2010 (7) TMI 812 - HC - Companies Law

Settlement scheme - Held that - By the impugned orders the Company Law Board has only enforced the settlement between the parties thereto. If any of the other parties are aggrieved by the transactions including on the basis of their being contrary to the articles of association of the company they must adopt independent proceedings which would be decided on their own merits. The applicants in Appeal No. 12 are at liberty to adopt separate/independent proceedings for the redressal of their grievance in respect of the said settlement including on the basis of article 10. The question whether the company ought to register a transfer pursuant to the said settlement and orders or not is a matter which does not arise in the present appeals. I am not inclined to interfere with the order of costs of Rs. 50, 000 for more than one reason. The Company Law Board rightly came to the finding that the appellants tried to wriggle out of a settlement. The manner in which they sought to do so does not warrant any interference with the order of the Company Law Board. Further no question of law arises in this regard. Appeal dismissed.

Issues Involved:
1. Alleged vacation of office by directors.
2. Maintenance and increase of authorized share capital.
3. Rectification of the register of members.
4. Allotment of shares to various persons.
5. Recovery of monies advanced by the company to third parties.
6. Implementation of the settlement agreement.
7. Compliance with the settlement terms.

Issue-wise Detailed Analysis:

1. Alleged Vacation of Office by Directors:
The respondents sought a declaration that the alleged vacation of office by them as directors is null and void and that respondent No. 2 continued as the working director of the company after March 31, 2006. The court did not delve into the merits of this issue as the matter was ultimately disposed of based on a settlement agreement between the parties.

2. Maintenance and Increase of Authorized Share Capital:
The respondents sought relief for maintaining the authorized share capital of the company and a declaration that any increase thereof is void. This issue was also not examined in detail due to the settlement agreement reached between the parties.

3. Rectification of the Register of Members:
The respondents challenged the allotment of shares to various persons and sought rectification of the register of members. The court did not address this issue substantively as the settlement agreement rendered it moot.

4. Allotment of Shares to Various Persons:
The respondents contested the allotment of shares to various persons. This issue was subsumed under the settlement agreement and was not separately adjudicated.

5. Recovery of Monies Advanced by the Company to Third Parties:
The respondents sought recovery of monies advanced by the company to third parties. This issue was also not specifically addressed in the judgment due to the settlement agreement.

6. Implementation of the Settlement Agreement:
The settlement agreement between the appellants and respondents Nos. 1 to 5 was a focal point. The court noted that the appellants initially attempted to wriggle out of the settlement with the aid of respondents Nos. 7 to 13. However, respondents Nos. 1 to 5 settled the matter with appellant No. 3 and respondents Nos. 7 to 11, leaving appellants Nos. 1 and 2 and respondents Nos. 12 and 13 in a different position. The court observed that the settlement was meant to be implemented only between the parties thereto, including appellants Nos. 1 and 2.

7. Compliance with the Settlement Terms:
The appellants contended that the agreement should compel respondents Nos. 1 to 5 to purchase the remaining 10.23% shares. The court found this contention astounding as the appellants had previously acquiesced in the case of other group members not being bound by the settlement. The court highlighted the appellants' letter dated July 7, 2007, and subsequent correspondence, which indicated a willingness to settle disputes amicably, including the valuation of the company and buyout of shares.

The court noted that the appellants filed C.A. No. 510 of 2007, suggesting that the parties should part ways amicably and that the Company Law Board should pass orders to this effect. The respondents accepted the appellants' offer to buy or sell shares at Rs. 1,788 per share, leading to the Company Law Board's order on December 10, 2007, recording the settlement and directing the implementation of its terms.

The appellants later attempted to resile from the settlement, alleging non-compliance by the respondents. However, the court found that the respondents had complied with the terms by arranging for the entire payment well before the expected time. The court dismissed the appellants' contention of breach and noted the concerted attempt by the appellants and their group members to wriggle out of the settlement.

The Company Law Board's order on February 29, 2008, was upheld, directing compliance with the settlement terms and imposing costs of Rs. 50,000 on respondent No. 2 for attempting to derail the proceedings.

Conclusion:
The appeals were dismissed, and the court upheld the Company Law Board's orders, enforcing the settlement agreement between the parties. The court emphasized that any aggrieved parties must adopt independent proceedings to address their grievances. The order of costs was also upheld, reflecting the court's disapproval of the appellants' attempts to undermine the settlement.

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