Ram Bahadur Thakur Ltd. A Company incorporated under The Companies Act v. Manish Mohan Sharma

Learned counsel for the appellants, however, contends that the order itself is perverse and arbitrary, not based on any material on the record and that itself makes it a question of law to be - 2 - considered by this Court. The short facts leading up to the present matter are that the appellants belong to the CBS Group and the respondents belong to the MMS Group, having dispute regarding the management of the various Companies owned by the family particularly the Company known as M/s. Ram Bahadur Thakur Limited. Ultimately during the course of proceedings under Sections 397 and 398 of the Companies Act filed by the MMS Group the matter was amicably settled leading to a joint management arrangement by which CBS Group was to manage 4 estates and MMS Group was to independently manage 5 tea estates owned by the Company. The transfer document and memorandum of family arrangement (MOFA) was also executed between the parties giving details thereof. There were further litigation with respect to them and the matter ultimately reached the Supreme Court which by its judgment dated 21.3.2006 held that the MOFA and Transfer Document were the outcome of the commendable and determined efforts on the part of the Company Law Board to bring to an end disputes between the parties in their best interest and remanded the matter to the Company Law Board to complete the implementation of the order dated 19th August 1999 by executing the same. While the matter was pending before the Company Law Board after the remand by the Apex Court, a Company Petition was filed by M/s. J. Thomas & Company Pvt. Ltd. for initiating a proceeding of winding up of the Company in this Court being Company Petition No. 6/2006 and by order dated 31.7.2008 this Court - 3 - ordered the winding up of the appellant no. 1 Company and appointed the Official Liquidator attached with the High Court as the Official Liquidator of the Company concerned. It is the case of the respondents that the appellant CBS group did not take any interest in the matter with respect to the said winding up order and it is the respondents MMS Group that approached the High Court by filing Company Appeal No. 16/08 in which by order dated 2.9.2008 the winding up order dated 31.7.2008 was stayed. Thereafter by order dated

24.10.2008 the appeal was disposed of in terms of the memorandum of compromise jointly submitted by the parties. Under the said compromise the promoters were to pay a sum of Rs. 6.5 crores in full and final settlement of all the respondents’ claims against the appellants. The amount was to be paid in three instalments. Subsequently, by order dated 28.2.2009 and 20.5.2009 the Division Bench of this Court modified the order regarding the payment of the instalments and payment of the last instalment of Rs. 1 crore was extended till 10th July, 2009 with a clear stipulation that no further interlocutory application for extension of time shall be entertained in the appeal and if the order is not complied in that event the stay granted for enforcement of the winding up order shall stand vacated without any further reference to a Bench. As per the accounts of M/s. J. Thomas & Company Pvt. Ltd, the dues against the company was to the extent of Rs. 13,68,61,420/- out of which the CBS Group was to pay Rs. 1,36,39,199/- and the MMS Group Rs. 12,32,22,221/-. In order to meet the liabilities of paying to M/s. J. - 4 - Thomas & Company the respondents filed an application before the Company Law Board for a direction upon the appellants to pay an amount of Rs. 1,36,39,199/- out of the liability of Rs. 6.5 crores. By its order dated 14.1.2009 the Company Law Board directed the appellants to deposit a sum of Rs. 1,36,39,199/- payable to the Registrar General, Patna High Court without prejudice, to get over the predicament of winding up. The draft was to be deposited before the CLB on 4.2.2009 the next date of hearing. On 4.2.2009 the CLB recorded the undertaking of the appellants CBS Group to pay Rs. 85 lacs through Demand Draft to the Registrar General, Patna High Court to be handed over to the respondents on 18.2.2009. Again by its order dated 4.5.2009 the CLB directed the respondents to make arrangements to contribute to save the company from being wound up. Against the order dated 14.1.2009 the appellants filed Company Appeal No. 3/2009 on 2.2.2009 but the same was finally dismissed for non-compliance of the peremptory order dated 16.4.2009. The admitted position is that no application for restoration of the said appeal has been filed. The main contention of learned counsel for the appellants is that the Company Law Board has acted in an arbitrary and perverse manner by issuing continuous directions upon the appellants only to pay the amounts without, as a matter of fact, deciding the actual liability of the appellants in this regard. It is stated that the said orders are not based upon any materials. The submission of learned counsel for the appellants is that the amount of dues of M/s. - 5 - J. Thomas and Company being to the tune of more than Rs. 13 crores which on the basis of compromise entered into between the parties got reduced to Rs. 6.5 crores, hence, they were also entitled to pro rata reduction of their liability towards M/s. J.Thomas and Company and in that view of the matter, their liability got reduced to about Rs. 64 lacs whereas they have already deposited a sum of Rs. 85 lacs. Therefore, the further direction of the CLB in this regard is wholly unjustified, not based upon any material on the record and hence perverse. Learned counsel also sought to emphasize that they have paid huge amount of money through Syndicate Bank and to the Tax Authority for which no liability has been thrust upon the respondents and they have not been required to contribute whereas in the case of the present settlement the appellants are being forced to pay much more than their actual share in the liabilities to M/s. J.Thomas and Company. It is also the contention of learned counsel that the order being based upon no material at all would thus be arbitrary and perverse and accordingly, all the pleas raised are pleas of law. In support of the said proposition learned counsel relies upon a decision of the Supreme Court in the case of V.S. Krishnan and others V. Westfort Hi-Tech Hospital Ltd. & others: (2008) 3 SCC 363, in para-16 of which it has been held as follows:- “ It is clear that Section 10-F permits an appeal to the High Court from an order of the Company Law Board only on a question of law i.e. the Company Law Board is the final authority on facts unless such findings are perverse, based on no evidence or are otherwise arbitrary. Therefore, the jurisdiction of the appellate court under Section 10-F is restricted to the question - 6 - as to whether on the facts as noticed by the Company Law Board and as placed before it, an inference could reasonably be arrived at that such conduct was against probity and good conduct or was mala fide or for a collateral purpose or was burdensome, harsh or wrongful. The only other basis on which the appellate court would interfere under Section 10-F was if such conclusion was (a) against law or (b) arose from consideration of irrelevant material or (c) omission to construe (sic consider) relevant materials.” Learned counsel has also sought to emphasize that with respect to the order dated 14.1.2009 the application has been filed by the appellant under Regulation 44 of the Regulations of the Company Law Board for modification of the said order, which enables the Company Law Board to pass any order in exercise of its inherent powers to meet the ends of justice. It is thus submitted that instead of deciding the said application, the Company Law Board has wrongly proceeded in the matter and enforced the further liability of Rs. 50 lacs to be paid by the appellants without assigning any reasons for the same. The said act, according to learned counsel, shows the arbitrariness of the Company Law Board. Learned counsel for the respondents, on the other hand, submits that under Section 10-F of the Companies Act an appeal against an order of the Company Law Board can only be entertained by this Court on a question of law and the present appeal does not raise a single question of law. It is submitted that so far as the order dated 14.1.2009 is concerned, the same has become final as the appeal against the same has stood dismissed, even if for default. It is submitted that once the order dated 14.1.2009 has itself acquired - 7 - finality the appellants were bound to have complied with the same and they having paid Rs. 85 lacs on 4.2.2009 would be required to pay another amount of Rs. 51 lacs and odd for full compliance of the said order. Learned counsel is at pains to point out that the order dated

4.2.2009 does not amount to modification of the order dated 14.1.2009 since the same merely records the undertaking of the appellants. It is further urged by learned counsel for the respondents that so far as the application under Regulation 44 is concerned, the inherent powers of the CLB cannot be utilized for review of its orders as no power of review has been conferred upon the CLB and it is an established proposition that a quasi judicial authority which is not specifically conferred with powers of review cannot exercise such powers. It is further submitted by learned counsel that even after filing the said application under Regulation 44 the same has not been pressed by the appellants at any stage thereafter and the proceedings are being conducted before the CLB on the main issues and not even once the said application has been moved. Learned counsel also submits that the order dated

14.1.2009 has never been modified which it is evident from the order dated 4.5.2009 where clear direction was issued to the appellants to pay the balance amount to save the company from being wound up. It is submitted that the said order has not been challenged by the appellants at any stage and the impugned order dated 15.7.2009 is merely a continuation of the order dated 4.5.2009. - 8 - Learned counsel also submits that the appellants have not approached this Court with clean hands. They have withheld facts regarding dismissal of their appeal and again the order dated

14.1.2009 and they have further withheld the order dated 4.5.2009 and the judgments of the Supreme Court which are most germane in the matter. It is lastly submitted by learned counsel for the respondents that the order of the Company Law Board to pay the amounts without prejudice shows that it is open to the appellants to raise the issues before the Company Law Board which is in the process of settling and adjudicating the rights of the parties in terms of the MOFA and the Transfer Documents in the proceedings in question. On a consideration of the rival submissions of the parties, this Court does not find any force in the submission of learned counsel for the appellants. It is evident that the main order regarding payment was passed by the Company Law Board on 14.1.2009 for an amount of Rs. 1.36 crore and odd and the said order having been challenged by filing appeal has been allowed to acquire finality by not pursuing the same and permitting the said company appeal to get dismissed for default for non-compliance of the peremptory order of this Court. In that view of the matter, the main order stares the appellants in their face and it is not open to them to state that they would not comply with the order although it still stands. The submission of learned counsel for the appellants - 9 - that the order stood automatically modified on 4.2.2009 when they were permitted to deposit Rs. 85 lacs by 18.2.2009, is without any legal basis as the order dated 4.2.2009 merely records the undertaking of the appellants to pay Rs. 85 lacs by the said date and there is not even a hint of any modification of the previous order dated 14.1.2009. In any view of the matter, it is evident that the Company Law Board has no power of review of its previous order and thus it is not open to it to review the order dated 14.1.2009. The fact that the order was not reviewed is also evident from the fact that the payment of the balance amount was reiterated by the Company Law Board in its order dated

4.5.2009. Thus the order dated 15.6.2009 requiring the appellants to pay Rs. 50 lacs is within the remaining amount of Rs. 51 lacs and odd that the appellants are still required to pay under the order dated

14.1.2009. The aforesaid being the position, it cannot be said that the order of the CLB is not based upon any material and therefore perverse. So far as the issue as to whether the Company Law Board was justified in directing the appellants to pay the entire amounts of Rs. 1.36 crore and odd and that they are entitled to pro rata reduction of their liability, is not a matter which can be gone into in the present appeal as the matter relates to the order dated 14.1.2009 which is not under challenge in the present proceedings. In the said circumstances, no benefit can be derived by learned counsel for the appellants from the decision of the Supreme Court in V.S.Krishnan’s case (supra). In the light of the aforesaid discussions this Court is - 10 - clearly of the view that no question of law arises in the present appeal. It is accordingly dismissed. It is however, made clear that this Court has not expressed any view regarding the liability of the appellants with respect to the amounts payable by them for the dues of M/s. J. Thomas & Company. In any view of the matter, since the orders of the CLB regarding payment is without prejudice, it would be open to the appellants to pursue their remedies before the appropriate forum in an appropriate manner. S.Pandey (Ramesh Kumar Datta, J.)