Company Law Board
Mrs. Indira Bhardwaj And Ors. vs Gold Laminates (India) Limited And Ors. on 6 October, 2003
Equivalent citations: [2004]118COMPCAS632(CLB), [2004]51SCL93(CLB)
ORDER
S. Balasubramanian, Chairman
1. In this petition filed under Sections 397/398 of the Companies Act, 1956 (the Act), on the suggestion of this Bench, the parties had agreed to resolve their disputes and accordingly an order was passed by this Bench on 5th March, 1997 incorporating therein the terms of consent given by the parties. According to this order, the respondents were to purchase the shares held by the petitioners' group at par i.e. Rs. 10/- per share and the entire consideration of Rs. 20.10 lacs was to be paid before 31.3.1998. In case the entire amount was paid before September, 1997, no interest was to be charged and the balance, if any, on that date would carry an interest at the rate of 15% effective from 1st April, 1997 and this interest was also to be paid by 31st March, 1998. After this order was passed, a number of hearings took place relating to releasing the petitioners from their personal guarantees given to the financial institutions. In this hearing held on 12.5.1998, the counsel for the respondents submitted that while assessing the company for Income Tax, the Assessing Officer did not accept the investment made by certain shareholders in the share capital of the company since they were not able to establish the source of income and the amount of investment related to the petitioners worked out to Rs. 5.6 lacs. The Assessing Officer had also issued a notice to the company as to why penalty should not be imposed on the company. The counsel for the respondents at that time submitted that even though the company had filed an appeal, yet, if the company did not succeed it would have to pay a penalty of around Rs. 8 lacs attributable to the investment of Rs. 5.6 lacs made by the petitioners and as such sought for safeguards before the entire amount of Rs. 20.10 lacs was paid. He also submitted that an amount of Rs. 17.10 lacs had already been paid to the petitioners towards the principal amount and that the total amount payable to the petitioner as on 15.11.1999 was of the order of Rs. 7.52 lacs comprising of Rs. 3 lacs towards principal and Rs. 4.52 lacs towards interest. He urged that before this amount was paid, the petitioners should execute a bank guarantee in favour of the company so that in case the Income Tax appeal filed by the company failed, it could have recourse to the bank guarantee. This Bench noted that there was a dispute between the parties regarding the quantum of interest. According to the petitioners, the interest worked out to s. 7.31 lacs as on 15.11.1999. This difference arose on account of the petitioners computing interest on compounding basis. Considering all these facts, this Bench passed an order on 29.11.1999 directing the company to pay a sum of Rs. 4.75 lacs towards interest up to 15.11.1999 in addition to payment of balance of Rs. 3 lacs towards principal. The entire amount was to be paid by 10.12.1999. This Bench also directed the petitioners to give a bank guarantee for Rs. 2.25 lacs with an indemnity bond in favour of the company undertaking to discharge the income tax liability by way of penalty, if any levied by the Assessing Officer on the investment made by the petitioners' group in the company. The matter was fixed for hearing on 13th December, 1999 for the petitioner to produce bank guarantee as well as indemnity bond and the respondent was to bring a draft for Rs. 7.75 lacs. In the hearing held on 13.12.1999, it was reported that the respondents had filed an appeal against the order of this Bench dated 29.11.1999 and the high court had stayed further proceeding before this Bench and as such the matter could not be taken up for hearing on that day. Later, the respondents had withdrawn the appeal. Thereafter the matter was adjourned from time to time. The petitioner filed this instant application CA 205 of 2002 enclosing therewith the order of Commissioner of Income Tax (Appeals) dated 14.8.2002 in which the order of the Income tax Officer relating to the investment of Rs. 5.6 lacs made by the petitioners in the company had been set aside. On the basis of this order, the petitioners have sought for directions to the respondents to pay the amount due to the petitioners. The petitioners have quantified the amount due to them as on 31.10.2002 as Rs. 12,53,984. In the reply to this application, the respondents have taken a stand that this Bench has become functus officio after passing of the order dated 30.3.2001 wherein it had given a liberty to the petitioners to file an application under Section 634A of the Act for enforcing the order dated 29.11.1999. Since the petitioners have not chosen to file the said application, the present application is not maintainable. They have also taken a stand that since this Bench had quantified the amount due as Rs. 7.75 lacs in its order dated 29.11.1999, this amount cannot be enhanced as this Bench has no power of review. Further, it is the petitioners who have not complied with the directions regarding furnishing of bank guarantees. They have also pointed out that since this application has been made only by the 5th petitioner to whom the entire consideration for he shares has already been paid, he has no cause of action to file this application. Accordingly they have sought for dismissal of this application.
2. The admitted position in this case is that a consent order was passed on 5th March, 1997 according to which the respondents were to purchase the shares of the petitioners' group at par and the entire consideration was to be paid before 31st March, 1998. In spite of this consent order, thus Bench had to interfere now and then as is evident from over 25 hearings that have taken place after the consent order. The fact is that as of to day, the entire amount due to the petitioners has not been paid for whatever might be the reasons. So far, as indicated in the order dated 29.11.1999, the petitioners have received only a sum of Rs. 17.10 lacs and not the full consideration and the interest due.
3. In the application, the petitioners have submitted that as directed by this Bench, they have brought bank guarantee for Rs. 2.5 lacs and also an indemnity bond on 13.12.1999 but on that date the counsel for the respondents informed the Bench that his clients had preferred an appeal against the order of this Bench dated 29.11.1999 and as such this Bench had adjourned the matter. This appeal was withdrawn by the respondents only on 7.11.2000. Therefore, any delay in payment of the consideration is attributable to the respondents only. Even though the respondents have paid Rs. 17.10 lacs in different instalments, in terms of various judicial decisions, the amount paid was first adjusted against interest and the balance was taken towards principal. On this basis, the petitioners have calculated simple interest at 15% on the overdue principal amount. On the basis of such calculations, the total amount due to the petitioners as on 31.10.2002 works out to Rs. 12,53,984. This amount together with further interest till the date of payment should be directed to be paid by the respondents to the petitioners.
4. The respondents have questioned the maintainability of the petition on various ground that this Bench has become functus officio after the order dated 30.3.2001, that it has no power to review its own order dated 29.11.1999 wherein the quantum of consideration payable had already been determined, that the 5th petitioner who has filed this application has no locus standi to file this application as he has already been paid the full consideration for the shares held by him. In addition, they have also stand the stand that since the petitioners had filed to provide bank guarantee for Rs. 2.5 lacs as ordered by this Bench, the respondents cannot be made liable to pay any interest. They have also questioned the methodology adopted by the petitioners in calculating the interest. They have therefore sought for dismissal of this petition.
5. The counsel appearing for the parties reiterated the averments made in the pleadings. As far as the issue relating to jurisdiction in considering the application is concerned, the admitted position is that the consent order was passed on 5th March, 1997. Thereafter, on a few occasions, drafts were handed over in our presence to the petitioners. In the hearing held on 21.1.1999, directions were given to the respondents to indicate a time schedule for making balance payment. Thereafter, the issue relating to bank guarantee was raised by the respondents. In the order dated 29.11.1999, specific directions were given that the respondents should bring draft for Rs. 7.75 lacs on 13th December, 1999 and on that date the counsel for the respondents submitted that his clients had filed an appeal against the order of this Bench dated 29th November, 1999. Since the said directions had not yet been complied and this application is towards enforcement of those directions, this Bench continues to have seizin over this matter and has not become functus officio. As far as the other ground that the 5th petitioner has no locus standi to file this application is concerned, it is to be noted that the petitioners all form a single group and the orders of this Bench dated 5th March, 1997 and 29.11.1999 were common orders applicable to all the petitioners as a single group. Therefore, one or more of them could file an application seeking for enforcement of the said orders. The 3rd ground taken by the respondents is that this Bench has no power of review and therefore cannot order payment of any amount over and above the one directed in its order dated 29.11.1999. As far as this issue is concerned, it is to be noted that the order dated 29.11.1999 is a follow up order of the order dated 5th March, 1997. In the order dated 5th March, 1997, it was specifically stipulated that any amount remaining unpaid by 30th September, 1997 would carry an interest at the rate of 15% per annum. In the hearing held on 12.11.1999, as recorded in the order dated 29.11.1999, the respondents themselves had indicated the interest liability as Rs. 4.92 lacs as against the claim of Rs. 7.31 lacs by the petitioners and this Bench fixed the interest at Rs. 4.75 lacs as on that date. In view of the respondents filing an appeal which was later withdrawn. In the present application, the petitioners have sought directions to pay the balance along with interest for the intervening period. A review of an order would mean that an earlier order is amended or modified. I do not propose to either amend or modify the order dated 12.11.1999 but would only be examining as to whether the petitioners are entitled to any interest for the period after the date.
6. The petitioners have claimed over Rs. 12 lacs as on 31.10.2002 without separately indicating the principal amount due and the interest thereon. They have taken the stand that the installments had been first adjusted against the interest and the balance appropriated towards principal. The methodology adopted by the petitioners appears to be a new stand taken by them as is evident from the fact that at no time during the earlier hearings they had taken such a stand. In the order dated 24.9.1998 which was later than the date by which the entire amount of Rs. 20.10 lacs could had been paid (31st March, 1998) this Bench had noted that the entire principal amount less Rs. 5.6 lacs had been paid as on 24.9.1998. Further, as seen from the order dated 29th November, 1999, the petitioners had then calculated interest on compounding basis and not on the basis of adjusting installments towards interest first. Therefore, there is absolutely no justification in adopting this methodology now purely on the basis that judicial decisions support this methodology. Since in the order dated 29th November, 1999, this Bench had rejected the claim of interest on compounding basis, the petitioners cannot claim interest on that basis. In the order dated 29th November, 1999, it has been noted that the principal amount due as on that date was Rs. 3 lacs and interest due on that date as Rs. 4.75 lacs. This order has not been challenged by the petitioners and therefore they are bound by the same. The only aspect which requires determination is whether, the petitioners are entitled for any interest on the principal amount of Rs. 3 lacs which remains unpaid till today. In the order dated it was stipulated that in case the entire amount was paid before September, 1997, no interest was to be charged and the balance, if any, on that date would carry an interest at the rate of 15% effective from 1st April, 1997. Since the entire consideration was not paid by that date, any amount due thereon which remained unpaid on that date will attract interest till the date of payment in terms of the order dated 5th March 1997. Therefore, I am of the view that the petitioners should be paid interest at the rate of 15% per annum (simple interest) on the principal amount of Rs. 3 lacs from 15.11.1999 till the date of payment plus Rs. 4.75 lacs interest due up to that date. Accordingly, I direct so. The petitioners should compute the amount due to them on this basis upto 30.9.2003 and submit the same to the respondents within 15 days from the date of this order and the respondents, subjected to verification of the claim made by the petitioners, pay the same by way of demand draft/drafts in the presence of the counsel for both the sides latest by 6th November 2003 at which time the petitioners should hand over all their share certificates along with blank transfer forms for exchange against the drafts.
7. Liberty to apply.