Rajasthan High Court - Jaipur
Prakash Chand Sanghi And Ors. vs Pawan Kumar Baj And Ors. on 22 May, 1996
Equivalent citations: [1996]86COMPCAS935(RAJ)
JUDGMENT V.K. Singhal, J.
1. The appellant has challenged the order of the Company Law Board dated December 19, 1995, passed under Section 634A of the Companies Act, 1956.
2. The brief facts of the case are that the two petitions bearing Nos. 66 of 1992--P. K. Baj v. P. C. Sanghi and 65 of 1992--Sudha Baj v. P. C. Sanghi were filed under Section 397 alleging various acts of oppression and mismanagement in the affairs of Thycon India Pvt. Ltd. A compromise was entered into on May 26, 1994, in accordance with which the respondents were to make the payment of Rs. 12 lakhs for transfer of 3,015 shares in lieu of the factory, land and building situated at F-45, Malviya Industrial Area, Jaipur, and three months' time was fixed to complete the formalities. Since the formalities could not be completed in the aforesaid period, it is stated that as per the memorandum of understanding on August 25, 1994, time was extended till September 9, 1994. The Company Law Board disposed of both the petitions in terms of the deed of compromise on October 31, 1994. According to learned counsel for the appellants, the respondents failed to comply with the terms of settlement by not making the payment of Rs. 12 lakhs within the stipulated time and made an application under Section 634A on April 28, 1995, for enforcement of the order dated October 31, 1994, According to the appellants, the respondents neither filed the draft sale deed nor got clearance from the income-
tax authorities and did not make the payment of Rs. 12 lakhs nor transferred the shares and "no objection certificate" from the bank was also not obtained. The Company Law Board on December 19, 1995, after considering the objections of both the parties, directed that the amount of Rs. 12 lakhs shall be paid along with interest at the rate of 18 per cent, till the date of actual remittance which shall be deposited in escrow account with the State Bank of Bikaner and Jaipur. The vacant possession of land and building as per compromise terms shall be given within one month from the date of deposit of the amount.
3. The above order has been challenged on the ground that the powers under Section 634A is in the nature of execution proceedings and if a time is specified in the compromise and has not been adhered to by the parties, the compromise comes to an end. It is not the jurisdiction of the Company Law Board to extend the time or to give directions for making the payment of interest on delay in respect of making the payment. Under Section 634A, the executing court cannot go into the merits of the decree and it is empowered to execute the same as it stands. In the execution proceedings the Company Law Board has exceeded its jurisdiction in giving the directions for making the payment of Rs. 12 lakhs with interest. An objection was also raised that the liability of the bank has also increased and they are not ready to give penal interest, but in view of the statement made on behalf of the bank the penal interest is to be waived. This point is not taken into consideration.
4. On behalf of the respondents it was stated that the appellant failed to incorporate the obligation and duty particularly to be performed by him and it was mentioned in the compromise that he has ensured that the properties are free from all the encumbrances and will take all the necessary steps to get the property registered in the name of Shri P. K. Baj or his nominee including obtaining the NOC from the Income-tax Department, if so required and clearance from the bank SBBJ, SMS Highway, Jaipur, with respect to the bank guarantee given by Shri P, K. Baj and his father Shri P. C. Baj, and other conditions were also contemplated in the compromise. A number of letters written to comply with the formalities were placed before the Company Law Board and the appellants have not alleged non-compliance of the obligations with regard to payment to SBBJ, Jaipur, and clearance of the respondents in respect of the bank guarantee given by him and his father and other conditions which were contemplated. So far as the respondents were concerned on the basis of compromise entered into, the civil suit and the contempt proceedings filed by them or their relatives or friends were withdrawn, that the appellant did not issue the discharge receipts nor made any payment to the Government or other authorities nor NOC or clearance as required was obtained and, therefore, the petitioner was compelled to move under Section 634A. The payment of Rs. 12 lakhs was also not made and the Company Law Board has not exceeded its jurisdiction as it has inherent powers under Rule 44 of the Company Law Board Regulations, 1991. The interest of Rs. 2,09,400 has been deposited on January 20, 1996.
5. In this matter various allegations and counter allegations were made which I need not consider at this stage. The only point is to be seen as to whether the Company Law Board under the proceedings under Section 634A could extend the time for implementation of the order passed by it on October 31, 1994.
6. It is a very clear proposition of law that in the execution proceedings the executing court cannot modify a decree. In the case of Hukumchand v. Bansilal, AIR 1968 SC 86, by consent of the parties the executing court dismissed the application of the judgment-debtor under Order 21, Rule 90 to set aside the sale held under a mortgage decree and allowed him time to pay the decretal amount and the auction-purchaser's commission. But the judgment-debtor failed to deposit the amount within time and prayed for extension of time. As this prayer was opposed by the decree-holder and the auction purchaser the court dismissed the prayer and confirmed the sale. It was observed by the apex court that though under Order 21, Rule 92, the court was bound to confirm the sale at once when it dismissed the application under Order 21, Rule 90, it was justified in postponing the question of confirmation of sale till the date allowed to the judgment-debtor to pay the amount. But as that time had been granted by consent of parties the court had no power to extend it without the consent of the parties. Section 148 would not apply in these circumstances and the executing court was right in holding that it could not extend time. In the case of Resham Singh v. Manmohan Singh Kent, AIR 1985 P & H 193, in a suit for specific performance of agreement to sell, a conditional decree was passed in favour of the plaintiffs that a sum of Rs. 50,500 was to be paid within one month, failing which the plaintiff's suit was to stand dismissed. It was held that the executing court could not execute the decree as the amount was not deposited within the time allowed according to the terms of the decree, the suit stood dismissed automatically. The extension of the time for depositing the sale price would be varying the decree of the trial court which could not be done as the court has become functus officio after passing the said decree. The Calcutta High Court in the case of Jaynal Haldar v. Khorsed Sheikh, AIR 1982 Cal 118, came to the conclusion that where the suit for specific performance of the contract was decreed on compromise and the solenama mentioned time as the essence of the contract and on failure of payment by the defendant within specified time the plaintiff could deposit and have kobala executed through the court by way of execution of the decree the court could not extend the time ex parte without the consent of the plaintiff on an application for extension of time by the defendant a copy of which was served on the advocate of the plaintiff. It was observed that before extending the time the court would have to secure the consent of the plaintiff and without doing so the court would have no power or jurisdiction to change, vary or alter the terms of the solenama decree. After the solenama decree, the court loses seisin of the suit altogether and as such there is no scope for extension of time.
7. In the present matter, the Company Law Board passed the decree in terms of the compromise deed filed on September 12, 1994, according to which a sum of Rs. 12 lakhs was to be paid by P. K. Baj and received by P. C. Sanghi on behalf of the company within a period of three months from the date of compromise as a result of which the possession of factory, land and building was to be taken along with Maruti car. Besides this, there were other conditions and P. C. Sanghi was to ensure that the properties are free from all the encumbrances and he shall take all the necessary steps to get the property registered in the name of Shri P. K. Baj or his nominee including NOC from the Income-tax Department if so required and clearance from the bank SBBJ, SMS Highway, Jaipur, with respect to the bank guarantee given by Shri P. K. Baj and his father Shri P. C. Baj. The civil suits pending in any court or authority filed by either party their friends or relatives were to be withdrawn. P. K. Baj was to make the payment of Rs. 12 lakhs in consideration of transfer of 3,015 shares belonging to Shri P. K. Baj and Sudha Baj in favour of P. C. Sanghi or his nominee in consideration of transfer of property, i.e., land measuring 2,000 square meters building, F-45 Malviya Industrial Area, Jaipur, and the discharge receipt was to be issued.
8. The amount of Rs. 12 lakhs was not paid within three months as stipulated in the compromise and, thereafter, a petition was filed by P. K. Baj before the Company Law Board under Section 634 of the Companies Act in which it was stated that a registered letter was sent on July 5, 1994, to P. C. Sanghi to complete the necessary formalities before expiry of time-
limit and a reminder was also sent on August 16, 1994/August 20, 1994. A memorandum of understanding was entered into between the parties on August 25, 1994, by which the time was extended by 15 days and according to averments of P. K. Baj a meeting was to be held after the expiry of seven days but nothing was done. A number of other allegations were also made.
9. The Company Law Board after hearing both the parties came to the conclusion that the problem with regard to the implementation of the consent terms has arisen because the exact modalities were not spelt out. Neither party approached for prescribing the modalities even after the expiry of the three months' period. It came to the conclusion that time was not the essence of compromise. A contention was also raised that negotiations with both the parties have also failed. The petitioner agreed to pay the commercial rate of interest. The Company Law Board held that the respondents (appellant) are only entitled to the price and for any delayed payment of the price they may claim interest and they cannot be permitted to take advantage of the market fluctuations if any after having committed themselves to an agreement. The interest at the rate of 18 per cent. till the date of actual remittance in an escrow account with the State Bank of Bikaner and Jaipur was directed to be paid and Shri P. K. Baj was held entitled to land and building within one month from the date of deposit of the above amount.
10. In appeal this order has been challenged. The executing court no doubt cannot vary the decree, but the question arises whether in a case where time was not the essence of compromise as it is evident that both the parties after the decree extended the time further, consequences on failure to make payment were also not stated and certain formalities were required to be done of which modalities were not chalked out, either in compromise or in the decree of the court, the executing court became functus officio. The apex court in the case of Smt. Periyakkal v. Smt. Dakshyani [1983] 2 SCC 127 where the executing court dismissed the application but the first appellate court set aside the sale and during the pendency of the respondent's second appeal before the High Court the parties entered into a compromise with the leave of the court whereby the appellants agreed to pay a certain amount to the respondents within a stipulated time in full and final settlement of the decree. A contention was raised that time was the essence of the agreement. It was observed that where the application under Order 21, Rule 90 of the Civil Procedure Code, is dismissed, there is a statutory compulsion to confirm the sale and, therefore, in that event postponement and further postponment of the confirmation of the sale can only be by the consent of the parties themselves. A distinction was drawn between a case where there was statutory compulsion and a case where there was no statutory compulsion, If the contract between the parties has merged in the order of the court, the court's freedom to act to further the ends of justice would surely not stand curtailed.
11. In the present matter, the Company Law Board while exercising the powers of the executing court found that the modalities were not prescribed and even that time was not the essence of the compromise. The appellant was compensated with the interest for the delay caused. The representative of the bank also admitted that they have entered into compromise and the contention of the appellant that the negotiation of the bank failed is also not factually correct.
12. In the case of Ramankutty Guptan v. Avara, AIR 1994 SC 1699, it was observed by the apex court that the court retains control over the decree even after the decree has been passed. It is open to the court to exercise the power under Section 28(1) of the Specific Relief Act, 1963, either for extension of time or for rescinding the contract as claimed. Therefore, where the execution application has been filed in the same court in which the original suit was filed, namely, the court of first instance, instead of treating the application for rescission on the execution side, it should have as well been numbered as an interlocutory application on the original side and disposed of it according to law. The apex court further observed that it is settled law that an appeal is a continuation of the suit and, therefore, when a decree for specific performance has been dismissed by the trial court but decreed by the appellate court it should be construed to he in the same suit. When the decree specifies the time for performance of the conditions of the decree on its failure to deposit money, Section 28(1) itself gives power to the court to extend the time on such terms as the court may allow to pay the purchase money or other sum which the court has ordered him to pay.
13. The decision in the case of K. Kalpana Saraswathi v. P. S. S. Somasundaram Chettiar, AIR 1980 SC 512, was also considered wherein it was held by the apex court that on an oral prayer made by counsel for the plaintiff for permission to deposit the entire amount as directed by the trial court the apex court directed the appellant to deposit the amount within six months from that date together with interest and other conditions mentioned therein. It was observed that an application for extension of time for payment of the balance consideration may be filed even in the court of first instance or in the appellate court of first instance or in the appellate court in the same suit as the decree of the trial court stands merged with that of the appellate court which decree is under execution. It is to be seen that procedure is handmaid to justice ; and unless the procedure touches upon jurisdictional issue, it should be moulded to subserve substantial justice. Therefore, technicalities would not stand in the way to subserve substantive justice. Take a case where the decree is transferred for execution to a transferee executing court, then certainly the transferee court is not the original court and the execution court is not the 'same court' within the meaning of Section 28 of the Act. But when an application has been made in the court in which the original suit was filed, and the execution is being proceeded with, then certainly an application under Section 28 is maintainable in the same court. According to the judgment of the Supreme Court even the power to extend the time could be exercised by the appellate court. In the present case, therefore, the trial court has the jurisdiction to pass the decree as well as for execution and if this judgment is taken into consideration then the application made by the defendant would be considered an application for extension of time in the decree itself for which the court has ample powers.
14. In these circumstances, I feel that it would not be proper to interfere with the discretion which has been exercised by the Company Law Board in extending the time. The amount has already been deposited with the bank as directed by the Company Law Board.
15. Consequently, the appeal has no force. It is hereby dismissed.