Case Note & Summary
The case involves an appeal filed by Shalby Limited and others against an order dated 25.04.2016 passed by the Company Law Board (CLB), New Delhi Bench, in CP No. 18 of 2015. The respondents, Dr. Digambar Surya Naik and Mrs. Mangala Digambar Naik, had filed a company petition under Sections 397 and 398 of the Companies Act, 1956, alleging oppression and mismanagement. During the proceedings, the CLB passed an interim order on 15.09.2015 based on a consensus between the parties, whereby the respondents were to buy out the appellants' shares. The appellants later challenged this order, but the CLB dismissed their application. The High Court held that since the order was passed with the consent of the parties, the appellants could not challenge it. The court dismissed the appeal, upholding the CLB's order.
Headnote
A) Company Law - Oppression and Mismanagement - Sections 397, 398 Companies Act, 1956 - Consent Order - The Company Law Board passed an interim order dated 15.09.2015 based on an agreement between the parties for buyout of shares. The appellants, who were parties to the consent, challenged the order. Held that a consent order cannot be challenged by the party who consented to it, as it is binding on them. (Paras 2-5)
B) Company Law - Interim Orders - Jurisdiction of Company Law Board - The CLB has jurisdiction to pass interim orders in proceedings under Sections 397 and 398 of the Companies Act, 1956, including orders based on consensus between parties. (Paras 2-3)
Issue of Consideration
Whether the Company Law Board could pass an order based on consensus between parties and whether such order can be challenged by the parties who consented to it.
Final Decision
Appeal dismissed. The order of the Company Law Board dated 25.04.2016 is upheld.
Law Points
- Consent order cannot be challenged by consenting party
- Company Law Board has jurisdiction to pass interim orders under Section 397-398 of Companies Act
- 1956
- Agreement between parties binding
Case Details
2016 LawText (BOM) (12) 76
Company Appeal No. 01 of 2016 and Company Application No. 36 of 2016
Mr. S. D. Lotlikar, Senior Advocate with Mr. D. Pangam and Ms. Ketki Naik for Appellants; Mr. S. G. Desai, Senior Advocate with Mr. Pavithran A.V. and Ms. Ketki Pednekar for Respondents
Shalby Limited, Dr. Vikram Indrajit Shah, Mr. Shyamal Shivkumar Joshi, Mr. Ravi Bhandari, Mr. Maitreya Anilbhai Shah, Vrundavan Shalby Hospitals Limited
Dr. Digambar Surya Naik, Mrs. Mangala Digambar Naik, Mr. Mammootil Thomas Koshy
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Nature of Litigation
Appeal against order of Company Law Board in company petition alleging oppression and mismanagement
Remedy Sought
Appellants sought to set aside the CLB order dated 25.04.2016 which dismissed their application challenging the consent order dated 15.09.2015
Filing Reason
Appellants challenged the consent order passed by CLB based on agreement between parties for buyout of shares
Previous Decisions
Company Law Board passed interim order dated 15.09.2015 based on consensus between parties; later dismissed appellants' application to challenge that order on 25.04.2016
Issues
Whether the consent order dated 15.09.2015 passed by CLB can be challenged by the parties who consented to it
Submissions/Arguments
Appellants argued that the CLB order was erroneous and should be set aside
Respondents contended that the order was based on consent and cannot be challenged
Ratio Decidendi
A consent order passed by the Company Law Board based on an agreement between the parties is binding on the consenting parties and cannot be challenged by them.
Judgment Excerpts
The above Appeal takes exception to the Order dated 25.04.2016 passed by the Company Law Board. New Delhi Bench, New Delhi in CP no. 18 of 2015.
Briefly, it is the case of the Appellants that a Company Petition was filed in 2015 before the Company Law Board, Mumbai Bench by the present Respondent nos. 1 and 2 against the present Appellants and the Respondent no. 3 under Section 397-398 of the Companies Act, 1956, alleging acts of oppression and mismanagement.
Procedural History
Respondents filed CP No. 18 of 2015 before CLB Mumbai Bench under Sections 397-398 of Companies Act, 1956. CLB passed interim order dated 15.09.2015 based on consensus. Appellants filed application to challenge that order, which was dismissed by CLB on 25.04.2016. Appellants then filed Company Appeal No. 01 of 2016 before High Court of Bombay at Goa.
Acts & Sections
- Companies Act, 1956: 397, 398
