VIJAYA HOSPITALITY AND RESORTS LIMITED v. SIBI C.K., K.C. BABOO, THE FEDERAL BANK LTD., AND OTHERS

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN & THE HONOURABLE MR. JUSTICE K.RAMAKRISHNAN THURSDAY, THE 9TH DAY OF JUNE 2016/19TH JYAISHTA, 1938 Co.Appeal.No. 3 of 2016 () --------------------------(AGAINST THE ORDER DATED 2.5.2016 IN C.A.NO.1 OF 2016 IN C.P.NO.68 OF 2015 OF THE COMPANY LAW BOARD, CHENNAI BENCH) APPELLANTS/RESPONDENTS 1 TO 4 & 6: ----------------------------------- 1. M/S. VIJAYA HOSPITALITY AND RESORTS LIMITED REGISTERED OFFICE AT 37/991, FIRST FLOOR, EMMY SQUARE, S.A.ROAD, KADAVANTHRA, KOCHI - 682 020, REPRESENTED BY ITS DIRECTOR MRS.SHALINI VIJAYAN, 44 YEARS, RESIDING AT FLAT NO. 6A, VIJAYA GLIMPSES, JAWAHAR NAGAR, KADAVANTHRA, KOCHI - 682 020. 2. C.K.VIJAYAN S/O. KRISHNANKUTTY, DIRECTOR/CHAIRMAN, VIJAYA HOSPITALITY & RESORTS LTD, 37/991, FIRST FLOOR, EMMY SQUARE, S.A.ROAD, KADAVANTHRA, KOCHI - 682 020, REPRESENTED BY HIS POWER OF ATTORNEY HOLDER MRS. SHALINI VIJAYAN, 44 YEARS, RESIDING AT FLAT NO. 6A, VIJAYA GLIMPSES, JAWAHAR NAGAR, KADAVANTHRA, KOCHI - 682 020. 3. MRS.SHALINI VIJAYAN AGED 44, W/O. C.K.VIJAYAN, DIRECTOR, VIJAYA HOSPITALITY AND RESORTS LIMITED, REGISTERED OFFICE AT 37/991, FIRST FLOOR, EMMY WQUARE, S.A.ROAD, KADAVANTHRA, KOCHI - 682 020, REISING AT FLAT NO. 6A, VIJAYA GLIMPSES, JAWAHAR NAGAR, KADAVANTHRA, KOCHI - 682 020. 4. SAIRA THAMPY KRISHNA W/. LATE THAMPI KRISHNA, DIRECTOR, VIJAYA HOSPITALITY AND RESORTS LIMITED, REGISTERED OFFICE AT 37/991, FIRST FLOOR, EMMY SQUARES,S.A.ROAD, KADAVANTHRA,KOCHI - 682 020, RESIDING AT FLAT NO 7A, VIJAYA GLIMPSES, JAWAHAR NAGAR, KADAVANTHRA, KOCHI - 682 020. 5. AKSHAY VIJAYAN AGED 21,S/O. C.K.VIJAYAN, DIRECTOR, VIJAYA HOSPITALITY AND RESORTS LIMITED, REGISTERED OFFICE AT 37/991, FIRST FLOOR, EMMY SQUARE, S.A.ROAD, KADAVANTHRA, KOCHI- 682 020, RESIDING AT FLAT NO. 6A, VIJAYA GLIMPSES, JAWAHAR NAGAR, KADAVANTHRA, KOCHI - 682 020. BY ADVS.SRI.S.EASWARAN SRI.P.MURALEEDHARAN (IRIMPANAM) SRI.M.A.AUGUSTINE SMT.SOUMYA JAMES SRI.P.SREEKUMAR RESPONDENTS/APPLICANTS, 7TH RESPONDENT & COMPANY LAW BOARD: ------------------------------------------------------------- 1. SIBI C.K AGED 45, S/O. C.K.KRISHNANKUTTY, BUSINESS, EX-DIRECTOR VIJAYA HOSPITALITY & RESORTS LTD, VIJAYA HOSPITALITY AND RESORTS LIMITED, REGISTERED OFFICE AT 37/991,FIRST FLOOR, EMMY SQUARE, S.A.ROAD, KADAVANTHRA, KOCHI - 682 020, RESIDING AT CHANJAMATTATHIL HOUSE, FLAT NO. 7D, VIJAYA GLIMPSES, JAWAHAR NAGAR, KADAVANTHRA, KOCHI - 682 020. 2. K.C.BABOO AGED 47, S/O. KRISHNANKUTTY, BUSINESS, EX-DIRECTOR, VIJAYA HOSPITALITY & RESORTS LTD, REGISTERED OFFICE AT 37/991,FIRST FLOOR, EMMY SQUARE, S.A.ROAD, KADAVANTHRA, KOCHI - 682 020, RESIDING AT CHANJAMATTATHIL HOUSE, PIRAVOM, ERNAKULAM DISTRICT. 3. THE FEDERAL BANK LTD ERNAKULAM, VYTTILA BRANCH, THAMMANAM ROAD, VYTTILA JUNCTION, KOCHI - 682 019, REPRESENTED BY ITS CHIEF MANAGER. R1 BY ADV. SRI.M.GOPIKRISHNAN NAMBIAR R1 BY ADV. SRI.P.GOPINATH R1 BY ADV. SRI.P.BENNY THOMAS R1 BY ADV. SRI.K.JOHN MATHAI R1 BY ADV. SRI.JOSON MANAVALAN R1 BY ADV. SRI.KURYAN THOMAS R3 BY ADV. SRI.A.ANTONY R3 BY ADV. SMT.LEELAMMA ANTONY THIS COMPANY APPEAL HAVING BEEN FINALLY HEARD ON 09-06-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **P.N.RAVINDRAN & K.RAMAKRISHNAN, JJ.** ------------------------------------------------------Company Appeal No.3 of 2016 -------------------------------------------------------------Dated this the 9[th] day of June, 2016 ## **JUDGMENT** ## **P.N.RAVINDRAN, J** The appellants are respondents 1 to 4 and 6 respectively in C.P.68 of 2015, presently on the file of the Company Law Board, Chennai Bench. Respondents 1 and 2 herein along with 10 others have in C.P. No.68 of 2015 prayed for various relief including interim relief. The interim reliefs prayed for as follows: _(i) To allow the petitioners 1 and 2 to infuse funds into the company as equity to the tune of Rs.22 Crores and to settle the dues of the company to Federal Bank to protect the valuable property of the company._ _(ii) To reinstate the petitioners as directors and to give them powers to operate the bank accounts of the company, consequent to their infusing the funds in the company as equity._ _(iii) To appoint an Advocate commissioner to go through the statutory records of the company and to submit a report forthwith to this Hon'ble Bench from March 2010 to till date._ _(iv) To remove respondent No.5 from the board of the company or at least pass such orders restraining him from acting as Managing Director of the respondent company._ _(v) To restrain the respondent company from alienating the property of the company in any manner, without the leave of the Bench and with due notice to the petitioners._ _(vi) To order status quo as on 1.8.2011 as regards the constitution of the board (i.e) only respondent No.2 and petitioners 1 and 2 shall be the directors and status quo of shareholding as on the Annual General Meeting of 2010._ _(vii) To order or restrain the voting rights of respondent No.4, in respect of at least 75% of her shareholding transmitted to her illegality from her late husband, Thampi Krishna, and to keep the said 75% in abeyance, till the disposal of the petition or recognise the mother and two children of the deceased as the legal owners of the 25% shares each of the total shares held by late Thampi Krishna._ _(viii) To restraint he voting rights in respect of the illegal acquisition or transfer of 115,886 shares held by petitioner No.2 and how illegally added to_ Co.A.No.3 of 2016 2 _the shares of the respondent No.2._ _(ix) Such other order as the Hon'ble Bench deems fit and proper, to meet the end of justice._ 2. After notice to the respondents in the petition, the Company Law Board considered the question whether the interim relief prayed for can be granted. Interim relief was declined on the ground that the petitioners in the company petition have failed to make out a _prima facie_ case. This was by order passed on 14.9.2015. One of the reliefs sought by respondents 1 and 2 herein in the company petition was to permit them to infuse funds to the tune of Rs.22 crores in the company with a view to settle the dues of the company to Federal Bank. Such a step was taken evidently to protect the property of the company which is being proceeded against under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. After the Company Law Board declined to grant an interim relief as prayed for, respondents 1 and 2 herein moved the Debts Recovery Tribunal, Ernakulam by filing a Securitization Application No.339 of 2015, wherein they prayed for setting aside the notices issued under section 13(2) and 13(4) of the Securitization Act. After considering the rival contentions, the Debts Recovery Tribunal dismissed Securitization Application No.339 of 2015 by order passed on 12.2.2016. Thereafter, respondents 1 and 2 herein filed C.A.No.1 of 2016, wherein they prayed for the following interim reliefs. Co.A.No.3 of 2016 3 _1. To permit the applicants and / or their nominees, to infuse such amount as investment in share capital, as it is necessary to settle the Federal Bank Limited (i.e) the 7[th] respondent and to save the valuable property of the respondent company._ _2. To direct the 7[th] respondent bank to open a 'No Lien Account' in the name of the company, so that the investment from the applicants and their nominees be deposited there, till it is duly appropriated against the dues of the bank._ _3. To pass orders that the present management of the company, should not operate the 'No lien Account', and misuse the funds for operations._ _4. To issue directions that the 'No Lien Bank Account', where the funds would be deposited be jointly operated by the first applicant and the 7[th] respondent bank._ _5. To appoint an Advocate Commissioner to go through the statutory records of the company and to submit a report forthwith to this Hon'ble Bench from March 2011 to till date._ ## 3. After repeated postings, the said application was taken up for consideration on 2.5.2016 and on that day the Company Law Board ## passed the following order:- _“The petitioners filed a memo dated 26.4.2016 requesting the Bench to hear the C.A.No.1/2016 filed by them. As per the request and to considering the above memo the matter is posted today._ _2. It is seen from the attendance-cum-order sheet dated 4.1.2016, the Bench allowed two weeks' time to file reply/counter to C.A.No.1/2016 by all the Respondents and the matter is posted on 9.2.2016. From the attendance-cum-order sheet dated 9.2.2016 it is seen that the Respondents No.1 to 6 have not filed the counter and requested the Bench to grant further time to file counter to this application. Considering the request, the bench further extended the time to file reply within a period of two weeks from 9.2.2016 subject to payment of costs of Rs.5,000/- to CM Relief Fund. The Bench is not aware whether the cost have been paid or not. The Bench had afforded sufficient time to the Respondents No.1 to 6 to file counter to C.A.No.1/2016._ _3. However, from the records it is seen that no counter has been filed so far. This Bench once again granted one week time to file counter by the Respondents No.1 to 6 to C.A.No.1/2016 and serve copies on the other side. Failing which, the right of filing counter to CA will be forfeited. The C.A.No.1/2016 will be heard and decided on the basis of pleadings, documents available with the Bench. The Bench inclined to settle the disputes amicably amongst the parties. Hence, I advise the petitioners and the contested respondents to present before the Bench on 12.5.2016 at 10.30 A.M. to explore the possibility of settlement. If the settlement process fails the CA will be decided as stated above. The Registry is directed to send copy of this Order to all the parties by speed post forthwith.”_ The said order is impugned in this appeal filed under section 10F of the Co.A.No.3 of 2016 4 Companies Act, 1956. 4. The impugned order discloses that it was based on a memo filed by respondents 1 and 2 herein on 26.4.2016 that C.A.1 of 2016 was taken up on 2.5.2016. The order further discloses that C.A.1 of 2016 was initially taken up for consideration on 4.1.2016 and on that day it was adjourned to 9.2.2016 with a direction to the respondents therein to file reply/counter. On 9.2.2016, as the respondents had not filed a counter two weeks further time was granted subject to payment of 5,000/- as costs to the Chief Ministers Relief Fund. Still later one weeks time was granted subject to the condition that, in the event of failure, the right to file a counter will be forfeited and the application heard and decided on the basis of available documents. Since no counter affidavit had been filed till 2.5.2016, the Company Law Board directed both sides to be present before it at 10.30 a.m. on 12.5.2016 to explore the possibility of an out of court settlement. The Company Law Board also granted the respondents in C.A.No.1 of 2016 an opportunity to file a counter affidavit in the meanwhile. 5. The impugned order does not in our opinion decide the rights of the parties. It only cautions the respondents in C.A.No.1 of 2016 that if a counter is not filed, the right to file a counter will be forfeited and the application will be heard and decided on the merits based on the pleadings and the available materials. It also direct the parties to Co.A.No.3 of 2016 5 explore the possibilities of an out of court settlement. By that order, none of the rights of the parties are affected. The reliefs prayed for in C.A.No.1 of 2016 have also not been granted. In other words, no order adverse to the interests of the parties had been passed. The order discloses that the application was being repeatedly adjourned for the purpose of filing a counter affidavit. It was for the reason that no counter affidavit has been filed even as on 2.5.2016, as a last chance, the Company Law Board granted to the respondents in C.A.No.1 of 2016 one week's further time to file a counter affidavit. In such circumstances, as the order does not decide any of the issues arising for consideration in C.A.No.1 of 2016 or in C.P.No.68 of 2015, we are of the opinion that the instant appeal is not maintainable. The Apex Court has in _**Purnima Manthena and Another v. Renuka Datla**_ _**and Others**_ (2016 (1) SCC 237) held that a decision on the issues raised is a sine quo non for a question of law to arise and that it is only on a question of law that an appeal under section 10F of the Companies Act, 1956 would lie. It was held that the existence of a question of law arising from the decision of the Company Law Board is an essential pre-condition for the maintainability of the appeal under section 10 of the Companies Act, 1956. In such circumstances, as the impugned order does not decide the rights of the parties and it does not decide any of the issues arising for consideration before the Co.A.No.3 of 2016 6 Company Law Board, the order impugned cannot be said to be an order which is appealable under section 10 of the Act. We accordingly hold that the instant appeal is not maintainable. The appeal fails and is accordingly dismissed. Needless to say, the interim order passed by this court on 13.05.2016 shall stand vacated. We make it clear that we have not expressed any opinion on the merits of the rival contentions and that, it is for the Company Law Board, which is in sezien of the dispute to take an appropriate decision in the matter having regard to the pleadings and the materials on record. Sd/- ## **P.N. RAVINDRAN, JUDGE.** Sd/- ## **K. RAMAKRISHNAN, JUDGE.** **cl** /true copy/ P.S to Judge