ORDER
S. Balasubramanian, Chairman
1. The disputes between two real brothers, the 1st petitioner and the 2nd respondent, have resulted in filing of two petitions CP 7 of 2002 and CP 43 of 2002 in respect of two family companies viz. Laxmi Ventures (India ) Limited and Laxmi Ventures (Bombay) Private Limited. While the first petition has been filed by 3 shareholders, the second petition has been filed by four shareholders. There has been a dispute regarding the quantum of shares held by the petitioners’ group in both the companies even though according to the 1st petitioner, he and his family members are entitled for a 50% share in all family companies as also in other family firms and trusts, which claim is disputed by the 2nd respondent. The petitioners have filed these petition alleging various acts of oppression and mismanagement in the affairs of the companies. On various applications filed, this Bench had passed certain interim orders. During the hearing of these applications, I had repeatedly suggested to the parties that, they being family members, should try to resolve the disputes amicably but nothing came out of this repeated suggestion. However, when the matter was fixed for final hearing on 29.1.2004, both the sides expressed their desire to resolve the disputes amicably in my presence. Accordingly, in my Chamber, the advocates for the petitioners and the respondents and also the 2nd respondent and the 1st petitioner present in person elaborately discussed the terms of settlement. The consensus emerged was that the petitioner and his group would leave not only both the companies but also all the trusts and firms of the family. Whether, the parting of ways should be by way of cash compensation or by way of division of the business, was also discussed. In all, nearly about 6 hours of discussions took place among the parties and their advocates. Finally, I passed an order in the following terms on 29.1.2004.
The parties were present in person, after elaborate discussion, have decided to settle the disputes in the following manner:
(1) In consideration of all his interests in whatsoever manner, the petitioner and his group have in the companies before me, family partnership firms, family trusts and other all family properties, he will get Bhillai Cigarette Making Unit along with the Guest House and servant quarters and Tredsra Unit and the land in Bhillai and two lands in Raipur. (2)
(2) The house No. 45 in Bhillai in which he is living will go to him.
(3) In so far as House No. 46 is concerned, the mother of the petitioner will decide as to whom it will go.
(4) The petitioner will supply one complete unit consisting of cigarette making machine, Mark VIII, one number filter attachment-III, one number Packer M2 and one number cigarette wrapping machine. He will supply another similar unit except one number Packer M.II which will be decided by the parties.
(5) First unit will be supplied within a month and the other unit within a period of 4 months.
(6) The petitioner will ensure that there is no default in supply of the machines and if necessary a default clause will be provided.
On the basis of the above agreement, the parties will prepare a detailed consent terms incorporating therein the names of firms, companies trust, family properties etc, to be signed by all the parties who will be affected by this settlement. The petitioner will relinquish all his rights and interests in all the companies, firms, partnership, trusts, assets and businesses.
The petitioner will enjoy absolute right in the business of Bhillai and Tredsra unit including the license in respect of these units.
Dictated in the presence of the parties.”
2. The matter was fixed for 4.2.2004 to enable the parties to file the detailed consent terms in pursuant to the above consent order. On that day, counsel for both the sides sought more time to file the consent terms. When the matter was heard on 12.3.2004, I had passed the following order “The counsel for the petitioners will react to the draft order given by the respondents incorporating therein the terms agreed by them before me, by 25.3.2004. If there is any difficulty, he will put the same in an affidavit with a copy to the respondents by the same date. In the meanwhile, neither of the parties will deal with the assets of the company/other family companies/firms in any manner as the compromise is on global basis. Adjourned to 5th April, 2004 at 2.30PM”. On 5.4.2004, the matter was adjourned to 19.4,2004 on account of the personal inconvenience of the counsel for the petitioners to attend the hearing. On 16.4.2004, the respondents filed the instant application CA 125 of 2004 in terms of Section 634A of the Companies Act seeking for implementation of/execution of the consent order dated 29.1.2004.
3. In the reply filed to this application, the 1st petitioner has raised various issues regarding the consent order passed on 29.1.2004. According to him, the working draft of terms of settlement is not acceptable to him and his family and unless there is a consensus among all the concerned parties it would be difficult to agree to relinquish their interests in the partnership firms, family trusts and other family properties. He has also averred that his family members, on going through the proposals recorded in the order, had expressed their anguish as according to them, the settlement terms were one sided in favour of the 2nd respondent. Accordingly he has sought that the interest in the partnership firms and other family properties cannot be made the subject matter of the present settlement and should be excluded. He has raised various other issues in the reply, some of them touching upon certain terms agreed to be recorded in the consent order.
4. The 2nd and 3rd petitioners in CP 7 of 2002, who are the wife and son of the 1st petitioner respectively, have filed affidavits stating that they were not present during the settlement discussions and that they had not authorised the 1st petitioner to act on their behalf and as such the consent terms are not binding on them. One Mrs. Neha Aggarwal, daughter of the 1st and 2nd petitioners in that petition, has also-filed an application CA 141/2004, seeking for impleading her as a party to the proceedings, on the ground, that the terms of consent would affect her interests in these two companies as a shareholder and also in the partnership firms and trusts in which she is a partner or a trustee and that she had never authorized the 1st petitioner to subject her interests as a part of settlement.
5. All the applications were heard together. Shri Kathpalia, Advocate for the respondents submitted: The objection filed by the 1st petitioner is malafide and has been done only with a view to wriggle out of the terms of settlement arrived before the Bench after extensive discussions. Even the application filed by the 2nd and 3rd petitioners cannot be considered in as much as Shri Krishan Kumar, Advocate had been representing all the 3 petitioners throughout the proceedings and he, who was present at the time when the consent order was passed, is also a party to the same. Further, all the petitioners were represented only by the 1st petitioner all through. He has signed all the affidavits on behalf of all the petitioners and therefore the consent order is binding on the 2nd and 3rd petitioners also. Even though the consent order was passed on 29.1.2004, the petitioners never questioned the same for nearly 3 months and in the 5 hearings that had taken place after wards. Further, the 1st petitioner specifically mentioned before this Bench that he was representing his entire group at the time of discussions on settlement. By engaging a separate counsel now, the 2nd and 3rd petitioners cannot allege that the consent order is not binding on them. It is a settled law that no party to a consent recorded by a court can challenge the same. Therefore, the consent order should be implemented.
6. Shri Krishna Kumar appearing for the 1st petitioner submitted: His client is not trying to wriggle out of the consent order. On the day when the compromise discussions took place, the matter had been fixed for final hearing. Therefore, neither he nor the 1st petitioner had any instructions from the 2nd and 3rd petitioners for compromise. Perhaps the 1st petitioner thought that he would be able to convince the other two petitioners about the settlement but they are not willing. Therefore the terms of compromise are not binding. Further, the alleged consent order is only a working draft and the parties had to come to an agreement on various issues to work out that order. Therefore it was not binding agreement as is evident from the fact that the Bench itself had stated in that order that the parties would prepare a detailed consent terms to be signed by all the parties who would be affected by the settlement. Till such time, this requirement is fulfilled, there is no binding consent terms approved by this Bench. In the draft agreement given by the respondents, there are a number of issues which were not covered during the compromise discussions nor in the order dated 29.1.2004. Therefore, there was no consensus ad idem when the order of this Bench dated 29.1.2004 was passed. In Shanti Prasad Jain v. Union of India (1973 CC 778 ), it has been held that before enforcing an agreement, it should be examined whether there was a concluded complete agreement. In the present case, as is evident from the draft agreement given by the respondents which contains a number of contested issues, until and unless they are resolved and made as a part of an overall and complete settlement, the order dated 29.1.2004 cannot be worked out. His client is not disputing the consent order and he stands by that order. However, to work out this order, various other issues have to be settled and if the respondents are willing to do so, the petitioner is prepared to comply with the terms of the settlement.
7. Shri Choudhary, Senior Advocate, appearing for the 2nd and 3rd petitioners submitted that his clients would be adversely affected if the order of 29.1.2004 is implemented. They had not given any authority to the 1st petitioner to act on their behalf in the matter of settlement. When the said order specifically stipulates that all the parties affected by the settlement should sign a detailed consent terms, this order would not be binding on the 2nd and 3rd petitioners till they sign a detailed consent terms. In Satish Chand Sanwalka v. Tinplate Dealers Association Pvt. Ltd. (CP No. 29 of 1996/CA No. 57 of 1997), the Company Law Board had passed an order incorporating therein the consent terms agreed to between the parties stating that the order would be binding on all the parties. However, two respondents filed applications stating that even though they were parties to the proceedings, they had not signed the consent terms and as such the same was not binding on them as such they should be excluded from the consent terms. Noting that without their being parties to the consent terms, the consent terms cannot be worked out, this Board recalled the consent order. Similarly, in the present case, even if his clients are excluded from the consent terms as they had not given their consent terms, the consent terms cannot be worked out.
8. In rejoinder, Shri Kathpalia submitted: The counsel for all the parties were present when the consent order was passed. The same was signed by the 1st petitioner. The only requirement by that order was that a document as a mechanism to implement the order was to be prepared. Even the order of this Bench dated 12.3.2004 records that the terms had been agreed before this Bench. Since Shri Krishna Kumar was the common counsel for the petitioners and as he was also a party to the terms recorded by this Bench on 29.1.2004, the terms are binding on all his clients. This order was dictated in the presence of the parties. The very fact that only 5 days time was given for filing the detailed compromise terms would indicate that there was no other issue to be decided between the parties. The 2nd and 3rd petitioners, if they had really aggrieved, should have filed an appeal under Section 10F of the Act which they have not done so and as such the order dated 29.1.2004 has become final and binding. Even the complaint of the 1st petitioner was that the draft given by the respondents did not reflect the terms of consent order but he never complained that the said order was not binding. Family settlement before this Bench is a solemn settlement on a higher footing. In Kuki Leather Private Ltd. v. T.N.K Govindraju Chettiar & Co. (110 CC 474 Mad), it has been held that a solemn agreement properly reported to and recorded by the adjudicated forum is binding and no counsel or litigant has a right to play fraud on the court or the tribunal and any attempt to do so must be discouraged. Likewise, in Salkia Businessmen Association v. Howrah Municipal Corporation (AIR 2001 SC 2790 ) the Supreme Court has held that when an order is passed on compromise, the, Court should strictly enforce the same.
9. I have considered the matter carefully. Before the order dated 29.1.2004 was passed, the 1st petitioner and the 2nd respondent along with their counsel discussed the terms of compromise before me in my Chamber. I had also interacted with them to resolve various issues that crept up during the discussion. Both the parties extensively consulted their counsel during the discussion. In other words, there was a frank, open and detailed discussions with my participation and the participation of the counsel and the parties themselves. Having discussed the matter for over 6 hours with the assistance of his counsel, the 1st petitioner cannot now raise an issue that there was no consensus ad idem. In case of Mrs Michelle Jawad Al-Fahoum v. Indo Saudi Travels Pvt Ltd (1998 30 CLA 42) the parties therein, like in the present case, discussed terms of compromise in my chamber along with their counsel and the terms agreed to by them were recorded as an order. Later on, the respondent therein raised a similar issue that there was no consensus ad-idem and sought for recall of the consent order or sought to make certain amendments. This Board declined the request on the ground that the order was recorded with the consent of all the parties and as was binding and no amendments could be made without the consent of all the parties.
10. The stand of the 2nd and 3rd petitioners that since they had not authorized the 1st petitioner to enter into a compromise, cannot stand in the eye of law for the simple reason that it was not the 1st petitioner alone who gave his consent. Shri Krishna Kumar who was representing all the petitioners and the senior counsel Shri Gopal Subbramaniam, instructed by Shri Krishna Kumar were present and advised the 1st petitioner and finally the order came to be recorded in their presence. Therefore, the terms of the order were not only consented to by the 1st petitioner but also by the common counsel for all the petitioners. In Kshounish Choudhury v. Kero Rajendra Monolitthis Limited (CA 192/98 in CP 88/97), the issue as to whether the consent given by an authorized agent of a party was binding on his clients arose, when the client claimed that he had not authorized the agent to compromise. In that case, the authority of an advocate to enter into a compromise was also examined. After considering the decisions in Sheonamdan Prasad Singh v.(AIR 1935 PC 119) and Smt Jamilabai Abdul kadir v. Shankar Lal Gulab Chand (AIR 1975 SC 2202), this Board held that even without a specific authority of a client, an advocate has the implied authority to enter into a compromise on behalf of his client, as long as the same is in the interest of his client. In the present case, the 2nd and 3rd petitioners, other than stating the compromise terms would be against their interests, have not elaborated the same. Therefore, since Shri Krishna Kumar was the common counsel for all the petitioners including the 2nd and 3rd petitioners and since he was a party to the terms of compromise, he should be deemed to have had the implied authority of the 2nd and 3rd petitioners to enter into the compromise, and as such the same is binding on the 2nd and 3rd petitioners. The decision in Tinplate case is not applicable in the present case because neither the applicants therein nor their counsel were present when the terms of compromise were arrived at nor they had signed the compromise terms. In the present case, the counsel for all the petitioners were parties to the order dated 29.1.2004 and therefore, the 2nd and 3rd petitioners cannot now contend that since they had not authorized the 1st petitioner to compromise, the same is not binding on them.
11. However, even though I have held that the consent order is binding on the petitioners, the same cannot be given effect to or implemented in view of the objections of Mrs. Neha Aggarwal. It is a fact that she is not a party to the proceedings and as such no advocate represented her. There is no written authority by her to any of the petitioners to act on her behalf when the compromise discussions took place and the order recorded. Therefore, the consent order is not binding on her since her interests in the company, firms and trusts would be affected if the consent order is executed. The parties were aware that besides the petitioners and the respondents, there were third parties, whose interests would be affected by the consent order and that is why, it was recorded in that order that the parties should file a detailed consent terms signed by all the parties who would be affected by the consent order. Only when the third parties: sign the consent terms, then, it would be binding on them. The consent order can also not be worked out by excluding Mrs Neha Agarwal, in as much as, the consent order is a composite one by which the entire petitioners’ group has to relinquish all their interest in the companies, family properties, firms and trusts in consideration of which the petitioners’ group would get Bhillai Cigarette Making Unit along with the Guest House and servant quarters and Tredsra Unit and a land in Bhillai and two lands in Raipur. In other words, the consent order has not identified the entitlement of Mrs Neha Aggarwal independently. If it had been other wise, it might be possible to exclude her completely from the consent terms. Therefore, the consent terms to which Mrs. Neha Aggarwal is not a party but which affects her interests, cannot be worked out and therefore the question of implementation of the same as sought for by the respondents in their application cannot be granted. Accordingly, this application is also dismissed and the order dated 29.1.2004 is recalled. The learned counsel for the respondents submitted that in case the order dated 29.1.2004 cannot be implemented, the petitioners be directed to sell their shares to the respondents for a fair value to be determined. Granting of this prayer would amount to disposal of the petition, which cannot be done until and unless the petitioners and other shareholders give their consent for the same .
12. In view of the compromise efforts having failed, both the petitions will be heard on merits on 30th and 31st August at 2.30 pm.