Sanjay Kumar, J.@mdashThe Principal Bench of the Company Law Board (CLB) at New Delhi dismissed Company Petition Nos. 78, 84 and 85 of 2006 and 38 of 2007 by its common order dated 29.10.2007. These Company Petitions arose under Sections 397 and 398 read with Sections 111 and 111A of the Companies Act, 1956 (for brevity, ''the Act of 1956''). C.P. Nos. 84 of 2006 and 38 of 2007 pertained to M/s. Kohinoor Glass Factory Private Limited and M/s. Commercial and Industrial Finance Private Limited respectively, private companies registered in Andhra Pradesh. C.P. Nos. 78 and 85 of 2006 pertained to M/s. Mahalaxmi Glass Works Private Limited and M/s. Western India Glass Works Limited respectively, which are private companies incorporated in the State of Maharashtra. Aggrieved by this common order dated 29.10.2007, the petitioners in C.P. Nos. 84 of 2006 and 38 of 2007 filed these Company Appeals u/s 10F of the Act of 1956. C.A. No. 9 of 2008 arises out of C.P. No. 38 of 2007 relating to M/s. Commercial and Industrial Finance Private Limited, Hyderabad, while C.A. No. 5 of 2009 arises out of C.P. No. 84 of 2006 pertaining to M/s. Kohinoor Glass Factory Private Limited, Hyderabad. This Court admitted C.A. No. 9 of 2008 on 25.11.2008 and directed the parties to maintain status quo with regard to the immovable properties at Hyderabad and not to take any steps to alienate or alter the nature or characteristics of the lands.
2. In so far as C.A. No. 5 of 2009 is concerned, Company Application No. 481 of 2008 was filed by the appellants seeking condonation of the delay of 112 days in its filing. Notice was ordered on this application on 22.07.2009. However, pursuant to the order dated 25.11.2008 passed by this Court, the appeal was numbered as C.A. No. 5 of 2009. No counter was filed by the respondents opposing the condone delay application.
3. The affidavit filed in support of the application reflects that the appellants presented C.A. No. 9 of 2008 against the common order of the CLB in respect of all the four companies and took steps thereafter to rectify their mistake, as two of the companies were in Maharashtra. By order dated 15.07.2008 passed in the appeal, this Court permitted the appellants to confine and treat C.A. No. 9 of 2008 as an appeal against C.P. No. 38 of 2007 alone, leaving it open to them to file a separate appeal in respect of M/s. Kohinoor Glass Factory Private Limited. Thereupon, the appellants filed this appeal with a delay of 112 days.
4. As Section 10F of the Act of 1956 provides for filing of an appeal against the order of the CLB within sixty days, extendable by a further period not exceeding sixty days; in all, 120 days, and as the reasons set forth by the appellants in their affidavit filed in support of the application commend acceptance, this Court condones the delay of 112 days in the presentation of C.A. No. 5 of 2009 and the appeal is admitted.
5. It may be noted that as regards C.P. No. 78 of 2006 pertaining to M/s. Mahalaxmi Glass Works Private Limited, Mumbai, the appellants filed C.A. No. 22 of 2008 and against the order in C.P. No. 85 of 2006, relating to M/s. Western India Glass Works Limited, Mumbai, they preferred C.A. No. 23 of 2008. Both these appeals were filed before the Bombay High Court and seem to have been renumbered thereafter as C.A. Nos. 43 and 44 of 2009.
6. The appellants moved applications u/s 25 CPC before the Supreme Court of India in Transfer Petition (Civil) Nos. 846-847 of 2009 seeking transfer of the Company Appeals pending before the Bombay High Court to this Court. By order dated 18.01.2010, the Supreme Court refused to act upon the transfer applications and dismissed them. Transfer Petition Nos. 12 and 13 of 2010 seeking transfer of Company Appeal Nos. 9 of 2008 and 5 of 2009 pending before this Court to the Bombay High Court were also dismissed by the same order.
7. The four Company Petitions were filed before the CLB alleging certain acts of oppression and mismanagement by the respondents in the affairs of the four companies. These companies were the flagship companies of the Chand Group of Companies controlled by three brothers viz., Sri. Naresh Chand, Sri. Mahesh Chand and late Sri. Ramesh Chand, who held equal shareholding in the companies, firms and Associations of Persons of the group. The Chand Group of Companies belonged to the family of Professor Kishan Chand, who died on 13.05.1961. Sri. Mahesh Chand was his eldest son while Dr. Naresh Chand and late Sri. Ramesh Chand were the second and third sons respectively. Their shareholding was detailed in the Annexure to the Arbitration Agreement dated 03.01.1989. Sri. Ramesh Chand was the husband of the first appellant herein and the father of the second and third appellants. He died in a car crash on 18.12.1986. As certain disputes arose after his death, the appellants, being his legal heirs, sought winding up of M/s. Mahalaxmi Glass Works Private Limited, Mumbai, before the Bombay High Court. During the pendency thereof, Arbitration Agreement dated 03.01.1989 was entered into by and between the parties. Pursuant thereto, two Arbitrators - Mr. Justice P.N. Bhagwati and Mr. Justice V.D. Tulzapurkar, retired Judges of the Supreme Court, were asked to resolve the disputes.
8. In the Arbitration Agreement, the appellants were clubbed together as the ''Ramesh Chand Group''. The other family members were referred to as the ''Mahesh Chand Group'' and the ''Naresh Chand Group''. The relevant date as per the Agreement was 18.12.1986, the date of death of Sri. Ramesh Chand. The terms of the Agreement, to the extent relevant, are extracted hereunder:
WHEREAS:
(a) ...
(j) In order to preserve family peace and harmony and to resolve all disputes and differences between the three groups and to avoid future disputes the three groups have arrived at a family arrangement whereby the Ramesh Chand Group has agreed to go out from the aforesaid businesses and sever their connections with the aforesaid businesses, companies, firms and AOPs and WIG and to receive the value of their 1/3rd share in the said businesses including the said Hyderabad properties and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG.
(k) The said three groups are unable to agree upon the value of the 1/3rd share of the Ramesh Chand Group in the said businesses and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG and the mode, manner and time of payment thereof and whether the payment thereof is to be made with or without interest;
(l) In order to resolve the said disputes, differences the parties hereto are desirous of referring the said disputes and differences herein to the arbitration of Mr. Justice P.N. Bhagwati (Retired) and Mr. Justice V.D. Tulzapurkar (Retired).
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:
1. The parties hereto declare and confirm that on the demise of Ramesh Chand on 18th December 1986 the members of the Ramesh Chand Group are the only legal heirs and representatives of Ramesh Chand.
2. The parties hereto agree, declare and confirm that each of the Mahesh Chand Group, Dr. Naresh Chand Group and Ramesh Chand Group has a 1/3rd share and interest in the aforesaid businesses including the Hyderabad properties and that the Ramesh Chand Group has a 28% share in the business of WIG.
3. The Ramesh Chand Group agrees to go out from and/or sever their connection with the aforesaid businesses including the said Hyderabad properties and the said companies, firms, AOPs and WIG on being paid the value of their 1/3rd share in the said businesses including the said Hyderabad properties and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG as provided herein, with interest, if awarded.
4. The parties hereto agree to refer and hereby refer to the summary arbitration of Mr. Justice P.N. Bhagwati (Retired) and Mr. Justice V.D. Tulzapurkar (Retired), the following issues and all other connected and incidental issues:-
(a) The determination of the value of the 1/3rd share of the Ramesh Chand Group in the aforesaid businesses, including the Hyderabad properties and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG.
(b) The aforesaid valuation shall be made as on the Relevant Date. The parties shall be at liberty to urge their respective contentions in regard to the mode and manner of such valuation, including the question as to how, in what manner and to what extent the claims, liabilities and demands in respect of the aforesaid businesses including the Hyderabad properties pertaining to the period prior to the Relevant Date which may be crystallized or raised subsequent to the Relevant Date are to be valued.
(c) Whether any interest and if so, at what rate, may be awarded as from the Relevant Date and/or pendente lite and/or from the date of the award till realization.
(d) The determination of the mode, manner and time of payment of the aforesaid value of the 1/3rd share of the Ramesh Chand Group in the aforesaid businesses including the Hyderabad properties and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG, and interest, if any, as determined by the learned Arbitrators and by whom.
5. It is a term of this Reference that separation of the Ramesh Chand Group from the aforesaid companies, firms, and AOPs and WIG will become effective only on receipt in full of the value of its aforesaid 1/3rd share and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG and interest, if any, as may be determined and awarded by the Arbitrators.
6. Until the award is made a rule of the Court, and the amount, and interest if any, awarded to the Ramesh Chand Group in respect of its said 1/3rd share and the value of the interest to the extent of 28% of the Ramesh Chand Group in the business of WIG are paid to the Ramesh Chand Group in full:- (a) no assets of any of the companies being parties of the 4th to 13th part, or firms or AOPs, or WIG shall be sold, disposed of or encumbered in any manner whatsoever save and except in the ordinary course of business and/or for the purposes of making full payment of the amount and interest, if any, awarded; (b) no party hereto shall hereafter sell, dispose of, encumber or transfer in any manner any of the shares in the Companies being parties of the Fourth to the Thirteenth part herein or in WIG save and except amongst the members of the family of the group concerned which shall not be objected to by the other parties, but intimation of the same shall be given to the other parties and (c) no party hereto shall make any change in the constitution of any of the partnerships or Association of Persons set out in the First Schedule.
...
17. From December 1989 the parties of the 2nd to the 13th part or any one or more of them shall pay a sum of Rs. 50,000/- per month which sum shall be paid on or before the 15th of every month and the first of such payments shall be made on or before 15th December, 1989 and the subsequent payments on or before the 15th of every succeeding month thereafter to the Ramesh Chand Group in the manner more particularly set out hereinafter until the date of the final award. As from the date of the final award a sum of Rs. 50,000/- per month shall be paid on or before the 15th of every month to the Ramesh Chand Group until the value of the one-third share in the said business including the Hyderabad properties and the interest to the extent of 28% of the Ramesh Chand Group in the business of W.I.G. with interest thereon that may be awarded by the Arbitrators is paid in full and the question as to which of parties shall be liable to pay the same shall be decided by the Arbitrators. Provided that the Arbitrators shall decide as to whether and in what manner and to what extent the liability to pay Rs. 50,000/-, salary, perquisites and dividends shall be reduced on part payments from time to time towards the amount of the final award together with interest, if any, awarded. The said monthly sums of Rs. 50,000/- shall be paid to M/s. Bachubhai Munim & Co, on behalf of the Ramesh Chand Group. The said sum of Rs. 50,000/- shall belong to and be divided equally between Suruchi Chand, Saloni Chand and Shivani Chand.
18. The said sum of Rs. 9,75,000/- as also the amount of Rs. 50,000/- per month as also the amount of salaries, perquisites to Miss Saloni Chand and dividends on shares paid or made available to any members of the Ramesh Chand Group after the relevant date, shall be adjusted towards interest awarded, if any. If no interest is awarded then in respect of the value of their one-third share in the said businesses including the Hyderabad properties and their interest to the extent of 28% in the business of W.I.G. the Ramesh Chand Group will be entitled to retain the payments made under clauses 15, 16 and 17 herein and the aforesaid dividends in addition to the amount that may be determined by the Arbitrators to be the value thereof.
(emphasis added)
9. Pursuant to the above Arbitration Agreement, the learned Arbitrators entered upon the reference and pronounced four interim awards and a final award. Three of the interim awards were dated 02.04.1994 while the fourth interim award was dated 20.02.1996. The three interim awards dated 02.04.1994 dealt with disputes between the parties as to certain Hyderabad properties, viz., the Serilingampally property, the Shiv Bagh property and the Hyderguda property respectively. The fourth interim award dated 20.02.1996 also pertained to the lands situated in Sy. Nos. 18, 19, 56, 69, 77, 87, 92, 93, 94, 96, 97, 98 and 117/1 of Miyapur Village in Hyderabad, admeasuring Ac. 282.17 guntas, Ac. 252.00 guntas and Ac. 384.00 guntas respectively. The final award dated 14.09.1996 determined the separate compensation payable to the appellants at Rs. 4,51,50,000/-. The final award categorically confirmed the four interim awards published earlier. It may be noticed at this juncture that the compensation of Rs. 4,51,50,000/, after effecting a deduction of Rs. 9,00,000/- therefrom, was withdrawn by the appellants on 23.11.1998.
10. The final award dated 14.09.1996 was challenged by the appellants before the Bombay High Court, but their objections were rejected and the award was made a Rule of the Court by order dated 23.01.1998 passed in Arbitration Petition No. 110 of 1997. The appellants'' challenge to the said order in Appeal No. 322 of 1998 met with failure when a Division Bench of the Bombay High Court dismissed it by order dated 02.04.1998. Their further appeal before the Supreme Court of India in Civil Appeal No. 4060 of 1998 was disposed of by order dated 18.08.1998 with certain consensual modifications of the award - while agreeing with the Bombay High Court that the award did not call for any interference, the Supreme Court took note of the appellants'' grievance that they were denied interest for the pre-award period and as the counsel for the contesting parties agreed before it that the respondents would pay Rs. 5,00,000/- to each of the three appellants in lump sum by way of pre-award interest, the Supreme Court recorded the same and directed that the award should stand modified to that extent. Parties were also directed to bear their own costs. The appellants were permitted to withdraw the amounts deposited by the respondents before the Bombay High Court with accrued interest, if any. These were the limited changes made by the Supreme Court. In effect, the final award also attained finality.
11. The first interim award dated 02.04.1994 pertained to the Serilingampally property, being an extent of Ac. 50.00 guntas (excluding Ac. 10.00 guntas of acquired land) in Sy. Nos. 94, 95, 96, 97, 102, 103/1 and 2. The title documents pertaining to this property were to be handed over to the appellants'' counsel, M/s. Bachubhai Munim & Co., who were to hold and hand over the same to the purchaser of the property. The appellants were to sell the said property on an ''as is where is'' basis within three months. In default, the property was to be sold by auction. The net sale proceeds after deduction of costs, charges and expenses, were to be divided between the appellants, on the one hand, and respondents 1 to 17 and 19 to 21, on the other, in the ratio of 1:2 in full satisfaction of their respective claims in the said property.
12. The second interim award dated 02.04.1994, pertaining to the Shiv Bagh property, allocated an area admeasuring 22,934 square metres or thereabouts in the marked plan appended thereto to the appellants in full satisfaction of their share in the property. On such allocation, their holding in the Shiv Bagh property was marked as ''B'' and ''E'' in the plan in Annexure-I, while the remaining land shown in ''A'', ''C'' and ''D'' along with the temple and well were allotted to respondents 1 to 17 and 19 to 21 therein.
13. The third interim award dated 02.04.1994, pertaining to the Hyderguda property, reflects that an area admeasuring 1,266 square yards, representing one-third of the entire land, was allotted to the appellants in full satisfaction of their share in the property. The remaining portion of the property, along with the structures thereon, was allotted to respondents 1 to 17 and 19 to 21 therein in full satisfaction of their claims. These respondents were required to pay the appellants one-third of the value of the structures on the property, quantified at Rs. 2,00,000/-, within three months from the date of the said award.
14. The fourth interim award dated 20.02.1996 pertained to the lands situated at Miyapur Village in Hyderabad. An extent of Ac. 312.17 guntas approximately, referred to as the Baquer Khan land, was situated in Sy. Nos. 18, 19, 44, 45, 56, 69, 77, 87, 92, 93, 94, 95, 97, 98 and 117/1. One third share in the said lands in an ''as it is'' condition was to be allotted to the appellants. Taking note of the fact that part of the Baquer Khan land was sold by M/s. Commercial and Industrial Finance Private Limited, the appellants were allotted one-third undivided and undemarcated share out of the remaining Ac. 282.17 guntas. However, as Ac. 100.00 guntas forming part of Sy. No. 45 and being part of the Ac. 130.17 guntas, agreed to be sold under agreement of sale dated 08.05.1995, was also allotted to the appellants, subject to the terms and conditions of the said agreement of sale, certain terms and conditions were imposed. The remaining Ac. 182.00 guntas of land, which was not the subject matter of the agreement of sale dated 08.05.1995, was to be sold by the appellants as per the terms and conditions stipulated. One third of the sale proceeds from the sale of this land, after deduction of costs, charges and expenses, was to be paid to the appellants. The award also noted that Rs. 12,20,000/- was lying in deposit in the Bombay High Court, pursuant to the order dated 07.12.1995 in Arbitration Petition No. 212 of 1995, and one-third share thereof was permitted to be withdrawn by the appellants in respect of their undivided and undemarcated one-third share and the balance was to be withdrawn by M/s. Commercial and Industrial Finance Private Limited. As regards the extent of Ac. 636.00 guntas of the Jeelani Begum land in Miyapur, one-third undivided and undemarcated share was allotted to the appellants. This land was to be sold by them and one-third of the sale proceeds, after deduction of charges and expenses, was to be paid to them. This allotment was subject to liabilities of Rs. 3,00,000/- in respect of these lands, which were to be paid by the appellants to M/s. Commercial and Industrial Finance Private Limited as and when the lands were sold at a price exceeding Rs. 3,00,000/-. The award further stated that though it was styled as an ''Interim Award'', it was final qua the matters dealt with thereunder.
15. Para 12 of the final award dated 14.09.1996 reflects that the learned Arbitrators confirmed the interim awards passed earlier and the directions issued therein, which had been accepted by the parties. By way of the final award, the learned Arbitrators determined that for the one-third share of the Ramesh Chand Group in the businesses of M/s. Mahalaxmi Glass Works Private Limited, M/s. Kohinoor Glass Factory Private Limited and the 28% share in M/s. Western India Glass Works Limited, a sum of Rs. 4,50,00,000/- was to be paid to them by way of compensation for going out of the businesses of these companies, subject to deduction of Rs. 9,00,000/- paid to them pursuant to the earlier directions of the Arbitrators between 01.04.1994 and 31.12.1994.
16. It was made clear that this payment was towards compensation for preserving of the respective businesses of the companies; for buying out the appellants to avoid obstructions and hindrances likely to be caused by them; and for carrying on the businesses by the respondents smoothly, unhindered by the presence of any of the appellants who might cause difficulties. This amount was to be paid within twelve months from the date of the award. In the event of delay, it was to carry interest at the rate of 18% per annum from the date of expiry of the period of twelve months. Para-38 of the final award is of relevance and reads thus:
The Claimants are directed to hand over to Mahesh Chand Naresh Chand groups in equal shares Preference Shares held by the Claimants or any of them in MGW, KGF and WIG together with the relative transfer deeds duly signed in blank by the registered shareholders at nil value. Such handing over shall be against full payment to the Claimants of the amount hereby awarded.
17. As per para-42 of the final award, the respondents were required to continue to make monthly payments in terms of the Arbitration Agreement which included salary, perquisites, etc. until the expiration of the period of twelve months from the date of the award as on which date, the liability for payment of interest would commence in the case of non-payment of the compensation amount. Such payments were directed to be in addition to the amount of compensation awarded and were to be retained by the appellants without adjustment. Upon expiration of the period of twelve months from the date of the award or upon full payment of the compensation amount awarded, whichever was earlier, the appellants ceased to have entitlement to any sum by way of monthly payments, salaries, perquisites, from the respondents.
18. As regards the firm, M/s. Kemenar Enterprises, the learned Arbitrators determined its value at Rs. 4,50,000/- and Rs. 1,50,000/- thereof, representing one-third share, was directed to be paid to the appellants in addition to the compensation amount already referred to. Paras-45 and 46 of the final award are also relevant and read as under:
45. The shares held by the Claimants or any of them in Kaycee Investments Pvt. Ltd., Emcee Investments Pvt. Ltd., Smriti Trading & Investment Co. Pvt. Ltd., Raj Rajeshwari Investment & Trading Co. Pvt. Ltd., Morena Investment & Trading Co., Fontainbleau Investment & Trading Co., Commercial and Industrial Finance Private Ltd and New Delhi Glass Industries Private Ltd shall be handed over together with the relative transfer deeds duly signed in blank by the registered share holders to Mahesh Chand and Naresh Chand groups by the Claimants at nil value. Such handing over shall be against full payment of the amount of compensation awarded by us to the Claimants.
46. With regard to Enmcee Investments and Arcee Associates which are associations of persons of which the Claimants or any of them are members, they shall cease to be members of such AOPs on full payments being made to them under the Award. The right, title and interest of the Claimants or any of them in the said AOPs shall vest in Naresh Chand and Mahesh Chand groups in equal shares.
19. As per para-48 of the final award, upon full payment of the compensation amount and the other amounts awarded by the learned Arbitrators to the appellants, there would be complete severance of connection of the Ramesh Chand Group and the members of the family from the companies, firms, AOPs and M/s. Western India Glass Works Limited, so that the respondents could continue to carry on business without any claim, demand or interest or interference of any nature whatsoever. Para-49 reflects that the parties were directed by the learned Arbitrators to execute whatever deeds, documents and papers were necessary for effecting implementation of the directions given in the award.
20. As per the letter dated 19.12.1996 of Mr. Justice V.D. Tulzapurkar, three corrections were stated to have been made in paragraphs 38, 45 and 46 of the final award dated 14.09.1996. The learned Arbitrator stated that in para-38, in the third line, the word ''Preference'' before the word ''shares'' had been deleted. He further stated that it was made clear that handing over of the shares by the claimants to the Mahesh Chand and Naresh Chand Groups should include not merely preference shares but also equity shares in M/s. Mahalaxmi Glass Works Private Limited, M/s. Kohinoor Glass Factory Private Limited and M/s. Western India Glass Works Limited. As regards para-45, the learned Arbitrator stated that in the sixth line after ''Fontainbleau Investment & Trading Company'' the names of two other companies were inadvertently omitted and that Commercial and Industrial Finance Private Limited and New Delhi Glass Industries Private Limited had been added. In para-46, the learned Arbitrator stated that the name ''Encee'' had been corrected as ''Emcee''.
21. However, another letter dated 16.05.2011 was placed on record by Sri. Ravi S, learned senior counsel for the appellants, wherein Mr. Justice P.N. Bhagwati, the other learned Arbitrator, stated to the effect that the alterations made in paras 38, 45 and 46 were not initialed by him. More about this aspect later.
22. The prayers of the appellants herein before the CLB in the four Company Petitions were similar. They sought restoration of their shareholding and the shareholding of late Sri. Ramesh Chand in the four companies, cancellation of the consequential transfers/transmissions of shares, rectification of the shares register, investigation into the affairs of the companies and other incidental reliefs. The appellants'' case before the CLB was that they were yet to receive the entire amount awarded to them by the learned Arbitrators and therefore, they did not suffer complete severance in terms of para-48 of the final award, which reads:
48. We direct that upon full payment of the compensation amount and other amounts awarded by us to the Claimants, there will be complete severance of connection of Ramesh Chand group and the members of his family from the companies, firms, AOPs and WIG so that the Respondents can continue to carry on the businesses without any claim, demand or interest or interference of any nature whatsoever.
23. They therefore asserted that they continued as 1/3rd shareholders of all the group companies, firms, AOPs and M/s. Western India Glass Works Limited, till such time all the directions of the learned Arbitrators were fully complied with.
24. The respondents contested this claim of the appellants before the CLB. They pointed out that the awarded amount of Rs. 4,41,00,000/- (Rs. 4,50,00,000 - Rs. 9,00,000 paid earlier) and Rs. 1,50,000/- payable towards the share of the appellants in M/s. Kemenar Enterprises had already been deposited by them with the Bombay High Court and pursuant to the orders of the Supreme Court dated 18.08.1998 and the Bombay High Court dated 23.11.1998, the appellants had already withdrawn the said sums. They therefore relied upon para-48 of the final award in support of their contention that there was complete severance of the connection between the Ramesh Chand Group and the respondents and their companies etc. It was further contended that the conditions precedent for invoking Sections 397 and 398 of the Act of 1956 had not been satisfied. They pointed out that such a petition could be maintained only by a member of the company and Section 399 of the Act of 1956 stipulated the requirements which the member must fulfill prior to alleging oppression and mismanagement. They therefore asserted that the appellants had to establish by documentary evidence that they were eligible, as per Section 399 of the Act of 1956, to move an application under Sections 397 and 398 of the Act of 1956. They further asserted that the appellants were not shareholders at all, let alone minority shareholders. They pointed out that the appellants were only heirs of late Sri. Ramesh Chand who held shares jointly in the companies with his two brothers. They averred that the appellants never held any equity shares in any of the organizations of the Chand Group and that they only held preference shares in the companies, which had to be compulsorily redeemed and were so redeemed on 11.06.1998. As per the final award, there was no question of allotting equity shares to the appellants, who were paid off in terms thereof. Details were furnished as to the restructuring of the share capital of the companies pursuant to the final award.
25. The respondents referred to the earlier attempt by the appellants to intervene in the proceedings filed before the Bombay High Court for sanction of a scheme of arrangement between M/s. Kohinoor Glass Factory Private Limited and M/s. Mahalaxmi Glass Works Private Limited, which they unsuccessfully pursued upto the Supreme Court. They pointed out that the amounts, payable as per the final award dated 14.09.1996, had been withdrawn by the appellants and contended that it was not open to them to claim that they continued to be the shareholders of the Chand Group of Companies. The principle of res judicata was pressed into service for non-suiting the appellants.
26. The CLB took note of the fact that the main grievance of the appellants was with regard to the Miyapur lands, the subject matter of the fourth interim award dated 20.02.1996, and that their contention was that as this award had not been acted upon fully, the final award could not be given effect to. The CLB also took note of the fact that execution proceedings had been initiated in respect of the directions of the learned Arbitrators in the interim awards with regard to the Hyderabad properties. The contention of the appellants was that upon a harmonious construction of the Arbitration Agreement and the awards passed by the learned Arbitrators, the appellants were not to sever their connection with the companies, firms, AOPs and M/s. Western India Glass Works Limited till such time they were paid the value of their one-third share in the businesses, including the Hyderabad properties and the value of 28% in M/s. Western India Glass Works Limited. The appellants therefore contended that the transfer and allotment of shares after 18.12.1986 were illegal and liable to be cancelled by the CLB. The appellants sought restoration of their 1/3rd shareholding in the four companies and the other group companies and AOPs. In effect, their argument before the CLB was that the severance of the Ramesh Chand Group from the group companies and other businesses would take place only when all the five awards were complied with and fully satisfied.
27. Rebutting the contention that they had no locus standi as they were not existing shareholders of the companies, the appellants urged that the policy decision to cancel their shareholdings was contrary to the statutory requirements of the Act of 1956. They contended that they were the lawful owners of one-third of the equity share capital of the companies and could not be divested thereof without following the due procedure.
28. As regards the principle of res judicata, the appellants argued that the orders passed by the Courts vis-�-vis their intervening application had no relevance to the issue raised before the CLB which was that their shareholding was illegally taken away by the respondents. They pointed out that the jurisdiction of the Bombay High Court under Sections 391 and 394 of the Act of 1956 did not extend to touching upon this aspect of the matter which rested solely with the CLB. According to the appellants, they had deposited the original shares held by them in respect of the following companies along with transfer forms, duly signed:
(1) Mahalaxmi Glass Works (P) Ltd....7,863 Preference shares
(2) Kohinoor Glass Factory (P) Ltd. ...6,012 Preference shares
(3) Western India Glass Works (P) Ltd. ... 100 Equity shares
(4) Commercial and Industrial Finance (P) Ltd. ... 1,300 Equity shares
(5) New Delhi Glass Industry (P) Ltd. ... 1,904 Equity shares
29. Arguments advanced having been set out at length, the actual consideration by the CLB commences from para-41 of its order. The CLB observed that the petitioners in the Company Petitions, the appellants herein, were the legal heirs of late Sri. Ramesh Chand, who had held one-third share in the companies jointly with his brothers. However, as he did not hold equity shares in his individual name, the CLB concluded that on his demise the shares jointly held by the three brothers vested in the surviving co-owners. The appellants, despite being his legal heirs, were held disentitled to inherit any equity shares in these companies. The redemption of the preference shares held by the Ramesh Chand Group was to be compulsorily made by 15.06.1998 and they were, in fact, redeemed on 11.06.1998. The CLB opined that as the Ramesh Chand Group had been paid off in terms of the final award dated 14.09.1996; they could not seek issuance of any equity shares. The CLB referred to the Bombay High Court''s orders holding that the appellants did not continue to hold rights in the companies as they were not members of these companies and held that they had no right and interest as members, whereby they could complain of lack of probity or unfair conduct. Sections 397 and 398 of the Act of 1956 were held to be inapplicable to them.
30. The CLB found that late Sri. Ramesh Chand had held 7,863 preference shares in his individual name, 470 preference shares in a joint holding and 334 joint equity shareholdings, for which consideration had been paid in accordance with the award. The CLB also held that it lacked jurisdiction in the matter under Sections 397 and 398 owing to the Arbitration Agreement between the parties and the awards passed pursuant thereto. The CLB observed that eight years had elapsed since the alleged acts which laid foundation for the applications under Sections 397 and 398 of the Act of 1956 and that it could not assume jurisdiction in the matter or accept the contention of the appellants that the awards were inter-linked and that they were to be paid the value of one-third share in the said businesses, including the Hyderabad properties and the value of 28% in M/s. Western India Glass Works Limited, before they lost their status in the companies. The CLB held against the appellants on the ground of inordinate delay and laches. The CLB concluded that it could not undo the effects of the arbitration and the consequent awards, which were confirmed by the Supreme Court. The CLB also held that the appellants were seeking review and execution of the awards, which was not permissible as the same was not within its competence. The petitions were accordingly dismissed as not maintainable.
31. Perusal of the pleadings in C.P. No. 84 of 2006 reflects that the Prothonotary and Senior Master, Bombay High Court, was stated to have passed order dated 01.12.1999, directing the appellants to deposit their shares in the group companies without prejudice to their rights and also execute all deeds and documents to give effect to the award. As per para 10.2 of the petition, the appellants deposited the shares as directed by the order dated 01.12.1999. The petition further reflects that though the appellants received a sum of Rs. 4,41,00,000/-, the sale of properties at Hyderabad was being continuously delayed and obstructed by the respondents. According to the appellants, late Sri. Ramesh Chand held 360 equity shares representing one third of the entire equity share capital of the company. The original certificates in respect of the shares were stated to have been deposited with the Court Receiver, Bombay High Court, under the directions of the said Court. A copy of the receipt from the Court Receiver''s Office was stated to have been attached to the petition as Annexure-XI. As regards the 9,000 preference shares held by the Ramesh Chand Group, the appellants claimed that they had deposited the same pursuant to the order dated 01.12.1999 of the Prothonotary and Senior Master, Bombay High Court. These shares, according to the appellants, were still lying with the office of the Prothonotary and Senior Master, Bombay High Court, even till 25.08.2006 and had not been released. According to the appellants, they were entitled to seek rectification of the shareholders'' register u/s 111A of the Act of 1956 maintained by the company as the 360 equity shares held by late Sri. Ramesh Chand should have been transferred in the names of his legal heirs upon his death. However, the company had removed the name of late Sri. Ramesh Chand from the register of shareholders and had not taken steps to include the names of his legal heirs, viz., the appellants. The shares of the appellants were transferred without their consent, despite a specific stipulation in the award that deeds and documents would have to be executed for such transfer. Several acts of mismanagement and oppression were alleged and the prayers, referred to supra, were projected.
32. Sri. Ravi S, learned senior counsel appearing for the appellants, contended that the mandatory procedure prescribed by Section 108 of the Act of 1956 had not been followed in so far as the transfer of equity shares belonging to the Ramesh Chand Group was concerned. He pointed out that the award, as originally framed, did not mention the words ''equity shares'' and mentioned only ''preference shares'', but the word ''preference'' was thereafter cut out. He pointed out that there was a disagreement between the two learned Arbitrators as to the amendments made in the award. Assuming without admitting that the award covered equity shares, the learned senior counsel pointed out that such transfer had to be made strictly in accordance with the legal procedure and in the event the appellants failed to execute transfer documents as required by the final award dated 14.09.1996, the remedy for the respondents was to seek execution of such transfer documents through the process of law and not to act unilaterally. Learned senior counsel pointed out that the shares of the company standing in the name of Sri. Ramesh Chand had been cancelled, which involved reduction of capital and it was not the case of the companies or the existing shareholders that any transfer deeds were executed. He therefore contended that the equity shareholding of the appellants did not stand divested.
33. According to the learned senior counsel, in so far as M/s. Kohinoor Glass Factory Private Limited is concerned, late Sri. Ramesh Chand had held 360 equity shares while in M/s. Commercial and Industrial Finance Private Limited, he held 1,300 equity shares. Reference was made to the counter filed by the respondents before the CLB, wherein it was stated that instead of handing over the share certificates with the duly signed share transfer forms, the appellants were dilly dallying, hence the companies in question took a policy decision to cancel the shares which stood in the names of the members of the Ramesh Chand Group and issued duplicate equity shares with the same distinctive numbers while the preference share were redeemed in accordance with law.
34. Learned senior counsel, pointed out that the order of the CLB under challenge did not even refer to the arguments advanced before it with regard to the violation of Sections 108, 111 and 111A of the Act of 1956. He placed reliance on the judgment of the Supreme Court in
35. Per contra, Sri. E. Manohar, learned senior counsel appearing for the respondents, pointed out that the Bombay High Court had already confirmed the common order, which is presently under challenge before this Court, in the appeals filed by the appellants in the context of M/s. Mahalaxmi Glass Works Private Limited and M/s. Western India Glass Works Limited. He therefore contended that it was not open to this Court to take a different view. He further pointed out that the Bombay High Court had, time and again, held that the appellants had no locus to maintain applications against the companies as they had no shareholding in these companies. He therefore asserted that the question of invoking Sections 108 and 111 of the Act of 1956 did not arise at all. Learned senior counsel also adverted to the fact that the sum of Rs. 4,42,50,000/- directed to be paid to the appellants as per the final award dated 14.09.1996 had been deposited by his clients on 12.09.1997 and had been withdrawn by the appellants herein pursuant to the directions dated 23.11.1998 passed by the Bombay High Court. He pointed out that the shares required to be deposited by the appellants were in fact deposited by them with the Bombay High Court even as per their own case. He further asserted that no ''question of law'' as required by Section 10F of the Act of 1956 arose out of the issues raised by the appellants.
36. In his reply, Sri. Ravi S, learned senior counsel, pointed out that though an application under Sections 397 and 398 of the Act of 1956 could only be maintained by members, no such requirement was there u/s 111 of the Act of 1956. He reiterated that the procedure u/s 108 of the Act of 1956 was mandatory and no violence could be done to the statutory procedure basing on the award. The award by itself, according to the learned senior counsel, did not contemplate automatic ouster of the appellants from the shareholding of the companies. That being so, if necessary steps that were to be taken by the appellants were not so taken, the only remedy was to seek execution of the award. Learned senior counsel pointed out that the award itself made it clear that the interim awards and the directions given therein with regard to the Hyderabad properties were confirmed and therefore, the failure on the part of the respondents in complying with those awards resulted in the continuance of the appellants'' status and there was no severance as contemplated by the award. Learned senior counsel also pointed out that substantial questions of law were raised in the Company Appeals. He asserted that the CLB had committed a patent error of jurisdiction in not dealing with the issues raised before it.
37. The appeals filed by the appellants before the Bombay High Court, against the very same common order which is the subject matter of these appeals, have already been dismissed. The common order dated 22.12.2011 passed by the Bombay High Court in Company Appeal Nos. 43 and 44 of 2009 along with the Company Petitions filed under Sections 391 to 394 of the Act of 1956 is placed on record. The Company Petitions were filed for sanction of a scheme of amalgamation between M/s. Kaycee Investments Pvt. Ltd., M/s. Smriti Trading and Investment Company Pvt. Ltd., M/s. Western India Glass Works Ltd. and an undertaking of M/s. Kohinoor Glass Factory Pvt. Ltd., on the one hand, and M/s. Mahalaxmi Glass Works Pvt. Ltd, on the other. The first appellant herein filed an objection to the proposed scheme of amalgamation stating that she was a shareholder of the transferor company. Referring to the earlier litigation between the parties, a learned Judge of the Bombay High Court rejected her contention that severance of status had not taken place as there was no transfer of the shareholding of the Ramesh Chand Group to the other two groups. In effect, the argument that is being advanced before this Court was also urged before that Court and rejected.
38. Reference was made by the Bombay High Court to its earlier order dated 08.04.2000 in the intervening application filed by the appellants objecting to the scheme of arrangement between M/s. Kohinoor Glass Factory Private Limited and M/s. Mahalaxmi Glass Works Private Limited. It was pointed out that the said application was also rejected holding that the appellants had failed to spell out any right or interest in M/s. Mahalaxmi Glass Works Private Limited. The appellants'' challenge to this order failed throughout upto the Supreme Court. The learned Judge of the Bombay High Court therefore observed that the self-same contentions were being raised before him which had already been negatived in the earlier round of litigation. The learned Judge observed that it would not be proper on his part to brush aside the earlier orders on the specious plea that the orders were passed on the basis of incomplete facts. The learned Judge observed that the argument that compliance with the obligations under the awards remained incomplete was urged earlier and was again being urged by seeking to distinguish between the orders passed earlier on the ground that the intervener had sufficient material to establish that she continued to be a shareholder of the company and opined that nothing was pointed out to enable him to hold that the intervener continued as a shareholder of the company. The learned Judge observed that it would be open to the parties to raise appropriate pleas in the pending Execution Petitions arising out of the interim awards relating to the Hyderabad properties.
39. The learned Judge held that severance had already taken place and that the intervener could not be permitted to go beyond the original Agreement. Referring to the disagreement between the two learned Arbitrators as to the corrections made in the award, the learned Judge stated that it was too late in the day for the appellants to urge that the corrections in the award were not made as stated in the letter dated 14.05.1996 of Mr. Justice V.D. Tulzapurkar. It was pointed out that this letter had been marked to the counsel appearing for the appellants and was referred to by both the parties during the course of the appellants'' challenge to the final award. As regards the letter 16.05.2011 addressed by the other learned Arbitrator, Mr. Justice P.N. Bhagwati, the learned Judge stated that the matter was better left without saying anything more. While approving and sanctioning the scheme of amalgamation, the learned Judge dismissed the Company Appeals.
40. The question, however, is whether this determination by the Bombay High Court would be binding on this Court. Sri. E. Manohar, learned senior counsel, would contend so while Sri. Ravi S, learned senior counsel, would argue otherwise. Sri. E. Manohar, learned senior counsel, relied upon the judgment of the Supreme Court in
41. It is however to be noticed that the four suits in
42. Significant to note, the Supreme Court refused to transfer these appeals to the Bombay High Court and the appeals before the said Court to this Court. Each High Court was therefore to deal with the appeals pending before it individually. That being so, the order of the Bombay High Court would only have persuasive value and this Court would not be bound by the findings recorded therein. Further, this Court is informed that the said order has not attained finality and is under challenge before the Supreme Court. Though Sri. Ravi S, learned senior counsel, assailed the order of the Bombay High Court relying upon the decisions in
43. The questions of law framed in these Company Appeals revolve around the interpretation of the awards passed by the learned Arbitrators and the provisions of the Act of 1956. Well settled is the proposition that construction of documents which form the basis of property claims raises a substantial question of law. (See
44. That being said, this Court must necessarily remember while considering these appeals that certain issues arising between the parties have already been traversed right upto the Supreme Court and the findings recorded thereon cannot be undone or wished away at this stage. The principle of res judicata would bar the parties from harping on the issues which stood finally settled in the earlier litigation. Significantly, all the awards passed by the learned Arbitrators have attained finality. Only the final award dated 14.09.1996 was subjected to challenge by the appellants and was ultimately confirmed by the Supreme Court with minor modifications, which are of no consequence presently. It however appears that the interim awards with regard to the Hyderabad properties have not been fully implemented and the documents filed by the appellants prima facie demonstrate that the respondents seem to be alienating such properties in violation of the said awards and the Arbitration Agreement.
45. Perusal of the final award reflects that one of the specific terms of the reference was as to the effecting of severance of the connection of the Ramesh Chand Group from the group companies, firms, AOPs and WIG, upon payment of the full value, as determined. The thrust of the final award was as to the determination of the value of the 1/3rd share of the Ramesh Chand Group in the businesses of M/s. Mahalaxmi Glass Works Private Limited, M/s. Kohinoor Glass Factory Private Limited and the 28% share in M/s. Western India Glass Works Limited. This share in the three companies was determined at Rs. 4,50,00,000/- which was to be paid to the Ramesh Chand Group for going out of the businesses of the said three companies, subject to deduction of Rs. 9,00,000/- already paid to them. This sum of Rs. 4,50,00,000/- was referred to as the ''compensation amount'' and was to be paid by M/s. Mahalaxmi Glass Works Private Limited and M/s. Kohinoor Glass Factory Private Limited.
46. In so far as M/s. Kemenar Enterprises, a partnership firm, was concerned, para-44 of the final award reflects that upon payment of Rs. 1,50,000/- to the Ramesh Chand Group, being 1/3rd of the value of the said firm, the partnership firm was to stand dissolved. Para-45 of the final award dealt with the handing over of shares by the Ramesh Chand Group in various group companies upon full payment of the compensation amount awarded to them by the learned Arbitrators. Para 46 stipulated that upon full payment being made to them under the award, the claimants ceased to be members in Emcee Investments and Arcee Associates, Associations of Persons, and their right, title and interest would vest in the Naresh Chand and Mahesh Chand Groups in equal shares. Para-48 which is crucial for the purposes of this case and has already been extracted supra, puts it beyond doubt that it was only upon full payment of the compensation amount and other amounts awarded by the learned Arbitrators that there would be complete severance of connection of the Ramesh Chand Group and the members of his family from the companies, firms, AOPs and WIG.
47. The issue presently is whether the reference to ''other amounts awarded'' in para-48 of the final award would take into its ambit the amounts payable to the appellants under the interim awards also. The learned Arbitrators specifically stated that the interim awards passed by them earlier as well as the directions issued therein, which had been accepted by the parties, stood confirmed. Significantly, the learned Arbitrators did not stipulate or indicate, be it by implication or otherwise, that the ''other amounts'' awarded by them should mean only those amounts awarded through the final award. On the other hand, the learned Arbitrators made it clear when it came to the shares of the Ramesh Chand Group in M/s. Mahalaxmi Glass Works Private Limited, M/s. Kohinoor Glass Factory Private Limited and M/s. Western India Glass Works Limited, that the same along with the relating transfer deeds, duly signed by the registered shareholders, were to be handed over by the claimants, the appellants herein, against full payment to them of the amount awarded by way of the final award. This is clear from para 38 of the final award which states thus: ''...such handing over shall be against full payment to the claimants of the amount hereby awarded'' (emphasis added).
48. It is therefore clear that the learned Arbitrators were conscious of the distinction between the amount awarded under the final award as compared to the amounts due and payable under the earlier interim awards. Therefore, the sentence ''...we direct that upon full payment of the compensation and the other amounts awarded by us to the claimants there will be complete severance of connection of Ramesh Chand Group ...'' in para-48 of the final award must be understood to mean that the learned Arbitrators did not merely contemplate payment of the amount awarded by them under the final award but also the amounts awarded by them prior thereto under the interim awards.
49. In consequence, though the appellants were required to handover shares in the named three companies upon payment of the compensation amount payable under the final award alone and M/s. Kemenar Enterprises, the firm, was to be dissolved upon payment of the amounts due under the final award, there was to be no severance of their connection with the group companies, firms, AOPs and WIG until all the amounts awarded to them, be it under the final award or the interim awards, were fully paid.
50. This Court is fortified in taking this view by the observations made by the Bombay High Court while confirming the final award. One of the grievances of the appellants in Arbitration Petition No. 110 of 1997 filed against the final award was as to the dissolution of M/s. Kemenar Enterprises upon payment of their 1/3rd share of its value on the ground that their separation from the companies, firms, AOPs and WIG was to be effective only upon receipt in full of the value of their 1/3rd share in all the businesses and the Hyderabad properties. Dealing with this aspect, the learned Judge of the Bombay High Court pointed out that at the end of para 45 of the award, it was clearly stated that handing over of the shares held by the claimants in Kaycee Investments Private Limited etc. to the Mahesh Chand and Naresh Chand Groups was to be against full payment of the amount of compensation awarded to them by the Arbitrators. The learned Judge observed that dissolution of M/s. Kemenar Enterprises on payment of Rs. 1,50,000/- to the claimants would not bring to an end their right in M/s. Kemenar Enterprises and that only the payment in full of the entire amount awarded to them would bring to an end the share of the Ramesh Chand Group in the companies, firms etc. The learned judge therefore concluded that the mere direction to dissolve M/s. Kemenar Enterprises on payment of Rs. 1,50,000/- would not have the effect of extinguishing the right of the claimants in the said dissolved firm and therefore, the contention that paras 42 and 44 of the award were contrary to clauses 5 and 17 of the Arbitration Agreement was incorrect.
51. In Appeal No. 322 of 1998 filed against this order, insofar as the issue of severance is concerned, the Division Bench affirmed that the learned Judge had rightly held that mere dissolution of the firm on payment of Rs. 1,50,000/- would not bring to an end the rights of the appellants in M/s. Kemenar Enterprises and that their rights were to come to an end only upon payment of the full amount under the award. Pertinent to note, as the interim awards were confirmed by the final award, they became part and parcel thereof. The use of the word ''award'' by the Division Bench is therefore to be understood in this perspective. This judgment was confirmed by the Supreme Court in Civil Appeal No. 4060 of 1998 with minor modifications. What was stated by the Bombay High Court in the context of M/s. Kemenar Enterprises, a dissolved firm, would hold good with equal vigour in the case of the respondent companies. Unfortunately, the Bombay High Court lost sight of these observations and the consequence thereof, while dealing with appellants'' claims thereafter. This Court therefore finds merit in the contention of Sri. Ravi S, learned senior counsel, that there was no severance of the connection between the appellants and the four companies which were the subject matter of the Company Petitions before the CLB.
52. Though there is a dispute as to whether the appellants had deposited all their shares with the Bombay High Court along with the necessary transfer deeds, the fact remains that para 49 of the final award stipulated that the parties were to execute the deeds, documents and papers necessary for effective implementation of the directions given in the final award. Thus, the final award did not envisage automatic ouster of the appellants from the companies nor did it contemplate any transfer of shares of the Ramesh Chand Group in violation of the statutory procedure. Section 108 of the Act of 1956 stipulates the procedure to be followed while effecting transfer of shares and a proper instrument of transfer duly stamped and executed by or on behalf of the transferor(s) necessarily had to be delivered to the company along with the shares certificate/letter of allotment of shares for registering such a transfer of shares.
53. As pointed out by the Supreme Court in
54. In the present case, the respondent companies seem to have issued duplicate shares and cancelled existing shares without following the statutory procedure. There was no instrument of transfer whereby the respondent companies could have issued the so-called duplicate shares in the names of persons other than the recognized shareholders, the Ramesh Chand Group. The Arbitration Agreement itself evidenced and acknowledged the shareholding of the Ramesh Chand Group in various companies and other commercial entities of the Chand Group of Companies. It is therefore too late in the day for the respondents to contend that the appellants did not hold shares and were therefore not entitled to assert rights of shareholders. The entire exercise before the learned Arbitrators was as to the valuation and determination of the 1/3rd share of the appellants, representing the Ramesh Chand Group, in the shareholding of various businesses and companies of the Chand Group of Companies. The respondents cannot therefore seek to re-open this issue by baldly stating that the appellants held no shares in the companies in their individual names.
55. The issue of the respondent companies not adhering to the statutory procedure while effecting restructuring of their share capital was not even dealt with by the CLB in its common order dated 29.10.2007. It is no doubt true that the appellants, having suffered a final order before the Supreme Court confirming the final award dated 14.09.1996, cannot seek to indirectly open any of the issues settled by way of the said award. However, that was not the endeavour of the appellants. On the other hand, they were asserting rights as per the final award and not in contradiction thereto. Once they were able to establish that there was no complete severance of their connection with the respondent companies, it was necessary for the CLB to ascertain their status in the context of this claim and then verify whether they fulfilled the requirements of Section 399 of the Act of 1956, whereby they could maintain applications under Sections 397 and 398 of the said Act. Further, as the respondent companies had, prima facie, not adhered to the procedure prescribed under the Act of 1956, the issue as to the rectification of the register on the basis of such transfers needed to be looked into. The CLB completely ignored the challenge levelled by the appellants in this regard.
56. The issue of alterations in the final award as to the deletion of the word ''preference'' before the word ''shares'' need not trouble this Court. Irrespective of the liability of the appellants to deposit their preference shares or their equity shares or both, the necessity to comply with the procedure prescribed by the Act of 1956 remained immutable. The finding of the CLB that upon the death of Sri. Ramesh Chand his shareholding did not devolve upon the appellants but upon the co-owners cannot be sustained. It is no doubt true that in
57. It is therefore too late in the day to apply the aforestated legal proposition for shutting out the appellants by asserting that they were not entitled to inherit the shareholding of late Sri. Ramesh Chand. The acts and actions of the parties all through speak to the contrary. This issue therefore stood settled and it was not open to the CLB to nullify the arbitration proceedings by holding that the shares of late Sri. Ramesh Chand in the group companies devolved upon his brothers as joint owners and not upon the appellants as his legal heirs. In that capacity, the appellants had sought winding up of M/s. Mahalaxmi Glass Works Private Limited which, in turn, led to the Arbitration Agreement. The arbitration proceedings were initiated thereupon in recognition of the fact that the appellants, being the legal heirs of late Sri. Ramesh Chand, were entitled to his 1/3rd share in the businesses and the Hyderabad properties of the Chand Group. In utter disregard of these admitted factual aspects, the CLB baldly concluded that the appellants did not inherit any shareholding in the companies. This finding therefore cannot be countenanced.
58. The CLB committed an error in limiting its attention only to the final award dated 14.09.1996, ignoring the fact that the said award confirmed the earlier interim awards passed by the learned Arbitrators. The CLB also ignored para-48 of the final award, which not only referred to the compensation amount awarded under the final award but also to the other amounts awarded by the learned Arbitrators.
59. The CLB also erred in holding against the appellants on the ground of delay. The reasoning of the CLB in this regard does not commend acceptance. There is no indication of when the appellants came to know about the rectification of the register and the transfer of their shares in violation of Section 108 of the Act of 1956. Further, such illegal transfers in violation of the mandatory statutory procedure were held to be void by the Supreme Court in
60. The CLB, having held that the appellants had no locus or qualification u/s 399 of the Act of 1956, observed:
...The points of alleged non-compliance in the fourth award or in any award for that matter do not empower the Company Law Board to undo the effects of Arbitration/or get the compliance made. Only the competent court can do that. Besides, there is uncondonable delay and laches in the matter. The petitioners cannot approbate and reprobate. They cannot take advantage and benefits of Awards which merged into the judgment and orders of High Court and Supreme Court, and then challenge the Awards, directly or indirectly. ... The petitioners are seeking a review or enforcement or execution of the Awards which is not permissible, it is not within the competence of the Company Law Board.
61. Holding so, the CLB dismissed the petitions as not maintainable. The aforestated observations however reflect that the CLB completely misdirected itself. The case of the appellants before the CLB being that they would not suffer complete severance of connection with the companies until and unless they were paid the full compensation amount and other amounts awarded to them, by virtue of the specific direction of the learned Arbitrators, their entitlement to be treated as members/shareholders of the companies had to be verified into for the purposes of ascertaining their locus u/s 399 of the Act of 1956 so as to maintain applications under Sections 397 and 398 thereof. Further, the appellants had also raised an issue in the context of para-49 of the final award which required statutory compliance as to the transfer of their shares for effective implementation of the directions in the final award. Their complaint that the said statutory procedure was not adhered to by the companies while effecting restructuring of their share capital by cancellation of their shareholding and issuance of duplicate shares in the names of others, fell clearly within the jurisdiction of the CLB. These were matters which flowed out of the awards and did not involve review, enforcement or execution of the awards. The CLB lost sight of this aspect.
62. No doubt, when M/s. Kohinoor Glass Factory Private Limited and M/s. Mahalaxmi Glass Works Private Limited proposed to enter into a scheme of arrangement and sought the sanction of the Bombay High Court under the relevant provisions of the Act of 1956, the appellants filed Company Application No. 493 of 2000 as interveners, objecting thereto and by order dated 08.11.2000, the learned Company Judge dismissed their intervening application. The learned Company Judge was of the opinion that the final award had been acted upon as the interveners had received the sums of Rs. 4.41.Crores and Rs. 1.5 Lakhs thereunder and it was they who had not cared to co-operate with regard to their shareholdings; not cared to sign necessary transfer forms in regard to other shares; and were on the other hand, trying to put a spoke in the scheme of arrangement without submitting any proof of their alleged right, title and interest in the shareholding. The learned Judge accordingly held that they had failed to make out a case or spell out any right or interest in the applicant company -M/s. Mahalaxmi Glass Works Private Limited.
63. This order was subjected to appeal in Appeal No. 104 of 2001 before the Division Bench of the Bombay High Court. By order dated 23.04.2001, the Division Bench dismissed the appeal. Perusal of the said order shows that no material was placed on record by the appellants as to why the scheme was bad or should not be approved. The Bench further observed that it was not satisfied that the appellants continued to hold rights in the companies as shareholders nor was it satisfied that there was any bonafide objection to the scheme. The Bench left it open to the appellants to execute the arbitration award in whatever manner possible and dismissed the appeal. Review Petition No. 34 of 2002 filed by the appellants was also rejected by a Division Bench of the Bombay High Court on 07.10.2003. Perusal of this order reflects that the Division Bench found no substance in the review petition. Thereupon, the order dated 23.04.2001 in the appeal and the order dated 07.10.2003 passed in the review petition were subjected to challenge before the Supreme Court in Petition(s) for Special Leave to Appeal (Civil) C.C. No. 1906 of 2004. By order dated 22.03.2004, the Supreme Court condoned the delay but dismissed the Special Leave Petition.
64. It is however to be noticed that the sums of Rs. 4.41 Crores and Rs. 1.5 Lakhs were paid to the appellants in pursuance of the final award but the amounts payable to them under the interim awards still remain unpaid. The consequence of this is that there was no complete severance of connection of the appellants with the respondent companies. This aspect was however not taken note of by the learned Company Judge. Though the Division Bench seems to have entertained a doubt in this regard the matter was decided on the ground that no valid objection was established by the interveners in so far as the scheme was concerned. Further, validity of the divesting of the shareholding of the appellants in the companies was not in issue in the said proceedings. The confirmation by the Supreme Court of the orders of the Bombay High Court passed in the context of the scheme would therefore have no impact on the subject issue of severance of the appellants connection with the respondent companies in terms of the arbitration awards. More so, as the Supreme Court itself had affirmed the orders of the Bombay High Court confirming the final award recording that the appellants'' rights would not stand extinguished until full payment was made to them.
65. Again in Company Appeal Nos. 43 and 44 of 2009 arising out of the subject common order dated 29.10.2007, the Bombay High Court took note of the fact that the four interim awards and the final award had merged into one and that the first appellant had filed execution proceedings insofar as the Miyapur and Serilingampally properties were concerned. The first appellant also pointed out before the Bombay High Court that the respondents were resorting to sale of properties at Serilingampally in violation of the interim award. Referring to the earlier intervening application and the findings recorded therein, the Bombay High Court held that the self-same contentions were being raised before it again and that it would not be proper for it to ignore and brush aside the orders passed earlier on the specious plea that those orders were passed on incomplete facts. The Bombay High Court opined that when execution proceedings were admittedly pending, it would be open to the intervener to raise appropriate pleas before the executing court which could consider them. The Bombay High Court further opined that it could not be called upon to consider the challenge to the award or the issue of its enforceability and executability. The only mode of enforcement was held to be by approaching the competent executing court. On facts, the Bombay High Court was also of the opinion that no ground was made out to interfere with the scheme of amalgamation. The Bombay High Court therefore dismissed the company appeals on the ground that the order of the CLB could not be said to be perverse.
66. Having acknowledged that the interim awards had merged with the final award but were not implemented, the Bombay High Court failed to give effect to the inevitable consequence thereof in terms of the observations made by it in the context of M/s. Kemenar Enterprises while confirming the final award. It is no doubt true that the appellants'' execution proceedings are pending before the Civil Courts in Ranga Reddy District. Execution Petition No. 24 of 2005 pertaining to the Miyapur lands (Baquer Khan and Jeelani Begum lands) is pending before the Principal District Judge, Ranga Reddy District. E.P. No. 25 of 2005 is also pending before the same Court and pertains to the execution of the interim award dated 02.04.1994 relating to the Serilingampally lands. However, the pendency of these execution petitions merely demonstrates and supports their contention that the interim awards have not been fully complied with. Pertinent to note, the Mahesh Chand and the Naresh Chand Groups are contesting the very maintainability of these execution petitions. It would therefore not be open to them to disown their liability under the interim awards, on the one hand, by asserting that the execution proceedings instituted in connection therewith are not maintainable and in the same breath contend that there was severance of the connection of the Ramesh Chand Group from the companies though they did not pay the amounts due under the said interim awards!
67. In this regard, it may also be noticed that the Arbitration Agreement specifically made it a term of the reference that separation of the Ramesh Chand Group from the companies would become effective only on receipt of the full value of its 1/3rd share in the named businesses and the Hyderabad properties, as determined and awarded by the learned Arbitrators. The learned Arbitrators did not state in the final award that they held to the contrary insofar as this term of reference was concerned. On the other hand, their reiteration in the final award that one of the terms of reference, as made out by the Naresh Chand Group, was as to the effecting of severance of the connection of the Ramesh Chand Group from the several companies, firms, AOPs and WIG upon payment of the full value as may be determined, clearly indicates that the learned Arbitrators were conscious of when the severance of the connection was to be effected. This aspect was further affirmed by para 48 of the final award whereby the learned Arbitrators directed that only upon full payment of the compensation amount and other amounts awarded by them to the claimants, there would be complete severance of the connection of the Ramesh Chand Group and the members of his family from the companies, firms, AOPs and WIG. Once this condition was not complied with, the invariable consequence was that there was no complete severance of status and in effect, the appellants retained an interest in the companies.
68. The divesting of the shareholding of the appellants by the respondents in these companies unilaterally on the basis of a so called policy decision and in violation of the statutory procedures and the directions of the learned Arbitrators; the impact thereof upon their status as members of the companies in the backdrop of the awards; and consequently, its effect on their locus to maintain applications alleging oppression and mismanagement, were therefore issues that needed to be considered independently by the CLB. Losing sight of its jurisdiction as to these issues, the CLB assumed that the appellants were seeking review or execution of the awards. That was not the import or object of the petitions filed before the CLB.
69. The common order dated 29.10.2007 passed by the Principal Bench of the Company Law Board at New Delhi, insofar as it pertains to Company Petition Nos. 84 of 2006 and 38 of 2007, is accordingly set aside and the matters are remitted to it for consideration afresh on the various issues which have been set out supra. The CLB shall decide the matters independently but taking heed of the observations made hereinabove on the issues that it specifically needs to address. As these petitions date back to the year 2006, it would be appropriate and in the interest of justice, that the CLB bestow its attention to these cases on priority basis and dispose of the same expeditiously and preferably, within four months from the date of receipt of a copy of this order.
70. The Company Appeals are accordingly allowed. Pending the disposal of the Company Petitions by the CLB, the interim order granted by this Court on 25.11.2008 shall continue to hold the field and the parties shall maintain status quo with regard to the Hyderabad properties and not take any steps to alienate or alter the nature or characteristics thereof. As the matters are remanded, no orders need be passed at this stage in Company Application Nos. 431, 432, 433, 434, 435, 436, 437, 479 of 2008 and 365 of 2012 in Company Appeal No. 9 of 2008 and Company Application Nos. 74, 75, 76, 77, 78, 79 of 2009 and 364 of 2012 in Company Appeal No. 5 of 2009, which shall consequently stand closed. Company Application No. 481 of 2008 in Company Appeal No. 5 of 2009 is allowed. No order as to costs.
