Kerala High Court
Dr.S.Krishna Sarma vs S.Lakshmana Sarma on 27 March, 2024
Author: A.Muhamed Mustaque
Bench: A.Muhamed Mustaque
CA Nos. 26 and 28 of 2007
-:1:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE
&
THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN
WEDNESDAY, THE 27TH DAY OF MARCH 2024 / 7TH CHAITHRA, 1946
CO.APPEAL NO. 26 OF 2007
AGAINST THE ORDER DATED IN CP NO.4 OF 2001 OF COMPANY LAW
BOARD, ADDITIONAL PRINCIPAL BENCH, CHENNAI
APPELLANT/S:
1 DR.S.KRISHNA SARMA
AGED 1 YEARS
S/O.LATE SIVARAMAKRISHNA IYER, SREEPATHI,VEERABADRA
GARDENS, PATTOM PALACE P.O,THIRUVANANTHAPURAM-4.
2 NANDINI.K.S
W/O.S KRISHNA SARMA, SREEPATHI, VEERABADRA GARDENS,
PATTOM PALACE.P.O., THIRUVANANTHAPURAM- 695 004.
3 SIVARAMA KRISHNA SARMA
S/O. LATE.DR.KRISHNA SARMA, SREEPATHI, VEERABADRA
GARDENS, PATTOM PALACE.P.O., THIRUVANANTHAPURAM- 695
004.
4 SAMBASIVA SARMA
S/O.LATE DR.KRISHNA SARMA, SREEPATHI, VEERABADRA
GARDENS, PATTOM PALACE.P.O., THIRUVANANTHAPURAM- 695
004.
CA Nos. 26 and 28 of 2007
-:2:-
ADDL. APPELLANTS 2- 4 ARE IMPLEADED AS ADDL
APPELLANTS 2-4 IN CO.APPEAL 26/2007 AS PER ORDER
DATED 18/11/2021 IN IA 1/21.
BY ADVS.
AJIT JOY
ANEESH JAMES
SAYUJYA
RESPONDENT/S:
1 S.LAKSHMANA SARMA
SREEVARDHANI,VELLAYAMBALAM,THIRUVANANTHAPURAM-3.
2 MS.KANTHIMATHY AMMAL,A-1,FIRST FLOOR
ROSY METILDA APARTMENTS, GOPALAPURAM IST STREET,,
CHENNAI-86.
3 MS.LAKSHMI AMMALC/O.K.M.SUBRAMONIAM
66,NEW COLONY,TUTICORIN-686 003.
4 MEENAKSHI AMMAL,D-2,HARI APARTMENTS
NO.32,SREEPURAM IST STREET, ROYPETTAH,CHENNAI-14.
5 V.SIVARAMAKRISHNAN,CHITHRA,
PATTOM PALACE P.O, THIRUVANANTHAPURAM-4
6 MS.T.S.RAJALAKSHMI,SREEVARDHINI
VELLAYAMBALAM,THIRUVANANTHAPURAM-3.
7 MS.V.KALYANI,CHITHRA,
PATTOM PALACE P.O, THIRUVANANTHAPURAM-4.
8 K.MAHESH,D-2,HARI APARTMENTS NO 32
SREEPURAM IST STREET, ROYPETTAH,CHENNAI-14.
9 MS.V.LALITHA LAKSHMI,CHITHRA,
PATTOM PALACE P.O, THIRUVANANTHAPURAM-4.
10 MS.V.PARVATJA VARDHANI,CHITHRA
PATTOM PALACE P.O,THIRUVANANTHAPURAM-4.
11 MS.V.KANTHIMATHY,CHITHRA
PATTOM PALACE P.O,THIRUVANANTHAPURAM-4.
12 M/S.KANTHIMATHY PLANTATIONS PVT.LTD
PATTOM P.O,THIRUVANANTHAPURAM.
13 T.P NAIR,H.N.R.A,280,V.V.ROAD,
PATTOOR,THIRUVANANTHAPRUAM-35.
14 D.PARAMESWARAN, NEAR PUMP HOUSE
PONGUMOODU,THIRUVANANTHAPURAM-35.
CA Nos. 26 and 28 of 2007
-:3:-
15 M/S.THE PEERMADE TEA COMPANY LTD
REGD.OFFICE SILVER OAKS,P.M.G JUNCTION, PLAMOOD
ROAD, PATTOM, THIRUVANANTHAPURAM-4.
16 M/S.THE BRAEMORE ETATES LTD ,REGD OFFICE
AT PLANTATION HOUSE,PLAMOOD JUNCTION,
THIRUVANANTHAPURAM-4.
17 M/S.THE PENINSULAR PLANTATIONS LTD
REGD OFFICE P.M.G JUNCTION,PLAMOOD ROAD, PATTOM
PALACE P.O, THIRUVANANTHAPURAM-4.
BY ADVS.
SRI.M.PATHROSE MATTHAI SR.
SRI.SAJI VARGHESE
SRI.TERRY V.JAMES
SRI.B.J.JOHN PRAKASH
SMT.MARIAM MATHAI
SR ADV.MURARI RAGHAVAN
SR.ADV.SHRI R.SANKARANARAYANAN
THIS COMPANY APPEAL HAVING BEEN FINALLY HEARD ON
19.03.2024, ALONG WITH Co.Appeal.28/2007, THE COURT ON
27/3/2024 DELIVERED THE FOLLOWING:
CA Nos. 26 and 28 of 2007
-:4:-
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE
&
THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN
WEDNESDAY, THE 27TH DAY OF MARCH 2024 / 7TH CHAITHRA, 1946
CO.APPEAL NO. 28 OF 2007
AGAINST THE ORDER DATED IN CP NO.4 OF 2001 OF COMPANY LAW
BOARD, ADDITIONAL PRINCIPAL BENCH, CHENNAI
APPELLANT/S:
1 KANTHIMATHY PLANTATION (P) LTD.
AGED 1 YEARS
REGD OFFICE, PATTOM P.O.,, THIRUVANANTHAPURAM 695
004, REPRESENTED BY ITS, DIRECTOR SRI.S.LAKSHMANA
SHARMA.
2 S.LAKSHMANA SARMA
AGED 1 YEARS
SREE VARDHANI, VELLAYAMBALAM- KAUDIAR ROAD,,
THIRUVANANTHAPURAM- 695 003.
3 V.SIVARAMA KRISHNAN
AGED 1 YEARS
CHITRA, PATTOM PALACE P.O.,, THIRUVANANTHAPURAM-4.
4 T.S.RAJALAKSHMI
AGED 1 YEARS
SREEVARDHINI, VELLAYAMBALAM,, THIRUVANANTHAPURAM-3.
5 V.KALYANI
AGED 1 YEARS
CHTRA,PATTOM PALACE P.O.,, THIRUVANANTHAPURAM-4.
CA Nos. 26 and 28 of 2007
-:5:-
BY ADVS.
SMT.MARIAM MATHAI
SRI.SAJI VARGHESE
SR.ADV.R.SANKARA NARAYAN
SR.ADV.MURARI RAGHAVAN
RESPONDENT/S:
1 S.KRISHNA SARAMA
SRIPATHY, PATTOM PALACE P.O., PATTOM,
THIRUVANANTHAPURAM.
2 T.P.NAIR
280, V.V.ROAD, PATTOOR,, THIRUVANANTHAPURAM-35.
3 D.PARMESWARAN
NEAR PUMP HOUSE, PONGUMMOODU,, THIRUVANANTHAPURAM.
4 THE PEERMADE TEA COMPANY LTD.
REGD. OFFICE AT PLANTATION HOUSE,, PLAMOOD JUNCTION,
THIRUVANANTHAPURAM-4.
5 THE BRAEMORE ESTATES LIMITED
REGD.OFFICE AT PLANTATION HOUSE,, PLAMOOD JUNCTION,
THIRUVANANTHAPURAM-4.
6 PENINSULAR PLANTATIONS LIMITED
REGD. OFFICE AT PLANTATION HOUSE,, PLAMOOD JUNCTION,
THIRUVANANTHAPURAM-4.
7 THE COMPANY LAW BOARD
ADDITIONAL PRINCIPAL BENCH,, SHASTRI BHAVAN,
CHENNAI.
8 MS.KANTHIMATHY AMMAL
D/O.S.S.AIYAR, RESIDING AT A-1, 1ST FLOOR, ROSY
METILDA APPTS. GOPALAPURAM 1ST STREET, CHENNAI 600
086.
9 MS.LAKSHMI AMMAL
D/O.S.S.AIYAR, RESIDING AT C/O.K.M.SUBRAMANIAM, 66,
NEW COLONY, TUTICORIN- 686 003.
10 MS.MEENAKSHI AMMAL
D/O.S.S.AIYAR, RESIDING AT D-2, HARI APPARTMENTS,
NO.32, SRIPURAM, 1ST STREET, ROYAPETTAH, CHENNAI -
600 014.
11 MR.K.MAHESH
S/O S.MEENAKSHI AMMAL, D-2, HARI APPARTMENTS,,
CA Nos. 26 and 28 of 2007
-:6:-
NO.32, SRIPURAM, 1ST STREET, ROYAPETTAH,, CHENNAI
600 014.
12 MS.V.LALITHA LAKSHMI
AGED 1 YEARS
D/O MR.S.VEERASUBRAMANIA SARMA,, RESIDING AT CHITRA,
PATTOM PALACE P.O.,, THIRUVANANTHAPURAM-695 004.
13 MS.V.PARVATJA VARDHANI
D/O.MR.S.VEERASUBRAMANIA SARMA,, RESIDING AT CHITRA,
PATTOM PALACE P.O., THIRUVANANTHAPURAM- 695 004.
14 MS.V.KANTHIMATHY,
D/O MR.S.VEERASUBRAMANIA SARAMA, RESIDING AT CHITRA,
PATTOM PALACE P.O., THIRUVANANTHAPURAM- 695 004.
15 ADDL.NANDINI.K.S.
W/O S.KRISHNA SARMA SREEPATHI ,VEERABADRA GARDENS,
PATTOM PLACE P.O. THIRUVANANTHAPURAM-695004
16 ADDL. SIVARAMA KRISHNA SARMA
S/O LATE.KRISHNA SARMA SREEPATHI ,VEERABADRA
GARDENS, PATTOM PLACE P.O. THIRUVANANTHAPURAM-695004
17 ADDL. SAMBASIVA SARMA
S/O LATE.KRISHNA SARMA SREEPATHI ,VEERABADRA
GARDENS, PATTOM PLACE P.O. THIRUVANANTHAPURAM-695004
LEGAL REPRESENTATIVES OF THE DECEASED FIRST
RESPONDENT ARE IMPLEADED AS ADDITIONAL RESPONDENTS
NOS.15 TO 17TH VIDE ORDER DATED 19.92023 IN IA
1/2023 IN COMPANY APPEAL 28/2007
BY ADVS.
SRI.RADHIKA RAJASEKHARAN P.
AJIT JOY
SRI.K.B.PRADEEP
ANEESH JAMES
SAYUJYA
THIS COMPANY APPEAL HAVING BEEN FINALLY HEARD ON
19.03.2024, ALONG WITH Co.Appeal.26/2007, THE COURT ON
27/3/2024 DELIVERED THE FOLLOWING:
CA Nos. 26 and 28 of 2007
-:7:-
A.MUHAMED MUSTAQUE & SHOBA ANNAMMA EAPEN, JJ.
------------------------------------------------
Company Appeal Nos.26 and 28 of 2007
------------------------------------------------
Dated this the 27th day of March, 2024
J U D G M E N T
A.Muhamed Mustaque, J.
In these appeals what we have to decide is the scope of
remand in an earlier appeal on this matter decided by this Court
in M.F.A.No.1200/2002, dated 15/1/2004. We are not referring in
detail about the factual narrative of the case as it is borne
out from the impugned order as well as the earlier orders of
this Court, and that our endeavour in this case is, only to find
out what was the scope of the remand.
CA Nos. 26 and 28 of 2007
2. This Court in the above judgment considered the appeal
arising from an order of the Company Law Board dated 9/8/2002 on
an application under Sections 397 and 398 of the Companies Act,
1956. The Company Law Board set aside the transfer of shares in
favour of S.Krishna Sharma for the following reasons:
i. The consideration paid by S.Krishna Sharma does not appear
to represent the true value of the impugned shares.
ii. There was no necessity for the sale of shares.
iii. There was no record to show that any offer was made to
any member before the sale of shares.
iv. There was no transparency in the transfer of shares.
Based on the above reasons, it was concluded that the sale was
effected in favour of S.Krishna Sharma at a consideration
prejudicial to the interest of the company.
3. In the appeal before this Court, this Court set aside
the order of the Company Law Board and directed the Company Law
Board to decide that question of share valuation alone afresh.
CA Nos. 26 and 28 of 2007
4. Inter alia, we note that there were five prayers which
are as follows:
a) to declare that the appointment of the second respondent as
director, managing director and chairman of the Company is
invalid;
b) to declare that the respondents 3 & 4 have ceased to be
directors of the Company;
c) to set aside the transfer of impugned shares;
d) to declare that the purported postponement of the 31st Annual
General Meeting by respondents 2 to 4 is illegal; and
e) to direct an investigation into the conduct of the second
respondent in regard to the affairs of the Company.
5. It is clear from the remand order that this Court
remanded the matter back to the Company Law Board to consider
the question relating to transfer of the impugned shares alone.
6. There is no dispute at the bar on the point of issue
involved for consideration by the Company Law Board. Before the
Company Law Board, the applicants contended that the entire issue
regarding sale of shares will have to be considered by the Board
CA Nos. 26 and 28 of 2007
including the necessity to sell the shares. On the other hand,
Dr.S.Krishna Sharma, the second respondent before the Company
Law Board, contended that this Court remanded back the matter
setting aside the finding that value of share was inadequate
without materials on record, and therefore, it was set aside to
find out actual value of the shares to ensure that no prejudice
is caused to the interest of the company. The Company Law Board,
in the impugned order, accepted the argument of S.Krishna Sharma
and overruled the objection of the applicants. Accordingly, a
Chartered Accountant was appointed to determine the market value
of the shares. Challenging this order, the original applicant
along with one of the companies have filed
C.A.No.28/2007. S.Krishna Sharma also filed C.A.No.26/2007.
7. Heard the learned Senior Counsel Sankara Narayan
appearing for the appellant in C.A.No.26/2007 and the learned
counsel Shri Ajith Joy, learned Senior Counsel Shri R.Murari and
learned counsel Smt.Mariam Mathai in C.A.No.28/2007.
8. In the context of the application under Sections 397
and 398 of the Companies Act, there are two possible grievances
CA Nos. 26 and 28 of 2007
that can be raised in respect of sale of shares: one is the
decision itself, as it may act prejudicial to the interest of
the company; and the other is the inadequacy of the value for
consideration of shares sold. The possibility of setting aside
the sale of shares may arise either on contingency as above or
on both the grounds. Therefore, two issues ought to have been
framed by the Company Law Board as follows:
i. Whether decision of the Board of Directors to sell shares
was oppressive to any member or members.
ii. If decision was proper, whether the valuation of share is
inadequate or not in a manner prejudicial to the interest
of the Company.
9. We perused the original order of the Company Law Board.
We find that the Company Law Board set aside the sale of shares
on both the grounds as above. This Court in appeal, though not
specifically referred to the circumstances which may result in
setting aside of the sale of shares, on a close reading of the
judgment it is clear that the Court was not able to accept the
CA Nos. 26 and 28 of 2007
reasoning given by the Company Law Board. The reasoning and
finding of the Company Law Board was found untenable by this
Court.
10. On a reading the judgment it is clear that the remand
was an open remand to redetermine the issue, and not a partial
remand to determine the market value of the shares sold. The
Company Law Board as well as this Court ought to have framed
distinct issues as mentioned above but treated it as a
consolidated issue. Here, we need to emphasise the importance
of framing proper issues by the competent authorities or
Tribunals. The proper framing of issue will allow the Tribunal
or Court to lead correct path to a conclusion. Correct
conclusion always depends on accuracy in framing issues and
determining the issues thereon. These issues lay the foundation
of the judgment. Judgment is built on the foundation of the
issues. If the issues are shaken, the super structure of judgment
will also be flawed. We find that this was not done by the Board
or this Court while deciding the matter. As a result, the
parties lost substantial time in the litigation.
CA Nos. 26 and 28 of 2007
11. The judgment of the Court always has to be understood
based on what it expressly declares while concluding the
decision. If the judgment expressly declared that a question
has to be decided afresh, it means that the entire issue has to
be decided afresh and not partially. It would have been possible
for this Court to affirm the decision of the Company to sell the
shares and remand back the matter to find out valuation. This
was not done by this Court. On the other hand, this Court set
aside the entire findings rendered by the Company Law
Board. That means, the issue is open for a fresh decision on
all the points related to the transfer of shares. Thus, the
Company Law Board has to decide on the correctness of the
decision, whether the sale of the shares was in a legal manner
or not; and if it is found valid, whether the consideration paid
is adequate to protect the interest of the company or not. We,
thus, allow the appeals and remand back the matter to consider
afresh on the question as above on the legality of the transfer
relatable to the decision of the Board of the Company as well as
based on the inadequacy of value of shares. The valuation
obtained pursuant to the direction of the Company Law Board shall
CA Nos. 26 and 28 of 2007
also be taken into account while considering the matter after
remand. The appeals stand disposed of as above. We direct the
parties to appear and mark their presence before the National
Company Law Tribunal, Kochi on 30/4/2024. Registry shall send
the records to NCLT, Kochi, forthwith.
Sd/-
A.MUHAMED MUSTAQUE, JUDGE
Sd/-
SHOBA ANNAMMA EAPEN, JUDGE
ms
CA Nos. 26 and 28 of 2007
APPENDIX OF CO.APPEAL 26/2007
PETITIONER ANNEXURES
Annexure A1 LETTER DATED 10.11.2022 FROM KUMAR AND
BIJU ASSOCIATES LLP, CHARTERED ACCOUNTANT
ADDRESSED TO PARTIES PRIOR TO VALUATION
Annexure A2 REPORT OF SHARE VALUATION AS ON 31.03.2000
SUBMITTED BY KUMAR AND BIJU ASSOCIATES
LLP, CHARTERED ACCOUNTANT
RESPONDENT ANNEXURES
Annexure R1(a) True copy of the letter dated 10.01.2023
issued by the 12th Respondent Company to
the Chartered Accountant
