Company Law Board
Duroflex Limited vs Mr. Johnny Mathew on 24 February, 2004
Equivalent citations: [2005]125COMPCAS845(CLB), [2004]55SCL652(CLB)
ORDER
K.K. Balu, Member
1. In the Company Petition filed by Mr. Johnny Mathew ("the petitioner") under Sections 397 and 398 of the Companies Act, 1956 ("the Act") alleging acts of oppression and mismanagement in the affairs of M/s Duroflex Limited ("the Company"), the Company questioned the maintainability of the Company Petition by means of the present application made under Section 402 of the Act on various grounds, as reiterated by Shri B.C. Thiruvengadam, learned Counsel appearing for the Company in the course of his arguments, as under:-
The acts of oppression and mismanagement set out in the Company Petition have been already urged before the CLB by Mr. Tommy Mathew, brother of the petitioner in CP No. 68 of 2000.
Mr. Tommy Mathew, having failed before the CLB, instigated the petitioner to file the present Company Petition seeking his reliefs on the basis of the grounds made by Mr. Tommy Mathew in C.P.No.68 of 2000. Most of the grounds urged by Mr. Tommy Mathew are the basis for the present Company Petition. The Company Petition No. 68 of 2000 was disposed of by the CLB on merits culminating in a final order dated 12.09.2000, with consent of the parties concerned. As the proceeding under Section 397 and 398 in the Company Petition No. 68 of 2000 is a proceeding in "rem", the petitioner is barred from claiming any relief in the present Company Petition by the principles of res judicata , in support of which learned Counsel relied on the decision of the apex court in Shankar Sitaram Sontakke v. Balkrishna Sitaram Sontakke - AIR 1954 SC 352 to state that consent decree is binding upon the parties thereto as a decree by "invitum" and is binding force of res judicata.
The petitioner had earlier filed a similar Company Petition through Mr. Tommy Mathew under Sections 397 and 398 alleging acts of oppression and mismanagement in the affairs of the Company on the grounds urged in the present Company Petition. The said Company Petition was withdrawn without leave to file a fresh petition on the same cause of action, in which case, the present Company Petition, for the same relief on the identical grounds is not maintainable as held in Jacob Cherian v. K.N. Cherian -1973 (43) CC 235.
The petitioner came out with yet another Company Petition in CP No. 18 of 2003 under Sections 397 and 398 claiming reliefs against the Company which came to be dismissed on 09.09.2003 on account of several of the inherent defects however, without granting any unconditional liberty to the petitioner to file a fresh Company Petition. By virtue of the order dated 09.09.1993 the petitioner is at liberty to invoke the provisions of Section 397 and 398 in accordance with the law, according to which the present Company Petition can not be Tiled again with the same cause of action on withdrawal of the first Company Petition, without any liberty to refile the same. The petitioner is resorting to forum shopping by instituting proceedings from time to time on the very same grounds, which must be declined as held in T. Arivandandam v. T.V. Satyapal - AIR 1977 SC 2421.
While the Company Petition No. 15 of 2003 filed under Section 111 of the Act, seeking transmission of the shares of Smt. Kunjamma Mathew, his mother, in his favour is pending before the CLB, the petitioner has urged the same cause of action once again in the present Company Petition.
The substantial grounds made in the present Company Petition are similar to the grounds set out in the earlier Company Petitions or Applications, making the petitioner guilty of misrepresentation as well as perjury before the CLB, especially when he claims in the Company Petition (para 7) that there are no Applications, Writ Petitions or Suits pending regarding the subject matter of these suits. The petitioner has neither chosen to explain the circumstances under which his earlier Application for impleading and his earlier Petitions were filed, withdrawn or dismissed. Thus the petitioner has suppressed the material facts and approached the CLB with unclean hands. As the relief under Sections 397 and 398 is an equitable relief which is entirely left to the discretion of the Company court, the requirement of good faith on the part of the petitioner is necessary, as held in Srikanta Datta Narasimharaja Wadiyar v. Sri Venkateswara Real Estate Enterprises (Pvt.) Ltd. - 1991 72 CC 211. Therefore, the relief claimed by the petitioner must be declined for want of good faith on the part of the petitioner.
The statement of objections filed on behalf of the petitioner is not supported by an affidavit sworn by the petitioner, as required under Regulation 23 read with Regulation 22 and 14(5) of the Company Law Board Regulations, 1991. Any statement filed before the CLB is required to be supported by an affidavit, especially when the proceedings before the CLB are summary in nature. In the absence of any affidavit, the parties concerned can neither be cross examined nor prosecuted for perjury, if any. The statement of objections filed by the petitioner without any supporting affidavit must be rejected.
Shri Thiruvengadam, learned Counsel, therefore, sought for dismissal of the Company Petition.
2. According to Shri P.M. Vasudevan, learned Counsel, the petitioner relied on the Company Petition No. 68 of 2000 in order to demonstrate the consistently oppressive and dishonest attitude of the respondent, which are still persisting. The petitioner in addition set out specific acts of oppression and mismanagement in the affairs of the Company. In this connection, learned Counsel pointed out that respondents 2 & 3 have incorporated a new company on 29.03.2001 under the name and style of M/s Coco-Latex Exports Private Limited with similar objects carried on by the Company and in support of his claim referred to the Memorandum of Association of the new company and also the pamphlets (Annexures G & H of the Company Petition). This act of oppression that the respondent is carrying on the competing business was not the subject matter of the Company Petition No. 68/2000. Moreover, the petitioner was not a party to the said Company Petition, and therefore, the consent orders made by the CLB can in no way bind the present petitioner. Shri Vasudevan further pointed out that when the petitioner filed the first Company Petition through his power of attorney holder, the same was resisted at the very inception by the respondent on the ground that such a petition through a power of attorney holder cannot be maintained, compelling the petitioner to withdraw the said Company Petition. Thus the first petition was withdrawn before registration without deciding the matter on merits. Similarly, when the Company Petition No. 18/2003 was filed by the petitioner, the respondent opposed the same on technical grounds, resulting in rejection of the said Petition by the CLB. The rejection was only on technical grounds. The petitioner was, thereafter, constrained to come out with the present Company Petition on account of his grievances in conduct of the affairs of the Company. Therefore, the principles of res judicata do not apply in the facts and circumstances of the present case, in support of which the learned Counsel relied on the decisions of the apex court in State of Maharashtra v. National Construction Company - AIR 1996 SC 2367 - to show that the bar under Section 11 of the Civil Procedure Code applies only if the matter directly and substantially in issue in the former suit has been heard and finally decided by a Court competent to try such suit and J.K. Iron and Steel Co., Ltd v. The Iron and Steel Mazdoor Union - AIR 1956 SC 231 to show that Section 11 of the Civil Procedure Code will operate only when the previous petition has been disposed of on merits, but not on technical grounds. The learned Counsel urged that the CLB must take into account the menu dated 18.09.2002 filed by the petitioner's power of attorney holder to show that the Petition was dismissed only on account of technical grounds. The proceedings initiated by the petitioner in CP No. 15 of 2003 for rectification of the register of members of the Company in respect of the shares of the Company inherited from his mother is a matter of record. In the event of the CLB is granting the remedy of rectification of the register of members of the Company in the present proceedings, the petitioner will not agitate the same in the Company Petition No. 15, of 2003. Mere non-furnishing of these various proceedings cannot disentitle the petitioner from instituting and pursuing the present petition. The statement of objections, according to Shri Vasudev, need not be accompanied by an affidavit especially when either Regulation 17 or 14(5) or 22(2) of the Company Law Board Regulations, 1991 does not contemplate any such requirement in the case of reply to any interim application. Moreover, it is only a technicality, which may be condoned by the CLB. For these-reasons, learned Counsel urged that the present Company Petition is maintainable.
3. I have considered the arguments advanced by learned Counsel. It is on record that Shri Tommy Mathew, brother of the petitioner had filed the Company Petition No. 68/2000 as early as on 25.08.2000 alleging acts of oppression and mismanagement in the affairs of the Company. When the Company Petition No. 68/2000 was mentioned on 25.08.2000, considering the family nature of the Company, the CLB directed the parties to resolve the disputes amicably, pursuant to which the parties deliberated the terms of settlement from time to time ultimately resulting in an order made on 13.07.2001, incorporating the terms of settlement agreed among the parties. Thereafter, a number of applications were filed by both the sides on the implementation of the terms of settlement and various orders were periodically passed. It is therefore, clear that the matter directly and substantially in issue in the Company Petition No. 68/2000 was not heard finally and decided by the CLB. On the other hand, the disputes among the parties concerned were amicably settled, without going into merits of the claim and counter-claim of either of the parties and without giving any finding on the acts of oppression and mismanagement alleged in the Company Petition No. 68/2000. By virtue of the consent orders, the respondents were to pay Rs. 199 lakhs together with interest at Specified rates to the petitioner in the Company Petition No. 68 of 2000 in full and final settlement of his claim including the consideration for the shares held by him. This consent order, does not give any relief to the present petitioner, not being a party to the Company Petition No.68/2000, in which the decision in Shankar Sitaram Sontakke v. Balkrishna Sitaram Sontakke-(supra) has no application in the facts of the present case. At this juncture, it is relevant to observe that the present petitioner made an application in CA No. 22/2001 during March, 2001 seeking for his impleadment as the second petitioner in the Company Petition No. 68/2000, which was resisted by the respondents and resulted in dismissal of the said application. When the petitioner filed the first Company Petition through his power of attorney holder in September 2002 alleging acts of oppression and mismanagement in the affairs of the Company, the respondents took objection on the premise that the petition could not be filed through his attorney, upon which Counsel for the petitioner filed a memo dated 18.09.2002, reading as under :-
"The Petitioner above named submits that he may be permitted to withdraw the Company Petition filed by him as constituted attorney of his younger brother Sri. Johnny Mathew Guatemala against Respondents No. 1 o 3 under Sections 397 & 398 of the Companies Act, 1956. "
The Bench by an order dated 18.09.2002 recorded that "Counsel for Mr. Johnny Mathew has filed a memo withdrawing the company petition filed under Section 397/398 of the Companies Act, 1956 against the Company". Thus, the first Company Petition was neither taken on record nor decided on merits. Thereafter, when the petitioner himself filed the Company Petition 18/2003 alleging acts of oppression and mismanagement in the affairs of the Company, the same came to be rejected for non-fulfilment of the relevant provisions of the Company Law Board Regulations, 1991, which means that the matter directly and substantially in issue in the Company Petition No. 18 of 2003 was neither finally decided by the CLB. Now, it shall be seen whether in the light of these proceedings, the present Company Petition is barred by the principles of res judicata. In this connection, Section 11 of the Code of Civil Procedure Code, 1908 assumes relevance, which reads as under:
"No Court shall try any suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court."
It is free from doubt that the following conditions must be approved for giving effect to the principles of res judicata:
(i) that the parties are same or litigating under same title,
(ii) that the matter directly and substantially in issue in the subsequent suit must be same which was directly and substantially in issue in the former suit,
(iii) that the matter in issue has been finally decided earlier, and
(iv) that the matter in issue was decided by a Court of competent jurisdiction.
As already observed, the parties to the Company Petition No. 68/2000 and the parties to the present Company Petition are not one and the same. The petitioner's endeavour to get himself impleaded to the Company Petition No. 68/2000 was declined. The first Company Petition was not registered by the registry of the Bench Office. The Company Petition in CP No. 18/2003 was rejected for non-compliance with the requirements of law. Moreover, the matter directly and substantially in issue was not finally decided by the CLB either in the Company Petition No. 68/2000 or in the subsequent Company Petitions, which are the pre-requisites of Section 11 of the Code of Civil Procedure as propounded by the apex court in the decisions, cited by learned Counsel for the petitioner. There is, therefore, no merit in the plea of the respondent that the claim of the petitioner is barred by the principles of res judicata. The decisions cited by learned Counsel for the respondent do not in any way to go their aid. The claim that the statement of objections is or is not required to be accompanied by an affidavit must be considered in the light of the Company Law Board Regulations, 1991. Regulation 22 provides that each respondent, intending to contest the petition, which as per clause 2(q) means an application, not being an interlocatory proceeding shall file a reply to the petition. The reply so filed shall be signed and verified in the manner as provided in Regulation 14, Regulation 14(5) specifies that every petition, other than an application under Sub-section (9) of section 58A of the Act or under Sub-section (2) of Section 45QA of the Reserve Bank of India Act, 1934, shall be accompanied by an affidavit in the prescribed manner. Regulation 23 stipulates that every counter-reply shall be accompanied by an affidavit verifying the same. Going by spirit of these regulations, the statement of objections filed with intension to contest the present application must necessarily be accompanied by an affidavit. Nonetheless, the various proceedings referred to by the respondent are matters of record, supported by the documents available before me, which speak for themselves. I, therefore, need not place any reliance on the statement of objections filed by the petitioner in the Company Petition to decide the issue of maintainability of the present Company Petition. The issue as to whether the petitioner is entitled for any equitable remedy for having suppressed the various Company Petitions and pendency of CP No. 15 and 16/2003 would be considered, while the Company Petition is decided on merits and not at this stage. In these circumstances, the respondent is directed to file counter by 31.03.2004 and rejoinder to be filed by 15.04.2004. The Company Petition will be heard on 24.04.2004 at 2.30 p.m.