Case: Manish Mohan Sharma  Vs. Ram Bahadur Thakur Ltd.

Kale vs. Deputy Director of Consolidation 1976 (1) SCR 202, 122, 123, 125). The courts lean heavily in favour of family arrangements and, "matters which would be fatal to the validity of similar transactions between strangers are not objections to the binding effect of family arrangements". This view has been reiterated recently in Amteshwar Anand vs. Virender Mohan Singh & Ors., (2006) 1 SCC 148. 34. In our opinion both the Company Law Board and the High Court erred in refusing to execute the order dated 19th August, 1999 under Section 634A of the Companies Act. They have thereby failed to exercise the jurisdiction with which they were vested. The failure is heightened given the nature of the order which they were bound to execute. They have erroneously proceeded upon principles applicable to contracts alone and have ignored the fact that the agreement between the parties had culminated in a consent order of the Company Law Board. The plea of the respondents that this Court should not interfere in the matter under Article 136 by reason of any alleged misconduct on the part of the appellants in managing the 5 estates is unacceptable. The appellants alleged lack of efficiency in running of the five tea estates is not a material consideration for deciding whether the order dated 19th August, 1999 should be enforced. 35. The respondents contention that the appellants were not themselves willing to abide by the terms of the consent order appears to us to be erroneous. The application under Section 634A was for implementation of the order dated 19th August, 1999 if necessary by appointing a Special Officer to carry it into completion. In fact even while the application under Section 634A was pending in the Company Law Board, the Vice Chairman had suggested to the appellants that they waive their claim in respect of the accrued gratuity under clause 4.1.1.11 of the Transfer Document and a certain portion of the interest claimed under the Transfer Document. The appellants confirmed that they would accept the Vice Chairmans suggestion but would do so on the basis that a consent order was passed in terms thereof on the same date. This was recorded by the appellants advocates in their letter dated 19th December, 2000 addressed to the Company Law Board and its Members and the Advocate for the respondents and has not been disputed before us as not reflecting the correct position. This is not the conduct of a party which is not willing to abide by the terms of the decree. 36. On the question whether the appellants had defaulted in payment of purchase price simultaneously with the completion in terms of Clause 4 of the Transfer Document, this again relates to an interpretation of the terms of the MOFA and the Transfer Document. According to the respondents, there was no default on their part as the respondents were required not only to settle all outstanding claims relating to the five estates prior to giving of the completion Notice but also to annex the necessary documents evidencing that the sale estates could be transferred free from all encumbrances to the MMS group by the respondent No. 1. The Company Law Board and the High Court have proceeded on the basis that the only dispute between the parties was as to the interpretation of Clause 4.1.1.11. Elaborate arguments have however been addressed to us on the merits of the four contentions noted by us earlier by both parties. We were initially of the view that the dispute should be resolved by us finally. However on a reconsideration, we deem it fit to remand this issues for determination by the Company Law Board if it is satisfied that the issues could be said to have been fairly raised by the parties before it. We make it clear that whatever interpretation may be put by the Company Law Board on the clauses of the MOFA and Transfer Document, the Board must implement the clauses as interpreted. 37. Moreover Clause 4 which relates to the payment of the purchase price by the MMS group specifically mentions the total amount payable by them to the respondent No. 1 namely Rs. 7,24,67,708.90 less certain deductions. As far as the deductions are concerned, some of the clauses have quantified the deductions, whereas others have left them undetermined in the sense that no quantum has been mentioned. In the first category are Clause 4.1.1.1 to Clause 4.1.1.5. Under Clauses 4.1.1.6 to 4.1.1.11 the amounts were required to be determined. This exercise will have to be carried out by the Board. The figures mentioned in Clauses 4.1.1.1 to 4.1.1.5 and 4.1.1.11 were also subject to verification under Clause 4.1.1.12 by the independent auditor appointed by the Company Law Board. The Company Law Board had by order dated 19th August, 1999 appointed Mr. M.C. Joseph, Chartered Accountant. We have not been told whether the independent auditor has carried out the verification. 38. We ourselves do not propose to go into the issues raised by the parties, namely whether the completion notice was valid nor the quantification of the deductions under Clause 4 of the Transfer Document. These are issues that must be worked out by the Company Law Board in executing the consent order in terms of the MOFA and Transfer Document. It is unnecessary for us to go into the powers of the parties to rescind the settlement (assuming that such rescission were at all possible at this stage) as neither of the groups have taken any steps to issue any notice of rescission till today. 39. We note that the MOFA and Transfer Document were the outcome of the commendable and determined efforts on the part of the Company Law Board to bring to an end disputes between the parties in a manner which would have been in the interest of the respondent No. 1 given the impasse between the two blocks of shareholders and saved the parties a lot of unnecessary harassment, expenditure and acrimony.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]34. In our opinion both the Company Law Board and the High Court erred in refusing to execute the order dated 19th August, 1999 under Section 634A of the Companies Act. They have thereby failed to exercise the jurisdiction with which they were vested. The failure is heightened given the nature of the order which they were bound to execute. They have erroneously proceeded upon principles applicable to contracts alone and have ignored the fact that the agreement between the parties had culminated in a consent order of the Company Law Board. The plea of the respondents that this Court should not interfere in the matter under Article 136 by reason of any alleged misconduct on the part of the appellants in managing the 5 estates is unacceptable. The appellants alleged lack of efficiency in running of the five tea estates is not a material consideration for deciding whether the order dated 19th August, 1999 should be enforced35. The respondents contention that the appellants were not themselves willing to abide by the terms of the consent order appears to us to be erroneous. The application under Section 634A was for implementation of the order dated 19th August, 1999 if necessary by appointing a Special Officer to carry it into completion. In fact even while the application under Section 634A was pending in the Company Law Board, the Vice Chairman had suggested to the appellants that they waive their claim in respect of the accrued gratuity under clause 4.1.1.11 of the Transfer Document and a certain portion of the interest claimed under the Transfer Document. The appellants confirmed that they would accept the Vice Chairmans suggestion but would do so on the basis that a consent order was passed in terms thereof on the same date. This was recorded by the appellants advocates in their letter dated 19th December, 2000 addressed to the Company Law Board and its Members and the Advocate for the respondents and has not been disputed before us as not reflecting the correct position. This is not the conduct of a party which is not willing to abide by the terms of the decree36. On the question whether the appellants had defaulted in payment of purchase price simultaneously with the completion in terms of Clause 4 of the Transfer Document, this again relates to an interpretation of the terms of the MOFA and the Transfer Document. According to the respondents, there was no default on their part as the respondents were required not only to settle all outstanding claims relating to the five estates prior to giving of the completion Notice but also to annex the necessary documents evidencing that the sale estates could be transferred free from all encumbrances to the MMS group by the respondent No. 1. The Company Law Board and the High Court have proceeded on the basis that the only dispute between the parties was as to the interpretation of Clause 4.1.1.11. Elaborate arguments have however been addressed to us on the merits of the four contentions noted by us earlier by both parties. We were initially of the view that the dispute should be resolved by us finally. However on a reconsideration, we deem it fit to remand this issues for determination by the Company Law Board if it is satisfied that the issues could be said to have been fairly raised by the parties before it. We make it clear that whatever interpretation may be put by the Company Law Board on the clauses of the MOFA and Transfer Document, the Board must implement the clauses as interpreted37. Moreover Clause 4 which relates to the payment of the purchase price by the MMS group specifically mentions the total amount payable by them to the respondent No. 1 namely Rs. 7,24,67,708.90 less certain deductions. As far as the deductions are concerned, some of the clauses have quantified the deductions, whereas others have left them undetermined in the sense that no quantum has been mentioned. In the first category are Clause 4.1.1.1 to Clause 4.1.1.5. Under Clauses 4.1.1.6 to 4.1.1.11 the amounts were required to be determined. This exercise will have to be carried out by the Board. The figures mentioned in Clauses 4.1.1.1 to 4.1.1.5 and 4.1.1.11 were also subject to verification under Clause 4.1.1.12 by the independent auditor appointed by the Company Law Board. The Company Law Board had by order dated 19th August, 1999 appointed Mr. M.C. Joseph, Chartered Accountant. We have not been told whether the independent auditor has carried out the verification38. We ourselves do not propose to go into the issues raised by the parties, namely whether the completion notice was valid nor the quantification of the deductions under Clause 4 of the Transfer Document. These are issues that must be worked out by the Company Law Board in executing the consent order in terms of the MOFA and Transfer Document. It is unnecessary for us to go into the powers of the parties to rescind the settlement (assuming that such rescission were at all possible at this stage) as neither of the groups have taken any steps to issue any notice of rescission till today39. We note that the MOFA and Transfer Document were the outcome of the commendable and determined efforts on the part of the Company Law Board to bring to an end disputes between the parties in a manner which would have been in the interest of the respondent No. 1 given the impasse between the two blocks of shareholders and saved the parties a lot of unnecessary harassment, expenditure and acrimony.