2006 Supreme(SC) 246

2006(3) Supreme 339
SUPREME COURT OF INDIA
(From Patna High Court)
Ruma Pal and Dalveer Bhandari, JJ.
Manish Mohan Sharma & Ors.—Appellants
versus
Ram Bahadur Thakur Ltd. & Ors.—Respondents
Civil Appeal No. 9446 of 2003
With
Civil Appeal No. 9445 of 2003
Decided on 21-3-2006
Counsel for the Parties :
For the Appellants : C.A. Sundram, Sr. Advocate, Ms. Rohini Musa, Ms. Shiva Santanam Shivanathan, Mrs. Jayshree, Ashish Wad, Neeraj Kumar, Arvind Gupta, Ms. Sumanti Chakraborti (for M/s. J.S. Wad & Co.), Advocates.
For the Respondents : A.N. Haksar, Sr. Advocate, Ashok Kumar, Advocate.

IMPORTANT POINTS
1. All orders made by the Company Law Board on an application under Sections 397 and 398 of the Companies Act are enforceable like decrees without any limit on the nature of the order passed by the Company Law Board.
2. A consent decree has been held to be a contract with the imprimatur of the Court superseded. It is something more than a mere contract and has the elements of both a command and a contract.
3. If a decree is ambiguous, it is the duty of the Executing Court to construe the decree.
4. The effort of the executing Court must be to see that the parties are given the fruits of the decree. The mandate is reinforced when it is a consent decree and doubly enforced when the consent decree is a family settlement. Family settlements are governed by a special equity and are to be enforced if honestly made.

Headnote:Companies Act, 1956—Sections 397, 398, 402, 634A—Company petition u/ss. 397 and 398 of the Act—Powers of Company Law Board—Respondent 1 company was founded by two first cousins Chatur Bhuj Sharma (CBS) and Madan Mohan Sharma (MMS), their fathers being brothers—Disputes arose between these two cousins, CBS Group and MMS Group—Creditors of companies including company’s bankers initiated proceedings against the company for recovery of outstanding dues—Matter was ultimately resolved between the parties with the persuasion of the Company Law Board—By an order dated 19.8.1999, the Company Law Board recorded the settlement set down in a Memorandum of Family Arrangement (MOFA) and Transfer Document—Directions made by the Board u/s 402 of the Act—MMS Group filed an application u/s 634A of the Act to direct the CBS Group to proceed with the completion as per the Transfer Document and the MOFA—It was prayed that a Special Officer should be appointed to take over the responsibilities of the CBS Group in the management of the Company and should be directed to complete the agreement between the parties—CBS Group’s prayer for recalling the orders passed by the Board—Whether Company Law Board was justified in dismissing both the applications—(No)—Company Law Board was bound to execute the order—Agreements were arrived at between the parties to resolve finally long pending disputes between the family members relating to jointly owned assets.

       Held : Both the Company Law Board and the High Court erred in refusing to execute the order dated 19th August, 1999 under Section 634A of the Companies Act. They have thereby failed to exercise the jurisdiction with which they were vested. The failure is heightened given the nature of the order which they were bound to execute. They have erroneously proceeded upon principles applicable to contracts alone and have ignored the fact that the agreement between the parties had culminated in a consent order of the Company Law Board. The plea of the respondents that this Court should not interfere in the matter under Article 136 by reason of any alleged misconduct on the part of the appellants in managing the 5 estates is unacceptable. The appellant’s alleged lack of efficiency in running of the five tea estates is not a material consideration for deciding whether the order dated 19th August, 1999 should be enforced. The respondent’s contention that the appellants were not themselves willing to abide by the terms of the consent order appears to us to be erroneous. The application under Section 634A was for implementation of the order dated 19th August, 1999 if necessary by appointing a Special Officer to carry it into completion. In fact even while the application under Section 634A was pending in the Company Law Board, the Vice Chairman had suggested to the appellants that they waive their claim in respect of the accrued gratuity under clause 4.1.1.11 of the Transfer Document and a certain portion of the interest claimed under the Transfer Document. The appellants confirmed that they would accept the Vice Chairman’s suggestion but would do so on the basis that a consent order was passed in terms thereof on the same date. This was recorded by the appellant’s advocates in their letter dated 19th December, 2000 addressed to the Company Law Board and its Members and the Advocate for the respondents and has not been disputed before us as not reflecting the correct position. This is not the conduct of a party which is not willing to abide by the terms of the decree. On the question whether the appellants had defaulted in payment of purchase price simultaneously with the completion in terms of Clause 4 of the Transfer Document, this again relates to an interpretation of the terms of the MOFA and the Transfer Document. According to the respondents, there was no default on their part as the respondents were required not only to settle all outstanding claims relating to the five estates prior to giving of the completion Notice but also to annex the necessary documents evidencing that the sale estates could be transferred free from all encumbrances to the MMS group by the respondent No.1. The Company Law Board and the High Court have proceeded on the basis that the only dispute between the parties was as to the interpretation of Clause 4.1.1.11. Elaborate arguments have however been addressed go us on the merits of the four contentions noted by us earlier by both parties. We were initially of the view that the dispute should be resolved by us finally. However on a reconsideration, we deem it fit to remand this issues for determination by the Company Law Board if it is satisfied that the issues could be said to have been fairly raised by the parties before it. We make it clear that whatever interpretation may be put by the Company Law Board on the clauses of the MOFA and Transfer Document, the Board must implement the clauses as interpreted.(Paras 34 to 36)

       We ourselves do not propose to go into the issues raised by the parties, namely whether the completion notice was valid nor the quantification of the deductions under Clause 4 of the Transfer Document. These are issues that must be worked out by the Company Law Board in executing the consent order in terms of the MOFA and Transfer Document. It is unnecessary for us to go into the powers of the parties to rescind the settlement (assuming that such rescission were at all possible at this stage) as neither of the groups have taken any steps to issue any notice of rescission till today. We note 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 a manner which would have been in the interest of the respondent No.1 given the impasse between the two blocks of shareholders and saved the parties a lot of unnecessary harassment, expenditure and acrimony. We also sought to bring an end the dispute by proposing measures which might be acceptable to both. However, such resolution does not appear to be possible. Therefore it must be left to the Company Law Board to execute its order dated 19th August, 1999 in accordance with the settled principles of law and in terms of the opinion expressed by us in this judgment. The impugned decisions of the Company Law Board and the High Court are for the reasons earlier stated set aside. The appeals are allowed and the matter remanded back to the Company Law Board for completing the implementation of the order dated 19th August, 1999 by executing the same.(Paras 38 and 39)

       (ii) Companies Act, 1956—Section 634A—Application under—Company Law Board when it deals with an application u/s 634A sits as an executing court—It is subject to all the limitations to which a Court executing a decree is subject.

       Held : Since the Company Law Board when it deals with an application under Section 634A sits as an executing court it is subject to all the limitations to which a Court executing a decree is subject. It is well settled that an executing court cannot go behind the decree, unless the decree sought to be executed is a nullity for a lack of inherent jurisdiction. A decree is without jurisdiction if the Court passing the decree usurps a jurisdiction which it did not have and which could not be waived by the parties. The lack of jurisdiction must be patent of the face of the decree in order to enable the executing court to come to the conclusion that the decree is a nullity.(Para 28)

       It is nobody’s case that the order dated 19th August, 1999 was a nullity. The respondents had filed an application for recalling the order dated 19th August, 1999. The Company Law Board dismissed that application. An appeal has been filed before the Patna High Court which is said to be pending. However, it has not been drawn to our attention by the respondent that the application for recall was founded on the submission that the order dated 19th August, 1999 was a nullity. In the absence of such an issue being raised and decided, the Company Law Board was bound to execute the order. If the Board found that the decree or any of its terms called for interpretation, it was within the Board’s jurisdiction to interpret that particular term and to execute the decree on the basis of such interpretation.(Para 30)

       (iii) Companies Act, 1956—Sections 397, 398, 634A—Enforcement of orders of the Company Law Board—Word ‘any order’ used in the opening of Section 634A indicates that all orders made by the Company Law Board on an application u/ss. 397 and 398 are enforceable like decrees without any limit on the nature of the order passed by the Company Law Board—All decrees whether preliminary or final are susceptible to execution— Civil Procedure Code, 1908—Section 36.

       (iv) Companies Act, 1956—Sections 402, 397, 398—Powers of (Tribunal) on application u/s 397 or 398—Powers u/s 402 are residuary in nature and in addition to the powers available to the Company Law Board u/ss. 397(2) and 398(2) of the Act.

       Held : The powers under Section 402 are residuary in nature and in addition to the powers available to the Company Law Board under Sections 397(2) and Section 398(2) which permit the Company Law Board to make such order as it thinks fit with a view to bringing to an end the matters complained of under Section 397(1) and with a view to bringing to an end or preventing the matters complained or apprehended under Section 398(1). Doubtless the Company Law Board speaks of ‘final disposal of the petition and the various interim applications’. This was because in terms of the order itself (which included the MOFA and the Transfer Document), various steps had to be taken to complete the severance of the relationship finally between the MMS Groups and the respondents. This did not make the affirmation of the MOFA and the Transfer Document an interim arrangement. The operative portion of the order directed the execution of the MOFA and Transfer Document by the parties after completion of the schedules thereto. The entire order was passed by consent. Parties cannot resile therefrom. Therefore the order cannot be described as an interim order in the sense that the issues decided thereby could be reopened.(Paras 20 & 21)