“  REPORTABLE”   

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION  

CIVIL APPEAL NO.___________OF 2008 (Arising out of SLP (C) No.19235-19236 of 2005)

J.P. Srivastava & Sons (Rampur)  Pvt. Ltd. & Ors. ….. Appellants

Versus

H.K. Srivastava (Dead) through L.Rs. & Ors. ….. Respondents

J U D G M E N T

V.S. SIRPURKAR, J

1. Leave granted.

2. A common Judgment of High Court of Madhya Pradesh at Gwalior in

Miscellaneous Company Appeals  filed  by the  Respondents  herein  is  in

challenge  before  us.   These  Appeals  were  filed  by  the  Respondents

against  the  order  of  the  Company Law Board (CLB)  arising  out  of  the

applications filed by the appellants herein under Section 397 and 398 of the

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Companies  Act  (hereinafter  referred  to  as  ‘the  Act’)  alleging

mismanagement of the company by the Respondents.  Both the parties

have already completed one round of litigation upto this Court and have

come up before us in the second round.  The factual matrix leading to the

filing of the present appeals before us dates back to July, 1995 when the

appellants herein filed the petitions under Section 397, 398 of the Act.  The

facts are as under.

3. This  is  a  family  dispute  amongst  two  brothers,  namely,  J.K.

Srivastava and H.K. Srivastava, both of whom have expired. Their Legal

Representatives are before us.  J.K. Srivastava Group (appellants herein)

filed Company Petition No.27 of 1995 dated 1.7.1995 before the Company

Law  Board  under  Sections  397  and  398  of  the  Act  alleging  that

M/s. Gwalior Sugar Company Ltd., which is a family concern, was being

mismanaged by H.K. Srivastava Group.   

4. The  Company  Law  Board,  on  the  basis  of  the  aforementioned

petition  and the  replies  thereto  by  the  respondents,  was initially  of  the

opinion that this being a family concern, the disputes should be resolved

amicably and passed an order dated 22.1.1996 calling upon the parties to

make efforts for compromise.  The relevant extracts of the order are as

under:

“In  view  of  the  close  relationship  between  the  parties,  we suggested to the counsel for both the sides that they should try

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to work out an amicable settlement between the parties.  The counsel have undertaken to do so.  The result of their efforts will be intimated to us on 20th February 1996 at 2.30 p.m”

Thereafter, three hearings took place and ultimately on 7.5.1996, the

CLB passed the following order:

“It was agreed by the parties that the petitioners will sell their shares  to  the  respondents  for  a  value  per  share  to  be determined by a valuer appointed by us and the value will be binding on all  the parties.   The parties will  approach jointly reputed  valuers  and  suggest  an  acceptable  name  for  our approval on 30.5.1996 at 4.15 p.m.”

5. On 10.6.1996, with the consent of the parties,  the CLB appointed

M/s. Thakur Vaidyanathan Iyer & company Chartered Accountants, New

Delhi to value the shares of the Company.  On 22.11.1996, the Chartered

Accountants  valued  the  shares.   As  the  respondents  had  reservations

about the value, the matter was re-heard by the valuer and ultimately the

value of equity shares was decided at Rs.6340/- per share.  The valuation

for  a  preference share of  Rs.100/-  was fixed at  par.   The respondents

herein objected to this valuation also vide their C.A. No. 302 of 1997.  They

also filed C.A. No. 264 of 1997 for recalling the order dated 10.6.1996.

Their contention was that the other disputes relating to the family properties

in possession of the petitioners should also be settled.  The matter was

fixed for hearing on 6.11.1998.

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6. However, before that, respondent no. 8 Mrs. Radhika Srivastava filed

an application C.A. No. 262 of 1998, challenging the order dated 10.6.1996

and praying for its recall.  It was alleged in the application that respondent

no. 8 had no knowledge of the compromise and that she was kept in dark

about  the  settlement  arrived  at.   She  also  further  contended  that  the

petition under Section 397 & 398 of the Act was not maintainable since as

per Section 399 of the Act,  the petitioner had to have 10% of the total

issued share capital which would include preference shares.  According to

respondent  no. 8,  the petitioner  did not  have the shareholding of  10%.

Hence the petition under Sections 397 and 398 of the Act before the CLB

itself was not maintainable.   

7. This  application  was  replied  to  by  the  present  appellants,  more

particularly, the appellant no. 3 Mrs. Nini Srivastava, wherein, it was stated

that the petition filed before the CLB under the provisions of Sections 397

and 398 of  the Act was on behalf of the appellant no. 3 herself and also as

the  trustee  of  J.K.  Srivastava  Family  Trust  (referred  to  as  the  ‘Trust’

hereinafter) and since the Trust had 1029 preference shares and since she

had an authority to represent the Trust and file petition on its behalf, the

petition was perfectly legal.  It was also contended that the respondent no.

8 Mrs. Radhika Srivastava was fully aware of this situation since she had

participated in the proceedings in which there had been 25 hearings over

three and a half years till  then.  By an order dated 6.11.1998, the CLB

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directed the appellants  to  file  the consent/authority,  if  any given by the

Trust to Mrs. Nini Srivastava for filing the petition under Section 397 and

398  of   the  Act.   On  9.11.1998,  the  appellants  brought  on  record  an

affidavit  dated  9.6.1995  and  one  affidavit  of  Mr.  V.K.  Srivastava  dated

12.6.1995 was also brought on the record.  A detailed reply was also filed

to  the  application  filed  by  Mrs.  Radhika  Srivastava  that  Mrs.  Nini

Srivastava, the 3rd appellant herein, was appointed as a trustee of the Trust

on 24.8.1994 and she enjoyed the authority/consent to file the petition vide

communication dated 9.2.1995 and she also had the consent of the co-

trustee Mr. V.K. Srivastava as per the affidavit dated 12.6.1995.

8. The  Company  also  filed  its  reply  and  naturally  supported  the

respondents contending that since the petitioner was holding the shares

less than 1/10th of the issued share capital of the company, the petition was

not maintainable.

9. All the three applications (C.A.No. 262 of 1998, C.A. No. 264 of 1997

and C.A. No. 302 of 1997) and the objections thereto were heard by and

decided  by  the  CLB  on  18.1.1999.   The  CLB  took  the  view  that  the

application C.A. No. 264 of 1997 was liable to be dismissed and C.A. No.

302  of  1997  was  also  liable  to  be  dismissed,  however,  it  arrived  at  a

conclusion that the proper valuation of the shares would be Rs.6000/- per

equity  share.   As  far  as  the  third  application  C.A.  No.  262  of  1998  is

concerned, the CLB took the view that though the other objections were

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without any merits,  the objection pertaining to  the maintainability  of  the

petition was valid, as the petitioner did not have the authority of the Trust

and the petitioner did not have shareholding exceeding 10% of the total

shareholding.  On this ground alone, the CLB dismissed the petition filed

under Sections 397 and 398 of the Act.   

10. Three appeals came to be filed against this order of the CLB.  One of

the  appeals  was  by  the  present  appellants  against  the  finding  of

maintainability,  while  the  other  two  appeals  were  by  the  respondents

(herein), whereby their prayer for recall of order dated 10.6.1996 and the

finding on the consent was rejected by the CLB.  All the three appeals were

dismissed by the learned single Judge of the High Court by its order dated

30.6.2000.  The learned single Judge upheld the findings of the CLB on the

maintainability  of  the  petition  and  dismissed  the  appeal  filed  by  the

appellants.  The learned Judge, however, observed that since the original

petition  itself  was  had  to  be  not  maintainable,  nothing  survived  in  the

appeal filed by the respondents herein, challenging the other findings of the

CLB.   

11. The appellants filed Letters Patent Appeal against the order of the

learned single Judge.  The Division Bench, however, dismissed the appeal

filed by the appellants vide its order dated 10.8.2001 and observed that

since the appellants had filed a fresh application before the CLB, the CLB

should  decide  the  subsequent  application  on  its  merits  ignoring  the

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observations made by the CLB as well as the learned single Judge about

the number of shares held by the Trust, and should further decide the case

on merits.   

12. All these appellate judgments of the learned single Judge as well as

the Division Bench were challenged by the appellants before this Court and

this Court allowed these appeals vide its judgment dated 26.10.2004.  The

Court specifically held that the third appellant Mrs. Nini Srivastava had the

necessary authority to file the appeal on behalf of the Trust and she as well

as the Trust had more than 10% of the share capital of the Company in

control, and as such, there was no bar under Section 399(3) of the Act and

also the Regulation 18 for the petition under Sections 397 and 398 of the

Act.

13. Accordingly, the matter was remanded back to the learned single

Judge.  The learned single Judge, however, came to the conclusion that

the CLB had not decided any other matter on merits, since it had taken the

view that the original petition under Sections 397 and 398 of the Act for

mismanagement  of  the  company  were  not  maintainable.   The  learned

single Judge, therefore, without expressing anything, sent back the whole

matter to the CLB by his order dated 27.7.2005.  It was observed by the

learned single Judge in his order:

“After hearing both the parties, I find that the Company Law Board had dismissed the petition on the ground that it is not

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maintainable and the said view was upheld upto the Division Bench.  However, now the Apex Court has taken a different view and held that the petition is maintainable.  From perusal of impugned order, I find that the Court below has not given any findings on the merits of the case, i.e., findings about the mismanagement.   In such circumstances, this  Court  has no option but to remand the matter to the CLB for deciding the matter afresh.  At the time of deciding the matter afresh, the Company Law Board shall consider the entire record available. At the time of arguments, it was also pointed out by both the parties that some subsequent events have taken place during the last six years and a fresh petition against the company is also filed which is pending.  Under regulation 24, the Company Law Board has to take into consideration all the events till the date of passing the order.”

Thus, the matter stood remanded further to the CLB.  It is against

this order of the learned single Judge that the appellants have filed the

present appeals.

14. Ms. Ahmadi, the learned counsel for the appellants strenuously took

us  through  all  the  orders  and firstly  contended  that  the  learned  single

Judge  has  completely  ignored  the  findings  given  by  the  CLB  on  the

questions other than the maintainability of the petition.  She pointed out

that the CLB had very categorically found that the respondents had given

consent for settling the matters amicably and accepting such consent, the

CLB had passed the final order.  She also pointed out that the CLB had

also fixed the valuation of the shares at Rs.6000/- per equity share, though

the Chartered Accountants appointed by the CLB had initially  fixed the

price at Rs.6340/- per equity share.  She also pointed out further that the

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petition filed by Mrs. Radhika Srivastava (C.A. No. 262 of 1998) was fully

dealt  with and the objections raised by Mrs.  Radhika regarding her not

even  having  consented  to  the  agreement,  was  rejected.   Her  further

contention for recall of the order dated 10.6.1996 was also rejected by the

CLB.  It was only her objection regarding the maintainability, which was

entertained by the CLB holding that the petition under Sections 397 and

398 of the Act was not maintainable.  But, however, since this Court has

held the petition to be maintainable, it  is obvious that the other findings

were  also  very  much  alive  in  that  order.   She further  pointed  out  that

appeals  were  filed  before  the  learned  single  Judge  in  the  first  round,

precisely against  those findings.  She, therefore,  urges that the learned

single  Judge was in  error  in  ignoring all  these findings and refusing to

decide  the  appeals  which  were  against  those  findings.   The  learned

counsel carries the arguments further and suggests that  this Court  now

should put an end to the controversy by upholding the order of the CLB

regarding the consent agreement on the part of the respondents.  She has

also relied on a number of decisions, which pertain to the effect of the party

even having consent for the compromise.   

15. As against this, the respondents, however had supported the order

of the learned single Judge, saying that all the questions were open before

the CLB and the learned single Judge is  right  in remanding the matter

further for re-hearing and re-decision on all the other questions.

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16. On this background, we would have to see as to whether the learned

single Judge was right in making a wholesale remand.  It would be proper

for us to first consider the order passed by the CLB in details, as it will have

to be examined as to whether the CLB has actually not decided upon any

other point excepting the maintainability of the petition as held by the single

Judge in impugned judgment.   

17. In  the  first  two  paragraphs,  the  CLB referred  to  the  facts  of  the

petition and subsequent settlement arrived at regarding the sale of shares

by the petitioner at a value to be determined by a valuer appointed by the

CLB.  It also referred to the appointment of M/s. Thakur Vaidyanathan Iyer

& Company, Chartered Accountants, New Delhi to value the shares of the

company.  In third paragraph, the CLB referred to the presence of          Mr.

Vikram Srivastava, Joint Managing Director, respondent no. 3 as also the

per share value arrived at by the Chartered Accountants as per their valuer

report,  which was arrived at Rs.7031/- per equity share.  The CLB then

makes  a  reference  to  the  date  5.3.1997,  when  the  counsel  for  the

petitioners  accepted  the  value  determined  by  the  valuer,  whereas,  the

respondents’  counsel had sought some time as also to the order dated

18.3.1997, wherein, it was held that the valuers should give hearing to the

petitioners as also to the respondents within three weeks.  In the fourth

paragraph, the CLB then refers to the written submissions before the valuer

as also the revised report of 8.10.1997 and the ultimate value computed by

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the valuer per equity share of Rs.100 each being Rs.6340/-.  It also made a

reference to C.A. No. 264 of 1997 seeking for recalling the order of the

Bench of valuation of the shares and for abandoning the valuation process

and to proceed with the petition in accordance with law.  It then made a

reference to  the  hearing  which took place  on 15.12.1997,  wherein,  the

request was made by the respondents to file objections to the valuation

report  as  also  to  the  further  developments  dated  20.12.1997  etc.  and

ultimately to the instructions by the CLB, wherein, the CLB had advised the

parties to send notes to the Bench stating specifically the points on which

they had reservations on the reports of the valuer, so that the Bench itself

could take up the matter with the valuer.  After referring to the fact of the

parties, sending the details of their petitions, the CLB ultimately referred in

this paragraph the possibility of settling the prices between the parties.   

18. In  paragraph  5,  the  CLB  referred  to  the  contentions  of  the

respondents  about  the  valuation  made  by the  valuer  through  Mr.  Vijay

Gupta, counsel for the respondents, mainly to the effect that the valuation

was vitiated, as the person who had done the valuation on behalf of the

valuers was earlier  a director  of  the Board of  a company in which one

petitioner was a director.  In paragraph 6, the arguments of the advocate

for  the  petitioner  were  dealt  with  to  the  effect  that  the  consent  terms

recorded was an independent one without having any connection with the

disputes between the parties and, therefore, they should be independently

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implemented.  The CLB also referred to the readiness on the part of the

petitioners to settle all  the disputes, as also to settle the other disputes

through arbitration.  The CLB also referred to the further arguments that,

however,  the  payment  for  the  shares  held  by  the  petitioner  should  be

independent of the arbitration.  In paragraph 7, the reply on the part of the

advocate for the respondents was referred to, while in paragraph 8, the

CLB referred to the application by respondent no. 8 being C.A. No. 262 of

1998  dated  3.11.1998.   It  also  referred  to  the  fact  that  replies  were

permitted to be filed to the aforementioned C.A. No. 262 of 1998, and it is

ultimately  in  paragraphs  9  and 10  that  the  CLB  initially  dealt  with  the

applications C.A. No. 264 of 1997 and 302 of 1997.  After considering the

arguments in  detail,  and after  referring to  the happenings at  the earlier

stage of the proceedings as also after considering a decision of the CLB in

Mrs. Michelle Jawad-A1-A1-Fahoum Vs. Indo Saudi Travels P. Ltd. (1988-

30 CLA 42), the CLB observed in the present case also that:

“there is absolutely no reference to the private understandings between  the  parties  in  the  order  dated  10.6.1996  and  the petitioners are not agreeable for any modification in the said consent order.  Once the parties consent to certain terms of settlement and the same is recorded by a judicial forum, then the parties are bound by the said settlement terms.  Therefore, there is no scope for recalling the order dated 10.6.1996 on this ground.”

Thereafter, the CLB also rejected the contention raised on behalf of

the respondents that even if the consent terms were to be implemented by

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which the respondents would purchase the shares of the petitioners, then it

could be only after the other disputes between the parties are settled and

till  such  time,  no  payment  need  be  made  for  the  shares.   The  CLB

observed that:  

“this  argument  also  deserves  to  be  rejected  as  no  such reference is found in the order dated 10.6.1996.  Further, after this order, a few hearings took place and at no point of time this issue was raised by the respondents”.

It further went on to hold:

“Thus it is clear that even if there has been an agreement to settle the other disputes, it was to be after the shares of the petitioners are bought out by the respondents”.

The  CLB  then  referred  to  the  proposal  by  the  counsel  of  the

petitioners to refer all other disputes to the arbitrator to be appointed by the

CLB and observed:

“We think that it is a very fair proposal as the same would put an  end to  all  the  disputes  between the  parties  and a  time frame  of  9  months  for  completion  of  the  arbitration proceedings  should  be  sufficient  and  that  on  expiry  of  9 months, the respondents should pay the consideration for the shares  irrespective  of  the  fact  whether  the  arbitration proceedings are concluded or not.”

In paragraph 10, the CLB referred to the valuation arrived at by the

Chartered Accountants.   The CLB ultimately recorded a finding:

“Thus on the basis of the valuation report, we consider that a sum of Rs.6000/-  per equity share would be an appropriate

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value for these shares and Rs.100/- each for the preference shares.

19. It is then that the CLB considered the objections and prayers raised

by respondent no. 8 in C.A. No. 262 of 1998 including the contention that

the petition under Section 397 and 398 of the Act was not maintainable as

the petitioner did not hold 10% of the share capital.  The CLB firstly held

that the prayer of the 8th respondent for recall of the order dated 10.6.1996

on the ground that she was not a party to consent agreement, had to be

rejected.   

20. The  CLB  took  into  consideration  the  various  facts  that  the

respondent no. 8 had kept quiet on large number of hearings, though, her

counsel  was  present  all  through.   It  also  made  a  reference  that  no

explanation was given as to why respondent no. 8 had waited for nearly an

year to present this application (C.A.  No. 262 of  1998),  challenging the

consent terms.   

21. On the second and the main aspect, concerning the Section 399 of

the Act, it was referred that the petitioners holding less than 10% of the

share capital could not move application under Section 397 and 398 of the

Act.  The CLB in paragraph 25 held as follows:

“Thus,  this  petition  suffers  from either  one  or  more  of  the following:   Consent  in  writing  was  not  filed  along  with  the petition;  The Trust  did  not,  on the  day of  filing  the  petition control all  the 1029 preference shares; all  the trustees have

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not been made parties to the petition and the trustees cannot, in law give consent to a co-trustee to file the petition.  If it is so, then the shares held by the Trust cannot be taken into account for the purposes of the provisions of Section 399 and as such without passing any directions in pursuance to our conclusions at paragraphs 9 and 10, we dismiss this petition.  However, since we ourselves feel that the correctness of our decision needs  to  be  tested  on  appeal,  we  also  stipulate  that  all subsisting interim orders will continue up to 31st March, 1999 so as to provide for some time to the parties to initiate appeal proceedings.  Petition is dismissed.  No order on cost”.

22. We have carefully seen and noted that this Court upset only the later

part of the order, particularly pertaining to the maintainability of the petition

under Section 397 and 398 of   the Act  on account of  the provision of

Section  399  (3)  of   the  Act.   It  specifically  held  in  its  judgment  dated

26.10.2004 that the CLB had incorrectly held the said petition to be not

maintainable.  This Court found specifically that the objection regarding the

applicability of Section 399(3) of the Act could not hold water, and it was

categorically  declared  that  the  3rd appellant  (herein)  had  the  necessary

authority to file the appeal on behalf of the Trust and she as well as the

Trust had more than 10% of the share capital alongwith the appellant   Mrs.

Nini Srivastava.  Thus, it  is clear that the order of the CLB  only on the

question of maintainability was held to be erroneous.  It is to be noted that

no other aspect and the finding in that order were even touched by this

Court.  Since this Court remanded the whole matter to the learned single

Judge before which the appeals against the order of the CLB were filed, on

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this  background,  when  we  consider  the  judgment  now  passed  after

remand, by the learned single  Judge, it  is  seen that  the learned single

Judge  has  miserably  failed  to  decide  any  questions  whatsoever.   The

parties were at issues on all the aspects of the order passed by the CLB

besides the finding of the CLB on the maintainability of the petition.  This

Court specifically held that the objection regarding the maintainability, more

particularly, raised by the respondent no. 8 was not tenable and the petition

under  the  Company  Act  was  perfectly  maintainable.   This  Court  had

deliberately not expressed on any other aspect of the matter.  A careful

scanning  of  the  order  passed by  this  Court  shows that  this  Court  had

decided the matter only on the question of applicability of Section 399 (3) of

the Act and had come to a clear conclusion that the petition under Section

397 and 398 of  the Act was perfectly maintainable.  In short, this Court had

left it to the learned single Judge to decide every other question dealt with

by the CLB in its order, since the appeals against those questions were

pending before the learned single Judge and since those appeals were not

decided at  the  first  instance by  either  the  single  Judge or  the  Division

Bench.

23. On this background, we find that the single Judge has taken a very

strange view of the matter and has proceeded to hold that the CLB had not

decided the matter on merits, and, therefore, the whole matter was liable to

be re-decided by the CLB.  In this behalf, we must point out that the CLB

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had given the findings on C.A. No. 264 of 1997, C.A. No. 302 of 1997, C.A.

No. 262 of 1998 as also the objections raised thereto by the appellants.  It

is for this reason that we have dealt with the order passed by the CLB in

great details in the earlier part of the judgment.  According to us, it cannot

be said that the CLB had not decided all the other matters, since, it had

found  the  original  petition  to  be  untenable.   We,  however,  desist  from

dealing with any other findings of the CLB to which we have already made

reference.  We refuse to express anything, since this Court had expected

the  learned  single  Judge  to  decide  all  those  matters  covered  by  the

appeals filed by both the parties and to decide upon the correctness of the

order passed by the CLB on all  the other issues excepting the issue of

maintainability, which issue was already finally dealt with by this Court in

the judgment dated 26.10.2004.  We are, therefore, of the clear opinion

that the matter  should be referred back to the learned single Judge for

deciding all the three appeals filed by the respective parties with the time

frame.   

24. As regards the contentions raised by Ms. Ahmadi, learned counsel

for  the appellants  as  also the contentions raised by the opponents,  we

have already held that it would not be feasible for us to consider the merits

of the appeals filed by the parties against the order of the CLB.  We have

pointed out that in its order, the CLB had considered number of questions

raised by the parties vide their  objections and independent  applications

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filed from time to time.  Barring the question of tenability – which is finally

decided upon – this Court had not considered any other questions covered

in those appeals and had left the same to be decided by the single Judge.

We,  therefore,  would  not  go  beyond  the  directions  of  remand,  earlier

issued by this Court.  That would be neither a proper nor an appropriate

course to follow.  However, we must clarify that it would be open for the

High Court to go into the question as to whether the parties hereto were

bound by the terms of compromise, which have been affirmed by the CLB.

In that, the High Court would also be bound to consider the tenability of the

appeals filed by H.K. Srivastava Group.  We have clarified this position, as

so far there has been no debate on the tenability of the appeals against the

orders effected through compromise.

25. We,  therefore,  would  reiterate  the  earlier  order  of  remand to  the

single Judge passed by this Court.  In that view, we direct:

(1) That the single Judge will now take up all the three appeals filed by the parties against the order of the CLB and dispose of the same in the light of the observations made by us.

(2) This shall be done within six (6) months from the date of this order reaches the High Court.

(3) All the other contentions would be allowed to be raised and considered  except  the  question  of  tenability  of  the  petition under Section 397 and 398, which has been finally decided by this Court in the earlier round of litigation.

(4) The parties are also permitted to raise the questions regarding the subsequent developments directly in accordance with law and only if they are germane to the matter in question.

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The appeals are disposed of  in above terms.   There shall  be no

orders as to costs.

………………………J. (Altamas Kabir)

………………..…….J. ( V.S. Sirpurkar )

New Delhi; September 3, 2008.

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Digital  Performa

Case  No.  : SLP (C) No. 19235-19236 of 2005

Date of Decision : 03.09.2008

Cause Title :  J.P. Srivastava & Sons (Rampur) Pvt. Ltd. & Ors.

Vs.

H.K. Srivastava (Dead) through L.Rs. & Ors.  

Coram :   Hon’ble Mr. Justice Altamas Kabir     Hon’ble Mr. Justice V.S. Sirpurkar      

Judgment delivered by :   Hon’ble Mr. Justice V.S. Sirpurkar

Nature of Judgment :  Reportable

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