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Judgment
Sunil Ambwani, J.—This is an appeal by Smt. Neelu Kohli, (the applicant before the Company Law Board) u/s 10F of the Companies Act, 1956 against the orders of the Company Law Board (CLB), Principal Bench, New Delhi dated 02.6.2006 and 15. 11.2006 in Company Petition No. 27 of 1997 u/s 397/398 of the Companies Act, 1956. The Company Law Board recorded a memorandum on 02.6.2006, of the alleged agreement between the panics to settle the matter, and that by order dated 09.10.2006 the application of Smt. Neelu Kohli, the appellant filed on 06.6.2006, to either modify or recall her consent to the order was dismissed.
Smt. Neelu Kohli, the appellant is the divorced wife of Shri Naveen Kohli, respondent No. 2. There were matrimonial differences between them for a long period of time. Shri Naveen Kohli, respondent No. 2 filed a petition u/s 13 of the Hindu Marriage Act, 1956 for divorce. The family Court ordered dissolution of marriage, which was solemnized on 20.11.1975 and directed Shri Naveen Kohli to pay Rs. 5 lacs as her livelihood allowance. He deposited the amount. The High Court allowed the first appeal setting aside the divorce and the annulment of marriage, The Supreme Court by its judgment dated 21st March, 2006 in Naveen Kohli Vs. Neelu Kohli, , allowed the Civil Appeal with the findings that parties have been living separately for more than 10 years with large number of criminal and civil proceedings initiated by Smt. Neelu Kohli against Shri Naveen Kohli and some by Shri Naveen Kohli against her resulting into damaging the matrimonial bond beyond repair. The marriage between the parties was only in name and was wrecked beyond the hope of salvage. The public interest and interest of all concerned lies in the recognition of the fact to declare the marriage defunct dejure, which is defunct defacto. The Supreme Court found that to keep the sham is obviously conducive to immorality and potentially more prejudicial to the � public interest than a dissolution of marriage bond, While setting aside the judgment of the High Court, the Supreme Court in the extraordinary facts and circumstances directed Shri Naveen Kohli to pay Rs. 25 lacs towards permanent maintenance including Rs. 5 lacs with interest deposited by him under the direction of the trial Court. The respondent was given liberty to withdraw the amount with interest. Since Smt. Neelu Kohli had withdrawn the amount awarded by the trial Court, she was made entitled to receive Rs. 20 lacs and in case the appellant did not pay the amount, the directions were to be of no avail. Learned Counsel for Shri Naveen Kohli informs the Court that the amount has been deposited by him but the same has not been withdrawn by Smt. Neelu Kohli.
The Supreme Court in the judgment noticed the litigation pending between the parties u/s 397/398 of the Companies Act, 1956 before the Company Law Board.
Smt. Neelu Kohli held 90% shares and Shri Naveen Kohli 10% share in M/s Nikhil Rubbers Pvt. Ltd. Smt. Neelu Kohli and her son Nimit Kohli filed a petition in the Company Law Board alleging acts of oppression and mismanagement by Shri Naveen Kohli. The Company Law Board decided by an order dated 25.9.2000, directing that Smt. Neelu Kohli and the respondent be declared as 50% shareholder each, considering the fact that one had contributed to the capital and other to the expertise as rubber technologist, and further directed the appellant to sell her 50% interest in the company to the respondents at a value to be determined by an independent valuer. Shri Vinod Jain, a Chartered Accountant was appointed as valuer for valuing the shares of the company. The parties were at liberty to submit written submissions to the valuer to take into account while preparing a draft valuation report. Shri Naveen Kohli challenged the appointment of valuer on which CLB changed the valuer from Shri Vinod Jain to M/s INMACS Management Services, vide its order dated 05.8.2002. A valuation report was submitted on 14.7.2003. Shri Naveen Kohli challenged the valuation report and prayed that a fresh arrangement be made for valuation of the assets of the company. Shri Naveen Kohli then filed another application on 14.11.2003 for adjournment pending decision in Civil Suit No. 1016 of 1997 filed by him restraining Smt. Neelu Kohli from entering the factory premises. The CLB dismissed the application on 21.3.2005 and fixed a date for hearing on which Shri Naveen Kohli filed a Company Appeal No. 2 of 2006 u/s 10F in this Court. By an order dated 03.3.2006, quoted as below, the company appeal was dismissed:
This appeal u/s 10F of the Companies Act, 1956, has been filed against the order of Company Law Board ( In short the Board) dated 10.2.2006; by which the application CA 251 of 2003 to adjourn the proceedings pending decision of Civil Suit No. 1016 of 1977 filed by second respondent in Civil Court, Kanpur has been rejected.
Learned counsel for the appellant has made submissions, which in fact challenge the order dated 25.9.2000 passed more than 5 years ago, holding that the petitioner and the second respondent would be deemed to hold 50% interest each in the company and the second respondent will purchase 50% interest of the petitioners on the value of the shares to be determined by an independent valuer.
The Company Law Board while deciding the recall application held that the order dated 25.9.2000 was passed after long deliberations and visit of the members of the Board to Kanpur. It has become final and that the application was only by way of after thought, to delay the final valuation.
It is a matter of serious concern that the appellant husband,( second respondent before the Board) who was allowed to run the company, on the ground that he was an active Director of the Company and that he should also have a business of his own, is running the company for the last five years. He has thereafter taken all steps to delay the process of valuation, Para 2 of the order of the Board shorts that firstly the appellant did not deposit the remuneration of the Chartered Accountant for about 2 years and thereafter he filed an application to adjourn the proceedings on the ground that a original suit No. 1016 of 1999 filed by second respondent for such declaration at Kanpur Civil Court is pending.
The Suits were filed in the year 1996 and 1997, and were pending at the time when the Board passed orders on 25.9.2000, after taking notice of the civil litigation.
Learned counsel for the appellant has relied upon the Apex Court judgment in M/S. Ammonia Supplies Corporation (P) Ltd. Vs. M/S. Modern Plastic Containers Pvt. Ltd. and Others, , which it was held that where a claim is based on some seriously disputed civil right or title, the denial of any translation or any other basic fact which may be the foundation to claim a right to be a member and if the Court feels such claim does not constitute to be a rectification but instead seeks adjudication of basic rights some such facts falling outside the rectification of share register the Board has discretion to send a party to seek his relief before Civil Court first for the adjudication of such rights. It cannot be said that such a right was taken away merely on account of the deletion of the proviso to Section 38 of the Companies Act, 1956. Otherwise under the garb of rectification one may lay claim of many such contentious-issues for adjudication not falling under it.
In my opinion, the appellant has wrongly placed reliance upon the observations of the Supreme Court. These observations relate to a dispute of rectification of register of members, and not where the minority alleges oppression against majority.
In the present case, the order dated 25.9.2000 has became final long ago. It is admitted that the appellant has not challenged the order. Instead Smt. Neelu Kohli, the respondent No. 2 filed a Company Appeal No, 5 of 2000, which was dismissed on 10.11.2005 on the statement given by her counsel that he is not getting instructions from her. The challenge to the order dated 25.9.2000 is thus barred on the principles of acquiescence. A person who had accepted the position to allow him to run the company and to pay the valuation of 50% share to his wife, cannot be heard to say, after he has resisted the valuation to be made for five years, that the shares were actually purchased by her benami from his income.
The Company Appeal has no merit and is dismissed.
M/s Nikhil Rubbers Pvt. Ltd., a company represented by Shri Naveen Kohli filed a special leave petition, which was dismissed by the Supreme Court on 01.5.2006. The orders of the CLB dated 10.2.2006 declaring that Shri Naveen Kohli and Smt. Neelu Kohli would be deemed to hold 50% interest each in the company and the Neelu Kohli will purchase 50% interest of the petitioner of the value of the shares to be determined by an independent valuer has become final between the parties.
The CLB after hearing both the parties on 15.5.2006 decided to make one more attempt to resolve the dispute amicably between the parties. They were asked to present in person to attempt re-conciliation, failing which the matter will be finally heard. On 02.6.2006 both the parties were present before the Chairman, CLB and a consent order was passed. The order written in the handwriting of the Chairman, CLB is quoted as below:
The parties have agreed to settle the matter of valuation in the following manner;
Since the land and building are divisible, the same will be divided into two equal parts and both will take one part each.
All machinery of the company as per balance sheet as on 31.3.1995 will be divided equally on the basis of the book value as of that date.
The respondent will pay a sum of Rs. 7.5 lacs as full and final payment in respect of all claims of the petitioner in so far as the company is concerned.
The portion with Hanuman Mandir (front portion) will go to the respondent and the other portion to the petitioner.
Respondent will ensure that vacant possession will be handed over to the petitioner latest by 30.10.2006. By the same time, the amount of Rs. 7.5 lacs will also he paid to the petitioner for imitation to UPSIDC within a week of handing over,
Both the sides will withdraw cases against each other except the suit filed by the respondent (suit No. 1016/1997 and review application filed by the petitioner in the Supreme Court).
As far as the built up area is concerned, the respondent will indicate by drawing the space going to him and the space going to the petitioner. Any shortfall will be adjusted against cost of construction of compound wall or paid in cash.
Order read out to the parties and their counsel and have consented to the same. To report on 10.11.2006 at 4.00 PM.
In para 17 of the affidavit of Smt. Neelu Kohli in this appeal, it is stated by her, "that immediately after the order was signed by the appellant, she met the members of the Bench and sought recall of the order signed and pronounced. She was directed the Bench accordingly to file a formal application in this regard."
Smt. Neelu Kohli moved a recall application on 05.6.2006 praying that CLB be pleased to reconsider the issues and that the parties should not take effective steps to implement the order dated 02.6.2006. The contents of this application are relevant for the purposes of deciding the appeal and arc thus quoted as below:
The Petition was fixed for hearing on 02.6.2006 to finalise the valuation of net worth as per the valuation report submitted by the Valuer appointed by the Hon''ble Board.
That before the matter could be taken up, the Hon''ble Chairman was kind enough to intervene and invited the parties (Petitioner and Respondent No. 2) in his chamber to explore the possibility of amicable settlement, if any,
That the petitioner was under depression, which, probably did not enable her to envisage the implications of such decisions about the settlement, in entirely, particularly, when the matter had become complex with several factors being considered. Further since the various matters being put in the said settlement, were not within the scope of the company petition and the petitioner alone being there, could not comprehend the consequences of such other matters in a short span of time. Even the counsel representing the petitioner in the company petition could not advise appropriately on the matters outside the scope of the company petition, pending otherwise.
That the Hon''ble Chairman, however, recorded certain terms and conditions of settlement and the petitioner also signed the same in haste along with others. The said terms of settlement, inter-alia, included as under:
(a) The Land & Building is to be divided into two equal portions by construction of a wall, with a front portion to be given to the respondent and rear portion to be given to the petitioner. The possession to be delivered to the petitioner on or before 31.10.2006.
(b) The respondent to pay a sum of Rs. 7.50 lacs to the petitioner, as a compensation for the flat (7/29 A, Flat No. 801 Chitrakoot Apartment, Tilak Nagar, Kanpur) V owned by the company to his own name, during the pendency of the proceedings, despite a status quo order being in force. Such payment to be made at the lime of handing over the possession of the aforesaid premises.
(c) The plant & machinery appearing in the books of account as on 31.3.95 to be divided between the petitioner and respondents in equal proportion.
(d) The parties to withdraw all cases filed by them against each other except suit No. 1016 filed by the respondents and a review petition filed by the petitioner.
That the petitioner had, though, brought out in discussions the following issues but the same did not find the place in the aforesaid order dated 02.6.2006:
(a) The period granted to the respondents for implementation of the order is too long and was not acceptable to the petitioner, unless implemented within a week.
(b) The petitioner insisted for the front portion of the factory premises, D.15, Panki Site II, Kanpur, to he given to her, as her shareholding had already been brought down from almost 98% to a meager 50% as per the order of the Hon''ble Company Law Board.
(c) The petitioner had not visited the factory premises for the last several years (the respondents had obtained an order from the civil court at Kanpur against her for her entry into the premises), it was not possible for her to form an opinion about the division of the premises,
(d) The value of the flat transferred by the respondent from the company despite a order being in force to the contrary,, as aforesaid, was atleast Rs. 60 lacs (as against Rs. 30 lacs considered in the terms of the settlement). The flat is situated in a posh locality of Kanpur and comprises of three bedroom, drawing dining etc. with a large terrace on the top.
(e) The rental for usage of the company''s premises by the respondent over a period of last 10 years has not been considered, which aggregates to Rs. 54.27 lacs till 31.5.2006.
(f) The cash in hand/ bank balance of the company as on 31.3.95 (Rs. 38 lacs) and the profits made by the company for the year 1995-96 and 1996-97 to the extent of Rs. 70 lacs have not been considered.
(g) All the criminal cases filed by the petitioner and also the cases pending in the Supreme Court i.e.
(i) Review, and
(ii)Application for modification will not be withdrawn.
(7) That the petitioner had always expressed her reservations throughout the discussions, bringing out the above issues very clearly, but somehow signed the order under a temporary depression without comprehending the implications and consequences. For this reason, the petitioner, immediately, after conclusion of the proceedings, went to the chamber of the Hon''ble Chairman in person, expressing all her reservations about the so called settlement and the Hon''ble Chairman was pleased to direct the petitioner to place the above on record to be considered,
(8) That since, the offer of settlement was suddenly put to her just before the hearing of the case, and the petitioner-was all along being represented by a lawyer and was not fully aware of all the facts and implications of such a settlement. The petitioner did not have all the facts and figures relating to the company and its assets concerning in her possession. Since the offer of settlement had been moved by the Hon''ble Chairman, the petitioner did not deem it proper at that stage to seek a deferment of the hearing, to collect her thoughts and correlate the material facts and figures, which would be necessary to arrive at a fair and equitable settlement.
The consent, therefore, given by the petitioner was not an informed consent.
That the petitioner, therefore, wish to state that the terms of settlement, in its present form as recorded on 2nd June, 2006 are one sided, more favorably towards the respondents and unfair to the petitioner. The settlement has just not considered that the petitioner, being a woman ! has brought up three children, single handedly without any support from the respondent/ husband, despite having tortured by moving around in various courts/ forum at different locations and has suffered a great agony for the last ten years.
That it is just and equitable that the said settlement therefore may not be given effect unless the aforesaid submissions (as per para 6) are considered, failing which, the matter may proceeded further on merits with the arguments on valuation and no one shall be prejudiced.
By the impugned order dated 15.11.2006 Shri S. Balasubramanian, Chairman of CLB dismissed the application with the observations that he had invited both the parties to his chamber on 02.6,2006 for discussions to explore the possibility of settlement of the long drawn litigation. Both the sides were present in his chambers without any aids and expressed their desire to settle their dispute amicably, each of them made a few alternate proposals. Finally they agreed on certain terms. With a view that they should also consult their counsels before the terms were recorded, their counsels wore invited find that the Chairman explained to them the various proposals made by both the parties and one finally agreed to by the parties. He observed that the petitioner Neelu Kohli also consulted one of her well-wisher, who was present. Thereafter, the order was recorded, read out to the parties and was signed not only by the parties but also by their counsels. At no time any reservation was expressed by the petitioner on the terms. He then records that after the respondent and his counsel had left, the petitioner (Neelu Kohli) met him again and expressed that the consent terms were unfavorable to her and such should be either recalled or modified to her satisfaction, Since the other side had left, she was advised that if she has any reservation on the consent terms, she could file an application and if the respondent was willing for either modification or recall, the same could be done. Now since the respondent has opposed to either recall the consent order or any modification in respect of the suggestion given by the Chairman to consider any of the other alternate proposal made by the parties during the discussion on 212.2006, the consent terms cannot be modified or recalled. The Chairman observed that it was not a case of forced compromise in which case it may be contended that it looses the very essence of its being a valid and lawful agreement and then relied upon Sambhu Charan Nundy Vs. Gopi Mohan Bhattacharjee, M.D. Boral v. D.J.P. Boral AIR 1980 Born 235 and recent judgment of the Supreme Court in Manish Mohan Sharma v. Ram Bahdur Thakur dated 21.3.2006 holding that when an order is passed with the consent of the parties, they cannot resile there from. An application for setting aside/ recall of a consent order is limited to only in cases where the order incorporates an agreement which is void or voidable at the instance of one of the parties to the proceedings on the ground of fraud, mistake, influence or other similar grounds. The contentions that the petitioner was in a depressed state of mind could not be taken cognizance of, in view of the fact that she did consult her counsel and well-wisher before recording the order. In view of the opposition of respondent (Naveen Kohli) to either modify or recall the order, the application was to be dismissed. The time schedule for compliance of consent order was extended upto 28.2.2007.
Shri Manish Kumar and Shri Manish Goyal appearing for the respondent No/2 have raised a preliminary objection to the maintainability of the appeal. It is contended by Shri Manish Kumar that no appeal lies against the consent order, The appellant (Neelu Kohli) participated in the discussions with the Chairman, CLB. She put alternate proposals and was assisted by a well-wisher and thereafter by her counsel, who had represented her in the proceedings throughout. She signed the consent terms along with her counsel and that the counsel also signed the terms without making any reservations. It is only after the respondent No. 2 (Naveen Kohli) and his counsel left, that she made a mention to the Chairman and thereafter, moved the application after four days. She as a estranged wife having lost in the divorce proceedings in the Supreme Court has not withdrawn Rs. 20 lacs deposited by Shri Naveen Kohli in pursuance of the order of Supreme Court and has no other purpose but to trouble her ex-husband by keeping the litigation pending. The order by which both of them were held to be shareholders to the extent of 50% has become final. The objections to the valuer''s reports were pending and that she having consented to the terms, which are beneficial to her, wants to resile from her voluntary agreement, only in order to keep the matter pending. Shri Manish Kumar further states that she never pleaded that she had not given consent to the terms offerred and settled by CLB. Her case before CLB was that certain issues, which were brought out in discussion did not find place in the order dated 02.6.2006. Her application was duly considered by CLB and was dismissed on the ground on which the alleged recall was sought, that she was under depression was not explained by her. She took contradictory stands before CLB, whereas she acknowledged that the matter was listed for an for arriving at a compromise. In her application before alleged that the matter was fixed for finalisation of the valuation. The application dated 20.3.2006 filed by her son Nimit Kohli was opposed by her. She made a statement before CLB that she had agreed to pay the share of Nimit Kohli, whatever she would get from her share. Shri Manish Kumar states that Shri Virendra Ganda, Advocate was throughout representing Smt. Neelu Kohli and was present, when the terms were recorded by CLB on 02.6.2006. She had removed Shri Vikas Mathur as her.... Advocate but then he was again engaged to file rejoinder. Her review application against the judgment of the Supreme Court dated 21.3.2006 decreeing Naveen Kohli''s suit for divorce was dismissed on 19.7.2006.
Shri Manish Kumar has pleaded estoppel and pleads that consent decree puts a stop to the litigation between the parties, just as much as judgment, which result from the decision of the Court after the matter has been fought to the end. The principles for this proposition are codified under Order 23 Rule 3 CPC and were reiterated in A. Thangal Kunju Musaliar Vs. M. Venkitachalam Potti and Another, : Shankar Sita Ram Sontakkc v. Balakrishna Sita Ram Sontakkc AIR 1954 SC 354 and in Pushpa Devi Bhagat (D) th. LR. Smt. Sadhna Rai Vs. Rajinder Singh and Others, He has also relied upon the judgment in Subhash Mohan Deo v. Santosh Mohan Deo (2001) 5 CLJ 104 (Gau.) in which reliance was placed upon the powers of the Company Law Board u/s 402 of the Companies Act, 1956, which are wide and discretionary in nature giving ample jurisdiction to CLB to achieve the objects set out in the statute and the judgment in Track Parts of India Ltd. (2002) 109 Comp Cas 350 (All ). He submits that there was no fraud or coercion or undue influence to vitiate the consent order, which was voluntary and was beneficial to the appellant.
Shri Yashwant Verma replying to the preliminary objections, and pressing the appeal, submitted that CLB committed manifest error in rejecting the recall application to rectify the error apparent on the face of record. The CLB did not consider the issues with regard to cash at bank, valuation of property, rent payable for usage of company premises, which needed to be resolved in order to term the settlement to be fair, equitable and disposing of all issues between the parties. The appellant was handicapped in the absence of regular counsel to form an opinion and that before the ink could dry, she made a mention on the same day, to the Chairman that the settlement has not considered all the issues and needs to be recalled. The settlement was not signed by all the parties. Nimit Kohli was also a shareholder and has attained majority. The consent terms did not take into account substantial assess, which affected the jurisdiction of the Board and that in order that the settlement was fair and equitable, it must have been incorporated and taken care of all the issues. He has relied upon Smt. Bismillah v. Janeshwar Prasad and Ors. (1990) 1 SCC 207 in which the Supreme Court In a matter arising out of suit for cancellation of sale deed on the ground of fraudulent misrepresentation to the character of the document and contents, held that the distinction based on the character and contents of a document is not without its difficulties in its practical application. The defence that the document was signed voluntarily was not available, where the mistake was to the very nature and character of the transaction. The common law defence of non est factum to actions on specialities in its origin was available where an illiterate person, to whom the contents of a deed had been wrongly read executed it under a mistake as to its nature and content. He could say that it was not his deed at all. The doctrine has been extended to the cases other than those of illiteracy and to other contracts in writing. The manner in which this defence is pleaded, the mistake is induced by fraud. But that is not perhaps a necessary factor, as the transaction is "invalid not merely on the ground of fraud where fraud exists, but on the ground that mind of signor did not accompany the signature:- in other words that he never intended to sign and therefore, in contemplation of law never did sign, the contract to which his name is appended." (Chitty on contracts, 25th edition, p.341).
In Ningawwa Vs. Byrappa and Others, the Supreme Court held:
The legal position will be different if there is a fraudulent misrepresentation not merely as to the contents of the document but as to its character. The authorities make a clear distinction between fraudulent misrepresentation as to the character of the document and fraudulent misrepresentation as to the contents thereof. With reference to the former, it has been held that the transaction is void, while in the case of the latter, it is merely voidable.
Chitty on Contracts ["General Principles" 25th edn. Para 343, page 194 observed, commenting upon the House of Lords in Saunders v. Anglia Building Society (1970) 3 All E R 961 as under;-
...It was stressed that the defence of non est factum was not lightly to be allowed where a person of full age and capacity had signed a written document embodying contractual terms. But it was nevertheless held that in exceptional circumstances the plea was available so long as the person signing the document had made a fundamental mistake as to the character or effect of the document. Their Lordships appear to have concentrated on the disparity between the effect of the document actually signed, and the document as it was believed to be (rather than on the nature of the mistake) stressing that the disparity must be "radical", "essential", "fundamental", or "very substantial.
The order of CLB dated 25.9.2000 that the petitioner and second respondent would be deemed to hold 50% interest each in the company became final after dismissal of the Company Appeal No. 2 of 2006 by the High Court on 3.3.2006 and the SLP No. 7263 of 2006 by Supreme Court on 01.5.2006. The parties were, thereafter, joined issues with regard to distribution of assets with the help of valuer''s report. INMACS Management Services Ltd. (formerly INMACS Management Services) the substituted valuer had submitted its report, to which objections were filed by both the parties. The valuation in terms of the order dated December 22, 2000 was to be based on balance sheet as on 31.3.1997. M/s Nikhil Rubbers Pvt. Ltd. (the company) was incorporated on February 25, 1985. Smt. Neelu Kohli and Shri Naveen Kohli were the first directors of the company. The company started business in the year of manufacture of saddlery products. The company was doing well, but for the differences in personal relationship between the directors. Shri Naveen Kohli set up M/s Navneet Elastomers, a proprietorship concern in April, 1994, which was functioning in the same premises of M/s Nikhil Rubbers Pvt. Ltd. and commenced production in 1995. The Company Law Board originally fixed balance sheet as on 31.3.1997 as dale of valuation but since no final balance sheet was available it fixed balance sheet as on 31.3.1995 in which complete assets and liabilities were communicated and audited, as the basis for valuation with liberty to both the parties to bring to the notice of the valuer all the events that had taken place after the order dated 25.9.2000. for the valuation of shares. Shri Naveen Kohli made submissions before the valuer that it should circumspect before placing faith on the information submitted by Smt. Neelu Kohli and should not consider him with Navneel Elastomers and the diversion of business. The fixed deposits with the bankers were provided with a rate of interest charged was variable between 9.5 to 15% He requested that the records relied upon by the valuer had no relevance and claimed certain expenditure namely Rs. 14,20,000/ towards security, Rs. 3,20,000/- towards allotment of shares with no date given by him and Rs. 1,60,000/- towards purchase of shares but again no date was provided. He did not provide the details Of the bank accounts nor records for the fund utilisation of M/s Nikhil Rubbers Pvt. Ltd. According to him Navneel Elastomers was operating in a small portion of the production hall belonging to the company and the tenancy receipts were issued by M/s Nikhil Rubber Pvt. Ltd. in favour of M/s Navneel Elastomers for a small portion. He questioned the authority of valuer to look into the transaction relating to flat No. 801, Chitrakoot Apartment, Tilak Nagar, Kanpur and then admitted that no funds were siphoned of except Rs. 9.5 lacs withdrawn by Smt. Neelu Kohli. He submitted a revised list of expenses given in the valuers report, the bills of Kanpur Electricity Supply Authority at the rate of Rs. 12000/- per month for six years.
The petitioner Smt. Neelu Kohli in her submissions before the valuer stated that the balance sheet of the company for the financial year 1993-94 and 1994-95 and the income tax returns upto 1995-96 were with Naveen Kohli. All accounting records and the details were with him. She requested that expert incentives received/ receivable should be accounted for and provided estimated turn over and profits earned by M/s Nikhil Rubbers Pvt. Ltd, during 1995-96 and 1996-97.
The valuer visited the factory premise at Kanpur and found that the entire plot is constructed with first floor and that about 60-70 workers were working in the factory. The valuer detailed the plant and machinery, molding machines, 1-2 Kirlosker Generator and other assets. The factory was found manufacturing car mats, saddlary products made of rubber and pet rubber products with in-house mold making and took room facilities. The rent receipts of Navneel Elastomers did not mention any area. He requested for factory map and the sales tax assessment orders from 1994-95 to 1996-97. The valuer also took into account the expenses on house No. 7/36, Tilak Nagar and Flat No. 801, Chitrakoot Apartment, 7/29-A, Tilak Nagar, Kanpur. The valuer in its long and detailed report assessed the value of the petitioner''s share in terms of the CLB''s order to be Rs. 153.22 lacs with deduction of Rs. 9.50 lacs withdrawn by her from the company with simple interest at 12%. The value of her share in the company, which was reduced from 90% to 50%, was valued at Rs. 128.76 lacs, taking into account the bank balance as on 31.3.1995 (Rs. 38 lacs), net profit for 1995-96 (Rs. 55.7 lacs), net profit for 1996-97 (Rs. 14.52 lacs) and rental from M/s Navneel Elastomers from 1997-98 till September 2000 (Rs. 20.47 lacs). Thereafter, the valuer valued the leased land at D-15, UPSIDC Industrial Area, Panki Site- II, Kanpur with the alternative valuations submitted by petitioner and respondent to be Rs. 24.95 lacs. The building was valued at Rs. 45.53 lacs. The valuer also valued the plant and machinery, dyes, furniture and fixtures, cycles, motorcycles, computers, sundry debtors, cost in trade, cash in hand, advances recoverable and bank balances and then valued good will at Rs. 76.58 lacs. It was found that entire facilities of company were under the control of Shri Naveen Kohli.
The objections to the valuer''s report were still pending, At this stage the Chairman, CLB called both the parties for a proposed settlement in his chambers without the aid of their counsels. The zerox certified copy of the settlement recorded by the Chairman shows that he wrote the settlement in his own handwriting, which is mostly unreadable. The terms of settlement (divided the land and building and machinery in equal parts as per the book value as on 31.3.1995. The front portion of the factory was to go to Naveen Kohli with vacant possession to he handed over by him by 30.10.2000, Both the parties were to withdraw the cases against each other except the suit filed by Shri Naveen Kohli bearing suit No. 1016 of 1997 in which he has obtained an injunction from Civil Court against her, and review application filed by Smt. Neelu Kohli in Supreme Court. With regard to built up area the respondent was to indicate by drawing the space going to him, with any shortfall to be adjusted against cost of construction of compound wall or paid in cash. The payment of Rs. 7.5 lacs by Shri Naveen Kohli to Smt. Neelu Kohli was to be taken as full and final payment in respect of all claims.
Taking into consideration the valuation report and the objections filed by the parties, the settlement was complete sell out in favour of Shri Naveen Kohli. The valuer had found the value of the shares of Neelu Kohli at 50% in terms of CLB outer to be Rs. 153.22 lacs. The valuer had found the net worth/ shareholder fund taking into account the entire fixed assets, current assets. loans and advances, bank balance, alter excluding the current liabilities and provisions. The valuer determined the share i.e. 50% at Rs. 153.225 lacs, excluding the fixed assets, land and building, plant and machinery value at Rs. 74.50 lacs, which was proposed to be divided in equal shares with advantageous front portion to Naveen Kohli, 50% share of Neelu Kohli was value at Rs. l15.95 lacs. Annexing the amount of Rs. 9.5 lacs with interest; at 12% per annum and further amount of Rs. 88965/- and Rs. 22,500/- taken by her as advances and imprest as per 31.3.1995 balance sheet was taken into consideration, her share would still be somewhere around Rs. 9() lacs.
As against these claims, the CLB round the terms of settlement of Rs. 7.5 lacs as full and final payment as voluntary settlement by Neelu Kohli.
Smt. Neelu Kohli was resisting the divorce suit. The Supreme Court annulled the marriage on 21.3.2006. On 02.6.2006 her review petition was pending. Instead of deciding the objections to the valuer''s report, the Chairman called both the parties to his chambers and considered the orders and counter offers put to him. He then recorded the alleged terms of settlement in his own hand writing, which is mostly unreadable and directed the parties to read them. The counsels for the parties, who came to argue the matter also found difficult to read. The observations of the Chairman that he had invited the counsels and explained to them various proposals made by the parties and finally agreed to by the parties, and that the petitioner consulted one of her well wisher, who was present, and that only, thereafter, the order was recorded and read out to the parties and was signed not only by the parties but also by their counsels, does not appear to be fair and reasonable method of resolving the dispute. It seems to be more an effort to get rid of one more matter pending on record than resolving the dispute in a matter agreeable to all the parties.
Soon after the consent terms recorded by the Chairman in his own hand writing were signed, the appellant Smt. Neelu Kohli requested the Chairman to recall or to modify the order to her satisfaction. She was advised to move an application! and thereafter, her application was dismissed only on the ground that Shri Naveen Kohli did not agree to modify the terms.
In the shadow of the decree of divorce, and that with the aid of counsel, who was not representing her regularly in the matter and was replaced after she had withdrawn the vakalatnama of Shri Vikas Mathur, the signing of the terms of settlement in the closed chambers with her ex-husband do not reflect her voluntary consent, which she immediately sought to recall. In such case the defence taken by her in her application dated 05.6.2006 that her signatures on the document were involuntary made under depression, which did not enable her to envisage the implication of such decision about the settlement in entirety could not be ignored only on the ground that it was not a case of forced compromise loosing the essence of being a valid and lawful agreement. The reliance in the judgment that final consent decree cannot be altered by the Court unless the parties agree to do so, was made without considering the facts and circumstance, which indicated that she never intended to sign the settlement,
The facts and circumstances in which the appellant Neelu Kohli signed the terms of settlement drafted in close chambers by the. Chairman of CLB in presence of her ex-husband, and which were highly unfair to her and in the manner that she was offered to be paid only about 10% of the value of her shares excluding land, and plant and machinery, after her share was deemed to be reduced from 90% to 50%, made the circumstances rare and exceptional. She made a complaint of the unfair settlement immediately after signing the document. All these facts support her plea that she had made a fraudulent mistake as to the character and the effect to the document. The Court fails to conceive circumstances in which appellant have a favourable valuer''s report, which offered to her about Rs. 90 lacs (after reducing her share from 90% to 50% and pegging the valuation to the balance sheet dated 31.3.1995) could have signed on settlement, which would give her only Rs. 7.5 lacs for balance lease rentals. Further Clause 7 of the terms of settlement left the discretion of deciding the cost built up area to Shri Naveen Kohli, the disputant, and then the shortfall to be adjusted against the cost of construction of the compound wall or to be paid in cash. These terms coupled with Clause 6, which allowed Suit No. 1016 of 1997 filed by Shri Naveen Kohli to continue and in which an injunction order was operative against her, clearly demonstrated that the agreement was grossly and fairly tilted in favour of Shri Naveen Kohli and that subscription of the signatures of the appellant to such a settlement not on account of her free will and, consent, which she expressed immediately on the same day to the Chairman.
Where it is established on record that the executor of the document never intended to sign the same and that she was deceived not merely as to its legal effect but as to the actual contents of the terms, the transaction to which she immediately protested the document can he avoided by her as fraud and misrepresentation played upon her to the character of the document. The submission that the appellant''s mind was not with her, when she signed the document and that she has never intended to sign the same in the frame of mind in which she was, deserves to be accepted.
The alleged settlement has many loose ends, Para 2 left the book value of the machinery to be determined, between the parties. Para 4, did not demarcate" the front portion and para 6, left the suit No. 1016 of 1997 to be decided by Civil Court, at Kanpur and para 7, left the discretion to draw the space of built up area to Shri Naveen Kohli. The disputes were thus left open and thus it cannot be said that the principles of CPC taking away the right to file appeal against consent decree in Section 96(3) CPC are applicable to the case.
In the present case, Smt. Neelu Kohli suffered on two counts. Firstly her share in the company was reduced from 90% to 50% and thereafter, inspite of a clear advantage given to her in the valuer''s report, which had not yet become final, she was made to sign, to accept only Rs. 7.5 lacs as against about Rs. 90 lacs determined as her share excluding land, plant and machinery. She was then offered the back portion of the factory with a discretion of dividing the constructions given to Shri Naveen Kohli. The alleged settlement as such was wholly unfair and smells of a fraudulent attempt to deceive her. She has explained the circumstances in which she was made to sign the same.
The company appeal is, consequently, allowed. The orders passed by Company Law Board dated 02.6.2006 and 15.1 1.2006 are set aside with direction to the Company Law Board to decide the Company Petition No. 27 of 1997 in accordance with law. The appellant is made entitled to Rs. 10,000/- as costs of prosecuting the appeal.