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TMI Blog2022 (10) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... r a character it did not possess, nor did it vest the civil court with a jurisdiction that stood most emphatically ousted. This is not a question of a specific performance being granted by the NCLT but whether the MOD was meant only to compromise the NCLT O M proceedings or whether the compromise was an incident or a consequence of a larger overall settlement. He maintains that the MOD was only to compromise the NCLT proceedings. If that be so, then surely one would expect to find a reference to the NCLT proceedings in the MOD. Other than the last seven words of the MOD, i.e., the withdrawal of the Company Petition, there is no mention in the MOD of the O M Petition. But there is a more telling or important clue that the settlement proposed in the MOD was well beyond the Oppression and Mismanagement Petition. The tabulation of the settlement amount payable to the Kamdars clearly includes amounts that are outside even AMPL, the company itself. They include personal obligations of the Sanghvi families. This could never, therefore, have been a proposal only to settle the Oppression and Mismanagement Petition. It is no answer to say that other matters were also being settled but all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffs, for Demerger Scheme [Exhibit "G" hereto] in accordance with the terms agreed in the said Agreement [Exhibit "A" hereto]. c. That in the event Defendant Nos. 1 and 2 fail and/or refuse to specifically perform the said Agreements as prayed from in prayer (b) above, and do all such acts, deeds, matters and things and execute all such documents as are necessary to give effect to the said Agreement including as stated in b(i) and (ii) above, then, this Hon'ble Court be pleased to appoint an officer of this Hon'ble Court for performing and effectuating the said Agreement in terms of prayer (b)(i) and (ii) above; d. for costs of the suit; e. for such other further reliefs as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case." 3. The Interim Application was for interlocutory relief in these terms. 4. By the order under Appeal, Chagla J restrained the Kamdars, directly or indirectly, from acting contrary to certain Minutes of Discussion ("MOD") or defeating the Plaintiffs' rights under those minutes. The Kamdars contend in Appeal that there is not now, and there never was, a concluded agreement capable for specific performance. The Sanghvis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N Venue : Hotel Taj Lands End, Mumbai Date : 14th June 2019 In meeting : Mr. RD Kamdar, Mr Pradip Kamdar (Gujarat family) Mr. Bharat Sanghvi, Mr Sachin Sanghvi (Maharashtra family) Mr Rajiv Sanghvi (AP& Telangana family) The minutes of discussion and the mechanics of the family settlement agreed to between the participants is as follows: 1. Settlement amount payable to the Gujarat family S.No. Particulars Amount (Rs in Crs) a) Gujarat division and Property (including all its assets and liabilities) 60.00 b) Pune Property 40.00 c) Amount agreed to be paid by AP & Telangana family independently - mechanics of the same to be decided by the AP & Telangana family as part of the Scheme of Arrangement (Demerger) 40.00 d) Investments (based on market value as on 07 June 2019) - refer Point 7 below 51.00 e) Working capital shortfall (upto 31 March 2017) - to be borne from the Investments 25.00 f) Working capital shortfall (1 April 2017 to 30 September 2018) - to be borne by AP & Telangana family independently 18.00 g) Working capital shortfall (1 October 2018 to 30 June 2019) from the common kitty - refer Point 8 below 7.00 h) Interest funding from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The above represents the understanding agreed to between the Gujarat family, Maharashtra family and AP &Telangana family and is without prejudice to the other rights and remedies available to the parties. The detailed understanding and the mechanics would be documented by way of family settlement agreement and Scheme of Arrangement (Demerger) to be filed with the National Company Law Tribunal and withdrawal of the existing Company Petition filed by the Gujarat family. 8. The MoD is signed by the two Kamdars and by Bharat, Rajiv and Sachin Sanghvi, Plaintiffs Nos 2, 1 and 3 (in that sequence). 9. According to Mr Kadam for the Kamdars, the MOD only compromised the pending NCLT O&M proceedings. It did nothing else. Mr Tulzapurkar and Mr Seervai for the Sanghvis say otherwise. They maintain that the MOD settled all disputes, and this is evident from the MOD itself. They also say that the MOD is a family settlement that settles all the necessary and relevant terms. If it contemplates a further document, this is only a formality. That provision does not in and of itself reduce the MOD to a non-binding or not concluded contract. 10. The relevant features of the MOD even viewed neu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of an administrator, an order compelling the Gujarat and Maharashtra divisions to disburse funds to the Gujarat division and an independent valuation of AMPL. Two factors are undeniable. One, that the Gujarat division had run into severe losses. There was an imminent threat from financial institutions. The Kamdars had been asking the Sanghvis to infuse funds to stave off this situation and the resultant crisis. But AMPL had more than its bus and coach business: It held investments, and these were evidently quite significant. A valuation of AMPL would necessarily be an enterprise valuation and would take into account these investments. Now this demand must be read with the MOD itself because the table below Clause 1 of the MOD (page 706) shows that the parties had agreed on a valuation and on the Kamdars/Gujarat division share being Rs. 245 crores. 15. In the meantime, just about a month earlier on 12th July 2020 some of the Sanghvis filed Miscellaneous Application No. 1008 of 2020 for a modification of the 6th April 2018 NCLT order to not change the structure. Thus, by August 2020 there were two Miscellaneous Applications before the NCLT. One was by the Sanghvis (or some of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or buyout the shareholding in the company. The Interim Application was served on the Kamdars with notice that an ex parte application would be made on 16th February 2022, just the day before the hearing scheduled before the NCLT. For whatever reason, the hearing before the NCLT never took place through June and July 2022. In the meantime, on 30th June 2022, Chagla J passed the impugned order. 19. We turn first to an order under appeal. It has an elaborate discussion on facts and law. The relevant facts are set out. The rival submissions are assiduously noted. On the MOD, Chagla J noted that the submission was that this was indeed a family settlement, sufficiently complete to be capable of specific performance. Much case law was cited. It was also submitted that the parties had acted pursuant to and in furtherance and implementation of the MOD. 20. This is in fact the sharpest point of the controversy before us. Mr Kadam says that post the MOD, the Sanghvis repudiated the MOD not only specifically in filings before the NCLT but by their conduct. They cannot be permitted to approbate and reprobate. Mr Tulzapurkar and Mr Seervai on the other hand contend exactly the reverse. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He bore in mind the fact of the Company Petition having been filed and that it was pending. He, however, held that the Civil Court, i.e., his Court had jurisdiction to determine whether the MOD was or was not a family settlement and to decide whether interim relief ought to be granted. He then proceeded to consider several aspects of the MOD in paragraph 84 and inter alia held that the phrase in the MOD that it was "without prejudice to the other rights and remedies available to the parties" was more correctly to be understood as being without prejudice to matters other than those covered by MOD and not, as Mr Kadam would have it, that the entire MOD was not binding. He rejected the argument in terms made by Mr Kadam that the MOD was only an agreement to enter into an agreement. He then considered some of the subsequent events and documents relied on by the two sides after the MOD. He was not persuaded to hold that the MOD merely records tentative discussions under an actual agreement that was yet to be concluded. Ultimately, in paragraph 92 Chagla J concluded that the MOD was no mere compromise of the NCLT proceedings. There is an emphatic finding returned that the MOD is a contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering of the relief sought for by the Defendant Nos. 1 and 2 by the NCLT. Such relief sought for by the Defendants would result in defeating the Plaintiffs' rights under the Minutes of Discussion and/or relief prayed for in the captioned Suit. Thus, in my view, 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. 111. Having arrived at the finding that in my prima facie view, 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. 112. In view thereof, following interim order is passed:- (i) Defendant Nos. 1 and 2, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principles are well established, but as has been observed by Viscount Simon in Charles Osention & Co. v. Johnston '…the law as to the reversal by a court of appeal of an order made by a judge below in the exercise of his discretion is well established, and any difficulty that arises is due only to the application of well settled principles in an individual case." The appellate judgment does not seem to defer to this principle." (Emphasis added) 25. An appellate reversal of a interlocutory order taking a possible view, one not shown to be palpably incorrect or untenable, is impermissible: Mohd Mehtab Khan v Khushnuma Ibrahim Khan (2013) 9 SCC 221., reaffirming Wander v Antox. The appeals court must not usurp the jurisdiction of the Single Judge: Monsanto Technology LLC v Nuziveedu Seeds Ltd. (2019) 3 SCC 381. The trial court must only assess the prima facie case, not conduct a mini-trial. SM Dyechem Ltd v Cadbury India Ltd, (2000) 5 SCC 573; Anand Prasad Agarwalla v Tarkeshwar Prasad & Ors, (2001) 5 SCC 568; Zenit Mataplast Pvt Ltd v State of Maharashtra & Ors, (2009) 10 SCC 388. The appellate court can act only if view taken by the trial judge was either perverse, arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is otherwise ousted by law; (1.3 There was not and there is now not a concluded contract in the MOD or otherwise. At best there was an agreement to enter into an agreement. (1.4 The MOD was incapable of specific performance. It was meant only to settle the disputes before the NCLT and the compromise that it recorded was limited to that Petition. (1.5 The NCLT is sufficiently empowered whether under Order XXIII of the Code of Civil Procedure 1908 or on analogous principles to record a compromise. (1.6 Nobody understood the MOD at any point to be a binding agreement of any kind whatsoever. The Sanghvis have consistently acted in repudiation of the MOD as their filings before the NCLT, their correspondence and their actions show. (1.7 The prejudice caused to the Kamdars is severe. Indeed, it is irreparable and irreversible. The Gujarat unit is now an empty shell. All dealerships are gone. What remains are unpaid debts. The intention of the Sanghvis was clear from their refusal to assist in paying of AMPL's debts. AMPL was always a single entity. It has not been demerged. The debts incurred due to Gujarat's operational losses are still debts to be discharged by AMPL. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. (2) Without prejudice to the generality of the powers under sub-section (1), an order under that subsection may provide for- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 3 of the Code of Civil Procedure 1908 ("CPC") reads thus: "1. …… 2. …… 3. Compromise of suit.-Where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise in writing and signed by the parties or where the defendant satisfied the plaintiff in respect to the whole or any part of the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith so far as it relates to the parties to the suit, whether or not the subject matter of the agreement, compromise or satisfaction is the same as the subject-matter of the suit: [Proviso] … [Explanation] … (Emphasis added) 33. Under Section 424, the NCLT has all the powers of a civil court under the CPC, while not being strictly bound by it. Read together, this meant that the MOD could be recorded as a compromise by - and only by - the NCLT; assuming that both sides saw it as capable of being recorded as a compromise. If the Sanghvis repudiated it, by word or deed, then what remained was the undoubted power of the NCLT i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. and State of Karnataka v Vishwabharathi House Building Cooperate Society & Ors. (2003) 2 SCC 412. If the NCLT is not bound by the CPC, it can go further than what the CPC allows. Its only fetter is to observe the principles of natural justice. We are unable to see how this will carry Mr Kadam's case further on the question of the ouster of jurisdiction of the civil court. It surely cannot be the suggestion that the NCLT can decree specific performance. 37. The answer from Mr Tulzapurkar and Mr Seervai runs along these lines. It is settled law that the ouster of a Civil Court jurisdiction is not to be read expansively but is to be narrowly construed: See: Dwarkaprasad Agarwal vs Rameshchandra Agarwal, paragraph 19. (2003) 6 SCC 220. The simplest test, as they put it, is to ask whether the NCLT could ever decree specific performance. When Mr Kadam derides the plaint by saying that a mere incantation of specific performance is meaningless, Mr Tulzapurkar and Mr Seervai point out that that is not so. There are many things that are to be decided and which are exclusively within the remit of the Civil Court. For instance, if it is Mr Kadam's case, as he now clarifies, that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lities to be worked out and details to be captured. But that does not mean, and it is not the law, that every single detail has to be encapsulated. Whatever be the phraseology, and even if the MOD says that a "detailed understanding" is yet to happen, this only means that the mechanics and the detailing remain. These would be incorporated in a more formalised family settlement and a scheme of demerger that are yet to come. The law in this regard is also, in our view, against Mr Kadam, as rightly held by Chagla J. As the Supreme Court said in Hari Shankar Singhania & Ors v Gaur Hari Singhania & Ors (2006) 4 SCC 658., family settlements are not approached with the same degree of rigour or strictness as commercial contracts. The purpose of an agreement is to bring about a negotiated rapprochement between family members. There may be a severance of formal relations but the other public purpose, one of broad policy, is to put an end to long and fruitless litigation within a family. Technical considerations must yield to a furtherance of an avowed objective of settlement. In Shivanand Vassudev Salgaoncar & Ors v Dattaraj Vassudev Salgaoncar 2014 SCC OnLine Bom 1250., a matter argued befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw cited in this regard and particularly the question as to whether an agreement is valid, subsisting and binding and if this can only be dealt with by a Civil Court. This discussion is important because in paragraph 44 the learned Single Judge noted the submission made by Mr Tulzapurkar that the NCLT did not have jurisdiction at all over the subject suit. This is a logical sequitur from the finding that the MOD is a valid and binding family settlement, and that it is required to be given effect to and brought to fruition. If this be so, then it is not possible to fault the view Chagla J preferred. 45. This narrows considerably the scope for the remaining discussion before us. The next area is an assessment of Mr Kadam's case that there was a repudiation by the Sanghvis of the MOD. He bases this principally on affidavits filed in one or the other of the two Miscellaneous Applications before the NCLT. It is true that the Sanghvis sought a modification of 6th April 2018 order, but this will have to be read in context, as Chagla J correctly found. The 6th April 2018 order said that the structure of the AMPL was not to be changed. What was that structure? The Kamdars were in charge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cture for the Gujarat Division could not be allowed to continue. This is even more relevant in the context of the Gujarat Division having incurred losses and the Kamdars constant reminders to the Sanghvis to infuse funds. As page 363 shows, the Kamdars made an application in August 2020 before the NCLT inter alia asking for disclosure of assets, valuation and demanding accounts. Prayer (a) of that application sought an inventory of assets and properties of AMPL. If anything, it was therefore the Kamdars who were attempting to scuttle the MOD and not the other way around. 47. Mr Kadam refers to an Affidavit filed by Sanghvis (page 1072 of volume 5). The emphasis is on a stray line that the Kamdars had failed to "finalise the settlement proposal so far". But this isolated instance does not assist the Kamdars or Mr Kadam. The very same paragraph later re-emphasised that there was MOD signed on 14th June 2019 but that had been stalled. The context in which this application was made was the Kamdars' demand for more funds. The concluding portion of this paragraph in the affidavit by the Sanghvis actually reaffirms the MOD and points out that the Kamdars were seeking a release of funds a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even words of the MOD, i.e., the withdrawal of the Company Petition, there is no mention in the MOD of the O&M Petition. 52. But there is a more telling or important clue that the settlement proposed in the MOD was well beyond the Oppression and Mismanagement Petition. The tabulation of the settlement amount payable to the Kamdars clearly includes amounts that are outside even AMPL, the company itself. They include personal obligations of the Sanghvi families. This could never, therefore, have been a proposal only to settle the Oppression and Mismanagement Petition. It is no answer to say that other matters were also being settled but all that was being compromised was the NCLT Petition. The MOD attempted to put a quietus to all disputes by separating out the Kamdar family. 53. We also do not find substance in Mr Kadam's submission that the plaint, a copy of which is in Volume IV, contains a denial, let alone in paragraph after paragraph as Mr Kadam says, by the Sanghvis of the binding nature of the MOD. He draws reference to paragraphs 3.11 to 3.13 at page 685 of Volume IV. We reproduce those below: "3.11 During the pendency of the aforesaid Company Petition, the parties held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the MOD. 55. Mr Kadam makes reference to the decision of the Supreme Court in Gujarat Urja Vikas Nigam Ltd v Amit Gupta (2021) 7 SCC 209. In particular he emphasises paragraphs 38.9 which dealt with the decision of the Supreme Court in Embassy Property. That observation is actually against Mr Kadam. The NCLT's powers are, as Embassy Property says, 'scattered all over the Companies Act', but this does not mean that the NCLT has a jurisdictional remit beyond the Companies Act or any other statute that expressly confers powers on it. Paragraph 77 of Gujarat Urja also deals with Embassy Property to the same effect. 56. Mr Tulzapurkar approaches the matter somewhat differently. Once it is shown, he submits, that the parties between them (and is at pains to emphasise that not just one side but both) took steps in implementation or furtherance of the MOD or had discussions, though perhaps unfruitful, pursuant to the MOD, then the Kamdars cannot possibly deny that the MOD was a concluded contract. The minute that cannot be denied, he submits, and we think correctly, the rest must necessarily follow. We find from a list of dates as also from the impugned judgment itself in paragraph 35(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the NCLT in paragraph 8.4 at page 21 contain an assertion by the Kamdars that the MOD was merely a document that set out the terms of a possible settlement being explored. It is then also asserted that neither side had acted on the documents and that the Sanghvis had repudiated the MOD. According to the Kamdars. the pleadings evidenced that the Sanghvis did not treat the MOD as a concluded contract. This exposes the peril of saying too many things in too many places. If the MOD's execution is not denied, then this assertion in paragraph 8.4 is itself sufficient ground to grant the Sanghvis an injunction in their specific performance suit. We were also shown an email dated 19th August 2020 at page 801 of Volume IV. Here, the Kamdars' lawyers responded to a series of steps of modalities suggested by the Sanghvis for implementation the MOD. One of these was the purchase a property from AMPL. The Kamdar said this was acceptable - but they wanted a higher consideration. This remains unexplained by the Kamdars. It is wholly inconsistent with their argument that there was no concluded contract in the MOD. 58. On the nature of the two actions, Mr Tulzapurkar draws attention to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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