Company Law Board
Shri Ashok Kumar Oswal And Calgary ... vs Panchsheel Textile Manufacturing & ... on 22 March, 2002
Equivalent citations: [2002]110COMPCAS747(CLB)
ORDER
S. Balasubramanian, Vice Chairman
1. CP No 49/2001 filed the petitioners was disposed of by an order dated 24.2.2002 in the following terms: "In facts of this case, that the company is a family company with two brothers, equity demands that the control of the company should go to the petitioner which proposition is not opposed by the respondents also as revealed during the hearing. The only stipulation by the respondents for handing over the control of the company to the petitioner is that, the shares of M/s Vardhman held by the company should be divided between the petitioner and the 4th respondent in the ratio of 69:32. We would have supported this view, as this Board had done in James Fredric case(supra) but for the fact that with the conversion of warrants in M/S Vardhman, the shareholding of the respondents' group in that company would go up considerably and in such a situation, the distribution of the shares as suggested by the respondents would be prejudicial to the interest of the petitioner. Therefore, notwithstanding the merits of the case, purely on equitable grounds, we feel that the control of the company should go to the petitioner along with all assets and liabilities of the company. Accordingly, we direct that as and when the petitioner assumes/discharges all the liabilities of the company, more so the liability towards ICICI and releases the 4th respondent and his group companies from whatever gurantees they have given in respect of this company, the 10000 shares shall stand cancelled and the share capital of the company will be reduced to that extent on refund of Rs. 1 lac that was received as consideration for these shares to the respondents. Simultaneously, all the loans taken by the companies under the control of the 4th respondent from this company will be repaid, and the petitioner will also acquire the preference shares held by 4th respondent and his group at the face value. Till that time the Board will continue as it and notices for the board meetings to all the directors will be sent by Registered post with at least 7 days clear notice and their signatures taken in the attendance register. As and when all the obligations as per this order on the petitioner are discharged, he will purchase the other shares held by the 4th respondent and his group at face value and the 3rd and 4th respondents will cease to be directors of the company. Till then, no voting rights held by the company in M/s Vardhman shall be exercised in any matter which would affect the status of the status of the petitioner or that of the 4th respondent in that company".(PARAGRAPH 35)
2. The respondents have filed CA 45/2002 dated 4.2.2002 seeking for correction and modification of certain terms of paragraph of the said order for the reasons stated in the application.
3. Shri Mookerjee appearing for respondents 2,3, and 4 submitted: The main contention of the petitioners in the petition is that the company belonged to them which was disputed by the respondents and this was the major issue to be decided by this Bench. However in paragraph 35 of the order it is stated that "equity demands that the control of the company should go to the petitioner which proposition is not opposed by the respondents also as revealed during the hearing". The later portion of this sentence "which proposition is not opposed by the respondents also as revealed during the hearing" would indicate as if the respondents had made this concession. At no point of time, the respondents had agreed to hand over the company on equitable consideration to the petitioners as is evident from the pleadings as well from the recording of the arguments of the counsel in the said order. Since the CLB order shows as if the respondents have made certain concession, it would prejudicially affect if the CLB itself does not correct the same. In State of Maharashtra v. R.S. Naik (1982 2 SCC 463) , the Supreme Court has held that "Statements of fact as to what transpired at the hearing, recorded in the judgment of the court are conclusive of the facts so stated and no one can contradict such a statements by affidavit or other evidence. If a party thinks that the happenings in the court have been wrongly recorded in a judgment, it is incumbent upon the party while the matter is still fresh in the minds of the judges, to call the attention of the very judges who have made the record to the fact that the statement made with regard to his conduct was a statement that had been made in error. That is the only way to have the record corrected". The CLB has passed the order on 25th Feb., 2002 and this application has been made on 4th March, 2002 itself. Therefore, it would be appropriate that this Bench should delete the words "which proposition is not opposed by the respondents also as revealed during the hearing"
4. Learned Counsel further submitted: Even though on merits of the case, the Bench had concluded that the petitioners had not established the allegations contained in the petition and had also endorsed the proposal of the respondents to divide the shares of M/s Vardhman held in the company in the ratio of 68:32, yet it had given the control of the company to the petitioners purely on the ground that on conversion of the warrants, the shareholding of the respondents' group in M/s Vardhman would go up substantially. Even though the presumption of the Bench on the day of conclusion of the hearing was valid, yet, such a presumption is no longer valid due to the events that had taken place between the conclusion of the hearing and the date of the order. The order of the CLB is based on the presumption that M/s Vardhman would convert the warrants and that the respondent company would not do so. In that situation, the petitioner would have around 33% and the respondents 39.5% if the shares held by the company in M/S Vardhman had been distributed in the ratio of 68:32. However, the Board of Directors of M/S Mahavir which held a large percentage of warrants had decided not to opt for conversion of the warrants into shares even before the last date of option on 19.2.2002. Now the situation is, in view of the order of the Bench, that the petitioners would have about 36.5% and the respondents 15.54% in M/S Vardhman. If the shares of M/S Vardhman held in the company is distributed in the ratio of 68:32 as suggested by the respondents, then, the petitioners would have 28.22% and the respondents 23.8%. Since this Bench has passed the order on equitable consideration, the same consideration should be applied in distributing the shares of M/S Vardhman held by the company in the ration of 68:32 so that the respondents are not adversely affected. As far as the poser of the Bench to Modify the order after the final order is passed is concerned, the CLB has the power to modify its order in terms of Regulation 44 of the CLB Regulations even after a final order is passed. This proposition has been upheld by the Madras High Court in Shoe Specialities Private Ltd. v. Standard Distilleries and Breweries Pvt. Ltd. (19 CC 1) wherein it has held that that the CLB has inherent powers in terms of Regulation 44 of the CLB Regulations to modify an order even after the final order is passed. Since the circumstances have changed between the date of conclusion of the hearing and date of passing of the order, the intervening events which would affect the final decision of this Bench can always be taken into consideration in modifying the order. Accordingly, paragraph 35 of the order dated 25.2.2002 should be modified by directing the distribution of shares held by the company in M/S Vardhman in the ratio of 68:32.
5. Shri Sarkar appearing for the company submitted: It was he who had submitted as is recorded in paragraph 16 that to put an end to the disputes between the parties, the shares held by the company in M/S Vardhman be divided in the ratio of 68:32. Other that this, he never made any submission that on equitable grounds, the company could be handed over to the petitioners with all assets and liabilities. Therefore, to this extent to reflect, the correct submission, the order should be modified. As far as the division of the shares in the ratio of 68:32 the court has inherent powers to modify the order if the state of affairs which prevailed during the hearing had changed between the date of conclusion of the hearing and the date of the order.
6. Shri Choudhry appearing for the petitioners submitted: This application is misconceived. If the respondents allege that there is mistake of law in the order, they could move the High Court on an appeal and cannot seek for review of the order. If they allege mistake of facts, they should have brought the same before the Bench before the final order was passed. The CLB has no powers of review as has been held by the CLB itself in M.V. Paulose v. City Hospital (Private) Limited (96 CC 588). Therefore, this application which seeks review of the order dated 25.2.2002 should be dismissed in limine. As far as the concession on equitable ground, the company should go to the petitioners is concerned, Shri P.C. Khanna, senior counsel appearing for the respondents on 29.8.2001 made a submission that the company could be handed over to the petitioner and as such there is no scope for amending the order in this regard. As far as the distribution of shares in the ratio of 68:32 is concerned, any change in the order would amount to review of the order, which power this Bench, does not posses. Therefore, the application should be dismissed.
7. We have considered the arguments of the counsel. As far as deletion of the portion of the order relating to "which proposition is not opposed by the respondents also as revealed during the hearing", we find substance in the stand of the respondents. No doubt, certain discussions took place for amicably settling the dispute as recorded in paragraph 23 of the order dated 25.2.2002 but all these discussions were without prejudice. We do not recollect that after the main proceedings had started, any mention was made by the counsel for the respondents that on equitable grounds, the company should go to the petitioners. If such a statement had been made, there would have been no need for the matter to have proceeded culminating in issue of the order dated 25.2.2002. Therefore, the recording of the portion sought to be deleted is purely a mistake and as such we delete the words " which proposition is not opposed by the respondents also as revealed during the hearing" from paragraph 35 of the order dated 25.2.2002. In doing so, we have been guided by the decision of the Supreme Court in State of Maharashtra v. R.S. Naik case (Supra) wherein the Supreme Court has held that for correcting mistakes in an order, the parties should approach the same judges who had passed the impugned order.
8. As far as the prayer relating to distribution of the shares held by the company in M/S Vardhman in the ration of 68:32, we do not find any scope to do so. While we do agree that events taking place between the date of final hearing and the date of the order could be taken into consideration if these events would have bearing on the merits of the case, yet, such events should be brought before this Bench before the order is issued. In this case, it is a matter of fact that the hearing on the petition was concluded on 11.1.2002 and the order had been reserved. It is in the knowledge of the respondents that the last date of exercising the option expired on 19.2.2002 by which time we had not passed the final order on the petition. Further, M/S Mahavir which is under the control of the respondents and which also held substantial number of warrants had also passed a resolution not to apply for conversion. This decision should have been prior to 19.2.2002. During the arguments, no mention was made that the respondents' group would not opt for conversion of the warrants into shares. Therefore, the change in the circumstances was within the knowledge of the respondents much before the final order was passed and they should have brought the change in the circumstances to the knowledge of this Bench immediately. It is not something that the respondents had no knowledge or control of the events that had taken place to claim that even after passing of the order, the same could be modified only on the ground that during the intervening period from the date of conclusion of the final order and the date of the order, circumstances have changed. Granting of the prayer of the respondents in this regard would amount to modification of the substance of our order, which cannot be done even in exercise of the inherent powers under Regulation 44 of the CLB Regulations. In Shoe Specialities case, even though the petition was finally disposed of by the CLB, yet, considering the facts of this case, it had directed the Chairman appointed by the Board as Chairman of the EOGM to send a report on the proceedings of the meeting within 15 days of the meeting and further orders were passed on receipt of the report of the Chairman and these further orders were challenged in the High Court on which the High Court held that such passing of further orders was in terms of Regulation 44 of CLB Regulations. Therefore, the decision of the Madras High Court in that case is not applicable to the present case before us. In regard to City Hospital case (Supra), the decision of this Board was with reference to a consent order in respect of which this Board held that it had no power of review and had not held that under inherent powers, the Board cannot modify and order. Anyway, in the present case, in view of the fact that the events that had taken place had not been placed before us before passing of the final order, no modification can be made after passing of the final order on the basis of the intervening events. Accordingly, the prayer relating to distribution of shares in the ratio of 68:32 cannot be considered and as such is rejected.
9. Application is disposed of in the above terms.