Gauhati High Court
Sri Deepak Lohia vs Kamrup Developers Private Ltd. & Ors on 3 May, 2010
THE GAUHATI HIGH COURT
(The High Court of Assam, Nagaland, Meghalaya, Manipur, Tripura,
Mizoram & Arunachal Pradesh)
Company Appeal Nos. 8/2004 and 4/2005
(I) CO.APP. No.8/2004
SRI DEEPAK LOHIA,
resident at A.T. Road, Tinsukia,
Pin-786125, Assam.
......Appellant.
-Versus-
1. KAMRUP DEVELOPERS PRIVATE LTD.,
a Company incorporated under the provisions of the
Companies Act, 1956, having its registered office at
PO-Ulubari, G.S. Road, Guwahati-781007.
2. SRI BHAJANLAL AGARWAL.
3. SRI ASHOK KUMAR AGARWAL.
4. SRI ANIL KUMAR AGARWAL
- All are residing at Dispur Christian Basti Link Road
(Zoo Road), near Sundarpur, Guwahati-781005,
Assam and at Room No.428, 4th floor,
Srimanta Market, A.T. Road, Guwahati-1.
5. SM. SANGITA LOHIA.
6. SM. SAVITRI DEVI LOHIA.
7. SM. SULOCHANA DEVI LOHIA.
- All are residing at A.T. Road, Tinsukia-786125,
Assam.
8. MAUD TEA & SEED CO. LTD.,
an existing Company within the meaning of the
Companies Act, 1956, having its registered office at
138, Biplabi Rash Behari Basu Road, Kolkata-700001.
9. SANKAR TEA COMPANY LTD.,
an existing Company within the meaning of the
Companies Act, 1956, having its registered office at
138, Biplabi Rash Behari Basu Road, Kolkata-700001.
10. SRI ADITYA AGARWAL,
a minor represented by his father and natural
guardian, Shri Ram Chandra Agarwal.
2
11. SM. SUJATA AGARWAL.
12. SM. SARITA AGARWAL.
13. SRI MAYANK AGARWAL.
14. SRI LAXMAN PRASAD AGARWAL.
15. SRI SANTANU AGARWAL,
a minor represented by his father and natural
guardian, Sri Laxman Prasad Agarwal.
16. SRI J.P. AGARWAL,
as Karta of a Hindu Undivided Family,
carrying on business under the name and style of
J.P. Agarwal & Sons (HUF).
- All are residing at C/o. Mittal Hardware, A.T. Road,
Tinsukia-786125, Assam.
17. SHREE RAM AGARWAL,
for self and as Karta of a Hindu Undivided Family,
carrying on business under the name of Sreeram
Agarwal & Sons (HUF).
18. SRI ANKUR AGARWAL.
19. SM. SABITA AGARWAL.
- All are residing at C/o. P.T. Commercial (P) Ltd.,
Central Bank Road, Tinsukia-786125, Assam.
20. P.T. COMMERCIAL (P) LTD.,
a Company under the provisions of the
Companies Act, 1956 and having its registered
office at Central Bank Road, Tinsukia-786125,
Assam.
21. D.S. PLYWOOD PRIVATE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 4, Synagogne Street, 3rd floor,
Kolkata-700001.
22. PIYUSH SECURITIES PRIVATE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 9/12, Lalbazar Street, 3 rd floor,
Kolkata-700001.
23. RANISATI TRADERS & INVESTMENTS PRIVATE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 9/12, Lalbazar Street, 3 rd floor,
3
Kolkata-700001.
24. RANISATI TRECON PRIVATE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 16, Pageya Patty Road, Kolkata-700007.
25. SURAJMAL RAMDIN FISCAL SERVICES PRIVATE
LTD., a Company incorporated under the provisions
of the Companies Act, 1956, having its registered
office at 9/12, Lalbazar Street, 3 rd floor,
Kolkata-700001.
26. TINSUKIA DEVELOPMENT CORPORATION LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at A.T. Road, Tinsukia-786125, Assam.
27. TIRUMALA MANAGEMENT PRIVATE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 9/12, Lalbazar Street, 3 rd floor,
Kolkata-700001.
28. TRIVENI CORPORATE MANAGEMENT PRIVATE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 9/12, Lalbazar Street, 3rd floor,
Kolkata-700001.
29. TRIVENI TRECON PRIVATE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 1, Mullick Street, Kolkata-700007.
30. RANISATI FAB TRADE LTD.,
a Company incorporated under the provisions of
the Companies Act, 1956, having its registered
office at 9/12, Lalbazar Street, 3 rd floor,
Kolkata-700001.
31. SM. RATNADEVI AGARWALLA.
32. SRI GAJANAND AGARWALLA.
33. SRI SUNIL AGARWALLA.
34. SRI SUSHIL AGARWALA.
- All are residing at C/o. Tekuram Ka, A.T. Road,
Tinsukia-786125, Assam.
35. SRI ABHIJIT DAURAH,
4
J.B. Road, Chenikuthi, Kamrup,
Guwahati-781003.
36. SRI NARENDRA KUMAR MINDA,
Hanuman Tower, Sati Jayabati Road,
Dist.-Kamrup, Guwahati-781001.
......Respondents.
Advocate(s) for the Appellant :
Mr. S.N. Mukherjee (Sr. Adv.), Mr. M. Bhuyan, Mr. R. Banerjee, Mr. P. Hazarika.
Advocate for the Respondents :
Mrs. M. Hazarika (Sr. Adv.), Ms. A. Ajitsaria, Ms. A. Medhi, Mr. K. Agarwal, Mr. R.J. Barua, Ms. D. Kakati, Mr. K. Goswami, Ms. J.M. Saikia.(II) CO.APP. No.4/2005
SRI DEEPAK LOHIA, resident at A.T. Road, Tinsukia, Pin-786125, Assam.
......Appellant.
-Versus-
1. KAMRUP DEVELOPERS PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at PO-Ulubari, G.S. Road, Guwahati-781007.
2. SRI BHAJANLAL AGARWAL.
3. SRI ASHOK KUMAR AGARWAL.
4. SRI ANIL KUMAR AGARWAL
- All are residing at Dispur Christian Basti Link Road (Zoo Road), near Sundarpur, Guwahati-781005, Assam and at Room No.428, 4th floor, Srimanta Market, A.T. Road, Guwahati-1.5
5. SM. SANGITA LOHIA.
6. SM. SAVITRI DEVI LOHIA.
7. SM. SULOCHANA DEVI LOHIA.
- All are residing at A.T. Road, Tinsukia-786125, Assam.
8. MAUD TEA & SEED CO. LTD., an existing Company within the meaning of the Companies Act, 1956, having its registered office at 138, Biplabi Rash Behari Basu Road, Kolkata-700001.
9. SANKAR TEA COMPANY LTD., an existing Company within the meaning of the Companies Act, 1956, having its registered office at 138, Biplabi Rash Behari Basu Road, Kolkata-700001.
10. SRI ADITYA AGARWAL, a minor represented by his father and natural guardian, Shri Ram Chandra Agarwal.
11. SM. SUJATA AGARWAL.
12. SM. SARITA AGARWAL.
13. SRI MAYANK AGARWAL.
14. SRI LAXMAN PRASAD AGARWAL.
15. SRI SANTANU AGARWAL, a minor represented by his father and natural guardian, Sri Laxman Prasad Agarwal.
16. SRI J.P. AGARWAL, as Karta of a Hindu Undivided Family, carrying on business under the name and style of J.P. Agarwal & Sons (HUF).
- All are residing at C/o. Mittal Hardware, A.T. Road, Tinsukia-786125, Assam.
17. SHREE RAM AGARWAL, for self and as Karta of a Hindu Undivided Family, carrying on business under the name of Sreeram Agarwal & Sons (HUF).
18. SRI ANKUR AGARWAL.
19. SM. SABITA AGARWAL.
- All are residing at C/o. P.T. Commercial (P) Ltd., Central Bank Road, Tinsukia-786125, Assam.
20. P.T. COMMERCIAL (P) LTD., 6 a Company under the provisions of the Companies Act, 1956 and having its registered office at Central Bank Road, Tinsukia-786125, Assam.
21. D.S. PLYWOOD PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 4, Synagogne Street, 3rd floor, Kolkata-700001.
22. PIYUSH SECURITIES PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 9/12, Lalbazar Street, 3 rd floor, Kolkata-700001.
23. RANISATI TRADERS & INVESTMENTS PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 9/12, Lalbazar Street, 3 rd floor, Kolkata-700001.
24. RANISATI TRECON PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 16, Pageya Patty Road, Kolkata-700007.
25. SURAJMAL RAMDIN FISCAL SERVICES PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 9/12, Lalbazar Street, 3 rd floor, Kolkata-700001.
26. TINSUKIA DEVELOPMENT CORPORATION LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at A.T. Road, Tinsukia-786125, Assam.
27. TIRUMALA MANAGEMENT PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 9/12, Lalbazar Street, 3 rd floor, Kolkata-700001.
28. TRIVENI CORPORATE MANAGEMENT PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 9/12, Lalbazar Street, 3 rd floor, Kolkata-700001.
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29. TRIVENI TRECON PRIVATE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 1, Mullick Street, Kolkata-700007.
30. RANISATI FAB TRADE LTD., a Company incorporated under the provisions of the Companies Act, 1956, having its registered office at 9/12, Lalbazar Street, 3 rd floor, Kolkata-700001.
31. SM. RATNADEVI AGARWALLA.
32. SRI GAJANAND AGARWALLA.
33. SRI SUNIL AGARWALLA.
34. SRI SUSHIL AGARWALA.
- All are residing at C/o. Tekuram Ka, A.T. Road, Tinsukia-786125, Assam.
35. SRI ABHIJIT DAURAH, J.B. Road, Chenikuthi, Kamrup, Guwahati-781003.
36. SRI NARENDRA KUMAR MINDA, Hanuman Tower, Sati Jayabati Road, Dist.-Kamrup, Guwahati-781001.
......Respondents.
Advocate(s) for the Appellant :
Mr. S.N. Mukherjee (Sr. Adv.), Mr. M. Bhuyan, Mr. R. Banerjee, Mr. P. Hazarika.
Advocate for the Respondents :
Mrs. M. Hazarika (Sr. Adv.), Ms. A. Ajitsaria, Ms. A. Medhi, Mr. K. Agarwal, Mr. R.J. Barua, Ms. D. Kakati, Mr. K. Goswami, Ms. J.M. Saikia.
8
BEFORE
THE HON'BLE MR. JUSTICE B.P. KATAKEY
Date of Hearing : 18.03.2010
Date of Judgment & Order : 03.05.2010
JUDGMENT AND ORDER
These two appeals, under Section 10F of the Companies Act, 1956 (in short the Act), are directed against the orders dated 15.06.2004 passed in CA No.41/2004 and dated 19.07.2005 passed in CA No.99/2005, by the Company Law Board (CLB), both arising out of CP No.82/2000. By order dated 15.06.2004, which is the subject matter in Company Appeal No.8/2004, the CLB has rejected the application, registered and numbered as CA No.41/2004, filed by the appellant, praying for a direction for adjustment of the amount paid by the respondent No.1, pursuant to the CLB's order dated 31.12.2001 passed in CP No.82/2000, which was affirmed by the Company Judge of this Court in Company Appeal No.1/2002 vide judgment dated 29.01.2004, first against the interest payable on such amount then against the principal, with a further prayer for injunction and appointment of receiver till the entire amount is paid. By order dated 19.07.2005, passed in CA No.99/2005, registered on the basis of the application filed by the respondent No.1, praying for waiver of interest on the 9 amount payable to the appellant in terms of the aforesaid order dated 31.12.2001, which is the subject matter in Company Appeal No.4/2005, the CLB restricted the payment of interest @20% per annum up to 31.08.2002, with a further direction to pay the same by 15.09.2005.
Since the aforesaid orders under challenge in these appeals arise out of CP No.82/2000, both are taken up together for hearing and disposal, as agreed to by the learned counsel for the parties.
2. The facts relevant for the purpose of the present appeals may be summarized as under:-
(i) The appellant had filed an application under Section 397/398 of the Act alleging oppression and mismanagement in the running of the affairs of the respondent No.1 company, contending inter alia that on the basis of an understanding reached between him and the Agarwal Group, the respondent No.1 company was incorporated in the year 1998 with an authorized capital of 5000 equity shares of Rs.100/- each. The paid up capital of the company consisted of 200 equity shares of Rs.100/- each, out of which the appellant was allotted 100 shares and the remaining 100 shares were held by the respondent No.3 Shri Ashok Kumar Agarwal. The respondent No.2 Shri Bhajanlal Agarwal, who was the owner of a plot of land, allowed his land to be developed by the respondent No.1 company and 10 for the purpose of which the respondent No.2 had executed an irrevocable Power of Attorney in favour of the company in return for a consideration of Rs.16,00,000/-. According to the appellant, both the Groups, namely, Lohia Group, headed by the appellant and Agarwal Group, headed by respondent No.3, also contributed Rs.2.5 lakhs each as share application money and the Lohia Group had brought in an additional amount of Rs.2.25 crores to the company, either as unsecured loans or as advances against booking of space in the building to be constructed in the plot of which the respondent No.1 was the owner. The further case of the appellant was that sometimes in the month of November, 1999, he noticed certain discrepancies in the accounts of the company, which the respondent No.3 could not satisfactorily explain and which led to the appointment of an Arbitrator and execution of a Memorandum of Understanding by and between the parties on 02.05.2000. According to the appellant, the said Memorandum of Understanding was not honoured by Agarwal Group and thereafter the said group by fabricating the records maintained by the company, had inducted two Additional Directors belonging to Agarwal Group thereby reducing the Lohia Group to a minority. It was further contended in the said application that on 01.09.1999 allotment of 2600 shares were made in favour of 11 Agarwal Group, whereas 2400 shares were allotted to the Lohia Group and such allotment was made by fabricating and falsifying the company's record and in breach of the understanding reached between the parties that both the sides were to have parity in the share holding or in the representation of the company. A further allegation that the Agarwal Group was not holding the Annual General Meetings or the Board Meetings of the company, was also made.
(ii) The said application was resisted by the Agarwal Group denying reaching of any understanding between the parties to maintain the parity in the share holding or in the representation in the Board of Directors as projected by Lohia Group. According to the Agarwal Group, the understanding was that they would hold the majority shares. The allegations of mismanagement as well as of not holding the Board Meetings and the Annual General Meetings were also denied.
(iii) The CLB on consideration of the materials placed on record as well as the respective cases projected, took the view that it was the understanding and intention of the parties to have equal shares and representation in share holding of the 12 company as well as in its Board. It was also found by the CLB that the induction of the Additional Directors belonging to the Agarwal Group as well as the allotment of additional shares to the said group were in breach of the agreement and understanding between the parties, and therefore constituted acts of oppression. Having held so, the CLB directed the respondent No.1 company to repay all the amounts of unsecured loans and booking advance taken from the appellant, his associates, relatives, etc. i.e. Lohia Group, as indicated in Annexure-P4 and Annexure-P5 to the said application together with interest as specified therein with a further direction to repay the appellant all the amount due within 8(eight) months. Such directions were issued after noticing that the proceedings had brought out complete lack of confidence between the two groups each alleging fabrication of documents by the other side and both were found to be acting in a manner prejudicial to each other resulting in the company's welfare being affected and the project in which substantial amount had been spent had come to a standstill, for which though there was every justification to wind up the company on just and equitable grounds, the same would not be in the interest of any of the shareholders. The CLB, therefore, found that in the interest of the company, one of the groups should go out of the 13 company. Relating to the payment of interest, the CLB having noticed that the appellant did not get any benefit out of his investment in view of his going out of the company and the respondent No.1 company has utilize the said amount on the project to which it would have otherwise raised funds on interest, found it appropriate to direct payment of interest @20% (simple) from the date of receipt of the funds by the respondent No.1 company till the date of payment to the appellant with a further direction to pay the principal amount and interest in one or more installments on or before 31.08.2002 and till such time, it was further directed that, the appellant will continue to be a director in the company and the shareholders from his group (Lohia Group) will exercise all the rights as shareholders.
(iv) The said order of the CLB was put to challenge by the respondent Nos.1 and 3 in Company Appeal No.1/2002, before the High Court, under Section 10F of the Act, which was, however, dismissed vide judgment and order dated 29.01.2004.
(v) An application was, thereafter, filed by the appellant before the CLB, which was registered and numbered as CA No.41/2004, praying for an order of injunction restraining 14 the respondent No.1 company and others from selling, dealing with and/or encumbering and/or disposing of any flats, shops or office spaces in the building constructed; for appointment of Receiver and/or Special Officer in respect of the office spaces, shops and flats in the said building and to take possession; to direct such Receiver and/or Special Officer to sell the office spaces, flats, shops, etc. in the said building, which remain unsold, by public auction etc. and to realize the sale proceed and handover the same to the appellant for disbursement to the entities mentioned in Annexures-P4 and P5 in CP No.82/2000 and to disclose to the appellant all particulars with regard to the dealings and transactions in respect of the flats and office spaces in the said building, basically contending that despite the order passed by the CLB on 31.12.2001, which had been upheld by the High Court vide judgment and order dated 29.01.2004, the respondent No.1 company did not pay the entire dues payable except making payment of Rs.50,00,000/- and leaving a balance of Rs.81,18,136/- including interest in so far as the entities concerned in Annexure-P4 and a sum of Rs.2,32,48,567/- including interest in respect of the entities in Annexure-P5 are concerned and on the other hand, the respondent No.1 company and other contesting respondents are 15 contemplating to sell the flats, office spaces, shop rooms and the building under construction, to avoid their liability to make the payment in terms of the CLB's aforesaid order.
(vi) The said application has been contested by the respondent No.1 company denying the claim of the appellant and contending inter alia that out of the principal amount of Rs.71 lakhs, an amount of Rs.56 lakhs has already been paid leaving the balance of Rs.15 lakhs towards the principal in respect of the entities in Annexure-P4 and an amount of Rs.114.25 lakhs is outstanding towards the principal amount due on account of Annexure-P5 entities, but since the payments could be made due to unforeseen circumstances and reasons beyond the control of the company, as mentioned in the said written objection, the respondent No.1 company sought for a year's time for repayment of the outstanding principal amount in respect of the entities in Annexures-P4 and P5. In the said objection, it has further been stated that it would be inequitable and harsh for the company to pay a further sum of Rs.81 lakhs on account of Annexure-P4 entities and a sum of Rs.2.32 crores on account of Annexure-P5 entities and calculation of such amount is erroneous and incorrect, when the payments made by the respondent No.1 company were to be 16 adjusted against the principal and not intended to be adjusted against the interest payable.
(vii) The averments made in the said application as well as the objection filed thereto, gave rise to the question before the CLB, as to whether the amount paid by the respondent No.1 company to the Lohia Group, in terms of the order dated 31.12.2001 passed by the CLB in CP No.82/2000, is to be adjusted against the principal amount due and payable or against the interest accrued thereon, first. The CLB by order dated 15.06.2004 has held that since the order for payment of interest was based purely on equitable grounds, in exercise of its equitable jurisdiction, to do justice to the parties, such direction cannot be treated to be a decree and as such the amount paid by the respondent No.1 cannot directed to be adjusted first against the interest due and payable and the remaining against the principal amount due and payable under the order dated 31.12.2001 passed by it.
(viii) Another application was filed by the respondent No.1 company before the CLB, which was registered and numbered as CA No.99/2005, praying for recording that all amount due and payable by it to the present appellant, pursuant to the order dated 31.12.2001 passed in CP 17 No.82/2000, have been paid and there is no other amount due and payable by the respondent No.1 company and/or by the respondent No.3 Shri Ashok Kumar Agarwal and they are not liable to make any further payment to the appellant or his associates (Lohia Group), contending inter alia that pursuant to the aforesaid order dated 31.12.2001 passed by the CLB, the entire amount towards the principal in respect of the entities in Annexures-P4 and P5 to the main application, has been paid and keeping in view the status of the project in question and the investment made therein by the Agarwal Group, a prayer was made to pass an order waving the payment of any interest by the applicants therein and/or by the company to the appellant and/or his associates.
(ix) The CLB upon hearing the learned counsel for the parties and on perusal of the materials made available before it as well as the pleadings of the parties, has held that on account of the circumstances beyond the control of the respondent No.1 company and other contesting respondents (Agarwal Group), the basis on which the rate of interest was fixed by it in the order dated 31.12.2001 no longer subsist and as such the Agarwal Group is justified in seeking the relief for waiver of the interest. The CLB accordingly directed that the 18 interest payable pursuant to the order dated 31.12.2001 passed by it would be payable up to 31.08.2002 i.e. the date fixed for payment of the principal sum and the interest vide the aforesaid order dated 31.12.2001 and directed payment of the same to the appellant by 15.09.2005. Hence the present appeals.
3. I have heard Mr. S.N. Mukherjee, the learned Sr. counsel appearing for the appellant, Mrs. M. Hazarika, the learned Sr. counsel appearing for the respondent Nos.1 & 3, Mr. K. Agarwal, the learned counsel appearing for the respondent Nos.8 to 20, Mr. R.J. Baruah, the learned counsel appearing for the respondent Nos.2 & 4 and Mr. K. Goswami, the learned counsel appearing for the respondent Nos.21 to
30.
4. Mr. Mukherjee, the learned Sr. counsel for the appellant referring to the order dated 31.12.2001 passed by the CLB in CP No.82/2000 as well as the provisions in Sections 397 and 398 of the Act has submitted that any order including the order passed by the CLB under Section 397/398 of the Act being enforceable, under Section 634A of the Act, like a decree passed by a Civil Court, there cannot be any differentiation of the order passed by CLB in exercise of its equitable jurisdiction, as the CLB under Section 397 of the Act is empowered to make such order, as it thinks fit, for bringing to an end 19 the matters complained of, it having passed the order for payment of interest @20% on the principal amount due and payable to the appellant. It has further been submitted that the CLB having decided the application in CP No.82/2000 vide order dated 31.12.2001, cannot subsequently alter the same, more so, when such order has attained the finality, the appeal preferred by the contesting respondents under Section 10F of the Act before the High Court having been dismissed, and when the appellant filed the application in CA No.41/2004 for execution of the order dated 31.12.2001 passed by the CLB. According to the learned counsel, the CLB though has no power to review its order, it has reviewed its earlier order thereby restricting the payment of interest @20% up to 31.08.2002 i.e. the date by which the CLB had directed the contesting respondents to pay the principal and the interest accrued thereon, which amounts to favouring the defaulter in making payment pursuant to its order dated 31.12.2001. According to the learned Sr. counsel, even the answering respondents knew that they are liable to pay interest till the date of actual payment and as such they in the application filed in CA No.99/2005 prayed for waiver of the interest payable.
5. Relating to the order dated 15.06.2004, which is under challenge in CA No.8/2004, it has been submitted that since the direction contained in order dated 31.12.2001 passed by the CLB in CP No.82/2000 is enforceable by it, in the same manner as if it was a 20 decree made by a Court in a suit, the CLB is not correct to observe that the order passed by it is not in the nature of a money decree and hence the amount paid by the contesting respondents towards satisfaction of the order dated 31.12.2001 cannot first be adjusted against the interest on the principal amount, more so when in effect the application filed by the appellant in CA No.41/2004 was for enforcement of the order dated 31.12.2001. The learned Sr. counsel further submits that since under Section 397 of the Act, the CLB is empowered to make such order, as it thinks fit, in an application filed under Section 397 of the Act alleging oppression, and such order is enforceable under Section 634A, the claim of the appellant for adjustment of the amount paid against the interest payable on the principal amount due, cannot be rejected on the ground that such order was passed in exercise of the equitable jurisdiction.
6. The learned Sr. counsel in support of his contentions has placed reliance on the decisions of the Apex Court in Gojer Brothers Vs. Ratan Lal Singh reported in AIR 1974 SC 1380, in Industrial Credit & Development Syndicate Vs. Smithaben H. Patel reported in (1999)3 SCC 80, in Manish Mohan Sharma Vs. Ram Bahadur Thakur Ltd. reported in (2006)4 SCC 416; of the Calcutta High Court in Hanuman Prosad Verma Vs. Stock and Finance Ltd. reported in 58 CC 338 and in Shaw Wallace & Company Ltd. Vs. Ghoom Investment Company Pvt. Ltd. reported in 2003(2) CHN 484. 21
7. Mrs. Hazarika, the learned Sr. counsel appearing for the contesting respondents referring to the decision of the CLB dated 31.12.2001 passed in CP No.82/2000 has submitted that the direction for payment of interest was passed in exercise of the equitable jurisdiction and as such the CLB is within its jurisdiction to alter the same, keeping in view the fact situation of the case and the difficulties faced by the answering respondents, more so, when the CLB in the order dated 31.12.2001 gave liberty to the parties to approach it, in case of any difficulty in implementing and for any consequential directions. According to the learned Sr. counsel, the answering respondents pursuant to the liberty given to approach the CLB in case of any difficulty in implementing the order, had approached the CLB in CA No.99/2005 and the CLB having taken into consideration the entire facts and circumstances of the case has restricted the payment of interest up to 31.08.2002, by which date the answering respondents were directed to pay the certain amount with interest, however, rejecting the prayer of the answering respondents to wave the payment of interest totally as directed earlier. Mrs. Hazarika submits that the application filed by the appellant in CA No.41/2004, from its contents and the prayer made therein, is not an application for enforcement of the order dated 31.12.2001 passed by the CLB, which in any case being an interim order and understood as such by the appellant, there is no question of enforcing the same. According to Mrs. Hazarika, what the 22 CLB intended in its order dated 31.12.2001 being to compensate the appellant, and the contesting respondents having paid the appellant the substantial amount pursuant to such order, the appellant has in fact been compensated. It has further been submitted that since the order dated 31.12.2001 was passed by the CLB in exercise of its equitable jurisdiction, the same cannot be treated to be in the nature of a money decree, so as to entitle the appellant to adjust the amount paid by the contesting respondents, pursuant to the aforesaid order dated 31.12.2001, against the interest first and the remaining against the principal.
8. Mr. Mukherjee, the learned Sr. counsel for the appellant in reply to the arguments advanced by the learned Sr. counsel for the contesting respondents has submitted that, because the liberty has been given to the parties to approach the CLB vide its order dated 31.12.2001, it cannot be said that the said order was an interim and not a final order. Referring to the said order dated 31.12.2001, it has been submitted that the application filed by the appellant under Section 397/398 of the Act was decided and certain amount was directed to be paid and all the interim orders passed earlier were vacated and as such the said order is a final order enforceable under Section 634A of the Act. The learned counsel appearing for the other respondents have supported the argument advanced by Mr. Mukherjee, the learned Sr. counsel for the appellant.
23
9. I have considered the submissions of the learned counsel for the parties and also perused the materials made available on record of the appeals as well as the various orders passed by the CLB including the orders impugned in the present appeals.
10. From the facts narrated above as well as the arguments advanced by the learned counsel for the parties, the questions of law which arise for determination in these appeals are:-
A. In Company Appeal No.8/2004:
(i) Whether the order dated 31.12.2001 passed by the Company Law Board in CP No.82/2000 is final disposing of the application filed under Section 397/398 of the Act and enforceable under Section 634A of the Act and if so, whether the amount paid by the contesting respondents to the appellant pursuant to the said order dated 31.12.2001 is to be appropriated first against the interest payable and only thereafter against the principal amount?
B. In Company Appeal No.4/2005:
(i) Whether the Company Law Board can alter the direction contained in the order dated 31.12.2001 passed in CP No.82/2000, by restricting the payment of interest 24 @20% up to 31.08.2002 only, after the said order dated 31.12.2001 has been affirmed by the High Court in an appeal preferred by the contesting respondents under Section 10F of the Act and in the absence of any challenge to the liberty given to the parties to approach the CLB in case of difficulties in implementing the award, by the appellant?
11. The CLB in a proceeding initiated under Section 397 of the Act is empowered to make such order, as it thinks fit, with a view to bringing to an end the matters complained of, provided, it is of the opinion that the company's affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to any member or members and winding up the company would unfairly prejudice such member or members, though otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up. While dealing with an application under Section 398 of the Act, the CLB, with a view to bringing to an end or preventing the matters complained of or apprehended, is also empowered to make such order as it thinks fit, when the affairs of the company are being conducted in a manner prejudicial to the public interest or in a manner prejudicial to the interests of the company or by any reason of any material change in the management or the control of the company, it is likely that the affairs of 25 the company will be conducted as provided in clause (b) of sub-section (1). Section 402 of the Act confers additional power on the CLB, to pass such order as stipulated therein, while dealing with an application under Section 397 or 398 of the Act, without prejudice to the generality of powers under the said provisions of law. Clause (g) of Section 402 of the Act confers jurisdiction on the CLB to pass such order, which in its opinion is just and equitable, while passing an order on the application filed under Section 397/398 of the Act. Section 634A of the Act provides how an order passed by the CLB is to be enforced. It provides that any order made by the CLB may be enforced by that Board in the same manner as if it were a decree made by a court in a suit pending therein. The CLB can, in case of its inability to execute such order, send the same to the court within the local limits of whose jurisdiction the registered office of the company situated, when such an order was passed against the company or where the person concerned voluntarily resides and carries on business or personally works for gain, when the order is against any other person, for execution. The proviso to the said provision stipulates that the said provisions shall not be applied on or after commencement of the Companies (2nd Amendment) Act, 2002, which has admittedly not been enforced till date.
12. The said provisions of the Act, therefore, make it clear that the CLB, apart from passing orders, as it thinks fit, while dealing with an application under Section 397/398 of the Act, is also empowered to 26 pass any such order, which in its opinion is just and equitable. The validity of an order passed by the CLB, therefore, is to be judged in the backdrop of its power to pass such orders, as noticed above.
13. In the cases in hand, the CLB passed the order dated 31.12.2001 in CP No.82/2000 requiring the Lohia Group to surrender the company to Agarwal Group, subject to payment of the value of the shares held by Lohia Group and return of the investment brought into the company by the said group along with interest thereon @20% per annum, having held that the company's affairs are being conducted in a manner oppressive to Lohia Group. By the said order, the entire principal and the interest was directed to be paid on or before 31.08.2002. While disposing of the said application filed under Section 397/398 of the Act, a further order, however, was passed by the CLB granting liberty to the parties to approach it, in case of any difficulty in implementing the order and for any consequential directions. From the nature of the said orders passed by the CLB, it is, therefore, evident that first part of the order i.e. requiring the Lohia Group to surrender subject to payment of value of the shares hold by the said group and return of all investments brought into the company by the Lohia Group along with interest thereon was passed in exercise of the jurisdiction conferred on it by Section 397/398 of the Act and the second part i.e. granting liberty to approach it again, in the event of any difficulty in implementing the said order and for any consequential directions 27 thereunder, was passed in exercise of the jurisdiction conferred by Section 402 of the Act, as the CLB in the order passed under Section 397/398 is also empowered to provide for any other matter, which in its opinion is just and equitable. From the order dated 31.12.2001 it also appears that such order was passed by the CLB, as it was in the opinion that because of complete lack of confidence between the two groups, each alleging fabrication of documents by the other side, and/or both the groups were found to be acting in a manner prejudicial to each other resulting in the company's welfare being affected and because of such act on the part of both the groups, the project in which substantial amount had been spent came to a standstill. From the nature of the said order dated 31.12.2001, it is evident that the same was a final order passed in a proceeding instituted under Section 397/398 of the Act. The final character of the said order would not be changed, as the liberty was given to the parties to approach the CLB in case of difficulties in implementing the said order, which part of the order was passed in exercise of the power under Section 402 of the Act.
14. The order of the CLB dated 31.12.2001 though in stricto sensu is not a decree passed by the Civil Court under the provisions of the Civil Procedure Code, it, however, can be enforced by the CLB, under Section 634A of the Act, in the manner as if such order was made by a court in a suit pending therein. The order passed by the CLB, therefore, is executable in the same manner in which a decree passed 28 by the Civil Court is executed. The CLB may enforce its own order or may send the same to the Court for its execution, in the case of its inability to execute such order, though as noticed above, the order passed by the CLB is not a decree as such passed by a Civil Court.
15. The CLB in its order dated 31.12.2001 passed in CP No.42/2000, as discussed above, directed payment of certain amount with interest @20% per annum with further direction to repay the entire principal and the interest by 31.08.2002. Such interest was directed to be paid from the date of receipt of the funds by the company till the date of payment. The Agarwal Group unsuccessfully challenged the said order in the High Court in an appeal under Section 10F of the Act. The Agarwal Group, therefore, subject to the order that may be passed by the CLB, in view of the liberty given to the parties in case of any difficulty in implementing the said order and for any consequential directions to be passed thereon, which order was passed in exercise of the jurisdiction conferred by Section 402 of the Act, is bound to pay the principal and the interest as awarded by the CLB and such order relating to the payment of principal and interest takes the character of a decree passed by a Civil Court under the provisions of the Civil Procedure Code for the purpose of its enforcement under Section 634A of the Act.
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16. There being no specific direction in the said order dated 31.12.2001 passed by the CLB relating to the mode of payment of the amount and how any amount paid pursuant to such order is to be appropriated, the money paid by Agarwal Group to Lohia Group is first to be applied in payment of the interest and then when it is satisfied, in the payment of the principal amount, as held by the Apex Court in Industrial Credit & Development Syndicate (supra). The order of the CLB being executable, as if it is a decree passed by a Civil Court, the principle of law laid down by the Apex Court in the said judgment shall also be applied in respect of the order passed by the CLB.
17. By order dated 15.06.2004, which is the subject matter in Company Appeal No.8/2004, the CLB has rejected the contention of the Lohia Group for adjustment of the amount paid, towards the interest first, by holding that the order dated 31.12.2001 was not a money decree and as such the said principle cannot be applied, more so, when such an order was passed on equitable ground. The said ground, in view of the aforesaid discussion, cannot be sustained in law and hence set aside.
18. By the other order dated 19.07.2005, which is the subject matter in Company Appeal No.4/2005, the CLB while rejecting the prayer of Agarwal Group for waiver of interest has directed that the payment of interest @20% per annum would be restricted to 30 31.08.2002, keeping in view the various difficulties faced by Agarwal Group in implementing the order dated 31.12.2001. As held above, the CLB in exercise of its jurisdiction under Section 402 of the Act had passed an order giving liberty to both the parties to approach it, in case of any difficulty in implementing the order and also for consequential directions. The order dated 31.12.2001 though was challenged in the High Court by Agarwal Group in the appeal filed under Section 10F of the Act, the same, however, had been dismissed without interfering with the order passed by the CLB. The Lohia Group had also not challenged such directions contained in the said order giving liberty to the parties to approach the CLB in case of any difficulty in implementing the order and for any consequential order. The Lohia Group, in fact, has filed the application being CA No.41/2004 seeking certain further directions, by taking advantage of such liberty given, wherein the CLB has passed the order dated 15.06.2004, which has already been dealt with in this judgment. An application was also filed by Agarwal Group, registered and numbered as CA No.99/2005, where the CLB has passed the order dated 19.07.2005, restricting the payment of interest up to 31.08.2002 keeping in view the difficulties faced by Agarwal Group in payment of interest while, however, rejecting the prayer of Agarwal Group to totally wave the interest payable under order dated 31.12.2001.
19. The contention of the appellant (Lohia Group) that the order dated 31.12.2001 having been affirmed by the High Court in Company 31 Appeal No.1/2002 vide its judgment dated 29.01.2004, the CLB cannot pass the order dated 19.07.2005, its order having merged with the order passed by the High Court in appeal, cannot be accepted as the High Court did not interfere with the order passed by the CLB giving the liberty to the parties to approach it again in case of any difficulties in implementing the order and reserving its jurisdiction to pass further order. Such liberty having been given by the CLB, in exercise of its power conferred by Section 402 of the Act, as discussed above, as well as in its equitable jurisdiction, no fault can be found with the CLB in passing the order dated 19.07.2005, keeping in view the difficulties faced by Agarwal Group. The question whether the Agarwal Group in fact faced any difficulties or not is a question of fact, which cannot be challenged by Lohia Group before the High Court, as appeal under Section 10F of the Act lies only on the question of law and not on the question of fact.
20. There is no dispute to the proposition of law enunciated by the Apex Court in Gojer Brothers (supra) that when an appeal has been preferred, the decree to be executed is the decree of the Appellate Court, as the decree passed by the Trial Court merges in the decree passed by the Appellate Court. In the instant case also the direction contained in the order dated 31.12.2001 passed by the CLB relating to the payment of principal and interest having been affirmed by the High Court such direction naturally merges with the order passed by the 32 High Court in an appeal under Section 10F of the Act. It however, does not mean that the CLB, in the absence of any challenge and in the absence of interference with the order contained in the said order dated 31.12.2001 granting liberty to the parties to approach it again, cannot entertain the subsequent application pursuant to the liberty granted by it to the parties, since such an order was passed under Section 402 of the Act. The appellant, in fact, took advantage of the said liberty and filed the application, which is the subject matter in Company Appeal No.8/2004.
21. In view of the aforesaid discussion, the decision of the Calcutta High Court in Hanuman Prosad Verma (supra) has no application in the case in hand. The decision of the Calcutta High Court in Shaw Wallace & Company Ltd. (supra) cannot also be applied, in view of the facts and circumstances of this case, as narrated above. There is also no dispute to the proposition of law as enunciated by the Apex Court in Manish Mohan Sharma (supra) that the words 'any order' used in Section 634A of the Act indicates all orders made by the Company Law Board on an application under Section 397/398 and as such are enforceable like decrees without any limit on the nature of the order passed by the CLB. In the instant case, a liberty, however, was granted to the parties to approach the CLB in case of any difficulties in implementing the orders. Such liberty granted by the CLB by the said order dated 31.12.2001, as noticed above, has not been challenged by 33 the appellant (Lohia Group) and, therefore, the direction for payment of principal and interest naturally has to be subject to the further order that may be passed by the CLB. There is no doubt that the direction for payment of principal and interest, subject to the subsequent modification that may be made pursuant to such liberty granted, is executable by the CLB or by any other Court under Section 634A of the Act.
22. In view of the above, while allowing the appeal being Company Appeal No.8/2004, the Company Appeal No.4/2005 stands dismissed. The amount paid by the Agarwal Group pursuant to the order dated 31.12.2001 passed by the CLB in C.P. No.82/2000 shall first be appropriated against the interest payable up to 31.08.2002 and the remaining amount shall be appropriated against the principal amount.
23. Keeping in view the facts and circumstances of the case the parties are, however, directed to bear their own cost.
JUDGE Roy