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TMI Blog2006 (8) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;B' and Respondents' group, styled as Group 'A', each hold 19.1% shares in the company. There had been certain disputes between the two groups consequent to which certain memorandum of family settlements providing for joint and equal participation in the management of the company were entered into, the terms of which were also incorporated into the Articles of the company. Yet, disputes did not end and this petition happened to be filed. Since the company is essentially a family company, this Board advised the parties to resolve the disputes amicably by dividing not only the company but also, all other family businesses and assets equally so that there was a complete parting of ways between the two groups. It was agreed that Group B would prepare two equal lots and Group A would have the first option of choosing one lot. Accordingly, in the hearing held on 14.2.2000, Group B gave a proposal of dividing the assets and businesses of the family including the company into two lots - Lot 1 containing the Jalandhar and Ambala Units and the Lot 2 containing Delhi and Jaipur Units. Thereafter, Group B gave a modified proposal on 7th March, 2000 again dividing the assets a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure equal division, I have to appoint an independent person, preferably, a retired High Court or Supreme Court Judge to supervise and complete this exercise. Accordingly, the matter is fixed for further consideration on 14th July, 2004 at 2.30 p. m at which time Group A should indicate as to whether they are willing to take the 2nd lot as given by Group B on 7th March 2000, or they would like to have the division done equally by an independent person ( with Jalandhar and Ambala with Group B and Delhi and Jaipur with Group A). In the later case, both the sides should also indicate whether they are willing for including all the firms as well as other family interests in the division so that there would be a complete parting of ways between the two groups. They will also indicate the name of a retired Judge mutually acceptable to both Group s failing which I shall appoint one and give further directions . 3.This order was taken on an appeal before Punjab Haryana High Court wherein the parties had agreed to settle the disputes amicably. Accordingly, the court passed the following order on 19.10.2005: The appellants, as well as, Group A have decided to settle the matter amicab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the revival parties, who have obtained the consent of their clients. - In view of the above, the impugned order passed by the Company Law Board is set aside and stands modified as above. Disposed of accordingly. Order dasti on payment of usual charges . 4.Consequent to the order of the High Court, Group B filed CA 318 of 2005 stating that the amount of ₹ 24 crores as directed by the High Court would be deposited before this Bench at the time of hearing and that till such time the settlement was worked out, the amount should be kept in an interest bearing deposit. It was further stated in the application that several clauses to the modified proposals given on 7.3.2000 had become either redundant or unworkable owing to lapse of time and therefore appropriate directions were required to be given in this regard. It was further sought in the application that Group B should be permitted to avail banking facility of ₹ 12.5. crores sanctioned by Vijaya Bank to meet the company's working capital need and that appropriate directions should be given to the Estate Officer, Chandigarh Administration to permit Group B to acquire and take possession of 4 plots allot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siphoned of large amounts form the company. In terms of the proposal dated 7.3.2000, all amounts as are available with the company and to be received are to be equally divided between the two groups. In their reply to this application, Group B has stated that the amount as shown in the balance sheet as on 31st March, 2004 and 31st March, 2005 were not available with the company as on date. Further, the figures in the balance sheets cannot be relied on by Group A as the balance sheet has not been approved in any board meeting or general meeting and even the assessment has not been completed. As a matter of fact, a revised balance sheet has already been filed with the Income Tax authorities. Further, Delhi Unit under the control of Group A owes large sums of money to Jalandhar Unit under the control of Group B Further, the figures shown in the balance sheet as on 31.3.2005 comprised of about ₹ 10.5 crores in Mumbai bank account and about ₹ 12.67 crores in the bank accounts of Delhi unit. Further, Group A cannot claim and are not entitled to any money belonging to Lot-1 which has been allotted to Group B. Group A is not entitled for equal share of assets as of date in vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s falling to the share of the other side. As a matter of fact, Group B did not need permission from this Board but in view of the Vijaya Bank putting the said condition, Group B applied to this Board for permission. Later on, Vijaya Bank itself had waived the afore said condition and sanctioned the credit facility which Group B has availed. Before sanctioning the credit limit, the Vijay Bank was convinced that assets of only Lot-1 which have been vested with Group B group in terms of the High Court order had been given as security. Since Group B had already parted with ₹ 24 crores, they were in need of funds for upgradation of the printing facility at Dharamsala, Jammu, Jalandhar and Ludhiana. Such upgradation was necessary to ward of competition from Jagran . 7.Thereafter, Group A filed CA 134 of 2006 in terms of Section 634A of the Act seeking for implementation of the order dated 19.10.2005 of Punjab and Haryana High Court and to award lot-2 to Group A and for a direction for dissolution of Hind Samachar Limited. 8.These applications were heard on a number of days. The learned counsel appearing for Group B submitted: In terms of Clause (xx)(1), the amount of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 19.10.2005 only provides that one group should not deal with the assets of the other group till the settlement is worked out and there is no bar in one group dealing with assets falling within its own lot. However, the bank has already sanctioned the limit and the company has already availed the credit facilities. In so far as land at Chandigarh is concerned, that land automatically falls within Lot-1 and only to avoid payment of penalty, Group B has sought for directions to the Estate Officer, Chandigarh to handover possession without levying any penalty as the delay in taking possession is on account of Group A not cooperating with Group A earlier as is evident from the earlier proceeding before this Board. 10. Shri Tikku appearing for Group A submitted: It is wrong on the part of Group B to contend that only a sum of ₹ 5.13 crores is lying in the credit of the company's bank account. They have not disclosed the balance available in the company's account as per the balance sheets. As per the balance sheet filed by them as on 31st March, 2004 with the Income Tax Department, there was a cash and bank balance of ₹ 32.50 crores. If the income for the year end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h all other requirements as per the modified proposal dated 7.3.2000. 11.I have considered the pleadings and arguments of the counsel on all the applications. It is unfortunate that alter having agreed to resolve the disputes amicably before the High Court, instead of working out the ways and means of amicable parting of ways, both the sides have made fresh allegations against each other. From these applications, I find that unless and until the issues raised in these applications are decided, it is not possible to implement the order of the High Court dated 1910.2005. That is the reason why I also directed that the drafts far the amount of ₹ 24 crores tendered by Group B be deposited in the name of this Board till the issues were determined. As far the issues raised in these application are concerned, I am giving below my findings on each of them. 12.Is Group B entitled to raise credit facilities in the name of the company: Group B has contended that in view of the order of this Board dated 17.5.2004, the company is to be with Group B and therefore, they had availed the credit facility in the name of the company. It is to be noted that in the order dated 17.5.2004, I h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding the fact that assets falling with that group only have been given as security. Further, when their application seeking for permission to avail the facility was pending, they could not have availed the facility. Anyway, since Group B has already availed the credit facility, it will, in accordance with clause (xxiii), register a new company and the facility now availed should be transferred that company. This should be done at the earliest. Hind)Samachar Ltd shall be wound up in accordance with the terms of the proposal dated 7.3.2000. 13.Whether Group A is entitled to exercise other options provided in Lot 2: It is the contention of Group B that since Group A had exercised the only option of accepting ₹ 24 crores before the High Court as per the option available to them in terms of Clause (xx) of the modified proposal, they are not entitled to exercise other options provided in Lot-2. I do not find any justification in this contention of Group B. It is recorded in the High Court order It has been agreed that appellant will be entitled to Lot-2 in terms of the enclosures accompanying the letter dated 7.3.2000 constituting proposal formulated by Group A ..Additionally, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to decide a case of more or less similar in facts as that of the present case in Prakash Nath v. Achal Nath (111 CC 711 CLB). The facts of that case were that the company was incorporated in Lahore in 1939 and the registered office was transferred to Delhi in 1967. The parties to the proceedings were family members of two brothers. The first petitioner Shri Prakash Nath, was one of the brothers and the first respondent was the son of the other brother, Shri Ashok Nath. The company was being managed by both the brothers jointly till about 1990. On April 8, 1990, a family settlement was arrived at between the brothers in the presence of five Panchas. Pursuant to this family settlement, further discussions were held between the parties with the assistance of the Panchas and finally, the company was divided into A and B Divisions with effect from November 30, 1992, pursuant to a memorandum dated August 29, 1992, by which Division A was taken over by Shri Ashok Nath while Division B was taken over by the first petitioner and these divisions were being independently managed by these two groups right from November 30, 1992. Both the groups held 50% share in the company. Group B filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace as for as the affairs of the units under the two groups are concerned. During the past few years of their independent management of the their respective units, they would have created further assets and incurred further liabilities and it would be inequitable to direct sharing of the same between the two groups. Further, there also does not appear to be any inter group transactions after the disputes had started. Even though the counsel for Group A contended that there were inter group transactions, in spite of my repeated reminders to him to give a list of such transactions, he did not do so. Therefore, I am of the view that as in the above case, and also as contended by Group B, the effective date to determine the shareable assets and liabilities should be the date on which both the groups started managing the affairs of the units under their control independently. However, it would be impossible to determine/pin point the said date and therefore it has to be decided on a rational basis. Since the proposal was given on 7.3.2000, I consider it appropriate that the effective date, in so far as sharable assets and liabilities in terms of the proposal should be 31st March 2000. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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