TMI Blog2015 (10) TMI 2257X X X X Extracts X X X X X X X X Extracts X X X X ..... r the matter to enable parties to approach it upon valuation to be carried out by statutory auditor and as such it is not permissible for Jain group to approach CLB, if it is aggrieved by valuation of statutory auditor – Valuer has determined the value of shares in accordance with the directions of the CLB as at the date of 31 March 1999 and after considering all relevant material - Valuation does not give rise to any ground to approach the CLB in challenge of the same - It is not open to CLB to interfere with original order of CLB which has since been confirmed with modification by this Court – Decided against the Appellant. - Company Appeal No. 48 of 2009, Company Application No. 275 of 2008, Company Petition No. 63 of 1998 - - - Dated:- 9-10-2015 - S. C. Gupte, J. For the Appellants : Mr. S. H. Doctor with Mr. P. A. Kabadi and Ms. F. J. Thakkar i/b. Dhojode Associates For the Respondent : Mr. K.R. Bulchandani with Mr. Amit Nikam and Ms. Meena Sudhakara i/b. M/s. Kamal Co. JUDGMENT The company appeal challenges an order passed on a company application filed in a disposed of company petition under Sections 397 and 398 of the Companies Act, 1956 ( the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roject. On 30 January 1994, PMC issued a stop work notice to the company. Around this time, Lokhandwala group expressed its inability to bring in further finance and offered to return the equity shares to Rashid group, or in the alternative, transfer them to a third party financer. In the premises, by an agreement dated 28 November 1995 between Rashid group, Lokhandwala group and Respondent No.1 (hereinafter referred to as Jain group ), Jain group was brought in with a view to bring in the requisite funds. Jain group agreed to fulfill the financial liability of Lokhandwala group. Accordingly, Jain group bought 19,170 equity shares of Lokhandwala group. Mr.Mahendrakumar Jain, a nominee of Jain group, was thereupon appointed as an additional director of the company. Sometime thereafter, disputes arose between the company and PMC. These disputes were referred to a sole arbitrator. Whilst the arbitration proceedings were pending, disputes arose between Rashid group and Jain group. In the midst of these disputes, an award came to be passed in favour of the company by the sole arbitrator on 31 March 1998. Appellant No.3 herein (a member of Rashid group) filed a suit before this Court, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport. Immediately, after receipt of this valuation report, the company tendered payment to Jain group for purchase of its shares in accordance with the valuation report. Following such tender of payment, the company also cancelled the shares held by Jain group and issued a public notice in that behalf. So also, in compliance with the undertaking given to this Court, Appellant No.3 withdrew Suit No.2943 of 1998 in the presence of the Advocate of Jain group. In the meantime, whilst the valuation exercise was being carried on by the statutory auditor, the arbitration award of 31 March 1998 was set aside by this Court. On 25 August 2006, this Court, by consent of parties, appointed another sole arbitrator to decide the disputes between the company and PMC. Nearly two and half years after the order of the CLB, as confirmed by this Court, was implemented by the Appellants, Respondent No.1 Jain group preferred the subject company application (Company Application No.275 of 2008) in the disposed of petition, in which the order impugned in the appeal herein came to be passed. By this application, Jain group prayed for setting aside of the valuation report of the statutory auditor and carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations 29 and 44 of the Company Law Board Regulations, 1991, it is submitted by learned Counsel that the CLB has power to pass such orders to give effect to its orders, as may be necessary, for meeting the ends of justice and preventing abuse of the process of the Bench. It is submitted that the impugned order was necessary to give effect to the original order passed by the CLB. It is submitted that the valuer directed to determine valuation of shares in accordance with the original order has abused the order by not valuing the shares as at the specified date and to prevent this abuse, the CLB was well within its rights to pass the impugned order. Learned Counsel relies on the judgments of the Supreme Court in the case of Supreme Court Bar Association vs. B.D. Kaushik (2012) 6 SCC 152 , the Madras High Court in the case of Shoe Specialities P.Ltd. vs. Standard Distilleries and Breweries P.Ltd. (1997) Vol 90 Company Cases 1 , this Court in the case of Shanti Prasad. vs. Union of India (1998) Vol. LXXV Bombay Law Reporter 778 , and the Supreme Court in the case of Cosmosteels Pvt.Ltd. vs. Jairam Das Gupta (AIR 1978 SC 375) , in support of his submissions. 5. Section 397 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29(6) is not implemented by the parties, the CLB has jurisdiction under Section 634A to direct enforcement of its orders. The order, to the extent it remains unimplemented, may be enforced by the Bench in the manner as if it were a decree made by a court in a suit pending before it. But once the orders of the CLB are implemented, the actions taken by the parties in implementation of those orders cannot be brought before the CLB either under Section 634A of the Act, unless such actions reflect nonenforcement of the order of the Bench, or under the original petition under Section 397 or 398 of the Act. Regulation 44 also does not take the case any further. Regulation 44 is a provision, which does not confer any further power on the Bench, but saves any inherent power that the Bench may have to make orders. It is trite to say that every court or tribunal may have powers to make such orders, as may be necessary, for securing the ends of justice or to prevent abuse of its process. What Regulation 44 does is to affirm that nothing contained in the Regulations does in any way limit or otherwise affect such inherent powers. It cannot possibly be suggested that if the board has no power, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could effectively exercise their majority rights . The Bench, accordingly, disposed of the petition with a direction to the board of directors to act on the requisition lodged by the petitioners. The Bench, in terms, observed that both the parties are at liberty to approach us in case of any difficulty in convening the general meeting . After this order was passed, apprehending that they would not be in a position to effectively exercise their majority right as the Bench would have them to, the majority shareholders sought intervention of the Bench by filing a miscellaneous application seeking certain directions. By an order on this application (order dated 15 July 1994), the Bench held that the word convening used in its main order in the company petition should not be construed literally and the same was used by them in a larger perspective to include all proceedings in the meeting, i.e. till the completion of the extraordinary general meeting. In the circumstances, the Bench inter alia directed that the proceedings of EOGM should be conducted in a proper manner and the Bench should have an independent information as to the conduct of this meeting from an independent source. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on such powers. The High Court upheld the CLB's conclusion that it had not become functus officio expressly on the footing that the original order passed on the petition was only a conditional order in the sense that the reliefs sought for in the petition were not necessary since the petitioners can effectively exercise their majority right . If that condition were not complied with, it was for the CLB to intervene and set the matter right. The High Court also noted that the order of the CLB passed on the first application on 15 July 1994 was not challenged by the parties; that on reading of that order it was clear that the Bench wanted to have a say even subsequent to the passing of the order. The Court felt that there was no necessity for the Bench to give directions so as to have an independent information as to the conduct of the meeting from an independent source and to that end appoint an observer requiring him to observe the proceedings of the EOGM and report to the Bench. The chairman of the meeting was also directed to record all the votes polled in favour and against each and every resolution separately memberwise and send a copy of the minutes of the meeting within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved by the valuation determined by the statutory auditor and the share price offered to it on the basis of such valuation. 8. Learned Counsel for the Appellants accepts that correctness or otherwise of the valuation cannot be challenged per se before the CLB in an application in the disposed of petition, but he submits that the valuation is not in accordance with the directions of the CLB inasmuch as the valuation of shares had to be as of 31 March 1999, but the auditor has considered subsequent events to arrive at the valuation. Even here the Appellants are not right. In the first place, the valuation report makes it clear that the value of shares has been determined as at 31 March 1999. Apropos of the three commonly used methods of valuation of shares, namely, Market Based Method, Asset Earning Method and Asset Based Method, the valuer has adopted the Asset Based Method. Rightly so, since the shares not being listed, there was no reason for adopting the Market Based Method, and the company not having commenced any business or earned any profit and not having any immediate plans of future business, there was no question of adopting Asset Earning Method for valuation of its sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in accordance with the directions of the CLB as at the date of 31 March 1999 and after considering all the relevant material and without taking into account any irrelevant material. The valuation does not give rise to any ground to approach the CLB in challenge of the same. 9. The decision of this High Court in Shanti Prasad (supra) merely underlines the width of the powers of the CLB. This decision was rendered in a totally different context. In that case, it was contended that the exercise of powers by the CLB under Section 402 of the Act was to be subject to limitations contained in the other provisions of the Act. That was negatived by our Court. This judgment has no bearing on the facts of the present case. So also, the decision of the Supreme Court in the case of Cosmosteels Pvt.Ltd. (supra), though it generally affirms the width of the powers of the CLB under Section 397 read with Section 402 of the Act, was rendered in a completely different context and has no bearing on the facts of our case. What was submitted in that case before the Supreme Court was that though under Section 402 of the Act, the CLB had the power to order the company to purchase the shares of minori ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
