Case Note & Summary
The appeal arose from an order of the Company Law Board (CLB), Principal Bench, New Delhi, dated April 4, 2005, in Company Application Nos.170 of 2003 and 89 of 2004 in Company Petition No.73 of 2000. The respondents (original petitioners) had filed applications under Section 634A of the Companies Act, 1956, read with Regulation 44 of the Company Law Board Regulations, 1991, seeking execution of earlier orders dated July 15, 2002 and December 13, 2002. The CLB, by the impugned order, appointed a retired Supreme Court Judge as Executing Authority, observing that the appellants owned certain properties/assets and that the respondents' dues could be settled from the sale of those properties. The Executing Authority was given full powers to dispose of the assets by auction or otherwise. The appellants challenged this order before the Bombay High Court. The High Court heard the appeal forthwith by consent as a short question was involved. The court held that Section 634A of the Companies Act, 1956, empowers the CLB to execute its own orders, and the CLB cannot delegate that power to a third party. The CLB must either execute the order itself or follow the procedure under the Code of Civil Procedure, 1908. The impugned order was set aside, and the appeal was allowed. The court did not express any opinion on the merits of the execution applications.
Headnote
A) Company Law - Execution of Orders - Section 634A Companies Act, 1956 - Power of Company Law Board to Execute Orders - The Company Law Board (CLB) appointed a retired Supreme Court Judge as Executing Authority to sell properties of the appellants to satisfy dues. The High Court held that Section 634A confers power on the CLB itself to execute its orders, and the CLB cannot delegate that power to a third party. The CLB must either execute the order itself or follow the procedure under the Code of Civil Procedure, 1908. The impugned order was set aside. (Paras 1-6)
Issue of Consideration
Whether the Company Law Board can appoint a retired Supreme Court Judge as an Executing Authority to execute its orders under Section 634A of the Companies Act, 1956, or whether it must execute the orders itself.
Final Decision
Appeal allowed. Impugned order dated April 4, 2005 passed by the Company Law Board, Principal Bench, New Delhi in Company Application Nos.170 of 2003 and 89 of 2004 in Company Petition No.73 of 2000 is set aside. No order as to costs.
Law Points
- Section 634A of Companies Act
- 1956 confers power on Company Law Board to execute its own orders
- delegation to a third party is impermissible
- CLB must itself execute or follow procedure under CPC
Case Details
Company Appeal (Lodging) No.10 of 2005 in Company Application No.170 of 2003 and Company Application No.89 of 2004 in Company Petition No.73 of 2000 with Company Application No.344 of 2005
Mr.Shekhar Naphade with Mr.Sanjay Jain i/b Mr.Nivit Srivastava for Appellants; Mr.H.C.Mehta with Ms.Dipti Shah with Mr.S.Nagvadaria i/b M/s.Mehta & Co. for Respondents
M/s.Chemosyn Limited and Samit Kantilal Shah
Unmesh Kantilal Shah, Smt.Prabhaben Kantilal Shah, and Hanumant Holding Private Limited
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Nature of Litigation
Appeal against order of Company Law Board appointing a retired Supreme Court Judge as Executing Authority to execute its orders under Section 634A of the Companies Act, 1956.
Remedy Sought
The appellants sought to set aside the CLB order appointing an Executing Authority.
Filing Reason
The CLB appointed a retired Supreme Court Judge as Executing Authority to sell properties of the appellants to satisfy dues of the respondents, which the appellants contended was beyond the CLB's powers under Section 634A.
Previous Decisions
The CLB had passed earlier orders dated July 15, 2002 in Company Application No.86 of 2003 and December 13, 2002 in Company Application No.71 of 2002, which the respondents sought to execute.
Issues
Whether the Company Law Board can appoint a third party as Executing Authority to execute its orders under Section 634A of the Companies Act, 1956.
Submissions/Arguments
The appellants argued that the CLB cannot delegate its power of execution to a third party; it must execute the order itself or follow the procedure under CPC.
The respondents supported the CLB order, contending that the appointment was within the CLB's powers.
Ratio Decidendi
Section 634A of the Companies Act, 1956 confers power on the Company Law Board to execute its own orders, and the CLB cannot delegate that power to a third party. The CLB must either execute the order itself or follow the procedure under the Code of Civil Procedure, 1908.
Judgment Excerpts
Heard Counsel for the parties.
Admit.
Appeal is heard forthwith by consent of the parties, as short question is involved.
This Appeal takes exception to the order passed by the Company Law Board, Principal Bench, New Delhi dated April 4, 2005 in Company Application Nos.170 of 2003 and 89 of 2004 in Company Petition No.73 of 2000.
The Respondents took out Application under Section 634A of the Companies Act (hereinafter referred to as the ‘Act’) read with Regulation 44 of the Company Board Rules and Regulation, 1981 for implementation/execution of the order dated 15th July 2002 passed in Company Application No.86 of 2003 and order dated 13th December 2002 in Company Application No.71 of 2002.
By the impugned order, the Company Law Board has observed that to get the said orders executed, it was appointing retired Judge of the Supreme Court as Executing Authority.
Procedural History
The respondents filed Company Application Nos.170 of 2003 and 89 of 2004 in Company Petition No.73 of 2000 before the Company Law Board, Principal Bench, New Delhi, seeking execution of orders dated July 15, 2002 and December 13, 2002 under Section 634A of the Companies Act, 1956. The CLB passed the impugned order on April 4, 2005, appointing a retired Supreme Court Judge as Executing Authority. The appellants appealed to the Bombay High Court, which heard the appeal on June 23, 2005 and allowed it.
Acts & Sections
- Companies Act, 1956: 634A
- Company Law Board Regulations, 1991: 44
