TMI Blog2019 (5) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... pany in that regard. There is no doubt that in the facts of a given matter when case of oppression and mismanagement is there and NCLT finds it just, it can direct Company also to buy back shares. It has the authority to do so. But then that should be stated. There is not a word even remotely stated in the Impugned Order that NCLT found it appropriate that it should direct the Company to buy back its shares. It is settled law when a matter is before NCLT or before this Appellate Tribunal, arising under Sections 241 and 242 of the new Act, read with Rule 11, irrespective of what the parties plead, say or do, the paramount consideration of the Tribunal is to keep in view as to what is in the interest of the Company. The interest of parties is subservient to interest of Company. It is necessary for the Tribunal to first consider interest of the Company. The health of the Company reflects on the health of economy and that is what matters - CLB had found that the parties do not see eye to eye and found it appropriate to get valuation done so that original Petitioners could go out of the Company. As such, they should be able to leave but with fair value and fair interest. The Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Company Law Board. It appears that after some hearings, on 1st April, 2011, CLB passed the following order:- In the facts and circumstances of this case where the petitioners do not see eye to eye with the other parties, in the interest of the Company, the Petitioners are even willing to go out of the company on receipt of fair valuation for their shareholding. For the purpose of determining fair valuation of the R-I s shares on repeated hearings the parties were required to give/suggest name of a Valuer to which both parties would agree. However, even on this small issue the parties have not been able to decide a name of a valuer to which both parties would agree. The petitioner has provided a list containing the name of three valuers. The parties at some point of time are said to have met S.S. Kothari Mehta Co. at serial No.2 in the list of valuer. The respondents have not provided the CLB with any list, nor are they willing to provide one. In view of these facts of the case, S.S. Kothari Mehta Co. (CAs. 146, Tribune Complex, Ishwar Nagar, Mathura Road, New Delhi 65), whose consent to take up valuation on record are hereby appointed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to the petitioners at the share price worked out by S.C. Vasudeva Co. (iii) Pass orders for any other relief the Hon ble Board deems appropriate in the facts and circumstances of the case. 6. The Impugned Order shows that when these developments were taking place in the CLB, Orders were passed on 01.07.2014, which have been reproduced in the Impugned Order and show that since the original Petitioners raised objections even the original Respondents side sought comments of the Valuer to the objections raised by the Petitioners. After hearing the parties, the CLB had allowed CA 114/2014 to refer objections to the Valuer and seek response. Meanwhile, the matter came to be transferred to the NCLT. NCLT heard the parties and in the Impugned Judgement and Order considered the averments raised by the original Petitioners relating to the method of valuation adopted by the Valuer; the claim that there has been under valuation in relation to the immovable properties; that the valuation should be based on prevailing market rates in the year 2012 2013 and that the Valuer had not given sufficient opportunity to the original Petitioners. NCLT discussed the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod of twelve months. True, the petitioners contested the valuation and thereby delayed the implementation of settlement. However, having regard to the bona fide nature of the dispute and the fact that the respondents have retained the money otherwise payable to the petitioners during this period of twelve months and could have profitably utilized the same, we have given this direction taking an overall view. 19. Going through the above decision of Hon ble Supreme Court since the monies which were otherwise payable to the Petitioners having been retained all along by the Respondents and having utilized the same, we feel that the ends of justice could be adequately met if the Respondents in the main C.P. are directed to pay interest @ 9% per annum on simple interest basis. Hence, taking into consideration the facts and circumstances and in the interest of justice, the following directions/orders are passed: i) The Petitioners are directed to sell their entire share holding held by them in Respondent No.1 Company as on the date of filing the Petition to the Respondents either jointly or severally at the fair price of ₹ 10.35 per share as arrived at by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. According to the Counsel, the Orders dated 01.04.2011 and 11.08.2011 should be treated as final Orders. Unlike Section 31 of the Arbitration and Conciliation Act, 1996 in the Companies Act, there is no provision for grant of interest on valuation fixed for the shares to be transferred in the Companies Act. It has been argued that in the Reply, which was filed by the original Petitioners present Respondents, there was no prayer for grant of interest and thus, NCLT could not have granted the interest. 8. Learned Counsel for the Appellant referred to various Orders passed by NCLT (copies at Page 585 to 597) to claim that the original Petitioners present Respondents were protracting the proceedings before NCLT and thus, they were not entitled to interest, when the objections raised by them prolonged the matter. It is argued that the Respondents have not filed Appeal against the Impugned Order, vide which Valuation Report has been accepted and thus, it must be said that the objections raised by the Appellants had no substance and they were responsible for protracting of the matter. The argument is that only if the Appellant had wrongly withheld payment, the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondents in NCLT, has no substance as out of the 13 Orders referred, in 8 of the Orders, it can be seen that the Respondents were not responsible for the adjournments. The Counsel at the time of arguments put on record copies of other 12 Orders passed in NCLT during the relevant time to show that even the Appellant did take adjournments and that the delay occurred sometime to accommodate the original Respondents, sometime due to the Petitioners and at some other times also, because the learned NCLT had reasons to adjourn the matter. Thus, according to the Counsel, the Respondents cannot be blamed for the time taken for deciding the question on Valuation of the Report and passing of the Impugned Order. 11. It has been argued by the Counsel for Respondents that the Order dated 01.04.2011 is not a decree. It is not any adjudication. That Order did not freeze any price. It was merely a stage in the proceedings. NCLT had merely acted on the expression of the Respondents (Petitioners) that they were willing to quit and called for Valuation Report. According to the Counsel, it cannot be said to be final Order or even Interim Orders. It was only an Interlocutory Order on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers versus Ram Bahadur Thakur Ltd. and Others reported as (2006) 4 SCC 416 and Judgement in the matter of Byram Pestonji Gariwala versus Union Bank of India and Others reported as (1992) 1 SCC 31 to submit that in view of Section 634-A as was existing under the old Act, NCLT could not go beyond the said order and which, according to the Appellant, was a consent order. Judgement in the matter of Manish Mohan Sharma was with reference to Section 634-A as was existing in the old Act. In the new Act of 2013, corresponding Section with such wordings existing in old Section 634-A is not there. Old Section 634-A read as under:- 634A. Enforcement of orders of Company Law Board.- Any order made by the Company Law Board 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, and it shall be lawful for that Board to send, in the case of its inability to execute such order, to the Court within the local limits of whose jurisdiction,- (a) in the case of an order against a company, the registered office of the company is situated, or (b) in the case of an order against any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat CLB when it deals with an application under Section 634-A sits as an executing Court and is subject to all the limitations to which the Court executing a decree is subject. The Hon ble Supreme Court first found that the CLB and High Court in that matter had erred in refusing to execute the Order dated 19.08.1999. 16. Judgement in the matter of Byram Pestonji (supra) was referred to by learned Counsel for Appellant to submit that Hon ble Supreme Court observed in para 43 that a Judgement by consent is intended to stop litigation between the parties just as much as a Judgement resulting from a decision of the Court at the end of a long drawn out fight. 17. Appellant has relied on Judgement in the matter of Consulting Engineers Services (I) Ltd. versus Kaikhosrou K. Framji 2002 (65) DRJ 52 in relation to enforcement of Order of CLB passed under Section 634-A. Para 3 of that Judgement shows that in that matter before the CLB, a settlement in writing was arrived at by which original Petitioners/Respondent had agreed to sell shares of all the 3 companies, to the Appellant Company which had agreed to purchase the shares at a fair value to be determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefrom. At the time of execution, the Executing Court in addition to the salary, gratuity and pension, awarded interest at 12% per annum from the date of the execution till the date of the Order. This was challenged and the High Court observed in that matter that the Executing Court had no power to enlarge the decree. In SLP to the Supreme Court, Hon ble Supreme Court observed that it is well settled legal position that an executing Court cannot travel beyond the Order or decree under execution. 19. Counsel for Appellant relied on the Judgement in the matter of Shivshankar Gurgar versus Dilip reported as (2014) 2 SCC 465. That was the matter under the MP Accommodation Control Act, 1961. In that matter, there was a compromise dated 25.07.2004 and the Respondent had agreed to pay the amount within a period of 6 months and that if the defendant violates any of the conditions, the Plaintiff would be entitled to get possession of suit accommodation. It appears that at the time of execution, the executing Court recorded the finding that the Respondent paid the entire amount due under the decree in the executing Court, although such a payment was made beyo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he High Court had in some of the matters granted benefit of UGC scale w.e.f. 01.06.1984 which was a date prior to 01.01.1986 which could not be granted, being beyond the recommendations of the UGC relied on. 23. In the matter of Messrs. Trojan Company versus RM. N.N. Nagappa Chettiar reported in 1953 SCR 789, on which Appellant relied, the amount of Plaintiff therein had been credited in the sum of ₹ 6762-8 on account of purchase of the shares. The Plaintiff had pleaded that the transaction was not authorized by him and it had been made in contravention of his instructions and he claimed compensation on the ground of breach of instructions. In the alternative, he did not claim ground of failure of consideration. The High Court had found that a claim for damages in respect of a particular transaction may fail, that circumstance was no bar to the making of a direction that the defendants should pay the plaintiff the money actually due in respect of that transaction. The Hon ble Supreme Court found (para 22) that it was unable to uphold the view taken by the High Court on the point. It was well settled that decision of a case cannot be based on grounds outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a patent mistake has been committed by the Valuer. Hon ble Supreme Court observed that even accepting the principle, it was unable to hold that the valuation in that matter, was vitiated by a demonstrably wrong approach or a fundamental error going to the root of the valuation. The Hon ble Supreme Court after considering the Report in that matter, concluded that the Valuer approached the question of valuation having due regard to the terms of settlement and applying standard methods of valuation and that the valuation had been considered from all appropriate angles. Para 20 and 21 of the Judgement read as under:- 20. In the result IA Nos. 2 to 4/2002 are liable to be rejected. However, there is one direction concerning the interest which we consider it appropriate to give in the given facts and circumstances of the case. Though the grant of interest, as prayed for by the petitioners, from 31.05.2002 -- the stipulated date of submission of valuation report is not called for, we feel that the ends of justice would be adequately met if the respondents concerned are directed to pay the interest at the rate of 9 per cent on 8.24 crores, which is the value of shares fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sposal of the assets of the company without involving the shareholders in the decision making would constitute oppression and mismanagement. The learned Counsel for the Respondents relied on the above para of the Judgement to submit that the Company Court had powers to take note of subsequent events to give directions and thus, according to the Counsel, NCLT rightly exercised its powers to give directions for payment of interest. 27. Reliance was then placed by the Respondents on the Judgement in the matter of Rakhra Sports Private Ltd. and others Vs. Khraitilal Rakhra and others Reported as MANU/KA/0068/1993: ILR 1993 KARNATAKA 920. In that matter, the Company Judge had directed the Respondents to pay Petitioners ₹ 600 per share subject to further valuation. In Appeal, the Hon ble High Court further took into consideration value of goodwill, reputation and assets of the Company and other factors and found in para 105 of the Judgement that the value of an equity share at ₹ 820 in that matter seemed to be as quite fair and reasonable. In para 106 it was observed:- 106. The valuation has to relate back to September 30, 1988 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n away from Section 144 the Court has inherent jurisdiction to order restitution so as to do complete justice between the parties. Thus, apart from Section 144 of CPC, the source of restitution is rule of justice, equity and fair play. 29. Counsel for Respondents relied on Judgement in the matter of Arcelor Mittal India Private Limited Vs. Satish Kumar Gupta and Ors. reported in MANU SC 1123/2018: 2018 (13) SCALE 381 and referred to para 83 of the Judgement to refer to the principle that the act of Court shall harm no man is a maxim firmly rooted in our jurisprudence. It is further argued by the Counsel for Respondents that under the Companies Act, the Court has wide powers to grant interest. The Counsel referred to the Judgement in the matter of Syed Mahomed Ali Vs. M. R. Sundaramurthy and Ors. reported as MANU/TN/0089/1958 where in para 3, the Hon ble Supreme Court referring to Section 402 and 406 of the Indian Companies Act, 1956 had observed that the Sections give ample jurisdiction to the Court to dispose of the matter in the larger interests of the Company. 30. We keep in view the facts as appearing and as laid above in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hows that the parties were not even on Board even as to the name of Valuer and CLB proceeded to take up the name from the list of 3 Valuers referred to by the Petitioners. The CLB recorded that the original Respondents have not provided the CLB with any list, nor are they willing to provide one. The CLB then proceeded to record that S.S. Kothari Mehta Co. have consented to take up valuation on record and thus proceeded to appoint the said CAs directing valuer to determine the fair value of the shares of R-1 Company as on 14.03.2007 (the date of filing of the petition) within a period of 30 days . The Order of 01.04.2011 does not record that the original Petitioners and/or Respondents had agreed to such date of 14th March, 2007 for the purpose of valuation. Thus, we find it difficult to treat this Order as a consent Order of both parties which left only execution to be done. It was an Order passed on the bare basis that Respondents Petitioners had expressed willingness to go out of the Company on receipt of fair valuation and with this object, CLB proceeded to appoint Valuer and fixed a date of valuation. 32. The Appellant has on the basis of Section 634-A of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aling with a Company Petition complaining oppression and mismanagement covered in Section 241 read with Section 242 of the new Act, Section 242 has wide enough powers to pass Orders with regard to any matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be made. In fact, although the Counsel for Appellant stressed that Order dated 01.04.2011 was consent Order and that it was a final Order which required to be implemented as it is, the record shows that this very Order on 11.08.2011 (Page 68 of the Appeal) underwent a change when CLB modified this Order dated 01.04.2011 to the extent that it changed the Valuer so as to then appoint S.C. Vasudeva in place of S.S. Kothari Mehta Co. This Order changing the Valuer does not say that the change of Valuer was consented by the parties. In fact, although the Order dated 01.04.2011 had fixed the date of valuation as on 14.03.2007, the Report of the Valuer (Page 17) shows that the Valuer himself changed the date of valuation to 31st March, 2007. This can be seen from the para 1.7.2 of the Report. This was done keeping in view practical difficulties involved and the date of valuation was chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. They claimed that they were able to get the copy of the final report only from the CLB. (It needs to be recalled that the Order dated 01.04.2011 had specifically directed the Valuer to give copy of the Valuation Report to R-1 Company and the Petitioner and the CLB). The Reply filed by original Petitioners then raised disputes regarding the valuation done and other comments on various aspects. The Reply sought rejection of the valuation of ₹ 10.35 and requested to approve fair value obtained by the original Petitioners through CA having regard to prevailing market rates of several assts. The Impugned Order passed by NCLT shows that it went into various details to discard the objections raised by the original Petitioners and rejected their request that they could not avail opportunities to raise objections prior to the filing of final report. This part of the Impugned Judgement of NCLT has become final as the original Petitioners have not challenged the Impugned Order. However, we have referred to the above aspects from the limited point of view to see whether the conduct of the original Petitioners was such as would have disentitled them to an Order of interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Valuation Report, but did not grant the same from that date and found that the ends of justice would be adequately met if the Respondents were directed to pay interest @ 9% on 8.25 Crores which was the value of shares fixed by the Valuer, for a period of 12 months. The learned Counsel for the Appellant submitted that in this matter, the Hon ble Supreme Court granted interest but it was only for 12 months. The submission which was made in alternative by the Counsel for Appellant is that if at all interest is to be granted, it should be only for 12 months. Going through the Judgement in the matter of Renuka Datla , we find that it can be compared with the facts in the present matter. As regards 12 months mentioned in para 20 of that Judgement, what appears to us is that in that matter, the Valuation Report was dated 28.09.2002 and the Judgement in the matter of Renuka Datla was passed on 30th October, 2003 which was period of 13 Months. 12 Months stated by Hon ble Supreme Court were not mentioned giving any reason. Thus, it was a matter based on its facts, Hon ble Supreme Court gave directions as deemed fit in interest of justice. 36. One of the arguments of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of record. 39. Going through the Impugned Order as a whole and the final Order, which has been passed by the learned NCLT, which we have reproduced in this Judgement - para -7 (supra), it is clear that the learned NCLT was not articulate when it directed the Petitioners to sell their entire shareholding held in the Respondent No.1 Company to the Respondents . It was necessary for NCLT to clearly identify the Respondents as Respondent No.1 was a Company and the other Respondents were shareholders. Rights and Procedure for Company to buy back its shares and Rights and Procedure for sale of shares inter-se shareholders are different. The Impugned Order nowhere even slightly or in the passing indicates that the learned NCLT had in its mind to order buy back of shares by the Company. Learned Counsel for both the sides tell us that in a case of oppression and mismanagement, NCLT has a right to even direct buy back of shares without the powers being circumscribed to rely on decisions of the Company in that regard. We have no doubt that in the facts of a given matter when case of oppression and mismanagement is there and NCLT finds it just, it can direct Company also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all the plaintiff or defendants, as the case may be. 33. Power of Court of Appeal.- The Appellate Court shall have power to pass any decree and make any order which ought to have been passed or made and to pass or make such further or other decree or order as the case may require, and this power may be exercised by the Court notwithstanding that the appeal is as to part only of the decree and may be exercised in favour of all or any of the respondents or parties, although such respondents or parties may not have filed any appeal or objection [and may, where there have been decrees in cross-suits or where two or more decrees are passed in one suit, be exercised in respect of all or any of the decrees, although an appeal may not have been filed against such decrees:] Relying on the above provisions of CPC, it is argued that these provisions have been interpreted by the Hon ble Supreme Court and Hon ble High Courts in various Judgements as under:- i) Karan Singh Sobti and Anr. Vs. Sri Pratap Chand and Anr. AIR 1964 SC 1305 (Paragraph 23) ii) Ratan Lal Shah Vs. Firm Lalmandas Chhadammalal and Anr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d principles, there is no difficulty in stating that rights of shareholders to purchase and sell shares of the Company are clearly distinct from the provision as to when a Company may purchase its own shares or other specified securities by way of buy back under Section 68 of the Companies Act, 2013. When the NCLT directs the Company to buy back shares and when the NCLT directs the shareholders to buy out each other, these are two distinct factors giving rise to different reasons for being aggrieved by the Orders. Thus, an appeal by the Company that it could not have been directed to buy back, would not be on the same ground as that of a shareholder. However, in the present mater, as we have mentioned, it was not a case of buy back which has by error crept in the Impugned Order. 45. In the circumstances of the present matter, although only the Company filed this Appeal and did not even claim to say that it was on behalf of the other Respondents, although we are proceeding to find that the directions of buy back shares are not the direction to the Appellant Company, still we propose to amend the Impugned Order so as to make it clear. We need not resort to Order X ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
