Karnataka High Court
Smt S Kunjithamala vs Hvac Systems Pvt Ltd on 3 July, 2023
Author: Alok Aradhe
Bench: Alok Aradhe
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 3rd DAY OF JULY, 2023
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
COMPA NO.14 OF 2012
BETWEEN:
1. SMT.S.KUNJITHAMALA,
W/O LAATE SRI RAMAMOORTHI,
AGED ABOUT 45 YEARS.
2. R.A.PREETHI,
D/O LATE SRI RAMAMOORTHI,
AGED ABOUT 21 YEARS.
3. MR.R.PRASHANTH,
S/O LATE SRI RAMAMOORTHI,
AGED ABOUT 18 YEARS.
ALL ARE R/AT C/O HVAC
SYSTEMS PVT. LTD.,
NO.145, 2ND MAIN, 1ST 'B' CROSS,
2ND PHASE, DOMLUR,
BANGALORE - 560 071. ... APPELLANTS
(BY SRI ADITYA SONDHI, SR. COUNSEL FOR
SRI H.MALLAN GOUD, ADVOCATE)
2
AND:
1. HVAC SYSTEMS PVT. LTD.,
REGISTERED OFFICE AT
BANGALORE, KARNATAKA
WITH REGN.NO.16023/94,
REPRESENTED BY ITS
MANAGING DIRECTOR,
NO.145, 2ND MAIN, IST 'B' CROSS,
2ND PHASE, DOMLUR, BANGALORE - 560 071.
2. L VIVEKANANDA,
S/O RAMAKRISHNAPPA,
AGE: MAJOR, R/AT NO.731, 1ST CROSS,
3RD MAIN, DEFENCE COLONY,
INDIRANAGAR, BANGALORE - 560 038.
3. ING VYSYA BANK,
CORPORAATE OFFICE,
M.G.ROAD, BANGALORE - 560 001.
(DELETED VIDE ORDER
DATED: 26.02.2015). ... RESPONDENTS
(BY SRI K.G.RAGHAVAN, SR.COUNSEL FOR
SRI A.SAMPATH, ADVOCATE A/W
SRI MALLIKARJUN, ADVOCATE FOR R2,
(NOTICE NOT ORDERED IN RESPECT OF R1)
THIS COMPANY APPEAL IS FILED UNDER SECTION 10F
OF THE COMPANIES ACT, 1956, PRAYING TO SET ASIDE THE
ORDER DATED 01.06.2012 IN CP NO.41/2005 PASSED BY THE
HON'BLE COMPANY LAW BOARD, ADDITIONAL PRINCIPAL
BENCH, CHENNAI AND PASS SUCH OTHER ORDERS INCLUDING
THE AWARD OF COSTS AS THIS HON'BLE COURT DEEMS FIT, IN
THE INTEREST OF JUSTICE AND EQUITY AND ETC.,
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 22.06.2023, COMING ON FOR PRONOUNCEMENT
OF JUDGMENT THIS DAY, ANANT RAMANATH HEGDE J.,
DELIVERED THE FOLLOWING:
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JUDGMENT
The petitioners in C.P.No.41/2005 before the Company Law Board, Chennai, (hereinafter referred to as the 'Board') are in appeal under Section 10F of the Companies Act, 1956 (hereinafter referred to as the 'Act') challenging the order dated 01.06.2012, passed by the Board.
2. In terms of the impugned order dated 01.06.2012, passed in a petition under Sections 397 and 398 of the Act, the Board directed the petitioners to purchase 20,000 shares held by the second respondent, in the first respondent Company at the rate of Rs.725/- per share with interest @ 6% per annum from 31.03.2005 till the date of realization. Further, it was held in the event of the petitioners not purchasing the shares, liberty is granted to the second respondent to get the amount realized by attaching the shares held by the petitioners in the first respondent-Company.
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3. The second respondent is also held entitled to recover Rs.50,000/- per month as salary from the first respondent Company from 09.08.2005 till his exit from the Company.
4. For the sake of convenience, the parties to the proceeding are referred to as per their designation before the Board.
5. The following facts can be gathered from the petition filed under Sections 397 and 398 of the Act.
- First respondent-Company ('Company' for short) was incorporated on 04.08.1994 under the Act with an initial authorized share of Rs.1,50,000/-. One Mr R Ramamurthy, his wife-the first petitioner, one Mr Chandrashekaran and his nominees were the promoters of the Company. After the exit of Mr Chandrashekaran and his nominee, the Company was run by Mr Ramamurthy and the first petitioner. Mr Ramamurthy died on 5 14.02.1998 and after his death, the second respondent, an employee of the Company, joined the Company as a Director.
6. It is averred that the second respondent is claiming to be an agreement holder under the fake agreement dated 05.03.1999 under which he is alleging that the first petitioner agreed to sell 40% of shares in favour of the second respondent for a consideration of Rs.2.40 lakhs. Based on the said agreement a suit in O.S. No.3567/2005 was filed in the City Civil Court, Bengaluru, claiming an injunction against the petitioners. In the said suit, the execution of the said agreement is disputed by the petitioners.
7. It is pleaded that the second respondent started interfering in the affairs of the management of the Company and later it transpired that the second respondent was siphoning the business of the Company to another entity in which he had an interest. 6
8. It is stated that on 11.04.2005, the second respondent resigned as Director of the Company. Later it transpired that the second respondent has created fake bills and misappropriated the funds and issued cheques approximately for Rs.32,00,000/- on the account of the Company after his resignation. It is also stated that Mrs. S.Rajalakshmi was inducted into the Board of the Company in place of the second respondent. Several other instances have been narrated in the petition to assert oppression and mismanagement of the affairs of the Company by the second respondent.
9. Based on the aforesaid facts, the petitioners sought an investigation into the books of the Company to ascertain the shareholding pattern and has sought a declaration that the second respondent has ceased to be the Director with effect from 11.04.2005. It is also prayed to declare that the induction of Mrs. S. Rajalakshmi (the 7 mother of petitioner No.1) as a Director of the Company is legal and binding on the Company.
10. In the alternative, if the second respondent is held to be a shareholder of the Company, it is prayed to work out an exit scheme for the second respondent from the Company. In addition, consequential relief of injunction is also sought against the second respondent.
11. The petition was contested by the second respondent. The allegations of mismanagement and misappropriation levelled against the second respondent are denied in toto. However, the second respondent has neither denied the petitioners' claim that the second respondent resigned as a Director on 11.04.2005, nor disputed the execution of the letter marked at Annexure- P4. The second respondent contended that he is a 40% shareholder and denied the allegations of siphoning off the funds and the business of the Company. On the other hand, alleged that the petitioners are acting contrary to 8 the interest of the respondents. And further he alleged the mismanagement of the affairs of the Company by the petitioners. The second respondent has prayed to dismiss the petition except for the prayer to work out a scheme for his exit. The second respondent in turn has also sought certain reliefs and sought damages. As an interim measure relief of payment of his salary and perks from April 2005 onwards, was sought.
12. After hearing the parties, the Board passed the impugned order dated 01.06.2012, directing the petitioners to purchase 20,000 shares held by the second respondent at a price of Rs.725/- per share along with interest @ 6% per annum from 31.03.2005 till the date of realization. In addition, the Board also held that the second respondent is entitled to a salary of Rs.50,000/- (per month) from 09.08.2005.
13. It is also relevant to note that vide order dated 09.08.2005, as an interim measure, the Board has held 9 that the second petitioner be paid Rs.50,000/- per month till further orders.
14. Aggrieved by the final order dated 01.06.2012, the petitioners before the Board are in appeal.
15. Heard Sri.Aditya Sondhi learned Senior counsel appearing for the appellants and Sri. K.G.Raghavan learned Senior counsel appearing for the second respondent.
16. Learned Senior counsel appearing for the appellants raised the following contentions:
(i) The Board without deciding the disputed question on ownership of 20,000 shares of the Company, could not have directed the petitioners to purchase the 20,000 shares allegedly owned by the second respondent.
(ii) That the impugned order is unsustainable in as much as in the petition under Sections 397 and 398 of the Act filed by the petitioners, the relief could not have been 10 granted in favour of the second respondent directing the petitioners to purchase the 20,000 shares allegedly owned by the second respondent.
(iii) The allegation of mismanagement, suppression and siphoning of funds and business are not considered by the Board and without the finding on such contentions, the Board could not have accepted the valuation report of the Chartered Accountant.
(iv) The direction issued by this Court vide order dated 29.08.2011 in Writ Petitions No. 27442-27444/2011 has not been followed while passing the final order and as such, the order requires to be set aside.
(v) The Board erred in fixing the price of the share at Rs.725/- when the valuation of the share arrived at by the Chartered Accountant is Rs.670/- per share.
(vi) Even the valuation of Rs.625/- per share is arbitrary in as much as the Board had passed an order to evaluate the value of the Company as of 31-3-2005.
However, the Chartered Accountant has taken into 11 consideration the projected profits up to 2007-08 and the same is beyond the scope of the order passed by the Board.
17. Sri. Aditya Sondhi learned Senior counsel appearing for the appellants in support of his contentions relied on the following citation.
Dale & Carrington Invt (P) Ltd., and another vs. P.K.Prathapan and others reported in (2005)1 SCC 212
18. Sri. K.G.Raghavan, learned Senior Counsel appearing for the second respondent urged that:
(i) The records placed before the Board would reveal that the second respondent owned 20,000 shares amounting to 40% of the shareholding. The shareholding is duly reported to the Registrar of Companies and the petitioners having admitted the ownership of shares of the 12 second respondent cannot raise a contention denying his ownership.
(ii) The first petitioner, during the pendency of the petition before the Board, has exercised the option to purchase the shares held by the second respondent as such, the petitioners are estopped from denying his ownership over the 20,000 shares.
(iii) The Chartered Accountant appointed by the Board has submitted the three reports and the 3rd report is after the direction issued by this Court in Writ Petitions No.27442-27444/2011. The Chartered Accountant again investigated the matter considering 864 documents submitted a detailed report. Based on the said report the value of the shares is determined and appropriate orders are passed by the Board.
(iv) The contentions relating to the allegation of siphoning of funds, mismanagement of the affairs of the 13 Company and siphoning of the business of the Company, need not be considered as the petitioners gave up the said contentions as the several applications filed in this regard, are dismissed as not pressed by the petitioners. Even the petitioners had requested the Board to dismiss their Company petition as not pressed. The Board having noticed that there is already considerable progress in the matter rejected the prayer of the petitioners. The order dismissing Company applications wherein the allegations are made about the alleged mismanagement has attained finality. Thus, the petitioners are estopped from raising any contentions relating to mismanagement. Even otherwise no materials were before the Board to hold that the second respondent misappropriated the funds and mismanaged the affairs of the Company.
(v) The report of the auditor did not point out the misappropriation as alleged by the petitioners and the 14 Board is not competent to sit over the report of the Chartered Accountant who is an expert on the matter.
(vi) The valuation report is submitted considering all the relevant materials and two standard methods are followed while evaluating the Company. The average of the valuations arrived at under the two methods is taken into consideration and a fair valuation is arrived at. There are no materials to hold the valuation is arbitrary and there cannot be an accurate value when it comes to the valuation of assets and liabilities of a company. The opinions on such matters are likely to differ to some extent and that consideration cannot be taken into account to hold that the valuation is incorrect. Unless it is established that the opinion is wholly based on irrelevant consideration or ignores relevant materials, the report submitted by an expert is to be accepted as correct.
(vii) The appeal under Section 10F of the Act is maintainable only on the question of law and no question 15 of law is raised in this appeal, as such, the appeal deserves to be dismissed.
(viii) Taking into consideration the conduct of the petitioners, no case is made out to grant the order of equitable nature sought in the petition and no case is made out to interfere in the order which is equitable in nature passed taking into consideration the interest of all the parties to the proceeding.
(ix) The allegations of fraud and misrepresentation being serious allegations must be established beyond reasonable doubt and the petitioners failed to establish the same and the Board is justified in passing the impugned order.
19. Sri. K.G.Raghavan, learned Senior Counsel appearing for the second respondent, in support of his contentions relied on the following citations: 16
1. Union of India vs. M/s. Chaturbhai M. Patel & Co. reported in (1976) 1 SCC 747
2. M.S.D.C. Radharamanan vs. M.S.D. Chandrasekara Raja and Another reported in (2008) 6 SCC 750
3. Chatterjee Petrochem (India) Private Limited vs. Haldia Petrochemicals Limited and others reported in (2011) 10 SCC 466
20. This Court has considered the contentions raised at the bar and perused the impugned order and the materials placed on record.
21. The first contention is relating to the ownership of 20,000 shares of the second respondent in the Company. This Court has noticed that both petitioners and the second respondent have taken a dual stand in this regard. The second respondent in a suit filed by him claimed to be the agreement holder agreeing to purchase 20,000 shares from the petitioners for consideration of 17 Rs.2.40 lakhs. At another breath, he claimed to be an allottee of shares. The suit filed by him for the relief of injunction based on the alleged agreement to purchase the share is said to be dismissed for non-prosecution without there being any finding on the validity of the alleged agreement to purchase the shares.
22. The petitioners having denied the execution of the agreement for the sale of shares, acknowledged the ownership of the second respondent over 40% shareholding in the records maintained by the Company and in the reporting made to the Authorities under the Act. In the rejoinder filed before the Board, the petitioners at one breath admitted that the second respondent owned shares and later took a stand that the second respondent is not the owner.
23. Despite contradictory pleadings by both parties, what is evident is, the declarations/reports sent to the Authorities under the Act to which petitioner No.1 is a 18 signatory. In the said declaration sent in Form No.2, the allotment of 14,000 shares in favour of the second respondent is admitted. Likewise in the annual return of the Company, his holding is shown to be 6,000 shares. The first petitioner is the signatory to the said document. In all, the second respondent owned 20,000 shares as per the records of the Company.
24. The Board vide order dated 09.01.2006 appointed an independent chartered accountant to evaluate the value of the Company and passed further orders giving the first option to the petitioners to purchase the shares of the second respondent. The said order is accepted by the petitioners. The petitioners offered to exercise the first option to purchase the shares of the second respondent. Thus, it is apparent that the petitioners admitted that the second respondent owned shares of the Company. The second report dated 15.07.2006 submitted by the Chartered Accountant 19 reveals that the second respondent owned 20,000 shares. These facts are undisputed and borne out by records. In the facts and circumstances narrated above, the Board had no occasion to dwell on the question of whether the second respondent owned 20,000 shares or not. Though the petition is filed raising the said question, subsequent developments, the conduct of the petitioners and the documents placed on record point to the conclusion that the second petitioner owned 20,000 shares in the Company and the said question has eventually paled into insignificance.
25. Thus, the inevitable conclusion is that the second respondent owned 20,000 shares and it cannot be said that the Board failed to decide the said question.
26. The second question is whether the valuations fixed by the Chartered Accountant and the Board are arbitrary. Both parties filed objections to the report of the Chartered Accountant. Though the second respondent filed 20 an objection to the report and claimed that Rs.4924/- should be the valuation per share, he has accepted the valuation fixed by the Board. Thus, the question before this Court is whether the valuation fixed at Rs.725/- is excessive or not.
27. Admittedly, the Chartered Accountant is appointed with the consent of both parties. The Chartered Accountant has submitted three reports. The first one is dated 26.06.2006, the second one is dated 18.07.2006 and the third one is dated 30.01.2012. The petitioners filed an application to withdraw the Chartered Accountant appointed on 09-01-2006 and prayed to appoint another Chartered Accountant. Said application is rejected by the Board, and this Court rejected the challenge to the said order, vide its order dated 03.02.2010 in COMPA No. 1/2010. Thus, there cannot be any objection as to the suitability of the Chartered Accountant. 21
28. The first report speaks about the valuation of the assets of the Company. Two methods are adopted in arriving at a valuation. By taking the average of the two, the Chartered Accountant valued the share value at Rs.675/- per share.
29. The second report dated 15.07.2006, was supposed to give a finding on the allegations and counter allegations of misappropriation. The report reveals both petitioner No.1 and respondent No.1 failed to establish the allegations against each other. A finding is recorded to the effect that the allegations against the second respondent about the suppression of turnover do not appear to be correct. However, at the same time, it is recorded that the proprietary concern owned by the father of the second respondent is the beneficiary of certain orders which were negotiated by the Company. The report also records a finding that certain allegations made by the Company and Petitioner no.1 cannot be verified for want of materials. It 22 is also observed that the records of the companies are in possession of the parties in bits and pieces. In the report, the Chartered Account has opined that the second respondent is allotted 20,000 shares. It is further held in the report that there are two power centers in the Company suggesting petitioner no.1 and the second respondent.
30. As far as the 3rd report dated 28.01.2012, is concerned, the Chartered Accountant has considered 864 documents submitted by the petitioners. The said report would indicate that the Chartered Accountant has applied his mind to all 864 documents and has given his opinion. In this report, he opines that there is no need to deviate from his previous report dated 15.07.2006 on the findings on misappropriation. Needless to say, this report is submitted after this Court passed orders in Writ Petitions No. 27442-27444/2011. The Order passed in the Writ Petitions No. 27442-27444/2011 is to the effect that the 23 Board is not bound only to consider the valuation and it has to consider all aspects of the case.
31. The contentions of the learned Senior counsel appearing for the appellants, that the report must be categorized as patently erroneous as the Chartered Accountant has travelled beyond the scope of the order appointing him in as much as the Chartered Accountant has taken into consideration the projected profits of the Company up to 2007-08. It is urged that the order was to evaluate the Company as of 31.03.2005 by taking into account the loss caused to the Company by the second respondent. This contention is not tenable as the Court has noticed the following:
(a) The Chartered Accountant has adopted two different methods to evaluate the assets of the Company and after arriving at a valuation under two different methods, he has taken the average of two valuations arrived at by following two different methods. 24
(b) The Chartered Accountant is of the view that no finding can be arrived at relating to the misappropriation of funds for want of materials.
32. So far as the first point relating to methodology, no error in the methodology is pointed out except for saying that the projected profits could not have been taken into consideration. The projected profits are taken into consideration by considering previous years' performance. The projected profit is not an unreasonably high figure in comparison to previous years' profit. In addition to that, it is to be noticed that in the year 2012, the third report is submitted. It is not brought to the notice of this Court that the profits projected in the 2nd report dated 15.07.2006, for the years 2006-07, and 2007-08 are exorbitant compared to actual profits for those years. This being the position, this Court does not find anything arbitrary in the methodology adopted by the Chartered Accountant.
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33. As far as the contentions urged relating to misappropriation and siphoning of the funds, it is relevant to note that the petitioners filed applications in this regard and later did not press the said applications. In other words, the allegation of misappropriation was given up. Assuming that such contentions were still alive, after the disposal of the Writ Petitions No. 27442-27444/2011, the Chartered Accountant went through 864 documents submitted by the petitioners, applied his mind, and gave his opinion/remarks on those documents. As noticed earlier the Chartered Accountant has reiterated his views in the report dated 15.07.2006, on alleged misappropriation.
34. It is required to be noticed that the petitioners moved the following applications before the Board making allegations of misappropriation of funds and mismanagement of affairs of the Company and these applications are dismissed as not pressed and the orders 26 dismissing the applications have not been questioned and these orders have attained finality.
35. This being the position, it can be safely concluded that the petitioners have abandoned their claim relating to the alleged misappropriation of funds and mismanagement of affairs of the Company by the second respondent. It is also required to be noticed at this juncture that the Chartered Accountant in his 3rd report has given a finding that the materials are not placed before him to give a finding as to whether there is misappropriation of funds and mismanagement of affairs of the Company by the second respondent.
36. The Board in a petition under Sections 397 and 398 of the Act cannot examine the expert's report as a Court of appeal. Unless manifest errors are pointed out which on the face of it point out the absurdity in the report, the same cannot be set aside. Likewise, it is also not open to this Court to sit in appeal over the opinion of 27 the Chartered Accountant, unless it is pointed out that the material documents are overlooked or immaterial and irrelevant facts/documents are taken into account. The challenge to the report does not fall under either of the said categories. This being the position the ratio laid down in the case of Dale & Carrington Invt (P) Ltd., supra is not applicable to the present case.
37. The Scope of this Court under Section 10F of the Act is confined to questions of law. From the materials placed on record it cannot be held that the report of the Chartered Accountant suffers from manifest or patent errors. Thus, the Board has rightly relied on the report of an expert.
38. As far as the contention of the learned Senior counsel appearing for the appellant that the Chartered Accountant has arrived at a figure of Rs.675/- per share and the Board has arrived at a figure at Rs.725/- per share and the same is impermissible and without any 28 justification, it is to be noticed, that the Chartered Accountant in his 3rd report has also opined that Rs.1,01,88,025/- is paid to the Company by one of its customers, and that figure is to be taken into consideration while determining the value of the share. The Board has taken into account the suggestion of the Chartered Accountant and has arrived at a figure of Rs.725/- per share by increasing the value of the share by Rs.50/-. Taking into account the scope of appellate power under Section 10F of the Act, no ground is made out to interfere with the finding of the Board pertaining to the valuation of the share.
39. As far as the contention of the appellant that the second respondent could not have claimed the relief in a petition filed by the petitioners under Sections 397 and 398 of the Act, and the relief could not have been granted in favour of the second respondent directing the petitioners to purchase the shares of the second respondent, learned 29 Senior counsel appearing for the respondent has relied upon the judgment in the case of M.S.D.C. Radharamanan vs M.S.D. Chandrasekara Raja and another referred supra. The Hon'ble Apex Court in the said case has dealt with the scope of the Board under Sections 397 and 398 of the Act and has held that the Board has the power to pass such orders in the interest of the Company.
40. In the case on hand, the order is passed on 09.01.2006 and the Board has given an option to the petitioners to purchase the shares of the second respondent at a fair value determined by the Chartered Accountant. The order further says that in case the petitioners do not purchase the shares, the second respondent will take the offer to purchase the shares. Thereafter the petitioners have exercised an option to purchase the shares of the second respondent. The said offer made by the petitioners aligns with the prayer made 30 in the petition to frame a scheme for the exit of the second respondent.
41. The Hon'ble Apex Court dealing with the scope of the Company Law Board under Sections 397, 398 and 402 of the Act in the case of M.S.D.C. Radharamanan vs M.S.D. Chandrasekara Raja and another referred supra in paragraphs No. 15, 16 and 17 has held as under:
15. Ordinarily, therefore, in a case where a case of oppression has been made a ground to invoke the jurisdiction of the Board in terms of Sections 397 and 398 of the Act, a finding of fact to that effect would be necessary to be arrived at. But, the jurisdiction of the Company Law Board to pass any other or further order in the interest of the company, if it is of the opinion, that the same would protect the interest of the company, it would not be powerless. The jurisdiction of the Company Law Board in that regard must be held to be existing having regard to the aforementioned provisions.
16. The deadlock in regard to the conduct of the business of the Company has been noticed by the Company Law Board as also the High Court. Keeping in view the fact that there are only two shareholders and two Directors and bitterness having crept into their personal relationship, the same, in our opinion, will have a direct impact in the matter of conduct of the affairs of the Company.31
17. When there are two Directors, non-
cooperation by one of them would result in a stalemate and in that view of the matter the Company Law Board and the High Court have rightly exercised their jurisdiction.
42. Though, Sri. Aditya Sondhi learned Senior Counsel appearing for the appellants tried to distinguish the case on the premise that the dispute in the said case was essentially a dispute between the father and the son and the Company in question was a quasi-partnership, it cannot be said that the ratio cannot be applied to the present case, given the fact that the dispute is between the petitioners and second respondent who together represented the shareholding of the Company. Added to this, it is required to be noticed that both the petitioners and the second respondent before the Board, pressed the Board to work out a solution for the exit of the second respondent from the Company. Thus, the above-said ratio squarely applies to the facts of the case as the Board has proceeded to work out the exit scheme of the second 32 respondent which is one of the prayers of the petitioners, though claimed as an alternative relief. This being the position it cannot be said that the Board had no jurisdiction to pass the orders under Section 402, without there being a finding on the aspects referred to in Sections 397 and 398 of the Act. More importantly, the petitioners in this case are not aggrieved by the exit scheme as such. The petitioners are aggrieved by the valuation. Thus, the order under challenge cannot be said to be one without jurisdiction.
43. However, two aspects need consideration viz., the starting date to charge interest on the price of the shares and also the date up to which the salary is to be paid to the second respondent.
44. The Board directed the petitioners to pay interest @ 6% p.a. on the value of the shares from 31.03.2005 till payment. Having gone through the said direction, this Court finds that the 33 starting date reckoned to charge interest is erroneous, as the liability to pay interest arises only when the amount becomes due. The amount became due only when the Board framed the scheme for the exit of the second respondent and adjudicated the price of the share. Thus, the interest on the amount due to the second respondent is to be paid from 01.06.2012 i.e., the date of the order passed by the Board and not from the date of the petition as ordered in the impugned order.
45. As far as the direction relating to the payment of salary is concerned, the order does not specify whether the salary payable is monthly salary or otherwise. It is clarified that the salary payable is the monthly salary of Rs.50,000/- per month payable from 09.08.2005. The order under challenge further directs that the salary be paid till the date of exit of the second respondent. The second respondent has made a statement that he is working on his own to earn his livelihood as his salary is 34 not paid in terms of the interim order passed by the Board. Thus, it is clarified that the second respondent is entitled to a salary of Rs.50,000/- per month from 09.08.2005 till the last day he worked in the Company and not till the date of his sale of shares pursuant to the exit scheme.
46. Hence the following:
ORDER
(a) Second respondent is entitled to interest @ 6% p.a. on the value of 20,000 shares from 01.06.2012 till the date of realization.
(b) Second respondent is entitled to a salary of Rs.50,000/- per month from 09.08.2005 till the last day he worked in the Company.
(c) The order dated 01.06.2012 passed in C.P. No.41/2005 on the file of the Company Law Board, Additional Principal Bench, Chennai is modified to the extent mentioned above.
(d) No order as to costs.35
Accordingly, the appeal is allowed in part.
Sd/-
JUDGE Sd/-
JUDGE BRN/GVP