Full Judgment Text
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CM Nos. 17175/07(stay) & 9432/09 (vacation of stay)
in FAO(OS) No.500/2007
JAGATJIT JAISWAL & ANR. …..Appellant through
Mr. P.V. Kapur, Sr. Adv. with
Mr. Ashim Vachher &
Mr. Achal Gupta, Advs.
versus
KARAMJIT SINGH JASWAL & ANR …..Respondent through
Dr. A.M. Singhvi, Sr. Adv.
with Ms. Malini Sood, Adv.
% Date of Hearing: July 23, 2010
Date of Decision: August 20, 2010
CORAM:
* HON'BLE MR. JUSTICE VIKRAMAJIT SEN
HON'BLE MR. JUSTICE A.K. PATHAK
1. Whether reporters of local papers may be
allowed to see the Judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the Judgment should be reported
in the Digest? Yes
VIKRAMAJIT SEN, J.
1. By these Orders, we shall dispose of CM No.l7175/2007
dated 12.12.2007 filed by the Appellants for appropriate orders,
inter alia, restraining the Respondents from discontinuing their
salary, perks and benefits; and for restraining the Respondents
from transferring, pledging, creating any third party rights,
parting with possession or otherwise dealing with in any manner
whatsoever the shares detailed in the Annexure. On the first
FAO(OS)500/2007 Page 1 of 9
date of hearing, that is, 14.12.2007, the following Order was
passed:
Issue notice. Learned counsel for the respondents may
file their Objections within six weeks. In the meantime
order dated 25.8.2006 passed by the learned Single
Judge shall continue to remain in operation subject to
the appellants filing undertaking in this court that in
case the appeal is eventually dismissed, the amount
received by them towards, salary, perquisites and other
benefits during the intervening period shall be
refunded to the company.
Hearing of this application has been deferred from time to time.
2. CM No.9432/2009 was filed on 13.7.2009 by the
Respondents seeking vacation of the aforementioned Order
dated 14.12.2007. The gravamen of the application is that the
substratum of the Appellants‟ case has vanished because their
entire shareholding in Jagatjit Industries Limited as well as L.P.
Jaiswal & Son Private Limited have been sold by them for a
consideration of ` 36,50,00,000/-. The argument is that interim
payment of salary and perks, passed on 14.12.2007, was
predicated on the Appellants‟ status as shareholder as well as
their erstwhile position in the Management of Jagatjit Industries
Limited.
FAO(OS)500/2007 Page 2 of 9
3. It is beyond the pale of the controversy that the sum of
` 36,50,00,000/- has been received by the Appellants and as a
consequence thereof, the Appellants do not hold any shares in
Jagatjit Industries Limited or L.P. Jaiswal & Son Private Limited.
This Arrangement was arrived at before the Company Law
Board (CLB), Principal Bench, New Delhi on 12.3.2009. The
CLB, in its Order dated 12.3.2009, recorded the compromise
between the parties as follows:-
4. In terms of the settlement, the Petition is dismissed
with the directions that
1. The Respondents will buy the entire shareholding of
the Petitioners in JIL and L.P. Jaiswal & Sons Pvt. Ltd.,
which as per the company‟s record is as follows:
Jagatjit Industries Limited
i) Petitioner Nos.1-3 28,95,524 shares
ii) Petitioner Nos.4-5 28,98,588 shares
(and other members of JJ Group)
L.P. Jaiswal & Sons Pvt. Ltd.
i) Petitioner No.1 300 shares
ii) Petitioner Nos.2 & 3 NIL
iii) Petitioner Nos.4-5 NIL
iv) JJ and other members of 300 shares
JJ Group
(Jagatjit Jaiswal)
The above shares will be purchased on the following
mutually agreed terms and conditions:
FAO(OS)500/2007 Page 3 of 9
2. The above shares of APJ Group and JJ Group will be
purchased at a value of Rs.36,50,00,000/- (Rupees
thirty six crores fifty lacs) each.
3. The Respondent No.1 Company will pay for shares of
Petitioners only by buyback of shares in cash and
consequently the equity share capital of the Company
will stand reduced to that extent. Payment will be made
within 3 months from the date of the order of CLB.
4. All allegations of oppression and mismanagement
and challenges to the preferential allotment both
before this Hon‟ble Board and before SEBI are
withdrawn unconditionally by the Petitioners and JJ and
the issue of shares with DVR are upheld as valid by the
Company Law Board as being in accordance with the
Articles of Association of the Company and provisions
of the Companies Act. This direction and consent will
take effect on the date of payment by the Respondent
to the Petitioners in terms hereof.
5. All interim orders passed are vacated, and the
Respondent will be entitled to sell/transfer/mortgage
any immovable assets as it deems fit from the list
annexed hereto as Annexure A. The proceeds thus
realized will be deposited in a separate account and
utilized for any other purpose only after the above
payments are first made to the Petitioners. Also
annexed hereto as Annexure B is a list of the properties
which the Company does not propose to sell presently.
6. All parties will file an Affidavit of compliance of this
order within 10 days.
7. It is agreed that this order will not affect any other
pending proceedings between the parties except that
FAO(OS)500/2007 Page 4 of 9
the allegations of oppression and mismanagement and
challenges to the preferential allotment will not be
raised by the Petitioners and JJ before any other
Court/Forum.
4. It is worthwhile to emphasize that the aforementioned
Settlement has occurred after the Admission of the present
Appeal and the passing of the interim Orders dated 14.12.2007.
Failure to specifically mention the effect of the Settlement on
these interim Orders is conspicuous by its absence. The
controversy would not have arisen had the Consent Terms dated
28.2.2009 (duly signed by the parties) clarified this conundrum.
If the understanding was that the salary, perquisites etc. that
were being received and enjoyed by the Appellants till March,
2009 were to continue, this ought to have been so spelt out by
the Appellants. Conversely, the Respondents should have taken
care to clarify that consequent upon the receipt of the said
sum of ` 36,50,00,000/- by the Appellants, the Order dated
14.12.2007 would become ineffectual.
5. The situation is worse confounded because Clause 7 of the
Consent Terms, which received the imprimatur of the CLB by
way of paragraph 8 of the said Order, articulates the Agreement
that –“the orders, presumably of the CLB, would not affect any
other pending proceedings between the parties except that the
FAO(OS)500/2007 Page 5 of 9
allegation of oppression and mismanagement and challenges to
the preferential allotment will not be raised by the Petitioners
and JJ (Appellant) before any other court”.
6. In the Order impugned in the Appeal, the learned Single
Judge has comprehensively discussed the rival contentions of
the parties with regard to Appellants‟ Petition under Section 9
of the Arbitration & Conciliation Act, 1996 (A&C Act for short).
The issue was whether Clause 9 of the Memorandum of Family
Settlement (MOFS), dated 30.3.2000, amounted to an
Arbitration Agreement. The conclusion of the learned Single
Judge was that there was no binding or enforceable arbitration
agreement between the parties and hence the Petition itself was
not maintainable. In such a situation the question of granting
the interim relief prayed for by the Appellants/Petitioners
obviously did not arise. The Prayers contained in CM
No.17175/2007 are in pari materia with the Prayers contained
in the Petition under Section 9 of the A&C Act.
7. There can be no gainsaying that where the Respondents
deny the existence of an Arbitration Clause, it will undeniably be
open to the Petitioners to initiate appropriate legal proceedings
in a Civil Court. There is always an awkward ambivalence felt by
the Plaintiffs who may have filed a suit for injunction etc. as any
favourable orders may be set to naught in the event the
FAO(OS)500/2007 Page 6 of 9
Respondents assert the existence of an Arbitration Agreement.
This is not the situation before us. If any doubt had existed, it
was set at rest by the impugned Order of the learned Single
Judge which accepted the Respondents‟ version that no
Arbitration Clause existed. The learned Single Judge was
concerned with the existence or absence of an Arbitration
Clause and, therefore, was not called upon to discuss and decide
whether the Appellants/Petitioners had made out a good case
for the grant of the interim relief which is the same in the
Petition under Section 9 of the A&C Act as well as in the Appeal
before us. We are, therefore, principally concerned with the
nodus whether the Petition under Section 9 of the A&C Act was
maintainable and that was entirely dependent on whether an
Arbitration Clause/Agreement existed between the parties. At
the highest, if the decision in the Appeal were to be in the
favour of the Appellants, the matter would be remanded to the
learned Single Judge for taking a decision as to whether the
injunction prayed for in the Petition under Section 9 of the A&C
Act ought to be granted or refused.
8. In these circumstances, the interim Order passed on
14.12.2007, in our opinion, travels far beyond the contours of
the Appeal before us. We cannot lose sight of this fact because,
as we have already noted above, there was no impediment for
FAO(OS)500/2007 Page 7 of 9
the Appellants to have initiated civil proceedings seeking the
very same relief that they had prayed for in the subject Petition.
9. Having said that, we feel duty-bound to return a prima
facie finding on the merits of the interim prayers made before
us. The interim Order was passed much before the compromise
between the parties. At this stage of the proceedings, it is
preponderantly evident that the injunctive relief was predicated
on the factum of the Appellants being principal/equal
shareholders in L.P. Jaiswal & Son Private Limited and a
substantial shareholder in Jagatjit Industries Limited. By
arriving at the settlement before the CLB, they have sold their
shareholding for a valuable consideration of ` 36,50,00,000/-.
The effect of the sale is that the position prevailing on
14.12.2007 and thereafter till March, 2009 has altered
altogether. Clause 7 mentioned above, no doubt, poses a
problem because of ambiguous and ill-advised wordings. It
seems to us that had the Appellants retained any part of their
shareholdings in Jagatjit Industries Limited or L.P. Jaiswal &
Son Private Limited, it was arguable that these Consent Terms
would not impact upon the present litigation because of the use
of the words „oppression and mismanagement and challenges to
the preferential allotment in the Consent Terms‟. With the sale
of the entire shareholding, the Appellants have been denuded
FAO(OS)500/2007 Page 8 of 9
not only of rights flowing therefrom, but also of any perceived
rights for salary, perquisites etc.
10. There is substantial substance and weight in the argument
put forward on behalf of the Respondents that since Jagatjit
Industries Limited is a public company, payments made
pursuant to private compacts between the parties would not be
rendered illegal. Judicial decisions should steer clear from
ordaining a situation which runs contrary to law.
11. For these reasons, we recall the Order dated 14.12.2007.
We dismiss CM No.17175/2007 and allow CM No.9432/2009.
We make no order as to costs. We also note that the Appellants
have furnished an Undertaking that they shall reimburse all
payments received and perquisites enjoyed as a consequence of
the Orders dated 14.12.2007. We, however, leave the issue open
for decision when the Appeal is itself taken for Final Disposal.
( VIKRAMAJIT SEN )
JUDGE
( A.K. PATHAK )
August 20, 2010 JUDGE
tp
FAO(OS)500/2007 Page 9 of 9
+ CM Nos. 17175/07(stay) & 9432/09 (vacation of stay)
in FAO(OS) No.500/2007
JAGATJIT JAISWAL & ANR. …..Appellant through
Mr. P.V. Kapur, Sr. Adv. with
Mr. Ashim Vachher &
Mr. Achal Gupta, Advs.
versus
KARAMJIT SINGH JASWAL & ANR …..Respondent through
Dr. A.M. Singhvi, Sr. Adv.
with Ms. Malini Sood, Adv.
% Date of Hearing: July 23, 2010
Date of Decision: August 20, 2010
CORAM:
* HON'BLE MR. JUSTICE VIKRAMAJIT SEN
HON'BLE MR. JUSTICE A.K. PATHAK
1. Whether reporters of local papers may be
allowed to see the Judgment? No
2. To be referred to the Reporter or not? Yes
3. Whether the Judgment should be reported
in the Digest? Yes
VIKRAMAJIT SEN, J.
1. By these Orders, we shall dispose of CM No.l7175/2007
dated 12.12.2007 filed by the Appellants for appropriate orders,
inter alia, restraining the Respondents from discontinuing their
salary, perks and benefits; and for restraining the Respondents
from transferring, pledging, creating any third party rights,
parting with possession or otherwise dealing with in any manner
whatsoever the shares detailed in the Annexure. On the first
FAO(OS)500/2007 Page 1 of 9
date of hearing, that is, 14.12.2007, the following Order was
passed:
Issue notice. Learned counsel for the respondents may
file their Objections within six weeks. In the meantime
order dated 25.8.2006 passed by the learned Single
Judge shall continue to remain in operation subject to
the appellants filing undertaking in this court that in
case the appeal is eventually dismissed, the amount
received by them towards, salary, perquisites and other
benefits during the intervening period shall be
refunded to the company.
Hearing of this application has been deferred from time to time.
2. CM No.9432/2009 was filed on 13.7.2009 by the
Respondents seeking vacation of the aforementioned Order
dated 14.12.2007. The gravamen of the application is that the
substratum of the Appellants‟ case has vanished because their
entire shareholding in Jagatjit Industries Limited as well as L.P.
Jaiswal & Son Private Limited have been sold by them for a
consideration of ` 36,50,00,000/-. The argument is that interim
payment of salary and perks, passed on 14.12.2007, was
predicated on the Appellants‟ status as shareholder as well as
their erstwhile position in the Management of Jagatjit Industries
Limited.
FAO(OS)500/2007 Page 2 of 9
3. It is beyond the pale of the controversy that the sum of
` 36,50,00,000/- has been received by the Appellants and as a
consequence thereof, the Appellants do not hold any shares in
Jagatjit Industries Limited or L.P. Jaiswal & Son Private Limited.
This Arrangement was arrived at before the Company Law
Board (CLB), Principal Bench, New Delhi on 12.3.2009. The
CLB, in its Order dated 12.3.2009, recorded the compromise
between the parties as follows:-
4. In terms of the settlement, the Petition is dismissed
with the directions that
1. The Respondents will buy the entire shareholding of
the Petitioners in JIL and L.P. Jaiswal & Sons Pvt. Ltd.,
which as per the company‟s record is as follows:
Jagatjit Industries Limited
i) Petitioner Nos.1-3 28,95,524 shares
ii) Petitioner Nos.4-5 28,98,588 shares
(and other members of JJ Group)
L.P. Jaiswal & Sons Pvt. Ltd.
i) Petitioner No.1 300 shares
ii) Petitioner Nos.2 & 3 NIL
iii) Petitioner Nos.4-5 NIL
iv) JJ and other members of 300 shares
JJ Group
(Jagatjit Jaiswal)
The above shares will be purchased on the following
mutually agreed terms and conditions:
FAO(OS)500/2007 Page 3 of 9
2. The above shares of APJ Group and JJ Group will be
purchased at a value of Rs.36,50,00,000/- (Rupees
thirty six crores fifty lacs) each.
3. The Respondent No.1 Company will pay for shares of
Petitioners only by buyback of shares in cash and
consequently the equity share capital of the Company
will stand reduced to that extent. Payment will be made
within 3 months from the date of the order of CLB.
4. All allegations of oppression and mismanagement
and challenges to the preferential allotment both
before this Hon‟ble Board and before SEBI are
withdrawn unconditionally by the Petitioners and JJ and
the issue of shares with DVR are upheld as valid by the
Company Law Board as being in accordance with the
Articles of Association of the Company and provisions
of the Companies Act. This direction and consent will
take effect on the date of payment by the Respondent
to the Petitioners in terms hereof.
5. All interim orders passed are vacated, and the
Respondent will be entitled to sell/transfer/mortgage
any immovable assets as it deems fit from the list
annexed hereto as Annexure A. The proceeds thus
realized will be deposited in a separate account and
utilized for any other purpose only after the above
payments are first made to the Petitioners. Also
annexed hereto as Annexure B is a list of the properties
which the Company does not propose to sell presently.
6. All parties will file an Affidavit of compliance of this
order within 10 days.
7. It is agreed that this order will not affect any other
pending proceedings between the parties except that
FAO(OS)500/2007 Page 4 of 9
the allegations of oppression and mismanagement and
challenges to the preferential allotment will not be
raised by the Petitioners and JJ before any other
Court/Forum.
4. It is worthwhile to emphasize that the aforementioned
Settlement has occurred after the Admission of the present
Appeal and the passing of the interim Orders dated 14.12.2007.
Failure to specifically mention the effect of the Settlement on
these interim Orders is conspicuous by its absence. The
controversy would not have arisen had the Consent Terms dated
28.2.2009 (duly signed by the parties) clarified this conundrum.
If the understanding was that the salary, perquisites etc. that
were being received and enjoyed by the Appellants till March,
2009 were to continue, this ought to have been so spelt out by
the Appellants. Conversely, the Respondents should have taken
care to clarify that consequent upon the receipt of the said
sum of ` 36,50,00,000/- by the Appellants, the Order dated
14.12.2007 would become ineffectual.
5. The situation is worse confounded because Clause 7 of the
Consent Terms, which received the imprimatur of the CLB by
way of paragraph 8 of the said Order, articulates the Agreement
that –“the orders, presumably of the CLB, would not affect any
other pending proceedings between the parties except that the
FAO(OS)500/2007 Page 5 of 9
allegation of oppression and mismanagement and challenges to
the preferential allotment will not be raised by the Petitioners
and JJ (Appellant) before any other court”.
6. In the Order impugned in the Appeal, the learned Single
Judge has comprehensively discussed the rival contentions of
the parties with regard to Appellants‟ Petition under Section 9
of the Arbitration & Conciliation Act, 1996 (A&C Act for short).
The issue was whether Clause 9 of the Memorandum of Family
Settlement (MOFS), dated 30.3.2000, amounted to an
Arbitration Agreement. The conclusion of the learned Single
Judge was that there was no binding or enforceable arbitration
agreement between the parties and hence the Petition itself was
not maintainable. In such a situation the question of granting
the interim relief prayed for by the Appellants/Petitioners
obviously did not arise. The Prayers contained in CM
No.17175/2007 are in pari materia with the Prayers contained
in the Petition under Section 9 of the A&C Act.
7. There can be no gainsaying that where the Respondents
deny the existence of an Arbitration Clause, it will undeniably be
open to the Petitioners to initiate appropriate legal proceedings
in a Civil Court. There is always an awkward ambivalence felt by
the Plaintiffs who may have filed a suit for injunction etc. as any
favourable orders may be set to naught in the event the
FAO(OS)500/2007 Page 6 of 9
Respondents assert the existence of an Arbitration Agreement.
This is not the situation before us. If any doubt had existed, it
was set at rest by the impugned Order of the learned Single
Judge which accepted the Respondents‟ version that no
Arbitration Clause existed. The learned Single Judge was
concerned with the existence or absence of an Arbitration
Clause and, therefore, was not called upon to discuss and decide
whether the Appellants/Petitioners had made out a good case
for the grant of the interim relief which is the same in the
Petition under Section 9 of the A&C Act as well as in the Appeal
before us. We are, therefore, principally concerned with the
nodus whether the Petition under Section 9 of the A&C Act was
maintainable and that was entirely dependent on whether an
Arbitration Clause/Agreement existed between the parties. At
the highest, if the decision in the Appeal were to be in the
favour of the Appellants, the matter would be remanded to the
learned Single Judge for taking a decision as to whether the
injunction prayed for in the Petition under Section 9 of the A&C
Act ought to be granted or refused.
8. In these circumstances, the interim Order passed on
14.12.2007, in our opinion, travels far beyond the contours of
the Appeal before us. We cannot lose sight of this fact because,
as we have already noted above, there was no impediment for
FAO(OS)500/2007 Page 7 of 9
the Appellants to have initiated civil proceedings seeking the
very same relief that they had prayed for in the subject Petition.
9. Having said that, we feel duty-bound to return a prima
facie finding on the merits of the interim prayers made before
us. The interim Order was passed much before the compromise
between the parties. At this stage of the proceedings, it is
preponderantly evident that the injunctive relief was predicated
on the factum of the Appellants being principal/equal
shareholders in L.P. Jaiswal & Son Private Limited and a
substantial shareholder in Jagatjit Industries Limited. By
arriving at the settlement before the CLB, they have sold their
shareholding for a valuable consideration of ` 36,50,00,000/-.
The effect of the sale is that the position prevailing on
14.12.2007 and thereafter till March, 2009 has altered
altogether. Clause 7 mentioned above, no doubt, poses a
problem because of ambiguous and ill-advised wordings. It
seems to us that had the Appellants retained any part of their
shareholdings in Jagatjit Industries Limited or L.P. Jaiswal &
Son Private Limited, it was arguable that these Consent Terms
would not impact upon the present litigation because of the use
of the words „oppression and mismanagement and challenges to
the preferential allotment in the Consent Terms‟. With the sale
of the entire shareholding, the Appellants have been denuded
FAO(OS)500/2007 Page 8 of 9
not only of rights flowing therefrom, but also of any perceived
rights for salary, perquisites etc.
10. There is substantial substance and weight in the argument
put forward on behalf of the Respondents that since Jagatjit
Industries Limited is a public company, payments made
pursuant to private compacts between the parties would not be
rendered illegal. Judicial decisions should steer clear from
ordaining a situation which runs contrary to law.
11. For these reasons, we recall the Order dated 14.12.2007.
We dismiss CM No.17175/2007 and allow CM No.9432/2009.
We make no order as to costs. We also note that the Appellants
have furnished an Undertaking that they shall reimburse all
payments received and perquisites enjoyed as a consequence of
the Orders dated 14.12.2007. We, however, leave the issue open
for decision when the Appeal is itself taken for Final Disposal.
( VIKRAMAJIT SEN )
JUDGE
( A.K. PATHAK )
August 20, 2010 JUDGE
tp
FAO(OS)500/2007 Page 9 of 9