w w w . L a w y e r S e r v i c e s . i n



SREI Venture Capital Ltd. v/s Ramani Ramaswamy & Others


Company & Directors' Information:- RAMASWAMY AND COMPANY PVT. LTD [Under Process of Striking Off] CIN = U52520TG1987PTC008008

Company & Directors' Information:- B B VENTURE PRIVATE LIMITED [Active] CIN = U52209CT2008PTC020645

Company & Directors' Information:- A TO Z VENTURE CAPITAL LIMITED [Active] CIN = U74899DL1995PLC074063

Company & Directors' Information:- S A R VENTURE PRIVATE LIMITED [Active] CIN = U70102DL2015PTC275704

Company & Directors' Information:- RAMANI & COMPANY PRIVATE LIMITED [Dissolved] CIN = U93090TN1956PTC002293

Company & Directors' Information:- N J VENTURE PRIVATE LIMITED [Strike Off] CIN = U70101MH2008PTC186387

    C.A. No. 60 of 2009 in C.P. No. 13 of 2008

    Decided On, 12 January 2010

    At, Company Law Board Southern Region Bench Chennai

    By, THE HONOURABLE MRS. VIMLA YADAV
    By, MEMBER

    For the Applicant: S.N. Mookherjee, R. Banerjee, A. Choudhary, Advocates. For the Respondents: R1 & R2, Nalini Chidambaram, K. Moorthy, R5 & R6, P.H. Arvindh Pandian, Cibi Vishnu, Advocates.



Judgment Text

Vimla Yadav, Member

1. In this order I am considering Company Application No. 60 of 2009 filed under section 634A of the Companies Act 1956 (hereinafter referred to as "the Act") read with regulation 44 of the Company Law Board Regulations, 1991 (hereinafter referred to as "the Regulation") in the matter of M/s. Creative Port Development Private Limited ("the company"). This company application under section 634A of the Act read with regulation 44 of the Regulations was mentioned by respondent No.2 namely, M/s. SREI Venture Capital Ltd. in Company Petition No. 13 of 2008 against the petitioners in the company petition namely Mr. Ramani Ramaswamy, s/o. K.M. Ramaswamy and Mr. R. Rangarajan, s/o. T.R. Ramaswamy. C.A. No. 60 of 2009 was mentioned on November 17, 2009 for the purpose of enforcement of the directions passed by the Company Law Board vide its order dated May 27, 2009 as approved and modified by the Hon'ble High Court of Judicature at Madras in its order dated August 28, 2009 (Probir Kumar Misra v. Ramani Ramaswamy (2010) 154 Comp Cas 658). On the date of mentioning of the company application the respondents/petitioners sought time to file counter affidavit to this application. The counter affidavit was allowed to be filed by December 7, 2009 and the company application was posted for arguments on December 14, 2009 at 10.30 am. On December 14, 2009 the applicant's learned senior counsel Shri S.N. Mookherjee, pointed out that in view of the Company Law Board's order as modified by the High Court, the applicant is immediately entitled to payment of the sum of Rs. 52.50 crores from the petitioners in C.P. No. 13 of 2008 for transfer of its equity shares, preference shares, OFCDs and all other interests to the petitioners in C.P. No. 13 of 2008 at the said consideration of Rs. 52.50 crores. Further it was stated that respondents Nos. 4, 5 and 6 in C.P. No. 13 of 2008 also support the applicant's case. This statement was affirmed by their counsel also. Counsel for the applicant reiterated that the petitioners in C.P. No. 13 of 2008/respondents to C.A. No. 60 of 2009 are under an obligation to make payment of the said sum of Rs. 52.50 crores for transfer of the shares and all other interests held by the applicant in the company. My attention was drawn to the Company Law Board's order dated May 27, 2009 (Ramani Ramaswamy v. Creative Port Development P. Ltd. (2010) 154 Comp Cas 519 ) at paragraph 9 which reads as under (page 591) :

"9. In view of my foregoing conclusions and in exercise of the powers under sections 397 and 398 read with section 402 of the Act and with a view to regulate the conduct of the affairs of the company, I direct as under :

9(i) The second respondent shall transfer its shares and all other interests held in the company to the petitioners at a consolidated price of Rs. 52.50 crores, or at a fair value as at March 31, 2008, whichever is higher. The fair value shall be determined by an independent expert valuer, appointed by the Bench. The second respondent shall exercise either of the options, by filing an appropriate affidavit before the Bench Officer, within 30 days of the receipt of the copy of the order, towards due completion of the exit formalities of the second respondent from the company.

(ii) Respondents Nos. 2 to 6 shall ensure reimbursement, in favour of the company, 30 per cent. of all benefits enjoyed by SREI from and out of the Machilipatnam Port Project as at March 31, 2008, which shall be ascertained by the expert valuer.

(iii) The petitioners shall forthwith reconstitute the board of directors of the company, in exclusion of the nominees of the second respondent, upon which the company is at liberty to carry on its business, in terms of the articles of association of the company.

(iv) The petitioners shall keep informed the second respondent of any major developments in the Subarnarekha Port Project every month, within seven days of the following month commencing from June 2009, till completion of the whole of exit formalities of the second respondent from the company."

With the above directions, the company petition and all the company applications were disposed of in that order reserving the right to issue appropriate consequential directions, in terms of clauses (i) and (ii) of para graph 9 on July 21, 2009 at 2.30 pm. All interim orders were vacated and no costs were imposed.

2. Shri Mookherjee pointed out that immediately after the order dated May 27, 2009 was passed by the Company Law Board the petitioners in C.P. No. 13 of 2008/respondents in C.A. No. 60 of 2009 undertook several acts such as (i) formation of Subernarekha Port Private Limited as SPV for the project with 100 per cent. shares of the company owned by the said petitioners in violation to the terms of concession agreement, (ii) reconstitution of the board of Creative Port Development Private Limited in exclusion of nominee directors of the applicant even without giving notice to them, (iii) appointment of three additional directors on the board of Creative Port Development Private Limited without the knowledge of the applicant and/or its nominees on the board of the company, (iv) shifting of registered office of the company to a new location, (v) change of bank accounts of the company thereby excluding nominee directors of the applicant from authorised sanatory in the operation of bank account, (vi) allotment of equity and preference shares of Creative Port Development Private Limited to the said petitioners, against expenses claimed to have been incurred by them for the company, (vii) subrogation of all rights of Creative Port Development Private Limited with regard to the project in favour of Subarnarekha Port Private Limited where shareholding was shown to be fully owned by the said petitioners in violation to the terms of concession agreement, (viii) entering into an memorandum of understanding with Signature Group International Limited of Cayman Island, for sale of equity stakes in Subarnarekha Port Private Limited. It was further pointed out that these acts of the respondents/petitioners were brought to the notice of the Hon'ble High Court of Judicature at Madras by the applicant in their appeals under section 10F of the Act in C.A. Nos. 11 of 2009 to 15 of 2009. The Hon'ble High Court at Madras after hearing the matter in detail confirmed the order of the Company Law Board in respect of relief granted under paragraph 9(i) varying the date of valuation as at March 31, 2008 to March 31, 2009. The Hon'ble High Court's directions in this matter as contained in paragraph 20 of the order dated August 28, 2009 (Probir Kumar Misra v. Ramani Ramaswamy (2010) 154 Comp Cas 658 (Mad)) read as follows (page 751):

"(i) the order of the Company Law Board in respect of relief granted under paragraph 9(i) is confirmed with a direction to the second respondent to transfer its shares and all other interest held in the first respondent-company (Creative Port Development Private Limited) to the petitioners either at an agreed consolidated price of Rs. 52.50 crores or any fair value to be arrived at by an independent expert valuer as at March 31, 2009, whichever is higher. The Company Law Board shall appoint, on an application by the second respondent within a period of thirty days from the date of receipt of a copy of this order, an independent expert valuer and decide about all other formalities in that regard;

(ii) the relief granted by the Company Law Board under para graph 9(ii) stands set aside, holding that the second respondent shall not have any obligation to reimburse any benefit accrued by it under Machilipatnam Port Project either to the petitioners or the first respondent-company;

(iii) all further acts of the petitioners pursuant to the order of the Company Law Board dated May 27, 2009 are directed to be kept in abeyance, except those vital acts which require the petitioners to act for the purpose of retaining the Subamarekha Port Project with the Government of Orissa, till the formalities in respect of fixing the consideration for exit of the second respondent is fixed by the Company Law Board, as stated above, and the entire amount is paid to the second respondent; and

(iv) the petitioners who have disclosed the affairs of the Subarnarekha Port Project as on June 25, 2009, shall continue to disclose any further developments and communications by sending copies to the second respondent periodically once in a month commencing from the end of August, 2009 till the formalities for exit of the second respondent are completed in full and till such formalities are completed respondents Nos. 2 to 5 shall be deemed to continue as the directors of the first respondent company."

3. Shri Mookherjee pointed out that since the judgment of the Hon'ble High Court at Madras several negotiations were held between the parties to amicably resolve the matter, wherein it had also been represented by the representative's of the petitioners in C.P. No. 13 of 2008 (Ramani Ramaswamy v. Creative Port Development P. Ltd. (2010) 154 Comp Cas 519 (CLB)) that funds to acquire the shares of the applicant and all its interests would be available by the end of October 2009. Relying on the said representation and believing the same to be true, the applicant had not taken any steps in the matter before the Company Law Board and more particularly as the certified copy of the order and judgment dated August 28, 2009 (Probir Kumar Misra v. Ramani Ramaswamy (2010) 154 Comp Cas 658 (Mad)) of the Hon'ble High Court was only made available on October 13, 2009 and hence on November 17, 2009 C.A. No. 60 was mentioned attracting the provisions of section 634A of the Act. It was pointed out that even though on a fair value basis, the price could be higher, but with an objective to settle the long standing dispute, the applicant is willing to and accepts the minimum sum of Rs. 52.50 crores for transfer of its shares and all other interests held in the company to the petitioners in C.P. No. 13 of 2008. By reason of such acceptance there is no further necessity of the Company Law Board to appoint any independent expert valuer to value the shares and all other interests and determine as to whether it is higher or not. By reason of having exercised the option of not getting the shares valued, the applicant has immediately become entitled to payment of sum of Rs. 52.50 crores from the petitioners in C.P. No. 13 of 2008 for transfer of its equity shares, preference shares, OFCDs and all other interests to the petitioners in C.P. No. 13 of 2008 at the said consideration of Rs. 52.50 crores.

4. Drawing my attention to the respondents'/petitioners' letter dated September 4, 2009 to the Commissioner-cum-Secretary, the Commerce and Transport Department, Government of Orissa, Secretariat, Bhubaneswar (specifically their statement in the penultimate para in that letter which reads as : "We also understand from the letter dated September 3, 2009 from Mr. P. K. Mishra that IPDF/SREI, West Bengal is planning to challenge the High Court Order dated August 28, 2009 in the Supreme Court. We wish to submit that we have always been ready to pay the amount to IPDF/SREI for their exit from CPDP as directed by both the Company Law Board (CLB) and the Hon'ble High Court of Madras in the interest of the Subarnarekha Port Project, Balasore District, Orissa."), Shri Mookherjee vehemently argued that the respondents/ petitioners had made a mis-representation before the Government, and had no intention to implement the Company Law Board's order as affirmed and modified by the Hon'ble High Court. It transpires that they are not desirous of complying in the near future with the directions as contained in the Company Law Board and the Hon'ble High Court's orders.

5. Shri Mookherjee relied on the case law in Atma Ram Properties P. Ltd. v. Federal Motors P. Ltd. [2005] 1 SCC 705 to show that it is well settled that mere preferring an appeal does not operate as stay on the decree or order appealed against nor on the proceedings in the court below. Further for the purpose of enforcement of the directions passed by the Company Law Board as approved by the Hon'ble High Court at Madras, to support his contentions Shri Mookherjee relied on the judgment in Manish Mohan Sharma v. Ram Bahadur Thakur Ltd. (2006) 131 Comp Cas 149; [2006] 4 SCC 416 to show that 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 lack of inherent jurisdiction. He further relied on the same judgment to show that the effort of the executing court must be to see that the parties are given the fruits of the decree.

6. My attention was also drawn to Order 21, Rule 22 of the Civil Procedure Code, 1908 by Shri Mookherjee to contend that since the applicant had come before the Company Law Board within two months the respondents/ petitioners were not even entitled to be heard in the matter. However, they had already been allowed time to file counter by December 7, 2009 and the same had not been filed till the date of hearing in the matter. Reiterating his arguments, counsel drew my attention to the applicant's prayer as contained in paragraph 20 at page 10 of this application under section 634A which reads as under : "(a) To direct the petitioners in C.P. No. 13 of 2008 to make payment of the sum of Rs. 52.50 crores to the applicant within a period of seven days ; (b) Direction upon the petitioners in C.P. No. 13 of 2008 to swear and file an affidavit disclosing the particulars of all the assets and properties ; (c) An order of injunction restraining the petitioners in C.P. No. 13 of 2008 from dealing with, disposing of and/or encumbering in any manner the assets and properties as mentioned in paragraph 11 hereinbefore and the assets and properties to be disclosed by them as stated in (b) above; (d) Order of injunction restraining the petitioners in C.P. No. 13 of 2008 from dealing with, disposing of, encumbering in any manner of any of the assets and properties of the said petitioners ; (e) Upon default of making payment a receiver and/or Special Officer be appointed to take possession of the assets and properties of the petitioners in C.P. No. 13 of 2008 herein as mentioned in paragraph 11 hereinbefore and all other assets of the said petitioners ; (f) The Receiver and/or Special Officer be directed to sell the assets and properties mentioned in paragraph 11 hereinabove by public auction or private treaty and to hand over the sale proceeds thereof to the applicant in protanto satisfaction of its consideration to be paid to the applicant as per directions of the Hon'ble High Court as contained in the Order of 28 August, 2009 ; (g) The Receiver/Special Officer be directed to sell all the assets and properties belonging to the petitioners in C.P. No. 13 of 2008 and to make over sale proceeds thereof to the applicant in protanto satisfaction of consideration liable to be paid by the petitioners in C.P. No. 13 of 2008 for acquisition of the shares and all other interests of the applicant ; (h)Ad interim orders in terms of prayers above ; (i) Costs of this application and incidental thereto be paid by the petitioners in C.P. No. 13 of 2008 ; and (j) Such further or other order or orders and/or direction or directions be given as to this Hon'ble Board may deem fit and proper."

7. On December 14, 2009 counsel for respondent No. 1 and respondent No. 2/petitioners sought further time to be heard in the matter. Though this company application was fixed for final arguments on December 14, 2009 the respondent/petitioners were allowed final opportunity of being heard on January 6, 2010 at 10.30 am and considering the facts and circumstances of the case the applicant's prayer at C as contained in paragraph 20 were allowed for the time being. On January 6, 2010 the respondents/petitioners filed their counter to C.A. No. 60 in the court during hearing and their learned senior counsel Smt. Nalini Chidambaram vehemently argued that this application under section 634A of the Act is not maintainable both in the eyes of law as well as on facts and deserves to be dismissed in limine. It was argued that the Company Law Board's order having merged with the High Court's order there is no matter pending in the Company Law Board ; the Company Law Board has become functus officio ; the Company Law Board has no jurisdiction/power to act further in this matter ; the Company Law Board has no power to execute by usurping jurisdiction on the order passed by the High Court ; on merger of the Company Law Board's order in the High Court's order, the Company Law Board's order is no longer in existence and hence the question of execution of the Company Law Board's order under section 634A does not arise ; the applicant is not seeking to execute the order of the Company Law Board but the High Court's order as if it is a money decree ; the, application and prayer seek to review the orders of the High Court asking the respondents to pay Rs. 52.50 crores and interest thereon ; the applicant's prayer seeking sequestration of assets was not even granted by the High Court ; the applicant is dishonest, the assets sought to be encumbered do not belong to the respondents ; SPPL has been made a party, even the High Court did not grant this prayer. My attention was drawn to paragraph 3 at page 3 of the counter affidavit which reads as under:

"3. It is submitted that the present application filed by the applicant is not maintainable for the following reasons:

(a) The order of the High Court only empowers the Company Law Board to appoint a valuer and finalise a value for the proposed transfer to respondents Nos. 1 and 2. Once the applicant has fore gone the right for valuation, the Company Law Board has no power to act further in this matter. The Company Law Board has no jurisdiction or authority to act beyond the explicit orders of the High Court which otherwise would amount to interfering with an order passed by a superior authority when especially the Company Law Board became functus officio. The Company Law Board order having been merged with the order of the High Court there is no matter pending in the Company Law Board for the applicants to move any application in the disposal of the company petition namely C.P. No. 13 of 2008 except to the extent directed by the High Court.

(b) There is no power for the Company Law Board to execute and usurp jurisdiction on the orders passed by the High Court.

(c) The application filed under section 634A of the Companies Act is totally misconceived. The Company Law Board order having been merged with the order of the High Court the Company Law Board order is no longer in existence and hence the question of enforcement of the order of the Company Law Board under section 634A does not arise.

(d) The above application being filed under section 634A, is not maintainable as the applicant is not seeking to execute the order of the Company Law Board. On the other hand the application seeks to execute the order of the High Court as if the High Court has passed a money decree.

(e) The application and its prayers are tantamount to seeking a review of the orders passed by the Hon'ble High Court by praying for direction to direct the respondents to pay Rs. 52.50 crores towards value of the shares and interest for which the Company Law Board has no power under Law to do so ;

(f) The application seeks action against the assets of respondents Nos. 1 and 2, in full and blatant violation of the High Court Order as the applicant in paragraph 23 of its C.M.P. No. 1 in C.M.A. No. 14 of 2009 has specifically sought the 'Sequestration of Assets' of the respondents and this direction sought by the applicants was not granted by the High Court and closed.

(g) The applicant in its application is under the mistaken impression which is totally unwarranted that the order of the High Court amounts to a decree for money and therefore it is immediately executable.

(h) The application is dishonest and fraudulent as it seeks prayers against "Encumbering of assets at No 84. Indira nagar first Avenue" as it was with the approval of the applicants that these assets have already been encumbered for the purpose of raising funds for the company because the applicants abandoned their duties to fund for the project.

(i) The application seeks prayers against assets at No 149, Krishnamachari Nagar, Alappakkam, Chennai 600 116 and No. 84 (IIIrd Floor), Indira Nagar First Avenue, Chennai 600 020, even though these are the assets not belonging to the respondents.

(j) The application seeks to make Subarnarekha Port P. Ltd. a party even though the High Court order did not grant this prayer of the applicants."

8. It was argued by Smt. Chidambaram that at the most the applicant could have moved the Company Law Board for the purpose of seeking an order for appointment of an expert valuer which they have not done. Rather they have exercised their option to waive their right for valuation accepting their exit from the company on payment of Rs. 52.50 crores towards the value of their shares and interest in the company. It was submitted that the applicant's formal confirmation to this waiver of their right may be recorded by the Company Law Board. It was also pointed out that respondents Nos. 1 and 2 have preferred a SLP on January 4, 2010 against the said impugned final judgment and order dated August 28, 2009, made in Company Appeals Nos. 11 to 15 of 2009 in respect of unjust benefits usurped by the applicant in relation to Machilipatnam Project. Further it was admitted that no appeal has been preferred on the order of the High Court in respect of paragraph 9(i) as modified by the High Court. However, without prejudice to the legal rights of respondents Nos. 1 and 2 in line with their consistent stand of fulfilling their commitments towards completing the exit formalities as per the orders of the High Court they have started the processes of arranging the sums required for the same.

9. Reiterating the contentions regarding the non-maintainability of the application under section 634A, senior counsel relied upon the judgment made in Chandi Prasad v. Jagadish Prasad [2004] CDJ SC 1108 to emphasise the doctrine of merger. Drawing my attention to paragraph 21 in that judgment which reads as under : "It is axiomatic true that when a judgment is pronounced by a High Court in exercise of its appellate power upon entertaining the appeal and a full hearing in the presence of both parties, the same would replace the judgment of the lower court and only the judgment of the High Court would be treated as final (see U.J.S. Chopra v. State of Bombay, AIR 1955 SC 633"). It was reiterated that the Company Law Board's order has got merged into the order of the Hon'ble High Court at Madras which alone can execute this order. It was reiterated that the Company Law Board's order is not in operation and it is not a case where the High Court has affirmed the order of the Company Law Board, there is no question of there being any order of the Company Law Board for execution. She relied upon the judgment made in Coastal Roadways Ltd. v. Kanoi Plantation P. Ltd. (2006) 132 Comp Cas 503 (Cal) to show that only the High Court has exclusive jurisdiction to pass any order including enforcement of the order passed by it. It was reiterated that the applicant cannot make the Company Law Board usurp the jurisdiction of the High Court and make it review that order as if it is a money decree. But it is not a money decree, the Company Law Board has no jurisdiction and hence the application deserves to be dismissed in limine.

10. Shri Mookherjee replying to the arguments of respondents/petitioners pointed out that their contentions are false and untenable. With regard to the submission that the application under section 634A of the Act in the matter is not maintainable in view of the fact that the order dated May 27, 2009 of the Company Law Board is merged with the order dated August 28, 2009 of the Hon'ble High Court of Madras, he submitted that it is the basic tenet of jurisprudence that the court of first instance is the executing court. My attention was drawn to section 2, sub-section (11) of the Act to show the definition of court and also to sections 634, 634A and section 10 of the Act. It was pointed out that as per the provisions of section 634 of the Act "any order made by a court under this Act may be enforced in the same manner as a decree made by the court in a suit pending therein". As per the provisions of section 634A of the Act "Any order made by the Company Law Board may be enforced by that Board in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for that Board to send, in the case of its inability to execute such order, to the court within the local limits of whose jurisdiction, -

(a) in the case of an order against a company, the registered office of the company is situated, or

(b) in the case of an order against any other person, the person concerned voluntarily resides, or carries on business or personally works for gain". He further drew my attention to the provisions of section 38 of the Civil Procedure Code to show that "a decree may be executed either by the court which passed it, or by the court to which it is sent for execution". Further he referred to section 37 of the Civil Procedure Code to give the definition of court which passed a decree. He further contended that though the Hon'ble High Court passed the order on the appeal, it cannot be termed as court of first instance. He submitted that the decree of the appellate court would be construed to be the decree passed by the court of first instance and in the present application the Company Law Board is the court of first instance and it can execute its own order in accordance with section 634A of the Act. To support his contentions he relied upon a judgment made in Ramankutty Guptan v. Avara (1994) 2 SCC 642. Shri Mookherjee pointed out, drawing my attention to paragraph Nos. 13 and 15 of the judgment in Coastal Roadways Ltd. v. Kanoi Plantation P. Ltd. (2006) 132 Comp Cas 503 (Cal) relied upon by the respondents/petitioners that it rather supports the applicant's case, the order of payment can be executed by the court which has passed the order, the execution proceedings are maintainable, the Company Law Board has jurisdiction to pass any order and any order made by the Company Law Board may be enforced by that board in the same manner as if it were a decree made by the court in a suit pending therein. As regards the theory of "doctrine of merger" it was pointed out that the doctrine of merger is based on the principles of propriety in the hierarchy of justice delivery system. The doctrine of merger does not make a distinction between an order of reversal, modification or an order of confirmation passed by the appellate authority. The said doctrine postulates that there cannot be more than one operative decree governing the same subject-matter at a given point of time. To support his contentions he relied upon the judgment made in Chandi Prasad v. Jagadish Prasad [2004] CDJ SC 1108 by the respondents/petitioners. It was contended that relying on the doctrine of merger was only to mislead and delay compliance of directions in the order of the court of first instance. He also emphasised on the "conduct" of the respondents by drawing attention to the letter dated September 4, 2009 written by respondent No. 1 on behalf of the company to the Commissioner-cum-Secretary, Commerce and Transport Department, Government of Orissa, Bhubaneswar wherein he mentioned that Mr. Probir Kumar Misra, the director, had written a letter to confuse and mislead the Department to the detriment of the Nationally Important Project and also stated that they would clarify the complete picture. He had further requested in the said letter that the Government need not take cognizance of party who has been asked to exit. It was contended that this clearly shows the conduct of respondents Nos. 1 and 2 who at one place state that they are willing to pay the amount to the applicant and at another place, without complying with the direction of payment, they are requesting the said Department not to take into cognizance of the submission of the applicant. To show that the respondents/ petitioners are dishonest litigants it was pointed out that on May 27, 2009, the Company Law Board passed an order in the company petition, on August 28, 2009 the Hon'ble High Court approved direction 9(i) modifying only the date of valuation, on September 4, 2009 they misrepresented to the Government of Orissa that they are ready and willing to implement the direction in respect of 9(i), then they mislead that they are filing special leave petition, thereafter on asking they reveal that the special leave petition, filed on January 4, 2010 is not in respect of the direction in 9(i) and in the Counter to C.A. No. 60 of 2009, they state that in line with their consistent stand of fulfilling their commitments towards completing the exit formalities as per the orders of the High Court they have started the pro cess of arranging the sums required for the same. It was reiterated that they have no intention to do that, even the High Court's order, mentions in para graph 17.17 their conduct which is shocking "17.17. The most shocking of all conducts of the petitioners is entering of memorandum of understanding dated June 4, 2009 before SPPL, represented by the petitioners . . ." Again in the High Court's order in paragraph 17.20 it is observed that by such hasty conduct of the petitioners they have created a big vacuum in the legal and financial status of respondent No. 1 company to which the second respondent as a financial partner having shareholding to the extent of 70 per cent. had invested substantial amount. It was pointed out by counsel for the applicant that the petitioners have taken over the company without paying the consideration for their shareholding and interest in the company.

11. As regards the respondents'/petitioners' contention that the applicant has dishonestly sought encumbering of respondents' assets, it was contended that firstly the respondents have not disclosed any documents to show that the assets do not belong to them, and secondly the applicant's list of assets is the same as disclosed by the respondents in their own pleadings. The respondents' counter affidavit is false in that regard.

12. Shri Mookherjee reiterated his contentions that the application is maintainable, the Company Law Board is the court of first instance and it is itself empowered to execute the Company Law Board's order as affirmed and modified by the Hon'ble High Court at Madras. It was contended that the Hon'ble High Court has not prescribed any time limit for implementation of direction under 9(i), the applicant having exercised the option, having waived determination of fair value by an independent expert valuer, the High Court's orders become operative with immediate effect and hence be enforced immediately to avoid irreparable loss to the applicant.

13. I have considered the pleadings and arguments of the rival parties. As regards the maintainability of C.A. No. 60 of 2009 under section 634A of the Act, it is noted that the respondents'/petitioners' argument that the Company Law Board's order having merged with the High Court's order there is no matter pending in the Company Law Board ; the Company Law Board has become functus officio ; the Company Law Board has no jurisdiction/power to act further in this matter ; the Company Law Board has no power to execute by usurping jurisdiction on the order passed by the High Court ; on merger of the Company Law Board's order in the High Court's order, the Company Law Board's order is no longer in existence and hence the question of execution of the Company Law Board's order under section 634A does not arise, is untenable being fallacious. There is no dispute with the doctrine of merger. It is for the finality of the issue and not to have more than one operative decree governing the same subject-matter at a given point of time. Once the superior court has disposed of the lis before it either by affirming or modifying or reversing the decree passed by the trial court it is the decree or order of the superior court, Tribunal or authority which is the final, binding and operative decree or order wherein the decree or order passed by the court, Tribunal or the authority before gets merged. Further, merger of a decree takes place irrespective of the fact as to whether the appellate court affirms, modifies or reverses the decree passed by the trial court. The apex court has held in the case of Chandi Prasad v. Jagadish Prasad [2004] CDJ SC 1108 that :

"23. The doctrine of merger is based on the principles of propriety in the hierarchy of justice delivery system. The doctrine of merger does not make a distinction between an order of reversal, modification or an order of confirmation passed by the appellate authority. The said doctrine postulates that there cannot be more than one operative decree governing the same subject-matter at a given point of time.

24. It is trite that when an appellate court passes a decree, the decree of the trial court merges with the decree of the appellate court and even if and subject to any modification that may be made in the appellate decree, the decree of the appellate court supersedes the decree of the trial court".

14. If the respondents'/petitioners' contention is accepted, all cases wherein lower courts' orders merge into the apex court's orders, the apex court would end up as the executing court whereas there is no such provision.

For execution of the decree, as per section 37 of the Civil Procedure Code it is the court of first instance which has the jurisdiction to execute the decree. Section 37 of the Civil Procedure Code provides definition of court which passed a decree as under :

"37. Definition of Court which passed a decree.- The expression 'court which passed a decree' or words to that effect, shall, in relation to the execution of decrees, unless there is anything repugnant in the subject or context, be deemed to include, -

(a) where the decree to be executed has been passed in the exercise of appellate jurisdiction, the court of first instance, and . . ."

15. From section 37 of the Civil Procedure Code, it is clear that the decree of the appellate court would be construed to be the decree passed by the court of first instance. It is settled law that an appeal is a continuation of the suit. The matter before the High Court in the case is in continuation of the same company petition in which order has been passed by the court of first instance, i.e., the Company Law Board. It is settled law that the Company Law Board is a quasi judicial authority exercising equitable jurisdiction having "the trappings" of a court. And the principles of the Civil Procedure Code do apply to the Company Law Board. The Company Law Board is the court of first instance in the matter. It has the jurisdiction to execute its orders. In execution proceedings its orders are to be executed as decrees in a suit. For this purpose the provisions of sections 634 and 634A are relevant. Section 634 reads as under :

"634. Enforcement of orders of courts.

- Any order made by a court under this Act may be enforced in the same manner as a decree made by the court in a suit pending therein."

16. At the conclusion of the proceedings a declaration of the liability is made. When once such declaration is made it can be enforced under section 634. Section 634 provides for treating the order of the company court as a decree and if it is a decree, the same can be executed under the provisions of the Civil Procedure Code.

17. This section applies to any order made by a court under the Act. Section 634 A of the Act reads as under :

"634A. Enforcement of orders of Company Law Board.- Any order made by the Company Law Board may be enforced by that Board in the same manner as if it were a decree made by a court in a suit pending therein, and it shall be lawful for that Board to send, in the case of its inability to execute such order, to the court within the local limits of whose jurisdiction -

(a) in the case of an order against a company, the registered office of the company is situated, or -

(b) in the case of an order against any other person, the person concerned voluntarily resides, or carries on business or personally works for gain.

Provided that the provisions of this section shall not apply on and after the commencement of the Companies (Second Amendment) Act, 2002."

18. Section 634A inserted by the Companies (Amendment) Act, 1977 was amended in 1988 consequential to the proposal to vest the Company Law Board with independent powers in respect of certain matters having adjudicative elements where such powers are being exercised by the Central Government or the court. The Companies (Second Amendment) Act, 2002 is yet to be notified. Section 634A provides that any order of the Company Law Board may be enforced by that Board in the same manner as if it were a decree made by a court in a suit pending therein. Under section 634A, the executing court cannot go into the merits of the decree and it is empowered to execute the same as it stands. It has been rightly argued by counsel for the applicant that it is the basic tenet of jurisprudence that decree is to be executed by the court of first instance, and in this matter the Company Law Board is the court of first instance and appellate proceedings are only continuation of the same suit (company petition for the purposes of the Company Law Board). In view of the clear legal provision I find no merit in the respondents' arguments on maintainability of this company application under section 634A of the Act. The Company Law Board has not become functus officio, the Company Law Board has jurisdiction to act further in the matter and execute the order and while doing so the Company Law Board is not usurping the jurisdiction of the High Court. It is he Company Law Board's order which has continued in the appellate proceedings before the High Court. C.A. No. 60 of 2009 is maintainable before the Company Law Board. Under section 634A of the Act under execution proceedings the Company Law Board has the same powers as an executing court has. Having exercised his option of not getting fair value determined for his shares and interest by an independent valuer, the applicant started negotiating with the respondents to pay the quantified amount for his exit and having failed to get the fruits of the decree has rightly come before the court of first instance wherein

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respondent No. 2 is to exit respondent No. 1 on receipt of the consideration for his shares and interest as quantified and to be paid to him as per the order of the Company Law Board which continued in the appellate proceedings. Quantification is final. The order for payment is final. The applicant's negotiations to get it implemented have failed. The Company Law Board can execute this order which has become executable immediately on the applicant's exercising the option for not to go for valuation of shares. 19. Further, I find no merit in the respondents'/petitioners' argument that the applicant is seeking to execute the order of the Company Law Board as affirmed and modified by the court as if it is a money decree. There is no dispute as regards the respondents' contention that the special Act supersedes the general Act and that the Company Law Board is not a forum for executing money decree. But in the present matter what the applicant has sought is payment in lieu of transfer of his equity shares, preference shares, OFCDs and all other interests to the respondents'/petitioners' as quantified in the Company Law Board's order and as affirmed in the order of the Hon'ble High Court and which the respondents'/petitioners' are showing to be willing and ready to pay, even the special leave petition filed on January 4, 2010 is admittedly not disputing this payment to be made. The Company Law Board has jurisdiction to pass an order for payment of money. In section 634A the words "any order" made by the Company Law Board means and includes order for payment of money and this can be enforced by various methods as has been provided under the laws. This is the decree of the court of first instance, i.e., the Company Law Board which is undoubtedly fully empowered to execute it or get it executed. 20. It is settled law that the conduct of the parties is very relevant in equitable proceedings, and even in execution proceedings of the Company Law Board. In the present matter it is noted that the applicant's contention that the respondents'/petitioners' are not desirous of implementing the orders containing payment of quantified amounts not disputed by the parties is found to be correct : At one point of time it is stated that they are ready to pay, then they change their stand and state that they are not in a position to pay, they need time to arrange the funds, and what prejudice would be caused to the applicant if the payment is not made. It is stated that the applicant does not stand to lose anything as they shall continue to be the shareholders. Such statements reveal that the respondents are litigants with unclean hands having no intention to implement even the final orders pretending that it shall not matter at all and thus turning the entire exercise before the Company Law Board and the High Court futile coming back to the respondents' adamant position frustrating all efforts and end up having their own way, what if the orders are there. This is not an impossible situation. There is a way out. There is provision for execution of orders which can result in confiscation of properties if decree or orders of the court of first instance, in this matter the Company Law Board are not implemented. The applicant's prayer seeking sequestration of assets is not unjustified. The respondents have failed to refute the applicant's contentions and distinguish or otherwise show the inapplicability of the judgments relied upon by them. 21. In view of the foregoing, in the facts and circumstances of this case, attracting the legal provisions and regulations I hereby allow the applicant's prayer at 'a' as contained in paragraph 20 at page 10 of C.A. No. 60 of 2009 under section 634A read with regulation 44 of the Act for implementation within 30 days of receipt of this order failing which the applicant is at liberty to give the status of implementation and in case of non-implementation, for sending it to the court within the local limits for execution of the decree. Till such time the prayer at 'c' in paragraph 20 at page 10 of the C.A. No. 60 of 2009 granted vide order dated December 14, 2009 shall continue to operate and shall stand vacated on implementation of prayer at 'a' in paragraph 20 at page 10 of the company application. No order as to cost.
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