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2013 DIGILAW 1754 (RAJ)

Shivam Adhesive Pvt. Ltd. v. Shiv Ratan Khadawat

2013-10-01

DINESH MAHESHWARI

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JUDGMENT 1. - By way of this appeal under Section 10F of the Companies Act, 1956 ('the Act of 1956'), the respondents of a company petition pending before the Company Law Board, New Delhi Bench ('the Board'), seek to question the order dated 23.04.2013 whereby, the Board has declined their prayer for stay of proceedings in the company petition until disposal of a civil suit (CO No. 123/2012), which has been filed by the appellants Nos. 2 & 3 in the Court of District Judge, Hanumangarh. 2. In brief, the relevant background aspects of the matter are as follows: The respondents herein have filed the said company petition [No. 129 (ND)/2011] under Sections 397, 398 and 403 of the Act of 1956, alleging oppression and mismanagement in respect of the affairs of the appellant No. 1 company. The appellants have filed a reply to the said company petition alleging, inter alia, that the petitioners (respondents herein) have not approached the Board with clean hands and have deliberately concealed the fact of execution of a family settlement dated 22.09.2009. It has also been contended that in view of the said family settlement, the petition does not fall within the purview of oppression and mismanagement under Sections 397 and 398 of the Act of 1956. It is noticed that the appellant No. 2 and the respondent No. 1 are brothers; and most of the other parties are also closely related to them and with each other. 3. It appears that the relations amongst the parties and their families were cordial until the year 2008. However, thereafter, differences and disputes cropped up; and it is alleged that in order to resolve the disputes relating to the family properties and businesses, four arbitrators were appointed who made the settlement by their award dated 28.01.2009. It is further alleged that as per the said award, the appellant company would belong to the appellant No. 2, who has been handed over the possession of factory premises of the company and who has also shifted his residence therein. It is further alleged that as per the said award, the appellant company would belong to the appellant No. 2, who has been handed over the possession of factory premises of the company and who has also shifted his residence therein. Further, according to the appellants, the respondents handed over the share certificates to the appellant No. 2 but subsequently, when the respondent No. 1 refused to abide by the terms, a written family settlement was arrived at on 22.09.2009; and as per the terms thereof, so far as the subject company is concerned, it was agreed that the respondent No. 1 and his sons would transfer their shareholdings to the appellant No. 2 and from that date, they shall have no interest or title or right or liability in the appellant company. 4. It is also alleged that the respondent No. 1 wrote a letter dated 02.10.2009 to the banker of the appellant company, asking to take the action for separation of securities and guarantees in accordance with the settlement. Further, according to the appellants, the appellant No. 2 filed a civil suit (CO No. 192/2009) in the Court of Civil Judge, Hanumangarh alleging material alterations and additions by the respondent No. 1 in clause 8 of the said settlement. According to the appellants, the petitioners Nos. 1 to 4 of the company petition (respondents Nos. 1 to 4 herein) have filed a written statement in the said civil suit admitting the execution of family settlement dated 22.09.2009. It is also submitted that on the basis of the family settlement dated 22.09.2009, the appellants Nos. 2 and 3 have filed another civil suit (CO No. 123/2012) in the Court of District Judge, Hanumangarh for partition of the joint properties against the respondents Nos. 1 to 4 and 10, who are the defendants in the suit; and the said Court, by its order dated 01.10.2012, has directed the parties to maintain status quo in respect of the disputed properties until further orders. 5. With reference to the aforesaid facts, the appellants submitted before the Board that the issue involved in the company petition was substantially and directly the same as involved in the pending suit in the Court of District Judge, Hanumangarh, i.e., of the adjudication as per the family settlement dated 22.09.2009. 5. With reference to the aforesaid facts, the appellants submitted before the Board that the issue involved in the company petition was substantially and directly the same as involved in the pending suit in the Court of District Judge, Hanumangarh, i.e., of the adjudication as per the family settlement dated 22.09.2009. The appellants, thus, prayed before the Board that the proceedings in the company petition be stayed until final disposal of the said civil suit (CO No. 123/2012). 6. The present respondents resisted the application so moved, inter alia, with the submissions that the company concerned was not a party to the said civil suit (CO No. 123/2012). It was further submitted that the suit was based on the alleged family settlement dated 22.09.2009 but the company being a separate juristic person, the relief granted in the suit would not be binding on it. It was also contended that without getting the shares transferred and abiding by the terms of settlement dated 22.09.2009, the present appellants were not entitled to seek shelter thereunder. Several other submissions were also made against the dealings of the present appellants Nos. 2 & 3. 7. The Board, in its impugned order dated 23.04.2013, has taken the documents filed along with the application on record but has declined the prayer for stay of proceedings in the company petition while observing that the said suit relates to the partition of joint properties and is for a different purpose, whereas the company petition, for the relief against oppression and mismanagement, is maintainable before the Board; and the civil Court has no jurisdiction to grant the relief claimed in the company petition. The Board has further observed that the two proceedings are not between the same parties or their representatives and any decision of the civil Court will not bind any of the share-holders of the company, who are not the parties to the suit. The Board has, inter alia, observed and held as under:- "However, the Suit before the Jurisdictional District Judge, Hanumangarh relates to partition of the joint properties against Petitioners Nos. 1 to 4 and 10 (Defendants in the Suit). Under these circumstances, as decided in the case of Vijay Krisliun Jaidka & ors. v. Jaidka Motors Co. Ltd., (1997) 1 Comp. The Board has, inter alia, observed and held as under:- "However, the Suit before the Jurisdictional District Judge, Hanumangarh relates to partition of the joint properties against Petitioners Nos. 1 to 4 and 10 (Defendants in the Suit). Under these circumstances, as decided in the case of Vijay Krisliun Jaidka & ors. v. Jaidka Motors Co. Ltd., (1997) 1 Comp. LJ 268 , I am also of the view that the Civil Suit and the present case is for a different purpose and hence, the Company Petition for relief of oppression and mismanagement before the Company Law Board is maintainable. Further, I also relied on the ratio of another case of Tiruppur Karur Transport Pvt. Ltd. and others v. T.V. Raju Naidu, (2006) 133 CC 64 (CLB) wherein it was held that the Civil Court had no jurisdiction to grant the relief claimed in the company petition and the two proceedings were not between the same parties or their representatives and any decision of the civil court would not bind any of the shareholders of the company who were not parties to the civil suit." In view of all these factors, I am of the considered view that the proceedings in the Company Petition No. 129 (ND) 11 should continue irrespective of the Suit pending before the District Judge, Hanumangarh. However, the annexures A and B may be used to the extent of consideration of prayers as contained in CP No. 129 (ND) 11. As such, it is held that the proceedings in CP N. 129(ND) 2011 pending before this Hon'ble Board to continue further and the documents (Annexures A and B) annexed with the present Application be taken on record." 8. Seeking to assail the order so passed by the Board, the learned counsel for the appellant submitted that the existence of family settlement had never been in dispute; and the company concerned, as being one of the entities covered thereunder, is to go to the share of the appellants, whereas the contesting respondents have taken over management and control of other company pursuant to the said settlement. The learned counsel also submitted that the family arrangements are governed by different principles and special equities, which are not applicable to the dealing with the strangers; and the Courts lean in favour of the family arrangements. The learned counsel also submitted that the family arrangements are governed by different principles and special equities, which are not applicable to the dealing with the strangers; and the Courts lean in favour of the family arrangements. On these premise, the learned counsel would strenuously argue that an adjudication by the Board as regards the affairs of the company in question is not desirable, particularly when the question regarding performance of the terms and conditions of the family settlement is pending before a competent Court in the civil suit; and the company in question forms the subject matter of the said suit, as being one of the family assets which was awarded in favour of the appellant No. 2. It is also submitted that when the civil Court has already passed an order to maintain status quo, the question regarding mismanagement or oppression in the company does not arise in the wake of such an interim order already operating. In these circumstances, according to the learned counsel, the Board ought to have stayed the proceedings in the company petition until disposal of the suit. 9. In response to the queries of the Court, the learned counsel has pointed out that the company petition was filed on 11.10.2011; and the said civil suit (CO No. 123/2012) was filed on 24.09.2012. 10. Having given a thoughtful consideration to the submissions made and having perused the material placed on record with reference to the law applicable, this Court is clearly of the view that this appeal remains bereft of substance and does not merit admission. 11. It is but apparent that the civil suit as filed by the appellants Nos. 2 and 3 in the Court of District Judge, Hanumangarh (CO No. 123/2012) is for the purpose of partition of the joint properties. The company petition has been filed by the present respondents essentially seeking the reliefs per Sections 397, 398, 402 and 403 of the Companies Act, 1956 while accusing the appellants Nos. 2 and 3 of oppression and mismanagement. It cannot be said that the issues involved in the two matters, i.e., the company petition and civil suit are directly and substantially the same. The inquiry in the two proceedings operate in different arena and different field; and rather, the issues involved in the company petition are within the exclusive jurisdiction of the authority/Court envisaged by the Act of 1956. 12. The inquiry in the two proceedings operate in different arena and different field; and rather, the issues involved in the company petition are within the exclusive jurisdiction of the authority/Court envisaged by the Act of 1956. 12. The suggestion about operation of the interim order as passed in the civil suit remains entirely misplaced and is of no avail for the appellants. This Court would not otherwise comment on the proceedings in the civil court for the same being not the subject matter herein but it appears to be wholly untenable a proposition that because of an order for maintaining status quo in a suit for partition of properties amongst the members of family, an inquiry on the allegations of oppression and mismanagement in a company governed by the Act of 1956 may also be stalled. 13. Merely because the appellants Nos. 2 and 3, and for that matter any of the parties, would suggest that the company in question also forms a part of family arrangement, the company does not cease to be an independent juristic person and being governed by the provisions of the Companies Act, 1956. Moreover, neither the appellant No. 1 company nor several other persons who are the parties to the company petition (respondents Nos. 5 to 9 and 11) are the parties to the said suit. Yet further, the appellants Nos. 2 and 3 filed the civil suit (CO No. 123/2012) for the purpose of partition of the joint properties only on 24.09.2012, much after filing of the company petition by the present respondents on 11.10.2011. 14. Viewed from any angle, the prayer made by the appellants for stay of the proceedings in the company petition could have only been, and has rightly been, rejected. 15. Consequently, and in view of the above, the appeal fails and is, therefore, dismissed. 16. A copy of this order be forwarded to the Company Law Board with reference to Company Petition No. 129(ND)/2011. *******