2007 unfettered by the observations or the directions in the order passed in the writ proceedings and unconstrained by the pendency thereof. This appears to have been completely lost on the CLB. 28. In the opening sentence of paragraph 29 of the impugned judgment, the CLB has found the appellants guilty of "forum shopping by filing multiple petitions before different for a based on the same cause of action." If such unintelligible sentence is accepted at face value and the English therein is disregarded, it appears that the CLB found that the appellants had approached divers fora by way of several proceedings for the same cause. The NCRDC proceedings were instituted by the company following the rejection of an insurance claim. The tussle as to the entitlement of either group to the management of the company was not integral to the matter before the NCDRC nor had such proceedings been instituted by the appellants herein for the purpose of asserting or establishing their control over the company. The DRT proceedings had not been launched by the appellants. If the CLB had condescended to see the 1993 Act, it may have dawned on it that pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons reflected in paragraphs 28 and 29 of the judgment to conclude that it was "not a case of merely parallel proceedings or prior suits wherein subsequent suits/proceedings can be kept in abeyance . . . a litigant cannot try his luck everywhere and all the time. There is suppression of material facts and abuse of process of law . . . such an abuse has to be put to an end." The sentiment expressed is most profound, the words are wisely said and there can be no manner of doubt that upon a litigant being found to indulge in multifariousness and abuse of the judicial or quasi-judicial process, the harshest of consequences should visit such litigant. The question is whether the judicial or quasi-judicial emotion reflected in the passage of 30 of the judgment matched the facts of the matter that was before the CLB. A judicial view has to be expressed on a set of facts by referring to the facts and applying the legal principles thereto; a judicial sermon with no relevance in, or reference to, the facts would be like the six blind men touching an elephant in its different parts to draw their varying conclusions on the make-up of the animal. 31. It is evident from the impugned judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion thereafter is that the petitioners before the CLB made "false, incorrect, incomplete and contradictory statements . . .on oath." 34. It may be presumed for the sake of argument that the allegations in the plaint relating to CS No.37 of 2004 were false. But that would not, by itself, permit a judicial or a quasi-judicial authority in seisin of any subsequent proceedings to dismiss the subsequent action. In any event, there was no finding rendered by the Court in CS No.37 of 2004 as to the veracity of the allegations contained in the plaint relating thereto. Such suit was unconditionally withdrawn by the petitioners before the CLB subsequent to the petition before the CLB having been filed and in accordance with the indication in the petition therein that the previous suit would be withdrawn. 35. The matter can be viewed from another perspective. The CLB may have proceeded on the basis that the first allegation made by a litigant on a particular matter had to be taken as correct. In such event, the allegations contained in the petition before the CLB, to the extent they were at variance with the contents of the plaint in CS No.37 of 2004 could be regarded to be false or u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court now being parked with tribunals manned by bureaucrats or non-judicial members with no legal training or acumen. What is evident from the impugned judgment is bound to follow if matters as to justice and equity that many have spent their lives without fully comprehending are left to tribunals manned by the uninitiated to pronounce upon; justice then becomes the casualty and inequity the order of the day. 38. The order impugned and the judgment in support thereof are set aside. If the observations here appear to be harsh to the CLB or the concerned member it is because the facts warrant it. There seems to be an obvious systemic flaw that needs to be addressed immediately. 39. The respondent no.1 will pay costs assessed at 3000 GM to the appellants. The matter will now be heard by the CLB afresh and it will be open to the CLB to arrive at the same conclusion as in the impugned order on the objection pertaining to the appellants' share qualification but with cogent reasons in support thereof. At any rate, the matter should not be taken up by the member who had rendered the judgment and order impugned in the present proceedings. It is desirable that since the Eastern Regi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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