L.MOHAPATRA, J. COPET 25 OF 2010 (Decided on 24.12.2010) SURENDRA KUMAR DALMIA …….. Appellant. .Vrs. SURYAA SPONGE IRON LTD. & ORS. ………Respondents. A. COMPANIES ACT, 1956 (ACT NO.1 OF 1956)-S.110. (B) CIVIL PROCEDURE CODE, 1908 (ACT NO.5 OF 1908) – S.13, 33, ORDER 6, RULE 4, r/w S.17 CONTRACT ACT,1872 . For Appellant - M/s. S.K.Kaour, S.P.Sarangi, B.C.Mohanty, P.P.Mohanty D.K.Das, P.K.Dash, R.Tripathy, A.K.Kanungo & B.P.Das. For Respondents - M/s. R.K.Rath, Jishnu Saha, S.K.Pattnaik, G.M.Rath, M.K.Mishra, S.S.Padhy, Biraja Prasad Das & A.Ekka (for Respondent No.1 1 to 7 and 10) M/s. Budhadev Routray, H.M.Dhal, B.Mohanty, A.Patnaik, M.S.Rizvi & Biplab Mohanty (for Respondent Nos.8 & 9) L.MOHAPATRA, J. This Company Petition/Appeal is directed against the order dated 6.10.2010 passed by the Company Law Board, Kolkata Bench in Company Petition No.767 of 2010. 2. The appellant was the petitioner before the Company Law Board and the respondents were the opposite parties. The appellant has filed the aforesaid Company Petition against the 1st respondent Company and others under Sections 111, 111A, 397, 398, 402 & 634A of the Companies Act for framing a scheme for management of the Company, to supersede the Board of Directors by a Committee of Management to be constituted by the Board, to record the name of the appellant as shareholder of 11,75,000 equity shares bearing distinctive numbers, to restrain the respondents from issuing any share capital of the Company, from creating any third party rights in respect of any shares of the Company, from dealing with shares and properties of the Company and for appointment of a Receiver to carry out the affairs and business of the Company and for appointment of a Special Officer to take possession and control of all records. The interim relief prayed for by the appellant was to restrain the respondents from issuing any further share capital of the Company, dealing with the shares and assets of the Company in any manner. In the impugned order, pending disposal of the main Company Petition, on the basis of the interim prayer, it has been directed that the 1st respondent company shall pass an order over the application filed by the appellant seeking registration of his name as a shareholder of the Company in respect of 11,75,000 shares and until such time, status quo shall be maintained over the assets of the Company. Not being satisfied with the said interim order passed by the learned Member (Judicial), Company Law Board, the appellant has preferred this Company Petition/Appeal. 3. The undisputed facts are that the Respondent-1 company was incorporated under the Companies Act, 1956 on 13.5.1996 with an authorized capital of Rs.10 crores divided into one crore equity shares of Rs.10/- each. It was promoted by the appellant and his group as well as respondents 2 to 10. The appellant and his group had 50% shares whereas respondents 2 to 10 had the rest 50% shares in the Company. In 2007 disputes arose between the appellant group and the respondents 2 to 10 resulting in filing of C.P. No.186 of 2007 by the appellant under Sections 397/398 of the Companies Act, 1956 on the grounds of oppression and mismanagement of the Company affairs. During pendency of the said Company Petition, a settlement came through between the parties and a Memorandum of Understanding (MOU) was drawn up on 28.11.2007. It was agreed that the appellant and his group will exit from the Company by selling off their shares to the respondents 2 to 10 and their nominees at a price of Rs.31/- per share aggregating to Rs.15.50 crores. It was also agreed that the appellant and his group would exit from the Management of the Company and personal/corporate guarantees submitted by the appellant and his group for obtaining loan from Allahabad Bank would be released before the appellant and his group transfer their 50% share in favour of respondents 2 to 10. The full price of the 50% shares was to be paid by the respondents 2 to 10 to the appellant and his group by 15.1.2008. In compliance of the terms of the aforesaid MOU (1st MOU for convenience), certain amounts were paid by respondents 2 to 10 to the appellant group and certain amount remained outstanding. One Ahinsha Vinimoy Private Limited (AVPL) belonging to appellant group had also shares in the said Company worth Rs.2,75,15,000/- and the respondents had given 17 demand drafts to the said AVPL towards the price of the share held by it. As it was not decided as to in whose favour the said shares would be purchased, the respondents 2 to 10 requested AVPL to keep the amount in suspense till a decision is taken. Subsequently AVPL was allowed to appropriate the amount and the entire payment against 50% share of the appellant and his group was cleared. The only term of the first MOU dated 28.11.2007 that could not materialize in time is the release of the personal/corporate guarantees furnished by the appellant and his group with Allahabad Bank for obtaining the loan. Therefore, on 14.2.2008 the second MOU was drawn up between the parties. It was provided in the said second MOU that the personal/corporate guarantees would be released on or before 15.5.2008 and the respondents 2 to 10 would deposit scrips in respect of 11,75,000 shares together with duly executed blank transfer deeds with the appellant and his group. It was further provided that the said shares would be retained by the appellant and his group and in the event the personal/ corporate guarantees were not released on or before 15.5.2008, the appellant would be entitled to have the same transferred in his favour or in favour of any nominee at his absolute discretion. In addition to the above, the respondents 2 to 10 also furnished cash security to ensure release of the personal/corporate guarantees within the time stipulated. In compliance of both the 2 MOUs, the appellant and his group made an exit from the Company and left the domestic forum to be controlled by the respondents 2 to 10. Before 15.5.2008, a meeting was held between the parties on 15.4.2008 as there was delay in getting the personal/corporate guarantees released from the Bank and the minutes of the meeting dated 15.4.2008 were recorded. In April, 2008 itself the appellant returned the cash security to the respondent No.2 and in September, 2008, the personal/corporate guarantees were procured from the banker. On 13.8.2010 the appellant sent 33 original share certificates relating to 11,75,000 equity shares together with duly filled share transfer deeds dated 14.2.2008 with the requisite stamps thereon to the respondent No.1 Company for registration in his name. Lodging of the share certificates along with the transfer deeds was also acknowledged by the respondent No.3 on behalf of the Company. When the above facts are not in disputes it appears from the pleadings of both the parties and submission made by the learned Senior counsel appearing for both the parties that the dispute relates to entitlement of the appellant to demand registration of 11,75,000 equity shares in his name. According to the appellant in terms of the second MOU, the personal/corporate guarantees having not been released in favour of the appellant within the time stipulated, the appellant became entitled to register the same either in his name or in the name of any of his nominees. The stand of the respondents before the Company Law Board was that by minutes drawn on 15.4.2008 between the parties, the terms and conditions of second MOU stood novated and therefore, the appellant is not entitled to claim any right over the said 11,75,000 equity shares. As is evident from the pleadings and the submission made on behalf of the parties, the entire case revolves around the three documents, i.e., the first MOU dated 28.11.2007, the second MOU dated 14.2.2008 and the minutes of the meeting held between the parties on 15.4.2008. Shri Kapur, the learned Senior Counsel appearing for the appellant submitted that the terms of the second MOU dated 14.2.2008 clearly prescribe that the personal/corporate guarantees would be released on or before 15.5.2008. It was also stipulated in the said MOU that the respondents 2 to 10 would deposit share scrips in respect of 11,75,000 shares together with duly executed blank transfer deeds with the appellant who would retain the same and if the guarantees were not released on or before 15.5.2008, the appellant would be entitled to have the same transferred in his favour or in favour of any nominee at his absolute discretion. It was further submitted by Shri Kapur, the learned Senior Counsel appearing for the appellant that in the minutes of the meeting dated 15.4.2008 only time was extended till 30.6.2008 for getting the personal/corporate guarantees released without affecting the terms and conditions of the second MOU and admittedly the guarantees furnished by the appellant and his group having been released after 30.6.2008, the appellant is entitled to have the said shares scrips transferred in his favour or in favour of any nominee at his absolute discretion. Shri Saha, the learned Senior Counsel appearing on behalf of the respondents 1 to 6 and 9 submitted that the language used in both the MOUs would clearly indicate that time was not essence of both the MOUs. All that was promised in both the MOUs is that the respondents would make an effort to get the guarantees released within a 3 stipulated time and therefore, the time for releasing the guarantee was extended not only in the second MOU but also in the minutes of the meeting dated 15.4.2008. According to Shri Saha, the learned Senior Counsel appearing for the said respondents time not being the essence for both the MOUs by virtue of the minutes of the meeting dated 15.4.2008, the terms and conditions mentioned in the second MOU dated 14.2.2008 stood novated and the appellant had absolutely no right to claim registration of the said 11,75,000 shares in his name. Moreover, had this right accrued in favour of the appellant after 30.6.2008, there was no reason on the part of the appellant to claim registration of the same in his favour in August 2010 and there is no explanation whatsoever for the said delay in exercising the so called right. 4. The three documents referred to earlier being important for the purpose of deciding the lis between the parties, it is necessary to refer to the said three documents and the terms and conditions stipulated therein. The first MOU was drawn up between the parties on 28.11.2007. Clause 1 of the said MOU provides that the appellant will transfer its 50% ownership and management control in the Company by way of transfer of its entire share holdings to the respondents 2 to 10 at a consideration of Rs.15.50 crores. The said transfer of shares will be considered as a single block for the entire share holding of 50,00,000 equity shares. The signed transfer deeds along with the share certificates would be deposited by the appellant in a specified locker to be taken in any Bank in the joint name of two eminent Advocates of this Bar and the same shall be handed over to the respondents 2 to 10 after completion of all the formalities specified in the MOU except Clause 9 of the said MOU. Clause 10 of the said MOU provided that personal/corporate guarantee of the appellant for the loan availed by the Company from Bank or from any other institutions will be released before transfer of the shares. Both parties shall explore all possibilities to replace the personal guarantee of the appellant on or before 15.1.2008. Clause 9 provided that the management status of the company will be restored to that of 29th September, 2007 by way of a board meeting with the prior approval of the Company Law Board and after compliance of the terms and conditions of the MOU, the appellant will withdraw from the management supported by resignation or by any other suitable process. In compliance of the above terms and conditions of the MOU, the price of the share certificates was paid in full to the appellant and his group though there was some delay in such payment for reasons which are not relevant for the purpose of the case. The appellant also withdrew himself along with his group from the management of the respondent No.1 Company. The only clause that could not be complied with is Clause 10 of the first MOU relating to release of personal/ corporate guarantee furnished by the appellant and his group. Though it was agreed that such personal/corporate guarantee of the appellant and his group would be replaced on or before 15.1.2008, the same could not be done. Because of the above reason, the necessity of the second MOU was felt and accordingly on 14.2.2008 the second MOU was drawn between the parties. In the second MOU, it was agreed that every effort would be made by the respondents 2 to 10 to arrange release of security furnished by the appellant in form of personal guarantees of S.K. Dalmia and Vikash Dalmia as well as Corporate Guarantee furnished by Vikash Constructions Pvt. Ltd. and mortgage of around one acre of land at Pahal with the Allahabad Bank within15.5.2008. It was also agreed that for the intervening period until the said security furnished in form of personal guarantees and the mortgaged land are released, the respondents 2 to 10 shall hand over shares as per Annexure-1 to the said MOU along with transfer deeds to the appellant to be held as counter security until 15.5.2008 or release of 4 personal/corporate guarantee of the appellant whichever is earlier. It was further stipulated that after expiry of the due date, i.e., 15.5.2008, if the personal/corporate guarantees and the mortgaged property are not released, the appellant shall be at liberty to get the shares lying with him transferred to any person or entity of his choice. In Clause (d) of the second MOU, it was agreed that transfer of shares mentioned in annexure-1 thereto by the respondents 2 to 10 in favour of the appellant shall form the consideration for the delay in release of personal/corporate guarantees as well as the mortgaged land and it shall in no way affect the rights of appellant to either demand release of the said guarantees or make any efforts on his own to secure release of the said guarantees. 5. It is claimed by the appellant that in terms of the second MOU, respondents 2 to 10 handed over 11,75,000 shares along with the transfer deeds to the appellant to be retained as counter security whereas it is the case of the respondents 2 to 10 that the said shares had been lost and therefore, duplicate shares had been issued in respect of the said share holders. The question as to whether the shares were handed over to the appellant by the respondents 2 to 10 or they were lost has been set at rest by the learned Member, Company Law Board in the impugned order and the story put forward by the respondents regarding loss of the said 11,75,000 shares has been disbelieved. On perusal of the terms and conditions of both the MOUs, other documents as well as the conduct of the appellant in producing the original share certificates along with the transfer deeds before the respondent 1 company for registration of the same in his name clearly support stand of the appellant that these equity shares had been in fact handed over to the appellant by the respondents 2 to 10 as counter security. 6. The next question that comes up for consideration is as to whether the minutes of the meeting dated 15.4.2008 takes aware the effect of the terms and conditions stipulated in the second MOU or it only extends the time stipulated in the second MOU for obtaining release of the personal/corporate guarantees furnished by the appellant and his group. On reading of the said minute, it appears that the meeting was arranged to discuss regarding release of co-lateral security and personal/corporate guarantee offered by the appellant and his group from Allahabad Bank. The decision taken in this regard appearing in the following paragraphs are relevant for the purpose of the case. “3. Surendra Dalmia & Associates will sign all documents required in the application to bank for release of the guarantees extended by their group and to be replaced by fresh guaranteed offered by Dindayal Agarwal & Associates. 4. All efforts will be made by Dindayal Agarwal & Associates to release the personal guarantees of Surendra Dalmia & Associates and replace the same by their own guarantees within 30 days from 31st day of May, 2008. 5. Surendra Dalmia & Associates will stand indemnified for any losses or damages to them on account of the above guarantees extended for M/s. Suryaa Sponge Iron Limited to Allahabad Bank. 5 6. In case of any default in the above schedule specified in Para 4 above by Dindayal Agarwal & Associates, Surendra Dalmia & Associates will have all the rights to claim damage on the matter against Dindayal Agarwal & Associates.” On reading of the aforesaid four clauses appearing in the minutes of the meeting dated 15.4.2008 it appears that in Clause 4 the time for release of the personal guarantees of Surendra Dalmia & Associates and the replacement of the same by Dindayal Agarwal & Associates by furnishing their own guarantees was extended for thirty days from 31.5.2008, i.e., up to 30.6.2008. Clause 6 stipulates that in case of any default in the above schedule as specified in paragraph 4 Surendra Dalmia & Associates will have all rights to claim damages on the matter against Dindayal Agarwal & Associates. Even though Clause 6 was included in the minutes of the meeting dated 15.4.2008 entitling Surendra Dalmia & Associates (appellant) and his group to claim damages in the event the corporate/personal guarantees are not released by 30.6.2008, the clause in the second MOU with regard to handing over of 11,75,000 equity shares in favour of the appellant and his group to be kept as counter security and their right to transfer the same to any person or entity of their choice was not withdrawn. Therefore, it may be that Clause 6 appearing in the minutes of meeting dated 15.4.2008 is in addition to Clause C and D of the second MOU. The above prima facie view is also supported by the fact that no where in the minutes of the meeting recorded on 15.4.2008 it is stated that the terms and conditions of the second MOU have been superseded. 7. It was contended by Shri Saha, the learned Senior Counsel appearing on behalf of the respondents mentioned above that time was not the essence of contract. Reliance was placed on the language used in both the MOUs and it was contended that the terms and conditions mentioned in both the MOUs only show that the respondents would make an effort to get the corporate/personal guarantees of the appellant and his group released within a specified time and the very fact that it was extended twice, time was never the essence of such contract. It is true that both the MOUs provide that the respondents shall make an effort to get the guarantees released within a specified time and such time was extended in the second MOU as well as in the minutes of the meeting held on 15.4.2008. But at the same time the second MOU provided for furnishing a counter security to be utilized by the appellant in case of failure on the part of the respondents to get the guarantees released within the time and similarly the minutes of the meeting dated 15.4.2008 also provided that the appellant would be entitled to damages in the event the guarantees are not released by 30.6.2008. Under these circumstances it is difficult to accept the contention of the learned Senior Counsel Shri Saha that time was not the essence of contract. 8. The learned counsel for the parties had cited some decisions in support of their respective contentions. One of the contention of the learned Senior Counsel Shri Saha appearing on behalf of the respondents was that while filing the Company Petition before the Company Law Board, the appellant had not disclosed about the existence of the minutes of the meeting dated 15.4.2008 and non-disclosure of such a relevant document was only to obtain advantage and such conduct amounts to fraud. Reliance was placed on a decision of the Hon’ble Supreme Court in the case of S.P. Chengalvaraya Naidu v. Jagannath and others, reported in (1994) 1 Supreme Court Cases 1. In the said decision, the court held that non-disclosure of relevant and material documents with a view to obtain advantage amounts to fraud and therefore, a 6 decree obtained by non-disclosure of the release deed amounted to fraud on court and therefore such decree is liable to be set aside. It is a fact that in the Company Petition filed by the appellant, existence of the minutes of the meeting dated 15.4.2008 has not been mentioned. In the objection filed by the respondents, it was brought to the notice of the Court. The Court, therefore, considered the said document before passing the order. Therefore, though it can be said that it was the duty of the appellant to disclose all facts before the court including the existence of the minutes of the meeting dated 15.4.2008, the same having been brought to the notice of the Court in course of the proceeding and the court having considered the same, it cannot be said that the impugned order was obtained by exercising fraud on the court. The other decision cited by the learned Senior Counsel Shri Saha in this regard is the case of Fletcher and another v. Royal Automobile Club Ltd., reported in (2000) 1 BCLC 331. In view of the reasons stated earlier, the said decision has also no application to this case. 9. The learned Senior Counsel Shri Saha also referred to another decision of the Hon’ble Supreme Court in the case of Bharat Petroleum Corporation Ltd. v. Great Eastern Shipping Co. Ltd., reported in (2008) 1 Supreme Court Cases 503. In the said case a time charter party was entered into between the appellant and the respondent on 6.5.1997 for letting on hire vessels for a period of two years. This was subsequently extended for one month with an option for two further extensions for a period of 15 days each. The terms and conditions, exceptions and exemptions contained in the charter party dated 6.5.1997 remained unaltered for the extended period as well. Pending finalization of a new charter party for the period commencing from 1.9.1998, there were various offers and counter-offers exchanged between the parties as to the terms on which the charter party was to continue pending finalization of a new charter party from 1.9.1998. At every stage the respondent clearly stated that since the tender was not finalized, as per usual practice pending finalization of a new charter, the existing terms and conditions of the charter party continue to apply. Ultimately, on failure of all negotiations, the respondent called upon the appellant to pay balance amount of Rs.4.4 crores to them as charter hire in respect of vessel in question for the period from 1.9.1998 to 31.8.1999 within a specified time. With this background, it was held that the general rule is that an offer is not accepted by mere silence on the part of the offeree, yet it does not mean that an acceptance always has to be given in so many words. Under certain circumstances, the offeree’s silence, coupled with his conduct, which takes the form of a positive act, may constitute an acceptance with an agreement sub silentio. Therefore, the terms of a contract between the parties can be proved not only by their words but also by their conduct. Reference to this judgment has been made