COMPANY LAW BOARD, NEW DELHI BENCH
Rockman Breweries (TNK) Ltd.
JUSTICE D.R. Deshmukh, CHAIRMAN
CA NOS. 236 & 375 OF 2012
CP NOS. 77 (ND) OF 2009
DECEMBER 13, 2012
1. This order shall govern CA No. 236/2012 filed under section 634-A of the Companies Act 1956 (henceforth the Act) by the Petitioner in CP No. 77 (ND)/2009 inter alia for enforcement of the order dated 23/03/2012 and CA No. 375/2012 filed by Rockman Breweries (TNK) Ltd. (henceforth the company) for an order unfreezing two Current Bank Accounts of the company.
2. CP No. 77(ND)/2009 u/s. 397, 398, 235, 237, 402, 403 and 406 of the Companies Act 1956 was filed on 24/08/2009 by Mr. K.K. Ahuja the Power of Attorney (POA) holder of the Petitioner Mr. Abhishek Ahuja. It was alleged that without notice the share-holding of the Petitioner was reduced from 41.5% to an abject minority on account of two illegal allotments of equity on 21/03/2009, pursuant to an illegal increase in the authorised share-capital on 20/03/2009. The Petitioner did not mention the actual percentage of his shareholding in the company on the date of the petition. The Respondents raised an objection by filing CA No. 458/2009 that the petition was not maintainable and was liable to be dismissed as the Petitioner did not satisfy the eligibility criteria under section 399 of the Act. By order dated 26/04/2011, the matter was adjourned for hearing the question of maintainability with a direction to the Respondents to raise all pleas on maintainability raised by them in CA No.458/2009 in their response. Response to the petition was filed on behalf of the Company and Respondent No.2 Mr. C.S. Agarwal on 30/08/2011. On 01/09/2011 it was directed that the issue of maintainability being a mixed question of law and fact should be adjudicated after hearing the petition finally. In other words after finally heating the petition, the question of maintainability would be adjudicated first and only after the petition is held to be maintainable, the reliefs prayed in the petition shall be considered.
3. As agreed by the parties, on 07/12/2011 the petition was listed for final hearing on 20/01/2012. The Memorandum of Settlement (MoS) dated 26/04/2010 and the Shareholders Agreement (SHA) dated 01/05/2010 surfaced for the first time on 02/02/2012 when a note was taken of the fact that the Petitioner had, in the rejoinder Para-2 disclosed the MoS dated 26/04/2010 and the SHA dated 01 /05/2012 between the parties. It was also noted that MoS dated 26/04/2010 was arrived between the parties for the purpose of a global settlement. It was also noted that even Respondent No. 1 had, in its response, placed reliance on the MoS dated 26/04/2010. Ld. Counsel appearing for the Petitioner placed on record, for the first time on 02/02/2012 photocopies of the MOS dated 26/04/2010 and SHA dated 01/05/2010. The Petitioner and the Respondent No. 2 thereafter sought adjournments for settlement and finally on 28/02/2012, a consensus was arrived between the parties and minutes for the order to be passed in terms of such consensus were reduced to writing and signed by Mr. K.K. Ahuja, the POA for the Petitioner and R-2 Mr. C.S. Agarwal which were then placed on record.
4. On 09/03/2012, Mr. C.S. Agarwal R-2 filed CA No. 114/2012 for cancellation of the terms contained in the minutes of settlement signed by the POA for the Petitioner and R-2. CA No. 114/2012 was heard on 23/03/2012. Following order was passed on 23/03/2012:-
“Heard CA No. l14/2012 filed by the Respondents. Order dated 28/02/2012 and minutes dated 28/02/2012 for the order to be passed in terms of the consensus arrived at between the parties perused. In compliance to para-4 thereof the Petitioner has already submitted in a sealed envelope a letter addressed to EOW Delhi informing about the settlement with a request to keep the complaint in abeyance until the amount as agreed to between the parties and mentioned in para-2 of the minutes are paid.
The minutes dated 28/02/2012 were arrived at between the parties after much deliberation. The said minutes were formulated on a clear consensus arrived at between the parties for complying with the terms and conditions contained therein. This is also reflected in the undertaking given by the parties on 03/03/2012. I accordingly order in terms of the consent terms contained in the minutes dated 28/02/2012 which shall be strictly adhered to and complied by the parties. The minutes dated 28/02/2012 shall form part of this order and shall be enforceable at the instance of either party.
The apprehension of the Respondent No.2 in CA 114/2012 is due to the letter dated 02/03/2012 sent by the EOW Delhi to Ms. Natasha Aggarwal, Mrs. Kavita Agarwal, Ms. Anjali Bhardwaj and Mr. C.S. Agarwal. However, there is nothing to indicate in the application CA No. 114 or the affidavit filed in support thereof that the investigation is continued at the behest of the Petitioner. The Petitioner has already filed with the Bench Officer a letter addressed to the EOW Delhi with an affidavit to request that until the payment of the amount as narrated in para-2 of the minutes is made the complaint be kept in abeyance.
Ms. Ranjana Roy Gawai, counsel for the Respondents states on instructions from Mr. C.S. Agarwal, R-2 who is present in the court that R-2 is still willing to honour the commitment recorded in the minutes dated 28/02/2012 if investigation is kept in abeyance by the EOW Delhi.
It appears that the EOW is unaware about the terms of the settlement arrived at between the parties. The apprehension expressed by the Respondents in CA No. 114 could be guarded by sending a copy of this order alongwith the minutes which is a part thereof to the EOW, Delhi for information so that the investigation on the complaint of the Petitioner is kept in abeyance. Bench Officer to comply forthwith. If the Respondents default in making payment as contemplated in para-2 of the minutes which forms part of this order intimation thereof shall be sent to EOW.
The Petitioner and the R-2 shall strictly adhere to and abide by the terms and conditions of the minutes forming part of this order.
With the above directions, CA No. 114/2012 stands dismissed”.
5. Few important facts which deserve to be noted are as follows:-
(a) CP No. 77(ND)/2009 was not disposed off in terms of the proposed minutes for the order duly signed by the PAO holder for the Petitioner and the Respondent No. 2.
(b) In the order reproduced above, the counsel appearing for the Respondents had reaffirmed the commitment only of R-2 to honour the terms recorded, in the proposed minutes dated 28/02/2012.
(c) In the penultimate paragraph of the order, a direction was given only to the Petitioner Mr. K.K. Ahuja and R-2 Mr. C.S. Agarwal who were the only signatories to the proposed minutes for the order in terms of the consensus arrived on 28/02/2012, to adhere to and abide by the terms and conditions of the minutes forming part of this order.
(d) The minutes filed on 28/02/2012 were signed by Mr. K.K. Ahuja, the POA holder for the Petitioner and R-2 – Mr. C.S. Agarwal in his personal capacity and not as an authorised representative of the Board of the company.
(e) The proposed minutes for the order filed on 28/02/2012 start with the words “In terms of the Settlement Agreement dated 26/04/2010” and clearly shows that the solemn document containing the terms of settlement is the MoS dated 26/04/2010 in terms of which the POA holder for the Petitioner and R-2, Mr. C.S. Agarwal, had agreed to certain terms and reciprocal obligations.
(f) In the application CA No. 236/2012 the Petitioner does not seek enforcement of the terms of settlement contained in the MoS dated 26/04/2010 but only seeks an execution of the order dated 23/03/2012 which also does not take note of the terms and conditions in the MoS dated 26/04/2010.
(g) The question of maintainability of the CP No. 77(ND)/2009 raised by the Respondents on the ground that the Petitioner does not satisfy the eligibility criteria u/s 399 of the Act is yet to be adjudicated.
(h) The Petitioner has filed an affidavit dated 08/08/2012 that the Petitioner group has received a payment of Rs. 60 lacs by way of a Pay Order and Rs. 40 lac in cash from R-10, Rockman Projects Ltd. The affidavit also acknowledges receipt of a further sum of Rs. 21 lac in terms of the order dated 05/05/2012 and 07/05/2012. The said affidavit which is completely silent regarding the proposed minutes for the order filed on 28/02/2012 states as under: –
“I say that the Memorandum of Settlement (MOS) dated 26/04/2010 contemplated a payment of Rs. 13.25 crore or as provided therein. Pursuant to schedule 1 of MoS, the cheques on various dates were presented by the Petitioner Group. However, all the said cheques bounced for various reasons such as ‘insufficient funds’ or for the reasons ‘drawers signature to operate account not received’. In view of the cheque dishonoured on 04.05.2010, the petitioner group received a payment of Rs. 60,00,000/- by way of Pay Order from Rockman Projects Limited and subsequently cash of Rs. 40,00,000/- from. Rockman projects Ltd. The Petitioner has not received any other amount in terms of MoS dated 26.04.2010.
I say that thereafter in terms of order dated 05.05 2012 and 07.05.2012, the petitioner has received a further sum of Rs. 21,00,000/-“.
(i) The affidavit of R-2 Mr. C.S. Agarwal dated 24/07/2012 contains the following statement in para-11.
That R-l, R-2 and R-3 collectively paid Rs. 3 crore. details of which are annexed herewith as (Annexure-V) and due to default in further repayment; on 28th February, 2012 R-2 again agreed before this Hon’ble Board for the ‘revised schedule of payment’ in order to pay the balance amount of Rs. 10.25 crore and the same undertaking was reendorsed before this Hon’ble Board again and again. But somehow the R-2 is failed to arrange the committed amounts due to the sluggish global economic conditions. That the above commitments and acts clearly show that the R-2 is not in denial anywhere for the money which he has borrowed from the Petitioners and willing to pay the same as soon as the economic condition improves”.
After the order dated 23/03/2012, the Respondent No.2 had filed another affidavit undertaking to pay Rs. 4 crore to the Petitioner as due on 01/06/2012 by 30/06/2012. A cheque for Rs. 21 lacs in favour of M/s. Ahuja Impex Pvt. Ltd. was also deposited with the Bench Officer which was substituted by R-2 with a Demand Draft for Rs. 21 lac on 07/05/2012 which was received by the Petitioner. The relevant para No.3 of the affidavit dated 07/05/2012 of R-2 is as under:-
“In view and in compliance of the Order dated 04/05/2012 of this Hon’ble Board, I hereby commit to make payment of Rs. 4 crores to the Petitioners, which would be due on 01/06/2012, by 30/06/2012. I further undertake to make the remaining payments to the Petitioners in terms of the schedule of payment in para-2 of the minutes dated 28/02/2012 and pay interest @ 18% per annum on any delay in payment of instalment which have fallen due under the consent order dated 23/03/2012”.
This lends full support to the view taken by me that under the proposed minutes of the order filed on 28/02/2012 the Respondent No.2 and not the company, i.e. R-l had undertaken the liability to pay the amount of Rs. 10.25 crore to the Petitioner. Even the penultimate paragraph of the order dated 23/03/2012 imposes the liability of abiding by the reciprocal terms and conditions contained in the minutes filed on 28/02/2012 on the Petitioner and R-2 and none else. This, in my considered opinion, is the appropriate interpretation of the terms contained in the proposed minutes filed on 28/02/2012 and the order dated 23/03/2012.
6. A perusal of the MoS dated 26/04/2010 shows that R-2 Mr. C.S. Agarwal was authorized by a Board Resolution passed in R-10, i.e. Rockman Projects Ltd., R-1, i.e. Rockman Breweries (TNK) Ltd., and another company Mega Lubes India Ltd. and Rockman Breweries Ltd. and all such resolutions were passed by the Board of the above mentioned companies on 26/03/2010.
7. Under the MoS dated 26/04/2010, Rockman Projects Ltd. is referred to as ‘Rockman Projects’, Rockman Breweries TNK Ltd. is referred to as ‘Rockman Breweries TNK’, Mega Lubes India Ltd. is referred to as ‘Mega Lubes’ and Rockman Breweries Ltd. is referred to as ‘Rockman Breweries’. Mr. C.S. Agarwal, R-2 is referred as under:
“Mr. C.S. Agarwal resident of 1/20 Sarva Priya Vihar, New Delhi-110 016 hereinafter collectively referred to as ‘Agarwals’ (which expression shall unless it be repugnant to the context or meaning thereof be deemed to mean and include their respective legal heirs, nominee(s), permitted assigns, executors, administrators, constituted attorneys, friends and associates) of the 8th Part.
The Parties of the 4th part to 8th part are collectively referred to as the “Agarwals & his Group” and individually as a “Party”.
The Ahujas, Agarwals, Rockman Projects, Rockman Breweries TNK and Rockman Breweries are collectively referred to as the “Parties” and individually as a “Party” and wherever companies are collectively referred to as ‘Companies'”.
8. In para 5.1 of the terms of settlement in the MoS dated 26/04/2010 it has been stated as under-
“That it has been agreed by parties that Aggarwals will pay a consolidated sum of Rs. 13,25,00,000/- (Rupees Thirteen Crore Twenty Five Lacs only) towards ‘Settlement Amount (which includes the amount for settlement of all disputes between the parties and sale consideration amount for transfer and vesting of 42000 shares held by Abhishek Ahuja in Rockman Brewries and 50000 shares held by Abhishek Ahuja) against all disputes by way of five instalments through cheques commencing from 4th May, 2010 and will make the complete payment by or before 7th September, 2010 subject to Clause 5.11 of this MoS and in terms of the schedule 1 as appended with the present MOS”.
It at once comes to notice that the words “Agarwals and his group” or “Parties” or “Companies” has not been used in this clause. It thus appears that under the MoS dated 26/04/2010, the liability to pay a consolidated amount of Rs. 13,25,00,000/- (Rupees Thirteen Crore Twenty Five Lac only) rests solely on the Aggarwals, i.e. Mr. C.S. Agarwal R-2, his respective legal heirs, nominee(s), permitted assigns, executors, administrators, constituted attorneys, friends and associates.
9. I have considered the arguments advanced and case law cited by the parties and perused the record with utmost circumspection. For the following reasons, I am of the considered opinion that the proposed minutes for the order arrived between the Petitioner and R-2 and made a part of the order dated 23/03/2012 cannot be enforced against the Respondent Company, i.e. R-l.
(i) The words ‘in terms of the agreement appearing in the proposed minutes’ leave no room for any doubt that the solemn document between the parties is the Memorandum of Settlement between the parties dated 26/04/2010. Therefore the proposed minutes dated 28/02/2012 have to be read in terms of the MoS dated 26/04/2010 and not in derogation thereof. Under the MoS dated 26/04/2010 the liability to pay a sum of Rs. 13.25 crore rests with ‘Agarwals’ which under the MoS refers to Mrs. C.S. Agarwal R-2 and not the Respondent company.
(ii) The proposed minutes filed on 28/02/2012 do not show that Mr. C.S. Agarwal R-2 was authorized by the Board of the company, i.e. R-1, to sign the proposed minutes for the order. Even in the order dated 23/03/2012, the counsel for the Respondents had reiterated only the commitment of R-2 to honour the terms recorded in the minutes dated 28/02/2012. Besides, the penultimate paragraph of the order dated 23/03/2012 directs only the Petitioner and R-2 to strictly adhere to and abide by the terms and conditions of the Minutes. Para 5 & 6 of the order dated 18/07/2012 also refers to the scant regard shown by R-2 for the orders passed by this Board by breaching the assurances and undertakings given by him on several occasions. Therefore only R-2 was asked to show cause, why action should not be initiated against him for contempt of the order dated 04/05/2012 and 14/05/2012. Similarly even in the order dated 18/07/2012 counsel for the Respondents admitted that R-2 was in complete breach of his obligation to deposit money under the settlement terms. Thus, the proposed minutes for the consent terms which was made a part of the order dated 23/03/2012 cannot be read dehors the terms containing the MoS dated 26/04/2010. Since under the MoS dated 26/04/2010 the liability to pay a sum of Rs. 13.25 crore was not of the Respondent-company but solely rested with Mr. C.S. Agarwal, R-2, the freezing of the account of the Respondent company would no longer be justified.
(iii) Order dated 14/08/2012 records the statement of the Ld. counsel for R-l company that the outstanding liability of R-l under the MoS dated 26/04/2010 is only Rs. 9.5 lac. A cheque No. 2825 dated 14/08/2012 drawn on Syndicate Bank for Rs.9.5 lac in favour of Ahuja Impex Ltd. was deposited by the Company R-1 in the safe custody of the Bench Officer. This further finds support from Annexure-V to the affidavit dated 24/07/2012 of R-2 which shows the status of outstanding amount from the company as on 30/06/2012 as per MoS dated 26/04/2010 as Rs. 9.5 lacs. It shows that out of the sum of Rs. 97,50,000/-outstanding towards the company, a sum of Rs. 88 lacs has already been paid in cash to the Petitioner and the remaining outstanding amount is only Rs. 9.5 lac. This statement stands unrebutted as of now. The Petitioner has not filed any affidavit to deny that the outstanding liability of the R-l company remains only at Rs. 9.5 lacs. In his affidavit dated 24/07/2012, R-2 has admitted his liability to pay Rs. 10.25 crore to the Petitioner. This is quoted in para 5(i) supra.
(iv) The minutes for the proposed order also show that there was difference in the amount paid in terms of MoU dated 26/04/2010 which according to the Respondents was Rs. 3 crore whereas according to the Petitioner it was Rs. 1 crore. This was to be reconciled between the parties. Such reconciliation is yet to be done. Thus enforcement of the order dated 23/03/2012 shall remain incomplete unless the amount of Rs. 3 crore is reconciled between the Petitioner and R-2.
(v) On 06/08/2012, ld. counsel for Rockman Projects Limited has stated that the amount payable to M/s. Rockman Projects Limited under the MoS dated 26/04/2010 has been paid to the Petitioner through PDCs. Ld. counsel for the Petitioner has sought time to place on record that PDCs deposited by R-10 with and received by him from the Escrow were deposited with the bank but most of the PDCs had bounced. Till date, except filing an affidavit dated 08/08/2012, the Petitioner has not filed any detailed statement of the PDCs received by him to show as to which of the PDCs had bounced. The Affidavit dated 08/08/2012 records an admission by the Petitioner that it has received a payment of Rs. 1 crore from R-10 i.e. Rockman Projects Ltd. This amount of Rs. 1 crore and another amount of Rs. 21 lac received by the Petitioner also remains to be adjusted from the sum of Rs. 10.25 crore.
(vi) It is also to be noted that even though admittedly the MoS was arrived between the parties on 26/04/2010 it did not surface before this Board until 02/02/2012 and none of the parties has sought enforcement thereof till now. The application CA No.236/2012 also does not seek enforcement of MoS dated 26/04/2010. It is pertinent to mention that as the minutes filed on 28/02/2012 are subject to the terms of the MoS dated 26/04/2010, its enforcement will remain incomplete without complying with the terms of the MOS dated 26/04/2012.
(vii) A perusal of the order dated 23/03/2012 shows that the petition CP No.77(ND)/2009 has not been disposed off in terms of the minutes dated 28/02/2012 or in terms of the MoS dated 26/04/2010. To reiterate, even the order dated 23/03/2012 makes no mention of the MoS dated 26/04/2010. Even the CA No.236/2012 does not seek enforcement of MoS dated 26/04/2010. Since the minutes forming basis of the order dated 23/03/2012 record that they are strictly in terms of the Settlement terms dated 26/04/2010, the argument that all the Respondents have conceded their joint and several liability to pay the sum of Rs. 10.25 crore cannot be accepted as MoS dated 26/04/2010 does not record the liability of the Respondent-companies to jointly and severally pay a sum of Rs. 10.25 crore to the Petitioner. On the contrary, it records in unmistakable terms that the liability to pay the above amount along with an amount of Rs. 3 crore rests solely with Mr. C.S. Agarwal R-2. As already stated, since the minutes drawn on 28/02/2012 does not show that Mr. C.S. Agarwal (sole signatory) was duly authorized by the Board of the Respondent-Company to sign the minutes, the terms contained in the proposed minutes filed on 28/02/2012 does not bind and hence cannot be enforced against the Respondent-company.
(viii) The issue relating to maintainability of the petition u/s. 399 of the Act raised by the Respondents is alive and is yet to be adjudicated. Under the order dated 01/09/2011, this issue is to be first adjudicated after final hearing. It would therefore be unjust to allow the Petitioner to let his footprints remain in the Company Petition, the maintainability of which is under challenge, while seeking enforcement of any order which would be in the nature of final adjudication of the petition. Therefore, in the peculiar facts and circumstances mentioned above, it would be appropriate if an order is passed after final hearing of the petition on the issue of maintainability of the petition as also the enforcement of the order dated 23/03/2012 against the Respondent No. 2.
(ix) Since the proposed minutes containing the terms of consensus filed on 28/02/2012 does not contain any authorization by R-l in favour of Mr. C.S. Agarwal R-2 to sign such minutes on its behalf, the minutes dated 28/02/2012 and the order dated 23/03/2012 cannot be enforced against the R-l company. It is open to the parties to file a joint application for disposal of the petition (CP No. 77(ND)/2009) in terms of the MoS dated 26/04/2010. In the present scenario, as prayed in CA 236/2012, there is no justification for passing an order appointing Receiver/Administrator in the R-l company or to injunct the Respondents from operating the bank accounts of R-1. The direction contained in para 6(a) of the order dated 18/07/2012 for freezing all accounts of Rockman Breweries TNK Limited and stopping any transactions in such accounts till further orders therefore deserves to be and is accordingly recalled. It is open to the Petitioner to receive and encash the cheque for Rs. 9.5 lac deposited by R-l with the Bench Officer.
10. In view of the conduct of Mr. C.S. Agarwal R-2 and his repeated breach of assurances and undertakings given in this Board, I direct that it is open to the Economic Offences Wing (EOW) to continue with the investigation on the complaint of the Petitioner against Ms. Natasha Agarwal, Mrs. Kavita Agarwal, Ms. Anjali Bhardwaj and Mr. C.S. Agarwal. The direction to keep the investigation on the complaint of the Petitioner in abeyance as contained in the order dated 23/03/2012 is recalled.
11. As a result, while allowing CA No. 375/2012, the CA No. 236/2012 for enforcement of the order dated 23/03/2012 is dismissed qua the R-1 company. By construing the term of the MoS dated 26/04/2010 and the minutes dated 28/02/2012 to hold that the order dated 23/03/2012 cannot be enforced against R-l it should not, in any manner be understood as a refusal to execute the order dated 23/03/2012 against the Respondent No. 2 Mr. C.S. Agarwal. It is however clarified that the direction contained in para 6(b) and (c) and para 7 of the order dated. 18/07/2012 shall remain in force till the enforcement, of the order dated 23/03/2012 against Respondents No. 2 is considered and determined after hearing the Company Petition No. 77(ND)/2009 finally. In the light of my observations in this order, after hearing the petition finally, appropriate orders shall be passed in relation to the prayer in CA No. 236/2012 for execution of the order dated 23/03/2012 against R-2.
12. CP No.77(ND)/2009 and CA No.236/2012 are now listed for final hearing in terms of the Order dated 01/09/2011 and the observations made in this order, on 13th December, 2012 at 10.30 A.M.