MANISH MOHAN SHARMA AND CO. versus RAM BAHADUR THAKUR LTD. AND ORS.

Citation: [2006] 3 S.C.R. 97 · Decided: 21-03-2006 · Supreme Court of India · Bench: RUMA PAL · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

MANISH MOHAN SHARMA AND CO. 
A 
v. 
RAM BAHADUR THAKUR LTD. AND ORS. 
MARCH 21, 2006 
[RUMA PAL AND DAL VEER BHANDARI, JJ.] 
B 
Companies Act, 1956-Sections 397, 398, 402 and 634A-Groups of 
family relatives having shareholding in a company-One group complaining 
under Sections 397 and 398 to Company Law Board of its ouster fraTtt C 
management-Resolution of issues between parties by execution of 
Memorandum of family arrangement (MOFA) and Transfer Document-With 
these two documents as integral part, CLB passing order under Section 402 
and directing parties to execute transfer deeds to effect transfer of relevant 
assets, with liberty to parties to approach it in case of difficulty in 
implementation of order-Thereafter, on dispute arising between parties on D 
issue of gratuity, when they approached CLB, it found that this issue was not 
contemplated when parties executed the two documents, and as there was 
dispute between parties regarding interpretation clause in those documents, it 
could not pass any order under Section 634A-High Court upholding order 
ofCLB-On appeal, held: Order ofCLB under 402 was not an interim order; 
it was a preliminary decree enforceable under Section 634A-CLB was bound E 
to execute it, if required, interpret its terms, and parties were bound by that 
interpretation-It was especially so as it was a consent order, and more so 
relating to a family settlement which is to be enforced even if agreed to on 
basis of error, mistake or ignorance of fact as to actual rights of parties. 
Companies Act, 1956-Sections 397, 398 and 402-Powers of Company 
Law Board under Section 402-Held: These are residuary and in addition to 
powers available to it under Section 397(2) and Section 398(2), and permit 
it to make such order it thinks fit to bring to an end matters complained under 
Section 397(1) or preventing matters complained or apprehended under Section 
F 
398(1). 
G 
Companies Act, 1956-Sections 397, 398 and 634A-Enforcement of 
orders a/Company Law Board under Section 634A-Held: Word 'any order' 
in opening of section indicates that all orders made by Company Law Board 
97 
H 
98 
SUPREME COURT REPORTS 
(2006] 3 S.C.R. 
A on application under Sections 397 and 398 are enforceable like decrees without 
any limit on nature of the order. 
Appellant and respondent are two groups of close family relatives 
having equal shareholding in respondent no. I company. Appellant filed 
a company petition before Company Law Board (CLB), under Sections 
B 397 and 398 of Companies Act, 1956 complaining that they were ousted 
from management of the company. CLB removed the Chairman and 
Managing Director of the company. A retired judge was appointed as 
Chairman, who tried to resolve matters between the parties. A 
Memorandum of family arrangement (MOFA) and Transfer Document 
C were executed between the parties. On 19th August, 1999, CLB passed 
an order with these two documents as integral part, and directed the 
parties to execute transfer deeds to affect transfer of relevant assets. This 
order was passed under Section 402. It also gave liberty to the parties to 
approach CLB in case there was some difficulty in implementing the order. 
In terms of MOFA, respondent gave a notice of completion. This notice 
D was objected to by appellant as not being in terms of the Transfer 
Document. Hence they filed an application under Section 634A questioning 
validity of the notice, and praying for direction to respondent to proceed 
as per the MOFA and the Transfer Document. During the pendency of 
this application, respondent filed an application for recalling of order of 
E the CLB. During hearing before the CLB, issue was raised as to accrued 
liability of gratuity, and there was dispute between the parties on it. CLB 
held that liabilities of gratuity were not contemplated by the parties when 
they entered the MOFA and the Transfer Document, that there was no 
meeting of mind on this issue and that there was a bona fide dispute 
between the parties with to regard to interpretation clause in these two 
F documents. Accordingly, it held that it could not pass any order on 
application under Section 634A and rejected it. It also rejected application 
filed by respondents. Appellant appealed to the High Court against this 
order. High Court upheld the order of CLB and dismissed the appeal. 
Hence the present appeal. 
G 
Appellants contended that the CLB could not refuse to execute its 
own order, especially as it w

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