DEEPAK LOHIA V. KAMRUP DEVELOPERS P. LTD [2010] 157 COMP CAS 82 (GAU) B.P. KATAKEY, J [DECIDED ON 3-5-2010]
Companies Act, 1956 – sections 402 and 634A – enforcement of order passed by CLB – whether can be enforced as decree passed by civil court – held, yes
Brief facts: In a petition filed by the appellant under sections 397 and 398 of the Companies Act, 1956, the Company Law Board, in view of lack of confidence between the parties directed the appellant to exit the company and to return the amount advanced by the appellant and his group to the company with interest at 20 % per annum on or before August 8, 2002. In its order the Company Law Board had held that the parties were at liberty to approach it in case of any difficulty in implementing the order. The appeal filed by the respondents was dismissed. In an application before the Company Law Board, the appellant sought for an injunction restraining the first respondent company from selling, dealing, etc., with its immovable property as the respondents had paid only Rs. 50,00,000 and had to pay Rs. 81,00,000 and a sum of Rs. 2,32,40,000 as interest. The respondents contested the claim of the appellants. The Company Law Board held that since the order of payment of interest was based purely on equitable grounds, such direction could not be treated as a decree and the amount paid by the first respondent company could not be adjusted first against interest due and payable and the remaining against the principal. Another application was filed by the first respondent company seeking a recording that all amount due and payable as ordered in the company petition had been paid. The respondents had contended that the principal amount had been paid in full and made a prayer for waiver from payment of interest. The Company Law Board restricted the payment of interest at 20% per annum to a specific date instead of waiver of interest as prayed for by the respondents. Appellants approached the High court under an appeal.
Decision: Partly allowed.
Reason : The Company Law Board’s order that the amount paid to the appellant group by the respondents, in terms of its orders, should not to be adjusted towards interest first, on the ground that the order passed in exercise of its jurisdiction under section 402 of the Act was not a money decree, was to be set aside.
The Company Law Board had granted liberty to the parties to approach it in case of any difficulty in execution of the order. The Company Law Board had reserved its jurisdiction to pass further orders. The appellant had taken advantage of such liberty granted by seeking directions against the respondent. The contention of the appellants that the order of the Company Law Board had merged with the order of the High Court in appeal and the Board could not pass the order restricting the period for which interest was payable, was not acceptable as the High Court had not interfered with the order passed by the Board. The High Court had affirmed the directions contained in the orders of the Company Law Board and the Board could entertain the application pursuant to the liberty granted by it to the parties. This grant of liberty had not been challenged by the appellant. Therefore, the direction for payment of principal with interest was subject to further orders that may be passed by the Board. The directions of the Board restricting the payment of interest to a specific date were to be upheld.
The direction for payment of principal and interest, subject to the subsequent modifications that were made pursuant to the liberty granted was executable by the Board or by any other court under section 634A of the Act. The amount paid by the respondents pursuant to the order of the Board was to be first appropriated against the interest payable up to the date as specified by the Board in its subsequent order and the remaining was to be appropriated towards the principal.