CRUX:
Vasantha Mills Limited vs Nandakumar Athappan on 30 December, 2015- The appeals were filed under Section 10 F of the Companies Act to have the Hon'ble Company Law Board's order of December 30, 2015 set aside.
DATE OF JUDGMENT:
23/09/2016
JUDGE:
HonourableDr. Justice G. Jayachandran
PARTIES:
Vasantha Mills Limited(Petitioner)
Nandakumar Athappan(Respondent)
SUMMARY
The appeals were submitted under Section 10 F of the Companies Act, requesting that the Hon'ble Company Law Board's December 30, 2015 order be overturned.
Background Facts
The appeals were filed within the time limit allowed under Section 10 F of the Companies Act, 1956. The orders in question in these appeals are dated December 30, 2015 and December 31, 2015. During the month of March 2016, the appeals were submitted. Section 434 of the Companies Act, 2013, had not been notified at the time these appeals were filed. On June 1, 2016, the Central Government exercised the power provided by Section 419(1) of the Companies Act, 2013, by establishing NCLT and NCLAT. On the same day, the National Company Law Tribunal was notified of ongoing matters, proceedings, or cases before the Company Law Board (NCLT). Sections 434 (1) (a) and (b) have been in effect from the beginning of the year.
The governing clause in appeals against CLB orders issued before June 1, 2016, is Section 434(1)(b), which reads as follows: - Comp. Appeal Nos.5 to 10 of 2016 and C.M.P.Nos.12006 to 12009 of 2016, 2839, 12840 of 2016, and 4491, 4496 of 2021 https://www.mhc.tn.gov.in/judis/ “Section 434 (1) ( b) Any person aggrieved by any decision or order of the Company Law Board made before such date may file an appeal to the High Court on any question of law arising out of such order within sixty days from the date of communication of the decision or order of the Company Law Board to him.
Submission By Learned Counsel of Respondent
The learned Senior Counsel for the respondent-ORE Holdings asserted that, following the appellate Court's ruling, the CLB's order was clarified by the appellate Court's order dated 05/08/2011. The appellants have never requested a time extension to fulfil their pledge to repay the invested funds with interest in the past. The ‘remote need' to invoke the second limb of the CLB order, namely, land transfer, stemmed from their failure to pay the money within the time given and no sign of endeavour to pay the money.
The declaration of title and vesting of the property is a natural result of the decree, not anything that happens before or after it. The CLB, which was established under Section 10 E of the Companies Act, will enforce Comp. Appeal Nos.5 to 10 of 2016 and C.M.P.Nos.12006 to 12009 of 2016, 2839, 12840 of 2016, and 4491, 4496 of 2021. CLB must only take the case to court if it is unable to carry out the order. As a result, these appeals, which do not raise any legal issues, are a misuse of the legal system to prevent the decree holder from reaping the benefits of the decree.
The High Court’s Decision
The properties of VML, i.e. 17.15 acres, are to be held as security and only in the event of a remote requirement, the properties of VML, i.e. 7.80 acres, are to be conveyed to ORE and 7.80 acres to Athappan, as indicated by the Division Bench of the High Court in its judgement dated 05/08/2011. As a result of the High Court's remark, it is obvious that the property is to be held only as security and cannot be conveyed unless there is a pressing need.
In this case, the CLB erred in vesting the land in the decree holder without any material or justification of remote need https://www.mhc.tn.gov.in/judis/ Comp. Appeal Nos.5 to 10 of 2016 and C.M.P.Nos.12006 to 12009 of 2016, 2839, 12840 of 2016, and 4491, 4496 of 2021. The property is worth a lot more than the original loan amount with interest. The property used as security, which is worth more than the amount owed, cannot be transferred. The idea of proportionality must be followed by the execution court. The CLB made a severe error in this case by failing to evaluate the proportionality of the amount owed and the value of the property conveyed, which is retained only as security.
Conclusion
CLB must be governed by natural justice principles in the exercise of its powers and the execution of its functions, and it must act with discretion. It can also regulate its own procedure [see Sections 10 E (5) and (6)]. When dealing with applications filed under Section 634 A of the Act, the CLB acts as the executing court. CLB has the authority to carry out its own orders under Section 634A. It allows CLB to file an execution petition with a court if it is unable to carry out the order.
CLB's power to execute is left to its discretion https://www.mhc.tn.gov.in/judis/ Comp. Appeal Nos.5 to 10 of 2016 and C.M.P.Nos.12006 to 12009 of 2016, 2839, 12840 of 2016 and 4491, 4496 of 2021. As a result, when CLB executes order XXI of CPC, the application of CPC in general or order XXI of CPC in particular is not envisioned under the Companies Act. The notion of natural fairness should be followed as a guideline. The appellants' case is not that CLB, in carrying out the order, breached the natural justice principle.
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