J.P. Srivastava & Sons Private Ltd. and Ors v. H.K. Srivastava through L.Rs. and Ors

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The Respondents have challenged a common judgement of the High Court of Madhya Pradesh at Gwalior in Miscellaneous Company Appeals[1]

The Respondents filed these appeals against the Company Law Board’s (CLB) order arising out of the appellants’ applications under Sections 397 and 398 of the Companies Act alleging Respondents’ mismanagement of the company.

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Facts

  • This is a family feud between two brothers, J.K. Srivastava and H.K. Srivastava, who have both passed away.
  • J.K. Srivastava Group (appellants) filed a Company Petition before the Company Law Board on 1.7.1995 alleging that M/s. Gwalior Sugar Company Ltd., a family concern, was being mismanaged by H.K. Srivastava Group under Sections 397 and 398 of the Act.
  • The Company Law Board (CLB) initially issued an order on 22. Jan.1996 urging the parties to make efforts for reconciliation and to settle the dispute amicably. 
  • The parties on 7. May.1996, decided that the petitioners would sell their shares to the respondents for Rs.6340/-per share which would be binding on both parties. 
  • The respondents objected to the valuation and lodged an appeal to have the order recalled, arguing that the other conflicts involving the petitioners’ family assets should be resolved as well.
  • One of the respondents also said that they had no knowledge of the settlement reached.
  • It was also claimed that the petition filed under Sections 397 and 398 of the Act could not be maintained because Section 399 of the Act required the petitioner to own 10% of the total issued share capital, which included preference shares. The applicant did not have a 10% shareholding, according to the respondent company, the petition was not maintainable.
  • The CLB rejected the applications, concluding that the shares should be valued at Rs.6000/- per equity share.
  • The CLB found that the challenge to the petition’s maintainability was legitimate because the appellant lacked the authority of the Trust and did not own more than 10% of the overall shareholding.
  • As a result, the petition filed under Sections 397 and 398 of the Act was dismissed.
  • All appeals were rejected by the learned single Judge, who affirmed the CLB’s conclusions on the petition’s maintainability. The learned Judge, on the other hand, pointed out that because the initial petition was deemed unmaintainable, nothing in the respondents’ appeal challenging the CLB’s other findings survived.
  • However, the appellants lodged a Letters Patent Appeal against the learned single Judge’s decision, which was dismissed.
  • All these appellate judgments were challenged by the appellants before the Supreme Court.
  • The Court expressly held on October 26, 2004[2], that the appellant had the requisite authority to file the appeal on behalf of the Trust, and that she and the Trust controlled more than 10% of the Company’s share capital, and that there was no bar under Section 399(3) of the Act or Regulation 18 for the petition under Sections 397 and 398 of the Act.
  • As a result, the case has been remanded to the learned single Judge.
  • However, the case was remanded to the CLB by the learned single Judge.
  • As a result, the case was remanded to the CLB.
  • The appellants also filed appeals to the Supreme Court in response to the learned single Judge’s order.
Also Read  Significance of Share Certificate

Issues

  • Are objections raised on maintainability tenable?
  • Was original petition under Sections 397 and 398 of the Act for mismanagement of the company not decided on merits?

Held

As a result, the CLB’s order based solely on the issue of maintainability was found to be incorrect. Since the Supreme Court remanded the case to the learned single Judge before whom the appeals against the CLB’s order were filed, it has noted that the learned single Judge has miserably failed to resolve any concerns.

Apart from the CLB’s finding on the petition’s maintainability, the parties disagreed on every aspect of the order issued by the CLB. The Court expressly held that the respondent’s opposition to the petition’s maintainability, in particular, was unfounded, and that the petition under the Company Act was perfectly maintainable. 

SC observed that it cannot be said that the CLB had not decided all the other matters, since, it had found the original petition to be untenable. 

Therefore, the matter is to be referred back to the learned single Judge for deciding all the three appeals filed by the respective parties with the time frame.

Court, therefore, reiterated the earlier order of remand to the single Judge and directed:

(1) That the single Judge will now take up all the three appeals filed by the parties against the order of the CLB and dispose of the same in the light of the observations made by us.

(2) This shall be done within six (6) months from the date of this order reaches the High Court.

(3) All the other contentions would be allowed to be raised and considered except the question of tenability of the petition under Section 397 and 398, which has been finally decided by this Court in the earlier round of litigation.

(4) The parties are also permitted to raise the questions regarding the subsequent developments directly in accordance with law and only if they are germane to the matter in question.

26. The appeals are disposed of in above terms. There shall be no orders as to costs.


[1] J.P. Srivastava & Sons Private Ltd. and Ors v. H.K. Srivastava through L.Rs. and Ors, Arising out of SLP (C) No.19235-19236 of 2005.

[2]  J.P. Srivastava and Sons Pvt. Ltd. and Ors. Vs. Gwalior Sugar Co. Ltd. and Ors.  [2004 ]56SCL 1 (SC).

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