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2011 DIGILAW 817 (CAL)

Assambrook Ltd v. Manju Devi Singhania

2011-06-21

I.P.MUKERJI

body2011
Judgment 1. SECTION 58A of the Companies Act, 1956 is with regard to deposits that may be invited or accepted by a Company. SECTION 58(9) has become important in this appeal. It provides that if a company fails to repay any deposit or any part of it, the Company Law Board may order repayment on terms set by it upon an application being made to it, inter alia, by a depositor. 2. THE appellant is one such Company which invited public deposits and was, without dispute, unable to repay them. Several depositors filed applications before the Company Law Board under Section 58A (9) of the Act seeking repayment. THE Company Law Board disposed of all these applications by a common order on 24th September, 2002, inter alia, directing the Company to make repayment of all deposits on the terms mentioned in the order with interest @ 10% per annum "beyond the date of maturity". The appellant Company made another application to the Company Law Board for extension of the time period fixed by the order dated 24th September, 2002 to make repayment of the deposits. The Company said that according to the order dated 24th September, 2002 it had paid Rs.85 lacs. Rs.1.81 crore was to be paid. As the conditions in the tea industry were adverse, it had suffered loss around that period of time. Time may be extended till March 2008 to repay the deposits. The Company Law Board did not grant time till March 2008 but did so till 2007, by its order dated 31st January, 2005. 3. ANOTHER application was made before the Board by the appellant Company for further extension of time. That application came up for hearing before the Board on 12th June, 2008. The Board noted that the Company had repaid by then a sum of Rs.1.62 crores. The balance to be repaid as noted by the Board was 1.04 Crores. The appellant Company urged the self-same point before the Board that there was recession in the tea industry and that time should be extended. The Board by this order dated 30th June, 2008 extended the time till 31st May, 2009 for payment of the entire outstanding amount. However, it clarified that the rate of interest would continue to be the same. 4. The Board by this order dated 30th June, 2008 extended the time till 31st May, 2009 for payment of the entire outstanding amount. However, it clarified that the rate of interest would continue to be the same. 4. AN application was made before the Board by the respondent depositors which was heard by the Board on 12th February, 2009. The applicants before the Board were the legal heirs of Som Prakash Singhania who died on 5th January, 2009. Som Prakash Singhania was a depositor with the appellant Company. It appears that the appellant Company raised some objections in making payment to the respondents on the ground that they were unable to produce the required succession documents. On 12th February, 2009 the Board passed an order providing for the deposits to be paid to the respondents provided they produced indemnity bonds and affidavits. The payment was to be made in terms of the order dated 30th June 2008. Now, this order of 30th June retained the payment of interest @ 10% per annum. 5. THIS order was appealed against by the Company, in this Court. The appeal was numbered as A.C.O. No. 29 of 2009 and A.P.O.T. No. 141 of 2009. The appeal was dismissed by an order made on 12th May, 2009 by brother Maharaj Sinha J. I read the material part of the order: "..............Having considered the order in question, I am of the opinion that the order of the Company Law Board should not be interfered with as the same has not affected or rather does not affect the interests of the appellant to any extent whatsoever. Merely because the Board did not ask the production of Succession Certificate it cannot possibly be said that it affects the interests of the appellant as the appellant will implement the order of the Board as the order of the Board and, therefore, the interests of the appellant are fully protected by the said order itself. Thus the appeal is dismissed. There will be no order as to costs." 6. ALL the dispute now between the parties is with regard to another application filed by the appellant-Company before the Board itself, was heard on 23rd April, 2009. The respondent-depositors submit that this application was entertained by the Company Law Board without any notice to them. This could not be disputed by the appellant Company. ALL the dispute now between the parties is with regard to another application filed by the appellant-Company before the Board itself, was heard on 23rd April, 2009. The respondent-depositors submit that this application was entertained by the Company Law Board without any notice to them. This could not be disputed by the appellant Company. In that application an order was passed on 18th May, 2009 by the Board reducing the rate of interest from 10% to 7% per annum. Mr. S.N. Mookerjee, learned Senior Advocate for the respondent-depositors brings in the doctrine of merger at this point of time. He cites the case of M/s. Gojer Brothers (P) Ltd. v. Shri Raton Lal Singh reported in AIR 1974 SC 1380 . He relies on paragraphs 16, 17 and 18 of the report which are reproduced below: "16. An application of this very principle yields the result that if the Court of appeal confirms, varies or reverses the decree of the lower Court, the decree of the appellate Court is the only decree that can be amended Brij Narain v. Tejbal, 37 IA 70 (PC) or that the limitation for executing a decree runs from the date of the decree capable of execution and that is the decree of the appellate Court which supersedes that of the Court of first instance 53 Ind App 197 : (AIR 1926 PC 93); or that if mesne profits are ordered form the date of suit until the expiry of three years after the date of the decree, the decree of the trial Court is confirmed in appeal, three years will begin to run from the date of the appellate decree (1900) 27 Ind App 209 (PC). 17. The decree, therefore, which Section 17-D empowers the Court to set aside is the decree which is capable of execution which, in this case, is the decree passed by the High Court on January 8, 1969. 18. The fundamental reason of the rule that where there has been an appeal, the decree to be executed is the decree of the appellate Court is that in such cases the decree of the trial Court is merged in the decree of the appellate Court. 18. The fundamental reason of the rule that where there has been an appeal, the decree to be executed is the decree of the appellate Court is that in such cases the decree of the trial Court is merged in the decree of the appellate Court. In course of time, this concept which was originally restricted to appellate decrees on the ground that an appeal is a continuation of the suit, came to be gradually extended to other proceedings like Revisions and even to proceedings before quasi-Judicial and executive authorities." 7. THE ratio of this decision was truly applicable to this case, it was submitted on behalf of the respondents. THE appeal was dismissed with some observations made by this Hon'ble Court. So it could be truly said that the Orders of the Company Law Board dated 30th June, 2008 and 12th February, 2009 merged with the order of this Court dated 12th May, 2009. 8. THE benefit which the learned Counsel for the respondents seeks to derive from this order is this. There is a stipulation in the order dated 30th June, 2008 that the interest rate would continue to be 10% inter alia in terms of which the order dated 12th February. 2009 was made. These stipulations necessarily merged with the order of our Court dated 12th May, 2009. Now, comes the core of the dispute. The respondents made an application before the Company Law Board being C.A. 116[634 (A)] of 2009 for enforcement of the said order dated 12th February, 2009. 9. THE respondents make the following submissions. THE Company Law Board had no jurisdiction to make the order dated 18th May, 2009 reducing the rate of interest to 7% without giving notice to them. Secondly, that order was a nullity because it was subsequent to the Order of this Court dated 12th May, 2009 and in variance of it. In these circumstances the rate could not be reduced to 7%. THE Company Law Board by its order dated 30th June, 2010 allowed the application of the respondents by ordering execution. 10. THE Company has preferred the instant appeal from that order. The grounds taken by the appellant Company to oppose the application before the Company Law Board as is available in the impugned order dated 30th June, 2010 were these. THE Company Law Board by its order dated 30th June, 2010 allowed the application of the respondents by ordering execution. 10. THE Company has preferred the instant appeal from that order. The grounds taken by the appellant Company to oppose the application before the Company Law Board as is available in the impugned order dated 30th June, 2010 were these. The Board by its order dated 18th May, 2009 reduced the rate of interest to 7% and that the appellant-Company was obliged to pay interest accordingly. That Order was subject to the condition that the fixed deposit receipts had to be surrendered in accordance with the terms of deposit. Otherwise the appellant-Company was not obliged to pay any amount. Succession Certificate was required to be filed by the respondents. An additional ground was taken in this appeal that interest in terms of the orders of the Company Law Board would accrue only from the date of filing of the above documents. 11. IT was also submitted that calculating interest @7% per annum and from the date of submission of the above documents, the entire amount payable was paid to the respondents. Discussion and Findings : 12. THE order of the Company Law Board made on 12th February, 2009 said that the deposits had to be repaid according to its order dated 30th June, 2008. That order stipulated interest @ 10% per annum from the date of maturity of the deposits. THE order dated 12th February, 2009 also provided that the deposits had to be repaid on the strength of indemnity bonds and affidavits filed by the respondents. THE above appeal against that order was dismissed by this Court by its order dated 12th May, 2009. I am plainly of the view that there was merger of the order dated 12th February, 2009 of the Company Law Board with the order in appeal dated 12th May, 2009 of this High Court following the principles laid down in M/s. Gojer Brothers (P) Ltd. v. Shri Ratan Lal Singh, AIR 1974 SC 1380 (supra). Since, there was no challenge to the order of the High Court, the order of the Company Law Board attained finally. 13. Since, there was no challenge to the order of the High Court, the order of the Company Law Board attained finally. 13. NOW, if that order of the Company Law Board dated 12th February, 2009 read with the order dated 30th June, 2008 attained finality, the Board had no jurisdiction to pass the subsequent order on 18th May, 2009, varying the terms of those orders. This is true irrespective of the fact whether the respondents were noticed while passing the order dated 18th May, 2009. The impugned order of the Company Law Board dated 30th June, 2010 refusing to follow the order dated 18th May, 2009, was according to law. By those orders which attained finality, the appellant-Company was to repay deposits @ 10% per annum from the date of maturity upon acceptance of indemnity bonds, affidavits, etc. There was no scope for any contention that interest was be paid at a lesser rate or from a later point of time or upon furnishing of Succession Certificate, surrender of fixed deposit receipts and so on. Those issues were no longer res Integra. Therefore, the Company Law Board by its impugned order rightly came to the conclusion that the deposits had to be repaid strictly according to the orders of the Board dated 30th June, 2008 and 12th February, 2009. 14. THEREFORE, I find no infirmity in the impugned order of the Company Law Board dated 30th June, 2010. Considering the submissions on behalf of the Appellant-Company, I only suspend its operation for a period of two years to enable it to repay the above deposits together with interest to the respondents in 24 equal monthly installments commencing from July, 2011 and payable by the 10th of the month. As payments are made, interest will be calculated on reducing balance principles. In default of payment of any one installment, the impugned order of the Company Law Board will become operational, on appropriate leave being granted by the Company Law Board and may be executed forthwith. I make it absolutely clear that interest will continue to run @ 10% per annum simple interest from the date of maturity of the deposits until the entire dues are paid off. The existing bank guarantee will be kept renewed by the appellant company and will abide by the orders to be passed by the Company Law Board in this behalf. 15. The existing bank guarantee will be kept renewed by the appellant company and will abide by the orders to be passed by the Company Law Board in this behalf. 15. THIS appeal is, accordingly, disposed of. Any stay application, if not disposed of, is also disposed of in terms of this order. 16. LEARNED Counsel for the appellant prays for stay of operation of this order. Such prayer is considered and refused. Urgent certified photocopy of this judgment and order, if applied for, to be provided upon complying with ail formalities.