Lsp IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION COMPANY APPEAL NO.9 OF 2008 IN C.L.B. COMPANY APPLICATION NO. 158 OF 2007 IN C.L.B. COMPANY APPLICATION NO.242 OF 2007 IN COMPANY PETITION NO. 61 OF 2005 1. Sujan A. Parikh of Mumbai, r/at: Skylark Little Gibbs Road, Malabar Hill, Mumbai 400 006. 2. Soha Vigyat Singh of Delhi, r/at 1-AR, Complex Sector 13, R.K. Puram, New Delhi-110 006. ..Appellants Versus 1. Natvar Parikh & Company Pvt. Ltd. a private limited company incorporated under the provisions of Companies Act, 1956 and having its registered office at 424, Hemu Kalani Marg, Chembur, Mumbai-400 071. 2. Apurva Natvarlal Parikh of Mumbai, Indian inhabitant, r/at 23, Vijay Mahal, ’D’ Road, Marine Drive, Mumbai 400 020. 3. Neela Apurva Parikh of Mumbai, 4. Rohan Apurva Parikh of Mumbai, 5. Romil Apurva Parikh of Mumbai, 6. Anuja Apurva Parikh of Mumbai 7. Sushila Natvarlal Parikh of Mumbai Respondents 3 to 7 residing at 23, Vijay Mahal, ’D’ Road, Marine Drive, Mumbai- 400 020. 8. Upendra Ratilal Parikh of Mumbai, r/at: 103, Indra Prasth, Neelkanth, Valley 7th Road, Rajawadi, Ghatkopar (E), Mumbai 400 077. 9. Sameer Upendra Parikh of Mumbai r/at: 202, Indra Prasth, 2 Neelkanth Valley 7th Road, Rajawadi, Ghatkopar (E), Mumbai - 400 077. 10. Parag Upendra Parikh of Mumbai r/at: 203, Indra Prasth, Neelkanth Valley 7th Road, Rajawadi, Ghatkopar (E), Mumbai 400 077. 11. Ketan Parikh of Mumbai, r/at 101-D, spring fields, Lokhandwala, Andheri (W), Mumbai-400 053. ..Respondents Mr. Janak Dwarkadas, Sr. Advocate with Mr. N.H.Seervai, Sr. Advocate with Mr. Zal Andhyarunjina i/b. Little & Co. for the appellants. Mr. P.K.Samdani with Mr. Kunal Vazani i/b. Wadia Gandhy & Co. for respondents. CORAM CORAM CORAM : A.M.KHANWILKAR,J. : A.M.KHANWILKAR,J. : A.M.KHANWILKAR,J. DATED DATED DATED : 22nd October, 2008 : 22nd October, 2008 : 22nd October, 2008 P.C. . This appeal takes exception to the judgment and order passed by the Company Law Board dated 24th March, 2008 dismissing Civil Application No. 242 of 2007, filed by the appellants herein, and allowing Civil Application no. 158/2007, filed by the respondents herein by directing the parties to execute the draft of the lease deed as revised by the respondent group. The Company Law Board (hereinafter referred to as CLB) has extensively reproduced the broad facts and the contentions of the respective parties in the impugned judgment. The arguments before this Court canvassed by 3 the respective parties was more or less reiteration of the stand taken before the CLB. For that reason I do not wish to burden this order with reproducing the same contentions which are already referred to in the impugned decision. Indeed I shall make reference to the relevant facts while dealing with the arguments of the respective Counsel on which emphasis was placed before this Court during the course of arguments at the appropriate stage. 2. Broadly stated, the appellants have been referred to as SAP group and contesting respondents collectively as NAP group. On account of certain disputes and differences arising between the two groups, company petition no. 61/2005 came to be filed before the CLB under section 397 and 398 of the Companies Act, 1956. The disputes between the parties, however, came to be resolved by division/separation of the business of Natwar Parikh group on terms recorded in the Term Sheet executed on 1-9-2005. In furtherance of the said first term sheet, the parties entered into another term sheet on 29th March, 2006. The parties then submitted the said terms sheet before the CLB alongwith minutes of order in respect of two companies. The CLB proceeded to dispose of the petition in terms of the minutes which were to form part of the said order. The CLB at the sametime granted liberty to the parties to apply in case 4 of any difficulty "in working of the terms of the minutes". 3. It is noticed that due to some differences between the parties with regard to their rights and obligations, company applications were filed before the CLB seeking certain directions in view of the liberty granted in order dated 30th March, 2006. Eventually, further minutes of order came to be filed before the CLB by consent of the parties whereby certain aspects of the earlier order dated 30th March, 2006 were modified/clarified. 4. In the present appeal the only issue is in respect of lease deed to be executed in respect of 50% of Jetty land. As per the agreed terms, the appellants initially submitted draft lease deed to the respondents. The said draft lease deed provides for terms and conditions that the lease in favour of the appellants would be unconditional and unrestricted. The said condition amongst other conditions, however, was not acceptable to the respondents. As a result, the respondents forwarded revised draft lease deed. 5. The respondents provided that the appellants would use the land only as Jetty land with marine business and no other purpose. Besides, it provided that the 5 appellants cannot sublet or create third party rights in the land during the lease period without prior permission of the respondents. Thereafter, the respondents filed Company Application No. 158/2007 before the CLB for following reliefs. a. That this Hon’ble Board be pleased to issue an order clarifying the 1st order as regards the following aspects: 1. That keeping in line with the True Intention, the Jetty Land should be used only as a jetty, i.e. for facilitating the berthing and docking of the barges and tugs owned by the Heavy Lift Division and Marine Division of NPIL. ii. that keeping in line with the True Intention, the Jetty Land should be used only for the businesses of the Natvar Parikh Group, particularly, Heavy Lift Division and the Marine Division; and iii. that keeping in line with the True Intention, the Jetty Land or any part thereof, cannot be sold and/or transferred and/or leased and/or licensed and/or subleased and/or sublet and/or under let to any third party, surely not to the competitors of the Natvar Parikh group, whether, by way of amalgamation and/or merger and/or demerger and/or any other arrangement of NPIL or otherwise. b. In the alternative, this Hon’ble Board be pleased to permit the ANP group to retain the entire Jetty Land and in consideration thereof, the ANP Group to compensate and SAP Group at the rate agreed to between the two groups i.e Rs. 4,102.26 per sq. meter. of actual land after deducting the CRZ area. c. for ad-interim and interim relief in terms of prayer (a) above. d. for such further and other directions as the Hon’ble Board may deem fit and necessary; and For costs. 6 6. On the other hand, the appellants filed application before the CLB being Company Application No. 242/2007 praying for following reliefs. "(a) that the Respondents group be directed to comply with the orders dated 30th March, 2006 and 26th February 2007 by executing the deed of lease in respect of the said jetty land at Borla as sent to them by the advocates for the Petitioner group, under cover of its email dated February 20, 2007 (Exhibit 4 hereto); (b) for costs; (c) for such other and further reliefs as the nature and circumstances of the case may require." 7. Both these applications have been disposed of by CLB by common order which is impugned in the present appeal. I shall straight away advert to the finding recorded by the CLB for allowing the application preferred by the respondents and dismissing the application preferred by the appellants. The CLB in the first place proceeded to observe that the number of cases cited by the Counsel for SAP group have expounded that consent orders cannot be modified. That contention of the appellants has been accepted. In so far as the statement of law that consent orders cannot be modified by the Court without the consent of all the parties is unexceptionable. The CLB then proceeded to observe that in the present case the appellants SAP group are seeking enforcement of the minutes of orders while respondents (NAP) group has sought clarification. It further held 7 that application preferred by the respondents was maintainable as the order dated 30th March, 2006 specifically granted liberty to the parties to approach the CLB for further clarification of the further orders. It then observed that the appellants have also approached the CLB for directions to be issued to the respondents to execute the lease deed in terms of the draft lease deed prepared by the appellants. The CLB then proceeded to observe that in both the applications the issue raised relates to the "terms of the lease deed". In so far as this observation is concerned, the same is obviously inaccurate. In the first place, the application preferred by the appellants was in the nature of direction or execution of the order already passed by the CLB whereunder the respondents would be required to execute the lease deed in favour of the appellants on the terms specified in the draft lease deed prepared by the appellants. On the other hand, the application of the respondents was for clarification about the true intention of the parties with regard to the terms of the minutes of order on the basis of which the petition was disposed of by the CLB. In that sense, it is incorrect to observe that both the applications pertained to the "terms of the lease deed". In other words, the issue was not in respect of the terms of the lease deed as such but the scope of the order and the intention of the parties behind the terms of the order 8 founded on minutes of order presented by the parties. 8. The CLB then proceeded to refer to the decision of the Apex Court in the case of Manish Mohan Sharma & ors. Manish Mohan Sharma & ors. Manish Mohan Sharma & ors. V/s. V/s. V/s. Rambahadur Thakur Ltd. & ors. reported in (2006 Rambahadur Thakur Ltd. & ors. reported in (2006 Rambahadur Thakur Ltd. & ors. reported in (2006 131 131 131 Company Cases 149 SC) Company Cases 149 SC) Company Cases 149 SC) which has held that it is the duty of the Court to interpret the consent terms and implement the same. Relying on the said decision the CLB observed that it had jurisdiction to consider both the applications. There is no difficulty in upholding the view of the CLB that the issues raised in both the applications were required to be adjudicated in accordance with law by the CLB. The CLB in para-7 then proceed to refer to the first minutes of the order and clause-17 thereof which provides for division of two businesses and in that event, the respondent (NAP) group was to lease out 50% of the Jetty with a right of way for 99 years in favour of the appellants (SAP) group. It has then adverted to clause-10 of the second minutes of the order which provides appellant (SAP) group was to prepare documents in respect of lease of the Jetty area. It went on to then observe that neither of the minutes contain any specific provision regarding the provision of the lease deed. In so far as this finding of fact is concerned, the same is unexceptionable. 9. The CLB then proceeded to refer to the plea taken 9 by both the sides. In so far as appellants were concerned, they wanted right to deal with the lease Jetty without requiring to take permission from respondents. On the other hand, the respondents wanted condition to be imposed in the lease that the appellants would not do so without their permission. In addition, the respondents wanted restriction to be included in the lease that the land to be leased to the appellants shall be used only for marine division of the appellants. The CLB then proceeded to advert to the stand of the appellants that the respondents did not raise any objection to the draft lease sent by them and instead proceeded to sign the 2nd minutes of order which presupposes that they had no reservation to the terms and conditions provided in the draft lease prepared by the appellants. It is on that representation the appellants surrendered their share certificates to the respondents. According to appellants, although the terms of minutes of order provided that the appellants would surrender share certificates to the respondents after lease deed was executed, the appellants on the basis of representation by the respondents that they would have no objection to the terms and conditions specified in the draft lease deed sent to them proceeded to surrender the share certificates to the respondents; and it is only after surrender of share certificates, the respondents have made grievance about the terms and 10 conditions of the draft lease deed. 10. The CLB has then adverted to the stand of the respondents that since the appellants accepted all their dues and surrendered their share certificates after the respondents modified the draft agreement, the appellants have deemed to have accepted the modifications. Further, the appellants inspite of modification suggested by the respondents to the draft agreement accepted all their dues from the respondents and were now insisting that the lease deed be executed on the basis of original draft agreement forwarded by the appellants. 11. In other words, both the parties were taking divergent stand with regard to the intention of the parties behind the minutes of the order as also the bonafides of the stand taken by the opposite party. This aspect has been brushed aside by the CLB on the specious reasoning that stand of neither of them was tenable because there was no specific mention about the draft deed forwarded by the appellant group when the second minutes of order came to be recorded or regarding the revised draft given by respondent group before the accounts were settled. In my opinion, what was expected from the CLB is to first enquire into the correctness of this divergent stand taken by the respective parties on 11 the basis of contemporaneous record and the evidence produced by the respective parties. If the CLB were to hold that respondent group did not raise any objection to the draft lease sent by the appellants and consciously signed the 2nd minutes of order and also accepted the share certificates from the appellants without any demurer, now cannot be permitted to resile so as to assert that the terms and conditions stated in the draft lease deed submitted by the appellant was not acceptable to them. On the other hand, if the CLB on the basis of contemporaneous record and evidence produced by the parties were to accept the plea of the respondents that the appellants accepted their dues and surrendered their share certificates without any demurer after the respondent group had modified their draft agreement, it would necessarily follow that the appellants had accepted the modifications suggested by the respondents. Unfortunately, the CLB has not addressed itself to this aspect at all. That is a question of fact which ought to have been addressed by the CLB in the first instance. 12. The CLB then in para-8 proceeded to refer to the legal position that the lessor ordinarily decides the terms under which his property could be used and the conditions on which the lessee would be allowed to use the same and restrict the rights of the lessee with 12 regard to the subletting etc. With due respect to the CLB, what was required to be examined is the position emerging from the circumstances on record as to the understanding on the basis of which the minutes of order were signed by the parties. It is not in dispute and as has been rightly found by the CLB, there is no specific reference in the minutes of order about the terms and conditions of the Lease. Whereas the minutes provide that the appellants were expected to hand over the draft of the Lease deed and nothing more. Thus, leaving it open to the appellants to articulate the terms and conditions thereof. If the respondents before signing the minutes of order intended that the Lease of Jetty would be conditional or restricted one were expected to spell out that intention very clearly. Whether that has happened is a matter for enquiry. In absence of such stipulation, ordinarily the law expects the lease to be unconditional and unrestricted. 13. In other words, if the parties were silent about the terms of lease, the inference will be that the lease was to be unconditional and unrestricted; but now the respondents want the lease to be a conditional lease. That, the respondents were expected to insist at the threshold. As aforesaid, whether that has infact happened is a matter for enquiry. 13 14. It cannot be overlooked that the parties have arrived at amicable settlement. The settlement is a one whole package. If the respondents at the threshold had insisted for imposing condition on the lease such as to the user of land or restriction regarding subletting or creating third party right therein, in that case the appellants may or may not have accepted the same or would have given counter proposal. For the time being, I am in agreement with the stand taken by the appellants that having regard to the purport of Section 105 read with Section 108(c) of the Transfer of Property Act, the lessee of immovable property has unconditional and unrestricted right to enjoy such property in absence of contract providing to the contrary. In other words, if the minutes of order and the terms of settlement are conspicuously silent about any such restriction either with regard to the usage of land or to the rights of the lessee, it necessarily follows that the concluded agreement between them would be for lease without any condition and unrestricted rights therein. Indeed, it was and is open to the respondents to establish the fact that the parties had infact arrived at an agreement to lease on condition or with restriction as is now suggested by the respondents in the draft lease-either with reference to the contemporaneous record or any independent evidence. 14 15. Suffice it to observe that the fact as to whether lessor at the threshold had insisted for granting conditional or restrictive lease in favour of the appellants is a matter which ought to have been pleaded and proved by the respondents. Atleast the minutes of order would not throw any light on that aspect. Rather the minutes of order are conspicuously silent about any such understanding or intention of the parties. In such a case the inevitable conclusion would be that the lease was to be an unconditional and unrestricted lease in favour of the appellants, in absence of contract to the contrary. 16. The CLB then proceeded to observe that it is an admitted position that with a view to resolve the disputes, the parties had decided to divide the businesses. There can be no doubt that initially both parties had equal right in the entire business. By way of arrangement agreed upon by them, they decided to separate the business so as to bring quietus to all the disputes between them. For that, it became necessary to separate the properties which were used common for both the businesses. The Jetty land was one such property which was required to be separated. Obviously, the parties agreed for division of said Jetty land in two equal parts namely 50% each. That necessarily means that 50% of Jetty land was to be enjoyed by the 15 appellants alongwith the marine business which had come to their exclusive share. If that is the logic for dividing the Jetty land in two equal parts, the question of respondents than placing restriction either with regard to usage or the right to sublet or create third party interest therein becomes doubtful. As a matter of fact the provision in the minutes of order is self eloquent that in the event both the businesses were to be taken by one party, the other party would be compensated with regard to the Jetty land at the rate of Rs. 4,102.20 per sq. meter. However, that valuation of Jetty land is in the context of whole package and cannot be the basis to deny the benefit of allocation of 50% of Jetty land free of restrictions to the appellants under the consent terms on the basis of which the matter stood disposed of, if there was contract to the contrary. 17. Significantly, the CLB proceeded to answer the issue in favour of the respondents on the reasoning that the appellants have sold most of the assets of marine unit, some of which respondents subsequently acquired. In fact, the respondents never raised any objection regarding disposal of interest in marine unit by the appellants and instead acquired some of the assets of the marine business. Therefore, that circumstance was of no avail. The CLB then proceeded to refer to the 16 objection of the respondents that the question of dealing with 50% of the Jetty land, the true intention of the parties will have to be gathered from the term sheet. The CLB, however, has rightly opined that the two minutes of order would prevail and the term sheet cannot be relied upon. But then the CLB proceeded to hold that the minutes of order were vague as they do not spell out any terms and condition of the lease and for which reason it was necessary for it to examine the contemporaneous document to discern the intention of the parties. As observed earlier, it is only the minutes of the order that ought to prevail with regard to matters relating to grant of Jetty land on lease. The fact that the term sheet or the minutes of order is silent about the specific terms and conditions of lease would infact militate against the respondents. If the minutes of order is conspicuously silent about the fact that the lease was to be conditional lease or restricted lease, it would necessarily follow that the understanding of the parties was to execute unconditional or unrestricted lease in favour of the appellants in absence of contract to the contrary. As aforesaid, it was open to the respondents to plead and prove the fact that the parties infact had agreed to enter into conditional or restricted lease. There can be no presumption of that fact. The presumption if at all ought to be contrary which approach would be consistent with the mandate of 17 Section 105 read with Section 108(c) of the Transfer of Property Act. However, whether there was agreement to the contrary is a matter which ought to be thoroughly examined by the CLB in the first instance with reference to all the contemporaneous record and other evidence, if any. 18. The CLB in para-9 of its decision has adverted to the terms sheet as contemporaneous record to find out the principle agreed for method of division. The CLB has referred to principle-5 that Jetty land was not to be valued and if each group gets control of one business, then group getting Jetty land would lease out 50% to the other group and if both the units come under the control of one group, the other group would be paid cash consideration at a particular rate to be determined. That arrangement was because both the business units were using the Jetty together. The CLB then went on to observe that intention of the parties appear to be that neither business should be denied the use of Jetty if the same were to go to two different groups. It is for that reason Jetty land had been left out for valuation of profit on nominal rental of Rs. 1/-