Back
2015 Supreme(Bom) 1805
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. GUPTE, J.
Bombay Cable Car Co. Pvt. Ltd. & Ors. - Appellants
vs.
B.M. Jain & Sons Co. Pvt. Ltd. & Anr. - Respondents
Company Appeal No. 48 of 2009 in Company Application No. 275 of 2008 in Company Petition No. 63 of 1998
Decided On : 09-10-2015
Advocate Appeared:
Mr. S.H. Doctor with Mr. P.A. Kabadi and Ms. F.J. Thakkar i/b. Dhojode Associates for Appellants
Mr. K.R. Bulchandani with Mr. Amit Nikam and Ms. Meena Sudhakara i/b. M/s. Kamal & Co. for Respondent No.1
The main legal point established in the judgment is the limited jurisdiction of the CLB after the final disposal of a petition and the application of the doctrine of merger to appellate orders.
Headnote:
Companies Act - Dispute between shareholders - Sections 397, 398 - Summary of Acts and Sections: Companies Act, 1956, Sections 397, 398 - The court discussed the powers of the Company Law Board under Sections 397 and 398 of the Companies Act, 1956, and the jurisdiction of the CLB to pass orders for redressal of grievances and to supervise the implementation of its orders. The court also considered the doctrine of merger and the effect of appellate orders on the original orders.
Fact of the Case:
The case involved a dispute between two groups of shareholders of a company over the valuation of shares and cancellation of shares held by one group. The original company petition was disposed of by the Company Law Board, and the appellate court upheld the order with further directions. Subsequently, the valuation of shares and cancellation of shares were challenged in a company application.
Finding of the Court:
The court found that the Company Law Board had no jurisdiction to interfere with the steps taken by the parties after the original order had been fully implemented. The court also held that the doctrine of merger applied, and the original order of the CLB had merged with the appellate order, making it impermissible for the CLB to modify the original order.
Issues: The issues involved the jurisdiction of the CLB to supervise the implementation of its orders and the effect of appellate orders on the original orders.
Ratio Decidendi: The court held that the CLB ceases to exercise any jurisdiction once it disposes of a petition finally and makes a final adjudication of the rights of the parties. The court also emphasized that the doctrine of merger applies, and once an appellate court affirms or modifies an order, it becomes the operative order.
Final Decision: The appeal was allowed, and the impugned order was not sustained.
The company appeal challenges an order passed on a company application filed in a disposed of company petition under Sections 397 and 398 of the Companies Act, 1956 (“the Act”). The company petition involved disputes between two groups of shareholders of the company. The petition was disposed of by the Company Law Board, Principal Bench (“CLB”) by directing one group to sell its shares to the other group at a valuation to be made by the statutory auditor of the company and issuing various other directions. That order was, upon a challenge in an appeal, upheld by this Court with passing of further directions. The statutory auditor thereupon proceeded to value the shares. The valuation was thereafter challenged by the Respondents herein by filing a company application in the disposed of company petition. By the impugned order, the valuation report prepared by the statutory auditor of Appellant No.1 company was set aside and a fresh valuation was ordered. So also, cancellation of 25000 shares held by Respondent No.1 in the company in pursuance of the order disposing of the company petition, was set aside. The order is challenged basically on the grounds that the CLB, having disposed of the company petition, had no jurisdiction to entertain the company application and secondly, the order of disposal of the company petition had merged with the appellate order passed by this Court, which had since been complied with by the Appellants.
2. On 21 November 1983, Appellant No.1 (“company”) was incorporated with the object of carrying on business of transportation of tourists and local citizens on mono-bio cable car system by Appellant No.2 Sabir Rashid and others of his group (hereinafter referred to as “Rashid group”). In April 1988, Respondent No.2 - Pune Municipal Corporation (“PMC”) issued a tender notice for provision of a passenger ropeway system within the limits of city of Pune between Nehru Stadium and Parvati Hill. The company's tender was accepted by PMC. An agreement for lease dated 5 July 1991 was, accordingly, executed between the company and PMC. The estimated cost of the project was Rs.6.05 crores. Rashid group was not in a position to fully meet the project cost. By an agreement dated 19 June 1993 between Rashid group and Lokhandwala group, Lokhandwala group agreed to invest in the company to the extent of Rs.1.25 crores to implement the ropeway project. Lokhandwala group was, in the premises, allotted 19,170 equity shares of Rs100/- each. The company, thereafter, commenced its work on the ropeway project. On 30 January 1994, PMC issued a stop work notice to the company. Around this time, Lokhandwala group expressed its inability to bring in further finance and offered to return the equity shares to Rashid group, or in the alternative, transfer them to a third party financer. In the premises, by an agreement dated 28 November 1995 between Rashid group, Lokhandwala group and Respondent No.1 (hereinafter referred to as “Jain group”), Jain group was brought in with a view to bring in the requisite funds. Jain group agreed to fulfill the financial liability of Lokhandwala group. Accordingly, Jain group bought 19,170 equity shares of Lokhandwala group. Mr.Mahendrakumar Jain, a nominee of Jain group, was thereupon appointed as an additional director of the company. Sometime thereafter, disputes arose between the company and PMC. These disputes were referred to a sole arbitrator. Whilst the arbitration proceedings were pending, disputes arose between Rashid group and Jain group. In the midst of these disputes, an award came to be passed in favour of the company by the sole arbitrator on 31 March 1998. Appellant No.3 herein (a member of Rashid group) filed a suit before this Court, being Suit No.2493 of 1998 against Jain group (represented by Respondent No.1 herein). The subject matter of this suit involved a challenge to Jain group holding on to its shareholding. The prayer was to direct Jain group to relinquish the sh
