Mr.Rakesh Malhotra v. Rsm Properties Pvt.Ltd. and 8 Ors.

Bombay HC20 Aug 2014COAPP/24/2013

Case brief

AI extract

What is this about?

A judge clarifies that previous orders restraining company fund usage and asset encumbrance did not intend to restrain changes in Board of Directors' composition. The judge dismisses a request to formally modify the record, stating the original order was sufficiently clear.

What did the court decide?

Order clarified that interim restraints are limited to fund utilization and asset disposal, not Board composition changes.

What the court decided

AI extract

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COAPP-18-13+.DOC

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agk IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY APPEAL NO. 18 OF 2013

¶3

Rajinder Kumar Malhotra & Ors…Appellants
Versus
Transauto And Mechaids Pvt. Ltd. & Ors.…Respondents
WITH
COMPANY APPEAL (L) NO. 10 OF 2013
Rakesh Malhotra…Applicants
Versus
Rajinder Kumar Malhotra & Ors.…Respondents
WITH
COMPANY APPEAL (L) NO. 11 OF 2013
Rakesh Malhotra…Applicants
Versus
Sapphire Properties Pvt. Ltd.…Respondents
WITH

¶4

COMPANY APPEAL NO. 15 OF 2013

¶5

Rajinder Kumar Malhotra…Applicants
Versus
Vidyut Metallics Pvt. Ltd. & Ors.…Respondents

¶6

WITH

¶7

1 of 8

¶8

COAPP-18-13+.DOC

¶9

COMPANY APPEAL NO. 16 OF 2013

¶10

Sapphire Properties Pvt. Ltd.…Applicants
Versus
Unique Properties and Securities Pvt. Ltd. & …Respondents
Ors.
WITH
COMPANY APPEAL NO. 17 OF 2013
RSM Properties Pvt. Ltd.…Applicants
Versus
Supermax International Pvt. Ltd. & Ors.…Respondents
WITH
COMPANY APPEAL NO. 23 OF 2013
Rakesh Malhotra…Applicants
Versus
Rajinder Kumar Malhotra & Ors.…Respondents
WITH
COMPANY APPEAL NO. 24 OF 2013
Rakesh Malhotra…Applicants
Versus
RSM Properties Pvt. Ltd. & Ors.…Respondents

Mr.Rakesh Malhotra Vs Rsm Properties Pvt.Ltd. and 8 Ors. — Company and Corporate | Bombay HC (2014)

¶25

1. Mr. Chinoy, learned senior counsel for the Respondents in
the first four of these Appeals and for the Appellants in the others,
makes an application by way of a praecipe. This is ostensibly an
application for “speaking to the minutes” of the detailed order and
judgment dated 12th/20th August 2014. That was a judgment by
which I disposed of all these Company Appeals under Section 10F
of the Companies Act, 1956.

¶28

2.I am informed that that order has been carried to the
Supreme Court. Leave has been granted in the Special Leave
Petition from that order. A stay has been refused. Parties have been
directed to proceed before the Company Law Board.

¶29

3.Mr. Chinoy points out that in paragraphs 129 to 139 of my
judgment, I referred to previous orders passed by the Company
Law Board. In particular, there was a reference to two orders dated
9th February 2012 and 7th November 2012. By the order of 9th
February 2012 an ex-parte ad-interim relief was granted. For the
present purposes, it is sufficient to note that that ad-interim order
restrained the Respondents (i) from utilizing, investing or dealing in
any manner with the funds, monies and securities of the Company
including the bank account except for the purpose of making
statutory payments to government authorities and salaries of
employees in the ordinary course of business until further orders,
and (ii) restraining the Respondents from disposing of, transferring,
encumbering or creating any charge on the assets of the Company
including the immovable properties until further orders. The term
‘Respondents’ in this order refers to the various companies in
respect of which operation and mismanagement was alleged, and
their respective directors.

¶30

4.The order dated 7th November 2012 records an undertaking
by counsel for both sides to maintain status quo as it existed on that
day in respect of the shareholding, the constitution of the Board of
Directors and fixed assets of the Company. The 7th November
2012 order then directs that the interim orders passed on 9th
February 2012 would continue until the next date fixed.

¶34

6.I heard both Mr. Madon and Mr. Chinoy extensively on these
orders at the time of my judgment and order of 12th/20th August
2014. I heard them in the context of an application for stay.
Paragraph 129 and 139 of the order of 12th/20th August 2014 read
as follows:

¶35

“129.Mr. Madon refers to the various interim orders
passed by the CLB. The first in time is a set of four
orders (one on each petition) dated 9th February 2012
inter alia restraining the four Respondent companies
from utilizing their funds except for salaries and statutory
payments and secondly from disposing of any assets. A
later order of 7th November 2012 directed the
maintenance of status quo “as regards the shareholding,
the constitution of the board of directors and the fixed
assets” of the companies. In addition, the interim orders
of 9th February 2012 were continued. As I have noted in
Section C of this judgment, this was followed by an
order of 19th November 2012 that clarified that there
was no injunction as regards Transauto’s board of
directors, but that it would continue for the other three
companies. Mr. Madon then points out the order of this
Court on admission of these petitions, passed on 7th
February 2013, by which the CLB’s orders of 9th
February 2012 and 7th November 2012 were continued.
This, he says, was clarificatory.

¶36

139.The application for stay is rejected. Mr. Chinoy’s
request that the pending interim orders of 9th February
2012 and 7th November 2012 passed by the CLB be
allowed to continue is one that I must accept. It is

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clarified that, except for those two orders, there will now
be no interim order in place as regards any of the four
Respondent companies. Parties are at liberty to make
such applications as they think fit for further suitable
interim orders. The Company Law Board will consider
every such application on its merits.”

¶40

7.Mr. Chinoy’s submission is that on 22nd September 2014,
M/s Udwadia, Udeshi & Argus Partners, the attorneys in the first
four appeals in which Mr. Madon appears, i.e., the ‘Respondents’
before the CLB wrote to M/s Federal & Rashmikant, the attorneys
for the CLB petitioners, and for whom Mr. Chinoy appears, saying
that the consequence of my order of 12th/20th August 2014 was
that there could be no change in the constitution of the Board of
Directors. This has been recently followed by a public
advertisement issued in the Times of India on 13th October 2014 to
the same effect.

¶42

“139. The application for stay is rejected. Mr. Chinoy’s
request that the pending interim orders of 9th February
2012 and 7th November 2012 passed by the CLB
restraining the Respondents fromutilizing the
funds of the companies & from disposing off or
encumbering the assets of the companies be
allowed to continue is one that I must accept. It is
clarified that except for those two orders which restrain
the Respondents from utilizing the funds of the
companies & from disposing off or encumbering
the assets of the companies there will now be no

¶47

9.Mr. Madon opposes this application most strenuously. He
says it has been moved on the last day before the Court closes for
Diwali Vacation. Mr. Chinoy’s clients had sufficient time to file a
proper application to which his clients would then have had a
chance to respond. In any case, he submits that the appeal having
been admitted, there is no question of my now modifying that
order. This is, he submits, not an application for speaking to the
minutes at all, i.e., an application for rectifying minor typographical
or clerical errors. It is a substantive application for modification,
one that cannot be made in this manner.

¶48

10.Mr. Madon may have been correct had this been an
application for modification of my judgment. It is not. There is no
doubt at all in my mind that what I intended in paragraphs 129 to
139 of my judgment dated 12th/20th August 2014 is precisely what
Mr. Chinoy suggests today. It was not my intention in that order,
though it may have been then infelicitously worded or insufficiently
expressed, to restrain the change in constitution of the Board of
Directors. Indeed, that could never have been so, this was the very
issue on which both Mr. Chinoy and Mr. Madon addressed me
while dealing with the question of stay, and I had made it amply
clear even at that time that I was not staying the change in the
constitution of the Boards of Directors of the companies in
question. The only restraint I ever intended was against the CLB

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Respondents from utilising the companies’ funds and from
disposing of or encumbering their assets. Other than these two
injunctions, i.e., limited to the fund utilization of the Company and
disposal of the assets, I intended no other injunction or stay. I
thought that was sufficiently clear from the order itself.

¶52

11.Paragraph 139 already references the order of 7th November
2012. As I have noted, and this appears from the preceding
paragraphs of the judgment of 12th/20th August 2014 also, my
intention in that judgment was to limit the continuance of the
previous order of 9th February 2012 and 7th November 2012 to a
restraint against the Respondents from utilizing the funds of the
companies and from disposing of or encumbering their assets; and
except for these two restraints, there was to be no further interim
order.

¶53

12.Mr. Madon requests for a stay of this order. I do not see how
this order can be stayed. I have today only made more abundantly
plain that which I thought was already sufficiently clear in my order
and judgment of 12th/20th August 2014.

Mr.Rakesh Malhotra v. Rsm Properties Pvt.Ltd. and 8 Ors.

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