ORDER
K.S. Radhakrishnan, J.
1. This is an appeal preferred under Section 10F of the Companies Act, 1956 for setting aside the order dated 3-5-2000 of the Company Law Board and also for a direction to the Company Law Board to fix the value of the appellant's shares on the basis of Annexure-G valuation report and for a direction to the respondents (majority) shareholders to purchase the appellants (minority) shares at the value so fixed by the Company Law Board and also for the other consequential reliefs.
2. Company petition was preferred by the appellant herein under Sections 397 and 398 of the Companies Act, 1956 complaining oppression and mismanagement by the majority shareholders and stated that all the ingredients of Sections 397 and 398 of the Companies Act, 1956 are present for passing an order pursuant to Section 402 of the Act. Further, it was also alleged that not only the minority shareholders are being oppressed but the company's affairs are being carried on in a manner which is prejudicial to the interests of the company and also against public interest. Company petition was numbered as C.P. No. 60 of 1994 by the Company Law Board which came up for hearing on 18-9-1996 and the Company Law Board advised the parties to amicably settle the matter by selling the appellant's shares to the respondents for an agreed price. Matter was got adjourned to 15-10-1996 and then posted to 28-5-1997. On that day parties have submitted before the Company Law Board that they are attempting for amicable settlement. Matter was then taken up on 3-2-1998. On that day counsel appearing for the majority shareholders stated that his clients are agreeable to purchase the shares of the minority shareholders at a valuation made by a Chartered Accountant appointed by the Company Law Board. Consequently the Company Law Board passed the following order:
The counsel for the respondents states that his clients are agreeable to purchase the shares of the petitioner at a valuation made by a Chartered Accountant appointed by us. Counsel for the petitioner states that his client is agreeable for the same. Both the counsel would intimate names of Chartered Accountants in Cochin who could be considered for valuation.
Case was then adjourned to 5-2-1998. On that day Company Law Board passed the following order:
As agreed to by the parties we shall pass an order appointing a valuer to value the shares as on 31-3-1994, so that the petitioners shares could be purchased by the respondents at a value to be determined by us on the basis of the valuation report.
Company Law Board later passed an order on 11-3-1998 appointing M/s. Billimoria and Company, Chartered Accountants, Cochin as Valuer for valuing the shares. We may extract the order passed by the Company Law Board for easy reference:
During the arguments on the petition, we suggested to the parties that they should attempt at resolving their disputes amicably. The parties have agreed to our suggestion by which the petitioner would sell his shares to the respondents on a valuation to be made by a Chartered Accountant. It has also been agreed that the valuation will be done as on 31-3-1994 on the basis that the petitioner was controlling 25 per cent shares in the company. The parties have requested us to appoint a valuer. We accordingly appoint M/s. Billimoria and Company, Chartered Accountants, Rama Centre (Second Floor), Ravipuram Road, Cochin-16 as valuer for valuing the shares. They will value the shares as on 31-3-1994. The parties are at liberty to make oral as well as written submissions before the value for their consideration. The Valuation Report is to be submitted to us on or before 31-5-1998. The valuer has indicated a fee of Rs. 30,000 for valuing the shares. However, since the company will be paying this fees, the same may be negotiated with valuer depending on the workload involved. The valuer while furnishing a copy of the report to us will also give copies of the Valuation Report to both the parties. On receipt of the report, the matter relating to settlement will be considered by us.
The Company will approach the valuer immediately along with a copy of the order for doing the needful.
Billimoria and Company then submitted their report dated 30-10-1999 to the Company Law Board whereby they have valued the shares of the company as on 31-3-1994 at Rs. 45,763 per equity share. It was stated that the appellants who hold 250 shares are entitled to Rs. 1,14,40,750 as the sale price for their shares as per order of the Company Law Board dated 5-2-1998. Valuation report was accepted by the appellants minority shareholders. Majority shareholders however, requested for time to file objection to the valuation report and the case was adjourned. Later the Company Law Board passed an order on 3 -5-2000 directing hearing of the main company petition since majority shareholders were not accepting the valuation report. Company Law Board passed the following order:
Since the counsel for the Respondents submits that his clients are not willing to accept the valuation the petition along with application will be heard on merits on 16-6-2000 at 10.30 a.m. In the meantime, the respondents may react to the proposal of the petitioners that he is willing to sell 250 shares held by him for a consolidated amount of Rs. 30 lakhs.
Minority shareholders/appellants are aggrieved by the said order and have approached this Court.
3. Sri Joseph Kodianthra, counsel appearing for appellants submitted that the Company Law Board has committed an error in not passing a final order on the basis of the valuation report. Counsel submitted that the majority shareholders cannot wriggle out of the orders passed by the Company Law Board on 3-2-1998 and 5-2-1998. Counsel submitted that the majority shareholders have agreed to purchase the shares of the minority shareholders at a valuation to be made by a Chartered Accountant appointed by the Company Law Board. Counsel submitted, valuation report has already been submitted before the Company Law Board and the Company Law Board is legally bound to pass orders on the valuation report. Counsel submitted that the orders passed by the Company Law Board on 3-2-1998 as well as 5-2-1998 would clearly fall under Section 402(b) of the Companies Act and are enforceable under Section 634A of the Companies Act. Counsel submitted, Company Law Board has committed an error in not determining the value of the shares based on the valuation report. In support of his contention counsel made considerable reliance on the decision of Apex Court in Manish Mohan Sharma v. Ram Bahadur Thakur Ltd. [2006] 67 SCL 91. Counsel submitted, in view of the order passed on 3-2-1998, 5-2-1998 and 11-3-1998 and in view of the valuation report received from the valuer appointed by the Company Law Board, the Company Law Board is obliged to determine the value of the minority shares of the appellants and to direct the majority shareholders to purchase the minority shares on the basis of the value to be determined by the Company Law Board failing which the minority shareholders have got a legal right to enforce that order under Section 634A of the Companies Act.
4. Sri. P. Radhakrishnan, counsel appearing for the respondents on the other hand contended that majority shareholders are not accepting the valuation report submitted by the valuer and therefore, there is no question of determining the value by the Company Law Board. Counsel submitted then the only course open to the Company Law Board is to hear the application under Section 397 of the Act. Counsel also submitted the sanctity of the orders dated 3-2-1998, 5-2-1998 and 11-3-1998 has lost its value because of the subsequent offer made by the minority shareholders to sell their shares on a consolidated amount of Rs. 30 lakhs. In any view of the matter, counsel submitted, the orders dated 3-2-1998, 5-2-1998 and 11-3-1998 are not orders which fall under Section 402(b) of the Companies Act and therefore, are not enforceable under Section 634A of the Companies Act. Counsel submitted, the principle laid down in Manish Mohan Sharma's case (supra) is not applicable to the facts of this case.
5. The powers conferred on the High Court under Section 402 of the Companies Act have been conferred on the Company Law Board by the Companies (Amendment) Act, 1988. While acting under Section 398, read with Section 402 of the Companies Act, 1956, the Court/CLB has ample jurisdiction and very wide powers to pass such orders and give such directions as it thinks fit to achieve the object and there would be no limitation or restriction on such power. Section 402 of the Companies Act, 1956, read with Rule 9 of the Companies (Court) Rules, 1959 the Court as well as CLB have powers to give such directions as are necessary to meet the ends of justice, and to make suitable provisions to bring about an amicable settlement to the disputes between the parties. The Calcutta High Court in Pramod Kumar Mittal v. Andhra Steel Corporation Ltd. [1982] 2 Comp. L.J. 629 held that while acting under Section 398, read with Section 402 of the Companies Act the Court has ample jurisdiction and very wide powers to pass such orders and give such directions as it thinks fit to achieve the object and there would be no limitation or restriction on such power that the same should be exercised subject to the other provisions of the Act dealing with normal corporate management or that such orders and directions should be in accordance with such provisions of the Act. The Supreme Court in Consmosteels (P.) Ltd. v. Jairam Das Gupta [1978] 48 Comp. Cas. 312 has examined the scope of Sections 397 and 398 and stated that the scheme of Sections 397 and 402 appears to constitute a code by itself for granting relief to oppressed minority shareholders and for granting appropriate relief, a power of widest amplitude, inter alia lifting the ban on a company purchasing its shares under Court's direction, is conferred on the Court. The above mentioned decision would categorically show that the Company Court has been conferred with wide powers under Section 402 to pass appropriate orders for bringing up amicable settlement of the disputes between the parties and to pass appropriate orders to meet ends of justice. In this connection we may refer to Section 402 which is extracted below for easy reference:
402. Powers of Tribunal on application under Section 397 or 398.-Without prejudice to the generality of the powers of the Tribunal under Section 397 or 398, any order under either section may provide for:
(a) the regulation of the conduct of the company's affairs in future;
(b) the purchase of the shares or interests of any members of the company by other members thereof or by the company;
(c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital;
(d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, and any of the following persons, on the other, namely:
(i) the managing director,
(ii) any other director,
(iii) & (iv)**
(v) the manager,
upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in all the circumstances of the case;
(e) the termination, setting aside or modification of any agreement between the company and any person not referred to in Clause (d), provided that no such agreement shall be terminated, set aside or modified except after due notice to the party concerned and provided further than no such agreement shall be modified except after obtaining the consent of the party concerned;
(f) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under Section 397 or 398, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference;
(g) any other matter for which in the opinion of the Tribunal it is just and equitable that provisions should be made.
Section 634A of the Companies Act deals with enforcement of orders of Company Law Board. The said provisions is extracted below for easy reference:
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.
Section 634A has conferred power on the Company Law Board to enforce its orders. Section 634A says that 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. A compromise or a consent order can also be executed by the Company Law Board in exercise of the powers under Section 634A. We may in this connection refer to the decision of the Delhi High Court in Consulting Engineers Services (India) Ltd. v. Kaikhosrou K. Framji [2002] 39 SCL 647. In a petition under Section 397, the Company Law Board passed an order with the consent of the parties that one party would sell his shares to the other and the other would purchase them without raising any technical objections. In an application to enforce this order against the party who was directed to purchase, the Court said that the words 'any order' in the section must be given their full natural meaning and effect so as to include consent orders also. Such an order could be enforced by the CLB in the same manner as if it were a decree. We may also refer to a decision of the Madras High Court in Kuki Leather (P.) Ltd. v. TNK Govindaraju Chettiar & Co. [2002] 110 Comp. Cas. 474 : 39 SCL 1. That was a case where the petitioner was seeking an order for investigation of affairs. The company offered to purchase the shares of the petitioner. An agreement was reached and recorded by the Company Law Board. It became an order disposing of the petition for investigation. The settlement was not. signed by the parties as required by the Civil Procedure Code. The Court said that this was only a technicality. The Civil Procedure Code was not applicable with all its technicalities. The Court held that the compromise was, therefore, executable. The Calcutta High Court in Debi Jhora Tea Co. Ltd. v. Barendra Krishna Bhowmick [1980] 50 Comp. Cas. 771, held that there shall be no limitation on the Court's power while acting under Sections 397, 398 and 402 of the Companies Act. Court held on a reading of Section 402(a) and Section 402(g), there can be no doubt that the intention of the Legislature was to confer wide and ample powers upon the Court for the regulation of the conduct of the company's affairs.
6. We may also refer to the recent decision of the Apex Court in Manish Mohan Sharma's case (supra). That was a case where the Company Law Board has recorded a memorandum of family arrangement and transfer document executed by the parties. The Court held that the same would form integral part of the order, and can be executed by the Company Law Board on an application under Section 634A. Reversing the order of the Company Law Board as well as the High Court, the Apex Court held as follows:
Both the Company Law Board and the High Court in fact interpreted Clause 4.1.1.11 and came to definite, albeit different, conclusions as to what the clause meant. It may be that conclusion was not what was being contended for by the appellants. It may also be that the interpretation put on the clause by the Board or the High Court was not in the contemplation of the parties. Nevertheless once having agreed to particular terms of settlement which were incorporated in a decree, the parties concerned are bound to comply with the terms as may be interpreted by the executing Court. Once the interpretation is done by the decree must be executed as interpreted. (p. 103).
In our opinion both the Company Law Board and the High Court erred in refusing to execute the order dated 19-8-1999 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....(p. 104)
The principle laid down in the above mentioned decisions would squarely apply to this case. In this case, we may mention that the suggestion made by the Company Law Board to purchase the minority shares was acceptable to the parties. When the matter came upon for hearing before the Company Law Board on 3-2-1998 counsel appearing for the majority shareholders has specifically stated that his clients are agreeable to purchase the minority shares at a valuation to be made by a Chartered Accountant appointed by the Company Law Board. Later Company Law Board passed order dated 5-2-1998 stating that as agreed to by the parties CLB would pass an order appointing a valuer to value the shares as on 31-3-1994, so that the appellant's shares could be purchased by the respondents at a value to be determined by the CLB on the basis of the valuation report. The valuer appointed by the Company Law Board then submitted its report and the Company Law Board should have passed final orders based on the report. Company Law Board cannot abdicate its statutory duty to pass order on the basis of the valuation report. Order to be passed by the Company Law Board on the basis of the valuation report is a final order in terms of Section 402(b) of the Act which can be executed by the parties under Section 634A of the Companies Act.
7. Company Law Board in our view has abdicated its duty in not passing final order under Section 402(b) of the Act, but passed an order to decide finally the application under Section 397 of the Act since majority shareholders had objected to the valuation made by the valuer appointed by the Company Law Board. We are of the view after having agreed to purchase the minority shares on the basis of a report submitted by the valuer appointed by the Company Law Board majority shareholders cannot wriggle out of their agreement which was accepted by the minority shareholders. Company Law Board, in our view, is duty bound to pass orders under Section 402(b) on the basis of the valuation report submitted by the valuer after hearing both parties rather than adjourning the matter for hearing the main petition on merits.
8. Appeal is accordingly allowed and Annexure-H order passed by the Company Law Board on 3-5-2000 is set aside. Company Law Board is directed to pass orders on the valuation report after hearing all the parties. Such an order, in our view, is executable under Section 634A of the Companies Act.