Holding

The order dated 19 August 1999 is a preliminary decree, not an interim order, and is enforceable like a decree under Section 634A; the CLB must execute it and may interpret its terms.

Summary

Two groups of family shareholders in Ram Bahadur Thakur Ltd. filed a petition under Sections 397 and 398 of the Companies Act, 1956, alleging ouster from management. The Company Law Board (CLB) removed the directors, facilitated a family settlement and, on 19 August 1999, passed an order under Section 402 incorporating a Memorandum of Family Arrangement (MOFA) and Transfer Document, directing the parties to execute transfer deeds and allowing them to approach the Board for implementation. A later dispute over accrued gratuity liability led the CLB to refuse to pass an order under Section 634A, a decision upheld by the Patna High Court. The Supreme Court held that the 19 August 1999 order was a preliminary decree, not an interim order, and is enforceable like any decree under Section 634A; the CLB was bound to execute it and could interpret its terms. The Court allowed the appeals and remanded the matter to the CLB for implementation of the consent order.

Issues considered

The nature of the CLB order dated 19 August 1999: whether it is an interim order or a preliminary decree enforceable under Section 634A.
Whether the CLB and the High Court could refuse to execute the consent order passed under Section 402.
The scope of the residuary powers of the CLB under Section 402 of the Companies Act, 1956.
The binding effect of a family settlement consent order despite alleged errors or omissions.
The authority of the CLB to interpret and enforce the terms of the MOFA and Transfer Document.

Legislation cited

Code of Civil Procedures. 36
Companies Act, 1956s. 397, s. 398, s. 402, s. 634A

Subjects

Company Law BoardConsent decreeFamily settlementSection 402Section 634APreliminary decreeEnforcement of ordersGratuity liabilityInterpretation of settlement

Judgment

MANISH MOHAN SHARMA AND CO. A
v.
RAM BAHADUR THAKUR LTD. AND ORS.

MARCH 21, 2006

[RUMA PAL AND DAL VEER BHANDARI, JJ.] B

Companies Act, 1956-Sections 397, 398, 402 and 634A-Groups of
family relatives having shareholding in a company-One group complaining
under Sections 397 and 398 to Company Law Board of its ouster fraTtt C
management-Resolution of issues between parties by execution of
Memorandum offamily arrangement (MOFA) and Transfer Document-With
these two documents as integral part, CLB passing order under Section 402
and directing parties to execute transfer deeds to effect transfer of relevant
assets, with liberty to parties to approach it in case of difficulty in
implementation of order-Thereafter, on dispute arising between parties on D
issue of gratuity, when they approached CLB, it found that this issue was not
contemplated when parties executed the two documents, and as there was
dispute between parties regarding interpretation clause in those documents, it
could not pass any order under Section 634A-High Court upholding order
ofCLB-On appeal, held: Order ofCLB under 402 was not an interim order;
it was a preliminary decree enforceable under Section 634A-CLB was bound E
to execute it, if required, interpret its terms, and parties were bound by that
interpretation-It was especially so as it was a consent order, and more so
relating to a family settlement which is to be enforced even if agreed to on
basis of error, mistake or ignorance of fact as to actual rights of parties.
F
Companies Act, 1956-Sections 397, 398 and 402-Powers of Company
Law Board under Section 402-Held: These are residuary and in addition to
powers available to it under Section 397(2) and Section 398(2), and permit
it to make such order it thinks fit to bring to an end matters complained under
Section 397(1) or preventing matters complained or apprehended under Section
398(1). G
Companies Act, 1956-Sections 397, 398 and 634A-Enforcement of
orders a/Company Law Board under Section 634A-Held: Word 'any order'
in opening of section indicates that all orders made by Company Law Board

97 H
98 SUPREME COURT REPORTS (2006] 3 S.C.R.

A on application under Sections 397 and 398 are enforceable like decrees without
any limit on nature of the order.

Appellant and respondent are two groups of close family relatives
having equal shareholding in respondent no. I company. Appellant filed
a company petition before Company Law Board (CLB), under Sections
B 397 and 398 of Companies Act, 1956 complaining that they were ousted
from management of the company. CLB removed the Chairman and
Managing Director of the company. A retired judge was appointed as
Chairman, who tried to resolve matters between the parties. A
Memorandum of family arrangement (MOFA) and Transfer Document
C were executed between the parties. On 19th August, 1999, CLB passed
an order with these two documents as integral part, and directed the
parties to execute transfer deeds to affect transfer of relevant assets. This
order was passed under Section 402. It also gave liberty to the parties to
approach CLB in case there was some difficulty in implementing the order.
In terms of MOFA, respondent gave a notice of completion. This notice
D was objected to by appellant as not being in terms of the Transfer
Document. Hence they filed an application under Section 634A questioning
validity of the notice, and praying for direction to respondent to proceed
as per the MOFA and the Transfer Document. During the pendency of
this application, respondent filed an application for recalling of order of
E the CLB. During hearing before the CLB, issue was raised as to accrued
liability of gratuity, and there was dispute between the parties on it. CLB
held that liabilities of gratuity were not contemplated by the parties when
they entered the MOFA and the Transfer Document, that there was no
meeting of mind on this issue and that there was a bona fide dispute
between the parties with to regard to interpretation clause in these two
F documents. Accordingly, it held that it could not pass any order on
application under Section 634A and rejected it. It also rejected application
filed by respondents. Appellant appealed to the High Court against this
order. High Court upheld the order of CLB and dismissed the appeal.
Hence the present appeal.

G Appellants contended that the CLB could not refuse to execute its
own order, especially as it was passed with consent of the parties.
Respondent contended that order of CLB was not a final order, and that
the appeal should be rejected under Article 136 of Constitution of India,
1950 keeping in view that investigation was being carried out by
H Government into mismanagement of assets held by appellants.
MANI SH MOHAN SHARMA v. RAM BAHADUR THAKUR LTD. 99

Allowing the appeals and remanding the matter to Company Law A
Board, the Court

HELD : I. Both the Company Law Board and the High Court erred
in refusing to execute the order dated 19th August, 1999 under Section
634A of the Companies Act. They have thereby failed to exercise the
jurisdiction with which they were vested. The failure is heightened given B
the nature of the order which they were bound to execute. They have
erroneously proceeded upon principles applicable to contracts alone and ·
have ignored the fact that the agreement between the parties had
culminated in a consent order of the Company Law Board. [113-C-D)

..... 2.1. The Company Law Board in the order dated 19th August, 1999 C
had itself recorded that if there was any difficulty in the implementation
of the order 'the parties shall be at liberty to apply to us for
implementation of this order'. Yet when the application was made for such
implementation the Company Law Board did not abide by its own
direction. (110-G-H; 111-Aj D
2.2. It is nobody's case that the order dated 19th August 1999 was a
nullity. The respondents had filed an application for recalling it. The
Company Law Board dismissed that application. An appeal has been filed
before the Patna High Court is said to be pending. However, it has not
been shown that the application for recall was founded on the submission E
that the order dated 19th August 1999 was a nullity. In the absence of
such an issue being raised and decided, the Company Law Board was
bound to execute the order. If the Board found that the decree or any of
its terms called for interpretation, it was within the Board's jurisdiction
to interpret that particular term and to execute the decree on the basis of F
such interpretation. (111-F-H; 112-A)

Topnmal Chhotamal v. Mis Kundomal Gangaram and Ors., AIR (1960)
SC 388 and Central Bank ofIndia v. Rajagopalan, AIR (1964) SC 743, relied
on.
G
2.3. Once having agreed to particular terms of settlement which were
incorporated which were incorporated in a decree, the parties concerned
-' are bound to comply with the terms as may be interpreted by the executing
Court. Once the interpretation is done, the decree must be executed as
interpreted. [112-C-DJ
H
JOO SUPREME COURT REPORTS [2006] 3 S.C.R.
'
A 3.1. The order dated 19th August, 1999 was not an interim order.
(109-8-E(

3.2. Doubtless the Company Law Board speaks of 'final disposal of
the petition and the various interim application'. This was because in terms
of the order itself (which included the MOFA and the Transfer Document),
B various steps had to be taken to complete the severance of the relationship
finally between the MMS Groups and the respondents. This did not make
the affirmation of the MOFA and Transfer Document and interim
arrangement. The operative portion of the order directed the execution
of the MOFA and Transfer Document by the parties after completion of
the schedules thereto. The entire order was passed by consent. Parties
C cannot resile therefrom. Therefore, the order cannot be described as an
interim order in the sense that the issues decided thereby could be
reopened. (109-G-H; 110-A-B)

4.1. The order dated 19th August, 1999 was passed expressly under
D Section 402 of the Companies Act. (109-B(
4.2. The powers under Section 402 are residuary in nature and in
addition to the powers available to the Company Law Board under Section
397(2) and Section 398(2) which permit the Company Law Board to make
such order it thinks fit with a view to bringing to an end the matters
E complained of under Section 397(1) and with a view to bringing to an end
or preventing the matters complained or apprehended under Section
398(1). (109·F-G)

5.1. The order dated 19th August, 1999 was in fact a preliminary
. decree. Final disposal of the matter or the final decree would be after full
implementation of the terms of the MOFA and Transfer Document. The
F interim orders passed relating to joint management were therefore
directed to be continued until such time. (110-F-G)

5.2. All decrees whether preliminary or final are susceptible to
execution. (110-FJ

G 5.3. Section 634A provides for enforcement of orders of the Company
Law Board. The word 'any order' used in the opening of the section,
indicates that all the orders made by the Company Law Board on an
application under Sections 397 and 398 are enforceable like decrees
without any limit on the nature of the order passed by the Company Law
H Board. (110-8-C)
MANISH MOHAN SHARMA 1•. RAM BAHADUR THAKUR LTD. ) 0)

Lyallpur Bank Ltd v. Ramji Das (deceased) through his spns and Anr., A
AIR (1945) PC 60, relied on.

5.4. Since the Company Law Board when it deals with an application
under Section 634A sits as an executing court it is subject to all the
limitations to which a Court executing a decree is subject. It is well settled
that an executing court cannot go behind the decree, unless the decree B
sought to be executed is a nullity for a lack of inherent jurisdiction.
[111-A-B)

Sunder Dass v. Ram Prakash, [1977] 2 SCC 662, Seth Hirata! Patni v.
Sri Kalinath, (1962] 2 SCR 747, Vasudev Dhanjibhai Modi v. Rajabhai Abdul
Rehman and Ors., (1970] l SCC 670 and Rajique Bibi (dead) by Lrs. v. Syed C
Wa/iuddin (dead) by Lrs. and Ors., (2004] 1 SCC 287, relied on.

6. The order dated 19th August, 1999 was a consent order. Its terms
and conditions were contained in the MOFA and the Transfer Document
which expressly formed an integral part of the order itself. A consent
· decree has been held to be a contract with the imprimatur of the Court D
superadded. It is something more than a mere contract and has the
elements of both a command and contract. (111-D-E]

C.F. Angadi v. Y.S. Hirannayya, (1972) 1 SCC 191, relied on.

Wentworth v. Bullen, 141 ELR 769 and Charles Huber Kinch v. Edward E
Keith Walcott and Ors., AIR (1929) PC 289, referred to.

7.1. The effort of the executing Court must be to see that-the parties
are given the fruits of the decree. The mandate is reinforced when it is
a consent decree and doubly reinforced when the consent decree is a
family settlement. Clause 3.1and3.6 of the MOFA make it clear that the F
agreements were arrived at between the parties to resolve finally long
pending disputes between the family members relating to jointly owned
assets. (111-D-E)

7.2. Family settlements are governed by a special equity and are to
be enforced if honestly made. This would be so 'even if the terms may G
have been agreed to on the basis of an error of the parties or originate in
a mistake or ignorance of fact as to what the rights of the parties actually
are, or of the points on which their rights actually depend'. This is because
the object of an arrangement is to protect the family from long drawn
out litigation, and to bring about harmony and goodwill in the family. H
102 SUPREME COURT REPORTS (20061 3 S.C.R.

A 8. The plea of the respondents that this Court should not interfere
in the matter under Article 136 by reason of any alleged misconduct on
the part of appellants in managing the 5 estates in unacceptable. The
appellant's alleged lack of efficiency in running of the five tea estates is
not a material consideration for deciding whether the order dated 19th
B August, 1999 should be enforced. (113-D-EJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9446 of2003.

From the Judgment and Final Order dated 14.2.2003 of the Patna High
Court in Company Appeal No. I of 2001.

c WITH

C.A. No. 9445 of 2003

C.A. Sundram, Ms. Rohini Musa, Ms. Shiva Santanam Shivanathan,
Mrs. Jayshree, Ashish Wad, Neeraj Kumar, Arvind Gupta and Ms. Sumanti
D Chakraborti (for Mis. J.S. Wad & Co.) for the Appellants.

A.N. Haksar and Ashok Kumar for the Respondents.

The Judgment of the Court was delivered by

E RUMA PAL, J. Ram Bahadur Thakur Ltd., the respondent No. I was
founded by Chatur Bhuj Sharma and Madan Mohan Sharma. They were first
cousins, their fathers being brothers. The shareholding of the two cousins in
the respondent No. I was equal. Since 1992, disputes arose between the two
groups, who are referred to respectively as the CBS Group and the MMS
Group. The MMS Group is in appeal before us and the CBS Group is
F represented by the respondents No.2 to 4. The disputes related primarily to
the management of the various companies owned by the family including and
in particular the Respondent No. I.

In 1996 the MMS Group filed a company petition (No.56 of 1996)
G before the Company Law Board, New Delhi under the provisions of Sections
397 and 398 of the Companies Act, 1956, complaining inter a/ia of having
been ousted from management of the companies and seeking a role in such
management. Various interim orders were passed. On 9th January, 1997, the
Company Law Board removed the respondent No.2 as Chairman and Managing
Director of the Company and appointed a retired Judge, Justice A.N. Varma
H as the Chairman of the Company. In 1998, pursuant to another interim order
MANISH MOHAN SHARMA v. RAM BAHADUR THAKUR LTD. [RUMA PAL, J.] J 03

passed by the Company Law Board, the MMS Group was put in joint A
management of the Company.

The creditors of the Companies including the company's bankers, namely
Syndicate Bank initiated proceedings against the company inter alia for
recovery of outstanding dues. The matter was ultimately resolved between
the parties with the persuasion of the Company Law Board and praiseworthy B
efforts of the Chainnan, Justice A.N. Varma. The terms of the family settlement
were set down in a Memorandum of Family Arrangement and Transfer
Document.

By an order dated 19th August, 1999, the Company Law Board recorded C
the history of the disputes between the parties and the proceedings taken by
each against the other and ultimately the resolution of the differences of the
parties. The Company Law Board recorded that the Board had in the course
of hearing suggested various terms of settlement to resolve the matters
amicably between parties hav\ng regard to their close relationship. It had
expressed its opinion that in order to achieve a fair and equitable settlement, D
out of the nine tea estates owned by respondent No. I, five tea estates together
with certain other assets should be vested in the MMS Group. The suggestion
was accepted by the parties in the settlement arrived at between them. They
identified the tea estates and other assets to be given to the MMS Group and
also quantified the share of the liability of the respondent No. I which had to E
be paid by the MMS Group which came to Rs. 7,24,67,708.90 (Rupees seven
crores twenty four lacs sixty seven thousand seven hundred and eight and
paise ninety only). The order records that the Memorandum of Family
Arrangement and Transfer Document executed between the parties would
form an integral part of the order. As far as the figure of Rs. 7,24,67,708.90
was concerned, the Company Law Board stated that it would be subject to F
all deductions and adjustments as set out in the Transfer Document. One Mr.
M.C. Joseph, Chartered Accountant was appointed as an independent auditor
for the purpose of clause 4.1.1.12 of the Transfer Document, who would
verify and certify the figures stated therein. It was also recorded that on
completion of the settlement, the five estates and certain other assets would G
vest in the MMS Group. In order to perfect their title thereto, the Company
Law Board directed the parties to execute the transfer deeds to affect the
transfer of the relevant assets. Accordingly, the Board pursuant to powers
vested in it under Section 402 of the Companies Act 1956, directed that:-

(a) both parties fill up and complete Schedules 1,4,7,8,l l and 12 in H
104 SUPREME COURT REPORTS (2006] 3 S.C.R.

A the Transfer Document relating to the Assets of Ram Bahadur
Thakur Ltd. (which are currently blank/incomplete), the mutual
agreement and following the completion of the said Schedules
the parties shall forthwith execute the Transfer Documents
Relating to the Assets of Ram Bahadur Thakur Ltd;

B (b) both parties fill up and complete Schedules I 4(Part B), 5,6,7,8
and 9 in Memorandum of family arrangement ( which are
currently blank/incomplete), by mutual agreement and following
the completion of the said Schedules the parties shall forthwith
execute the Memorandum of Family Arrangement. And both
parties shall take all necessary steps to implement the settlement
c contemplated under the said documents which must be completed
by 30th September, 1999. The Memorandum of Family
Arrangement and the Transfer Document Relating to the Assets
of Ram Bahadur Thakur Ltd. set out the entire agreement the
parties and there are no understandings and/or arrangements other
D than expressly stated in these documents."

Paragraph 8 of the Order is also of some consequence and is quoted
verbatim:-

"Time shall be of the essence in affecting the settlement. If either
E party fails to perform it's obligations undertaken pursuant to the
Memorandum of Family Arrangement or the Transfer Document
relating to the Assets of Ram Bahadur Thakur Ltd., within the time
specified therein, the aggrieved party shall be at liberty to approach
us for appropriate orders/directions and for expediting the final disposal
of the petition and the various interim Applications. After the
F completion of all the transactions both sides shall appear before us
for the final disposal of the petition and the various Interim
Applications. In the event of any further difficulties in the
implementation of this order the parties shall be at liberty to apply to
us for implementation of this order".
G
In paragraph 12 of the order the Company Law Board recorded that the
order had been read out to the parties and the parties had confirmed their
consent to the terms of the order.

In terms of the Memorandum of Family Arrangement (referred to
H hereafter as the 'MOFA'), the CBS Group was required to give a completion
MANI SH MOHAN SHARMA v. RAM BAHADUR THAKUR LTD. [RUMA PAL, J.] ] 05

notice to the MMS Group signifying that the five estates were free from all A
encumbrances and ready to be transferred by the Respondent No. I to the
MMS group. According to the CBS Group, such notice was given on 17th
January, 2000. The notice was objected to by the MMS Group by letters
dated 18th January, 2000 and 20th January, 2000 on the ground that it was
not in tenns of Clauses 7.2 and 7.3 of the Transfer Document.
B
On 7th February, 2000 the MMS Group filed an application under
Section 634A of the Companies Act 1956 praying for a decision as to whether
the notice dated 17th January, 2000 was valid and if so, to direct the CBS
Group to proceed with the completion as per the Transfer Document and the
MOFA. Alternatively it was prayed that if the notice was held to be invalid C
the CBS Group should be directed to handover the entire Management of the
Respondent No. I to the MMS Group and the MMS Group should complete
the agreement. In the further alternative it was prayed that a Special Officer
should be appointed to take over the responsibilities of the CBS Group in the
Management of the Company and should be directed to complete the
agreement between the parties. D
While this application was being heard, the CBS Group filed an
. application on 5th July, 2000 seeking for recalling of the orders of the
Company Law Board including the order dated 19th August, 1999 and to
take up the matter for final hearing and to permit the respondent No. I to sell
one or more of its assets to clear the outstandings of the Syndicate Bank or E
in the alternative appoint an administrator to sell the respondent No.1 's assets
and property to clear the dues of the Syndicate Bank and other statutory dues.

Apart from other contentions raised by the MMS Group, it was
contended by them before the Company Law Board that they were not liable F
to pay the accrued gratuity liability amounting to Rs. 8.5 crores or the portion
attributable to the 5 estates agreed to be sold to the MMS Group amounting
to Rs. 4. 74 crores. It was stated that they had already paid several amounts
to the respondent No. I and were entitled to deductions in terms of the
agreement. They sought for enforcement of the order of the Company Law
Board dated I 9th August, 1999 as a decree. G
The CBS Group contested the submissions before the Company Law
Board and stated that they were still interested in working out the settlement
provided the MMS Group adhered to the tenns of th~ agreement. According
to the CBS Group if the MMS Group had paid their outstanding liability of
Rs. 3.6 crores directly to the Syndicate Bank, the CBS Group could have paid H
106 SUPREME COURT REPORTS [2006] 3 S.C.R.

A the balance of 4 crores demanded by the Bank and the 5 sale estates could
have been transferred free of all charges and the MMS Group would have
become absolute owner of the estates. It was also stated that because of the
failure of the MMS Group to clear their dues, the Bank had got a decree from
the Debt Recovery Tribunal and the properties of the Company had been
attached.
B
The Company Law Board by its order dated 18th August, 2000 noted
that the MMS Group had submitted that they were not liable to make any
payments towards the outstanding Bank dues, and that according to the MMS
Group nothing would become payable by the MMS Group to the CBS Group
C in terms of the agreement after giving effect to all the clauses. In fact according
to the MMS Group, the CBS Group had to pay an amount to the MMS Group
after the adjustment of the account. The Board noted that the only question
was whether the accrued gratuity liabilities in respect of the employees of the
5 estates had been taken into account by the parties when they entered into
the agreements and what the parties had intended in including clauses 4.1. I. I I
D in the MOF A. The Board found that there was substance in the contention of
the CBS Group that the liabilities on account of gratuity was never
contemplated by the parties when they entered into agreemem fixing the
MMS Group's share of liabilities. Thus although they found that the MMS
Group was "legally right in claiming the amount", the CBS Group was justified
E in its stand that this was not in contemplation of the parties. It was, therefore,
found that there was no meeting of minds and there was bona fide dispute
between the parties with regard to the interpretation of the clause relating to
the accrued gratuity liability. In these circumstances, the Board found that it
could not pass any order on the application under Section 634A filed by the
MMS Group. As far 'as the CBS Group's application was concerned, their
F prayer for recalling the orders passed by the Board was rejected. Both the
applications were accordingly dismissed but it was observed that:-

"In case the parties still desire to have the disputes decided amicably,
they are at liberty to do so failing which the petition will have to be
heard or merits and till that time all the interim orders including the
G present arrangement in relation to the management of the affairs of
the company will continue."
-
The MMS Group carried the matter before the High Court of Patna by
way of an appeal under Section I OF of the Companies Act, 1956. The appeal
was dismissed by the learned Single Judge holding that the clause relating to
H
, ..

MA NISH MOHAN SHARMA r. RAM BA HA DUR THAKUR LTD. [RUMA PAL, J] J07

gratuity namely clause 4.1.1.11 clearly showed that the liability to pay the A
gratuity was on the MMS Group. However, the High Court also found that
the Company Law Board was correct that the same was not in contemplation
of the parties and accordingly dismissed the appeal.

Learned counsel appearing on behalf of the appellant has submitted
that the Court could not refuse to implement the consent order dated 19th B
August, 1999. It was stated that the Company Law Board while dealing with
an application under Section 634A sits as an executing Court and in such a
situation its powers are curtailed to the extent that it is bound to take the
judgment as it stands. The Executing Court can interpret the decree and
proceed with its execution as interpreted but could not refuse to execute it. C
It was argued that the legal effect of the consent order is that it is binding on
the parties and could not be set aside except on very limited grounds, none
of which was present. It was submitted that even if there was an ambiguity
in the consent order that could have been interpreted. There was in fact no
mistake of fact that had arisen either with respect to the agreement or the
consent order. As far as the issue of the liability of the MMS Group under D
clause 4.1.1.11 of the Transfer Document to pay the gratuity which had
accrued to the employees of the estate transferred to the MMS Group was
concerned, it was submitted that the MMS Group without prejudice to its
rights and contentions had agreed before the Company Law Board and were
still willing to take over that liability. In any event, it was submitted that the E
disputed clause could be severed and the remaining clauses of the agreement
could be implemented.

Learned counsel appearing on behalf of the CBS Group submitted that
the order of the Company Law Board recording the MOFA and Transfer
Document was not a final order. It was submitted that the parties never F
understood the order of the Board dated 9th August, 1999 to have finally
disposed of the disputes. In fact after the order of the High Court, the appellants
themselves had gone back to the Company Law Board and filed an application
praying for enforcement of the agreement after severing clause 4.1.1.11. That
application was pending. Secondly it was submitted that in terms of the
agreement, the payment of amounts in terms of the agreement by the MMS G
Group to the CBS Group was to be simultaneous with the completion. The
MMS Group defaulted in carrying out its obligation and in fact the parties
therefore had the right in terms of the MOF A to rescind the agreement. As
far as the Transfer Document was concerned, it was stated that the CBS
Group had acted strictly in terms thereof. It was stated that had the MMS H
108 SUPREME COURT REPORTS [2006) 3 S.C.R.

A Group carried out their obligations under the agreement, the Bank's dues
would have been discharged. As matters now stood the Bank dues had
increased from approximately Rs. 8 crores to a demand of about 18 crores.
It was stated that in an adjustment of the equities, the MMS Group would
have to bear its share of the Bank dues as at present obtaining. Finally it was
B submitted that the appeal of the MMS Group should not be entertained under
Article 136 having regard to their conduct. Our attention was drawn to an
investigation initiated by the Government against the 5 tea estates under the
Management of the MMS Group.

Broadly speaking, the Memorandum of MOFA and Transfer Document
C provide for a Transfer of 5 tea estates by the respondent No. I to the MMS
Group subject to the MMS Group paying a certain amount towards its share
of liabilities of the respondent No. I. The CBS Group would get to retain the
respondent No. I and all its other assets moveable and immoveable including
-
four tea estates. The interpretation of the clauses which are called into question
before us are those which dealt with;
c (a) The sequence in which the clauses in the agreements were to be
implemented;
(b) The requirements of the completion notice;
(c) The quantification of the liabilities undertaken to be borne by the
E MMS Group;
(d) The consequence of the failure of either of the parties to abide
by the terms of the MOF A and Transfer Document.

The Company Law Board and the High Court did not decide questions
F (a) (b) or (d). As far as (c ) was concerned the question was limited to the
interpretation of Clause 4.1.1.11. That Clause reads:-

"Any statutory dues or dues in respect of labour and executives
employed at the Sale Estates accrued upto 31st May, 1998".

G The 'sale estates' are the five estates which were to be transferred by
the respondent No. I to the MMS group. As we have noted learned counsel
for the appellants submitted that although they had an arguable case on the
incorrectness of the finding of the High Court which held that the MMS
Group was liable to pay the gratuity liability, they were agreeable to concede
this point so that the differences between the parties could be resolved. We
-
H have therefore not heard them on the interpretation of clause 4.1.1. J l. Their
'
MANISH MOHAN SHARMA v. RAM BAHADUR THAKUR LTD. [RUMA PAL, J.] ) 09

basic grievance was that the Company Law Board could not refuse to execute A
the order dated 19th August, 1999 and the terms of the MOFA and Transfer
Document which were incorporated therein and that is the issue which calls
for resolution by us.

In our opinion the order dated 19th August, 1999 was not an interim
order as contended by the respondents. The issues resolved thereby could not B
be reopened or reargued for a different disposal of those issues. The order
was passed expressly under Section 402 of the Companies Act which reads:-

"402. Powers of (Tribunal) on application under Section 397 or 398.-
Without prejudice to the generality of the powers of the (Tribunal)
under section 397 or 398, any order under either section may provide C
for

(a) the regulation of the conduct of the company's affairs in future;

(b) the purchase of the shares or interests of any members of the
company by other members thereof or by the company; D
(c) in the case of a purchase of its shares. by the company as aforesaid,
the consequent reduction of its share capital;
(d) .................... ..

(e) .................... ..
E
(f) ..................... .

(g) Any other matter for which in the opinion of the (Tribunal) it is
just and equitable that provision should be made.

The powers under Section 402 are residuary in nature and in addition F
to the powers available to the Company Law Board under Sections 397 (2)
and Section 398(2) which permit the Company Law Board to make such
order as it thinks fit with a view to bringing to an end the matters complained
of under Section 397( 1) and with a view to bringing to an end or preventing
the matters complained or apprehended under Section 398(1).
G
Doubtless the Company Law Board speaks of 'final disposal of the
petition and the various interim applications'. This was because in terms of
the order itself (which included the MOFA and the Transfer Document),
various steps had to be taken to complete the severance of the relationship
finally between the MMS Groups and the respondents. This did not make the
H
I JO SUPREME COURT REPORTS (2006] 3 S.C.R.

A affinnation of the MOFA and the Transfer Document an interim arrangement.
The operative portion of the order directed the execution of the MOFA and
Transfer Document by the parties after completion of the schedules thereto.
The entire order was passed by consent. Parties cannot resile therefrom.
Therefore the order cannot be described as an interim order in the sense that
B the issues decided thereby could be reopened.

Under Section 634A which provides for enforcement of orders oi che
Company Law Board,

"Any order made by the Company Law Board may be enforced
by that Board in the same manner as if it were a decree made by a
c Court in a suit pending therein".

The word 'any order' used in the opening of the section, indicates that
all orders made by the Company Law Board on an application under Sections
397 and 398 are enforceable like decrees without any limit on the nature of
D the order passed by the Company Law Board. (See: Lyallpur Bank Ltd. v.
Ramji Das (deceased) through his sons & Anr.. AIR (32) 1945 Privy Council
60).

A "decree" under the Code of Civil Procedure has been defined as
meaning
E "...... the fonnal expression of an adjudication which, so far as regards
the Court expressing it, conclusively determines the rights of the
-
parties with regard to all or any of the matters in controversy in the
suit and may be either preliminary or final".

F All decrees whether preliminary or final are susceptible to execution.
(vide Section 36 of the Code of Civil Procedure.)

The order dated 19th August, 1999 was in fact a preliminary decree.
Final disposal of the matter or the final decree would be after full
implementation of the tenns of the MOF A and Transfer Document. The
G interim orders passed relating to joint management were therefore directed to
be continued until such time.

Significantly, the Company Law Board in the order dated 19th August,
1999 had itselfrecorded that if there was any difficulty in the implementation
of the order "the parties shall be at liberty to apply to us for implementation
H of this order". Yet when the application was made for such implementation,
I
r-
MANISH MOHAN SHARMA v. RAM BAHADUR THAKUR LTD. [RUMA PAL, J.] j J J

the Company Law Board did not abide by its own direction. A
Since the Company Law Board when it deals with an application under
Section 634A sits as an executing court it is subject to all the limitations to
which a Court executing a decree is subject. It is well settled that an executing
court cannot go behind the decree, unless the decree sought to be executed
is a nullity for a lack of inherent jurisdiction. A decree is without jurisdiction B
if the Court passing the decree usurps a jurisdiction which it did not have and
which could not be waived by the parties. (See: Sunder Dass v. Ram Prakash,
[1977) 2 SCC 662, 667; Seth Hirata! Patni v. Sri Kalinath, [1962) 2 SCR
747, 750; Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman & Ors.,
[1970) 1 SCC 670, 672; Rajique Bibi (dead) by Lrs. v. Sayed Waliuddin C
(dead) by Lrs. & Ors., [2004) 1 SCC 287,292). The last two decisions have
also held that the lack of jurisdiction must be patent of the face of the decree
in order to enable the executing court to come to the conclusion that the
decree is a nullity.

Furthermore, the order dated 19th August, 1999 was a consent order. D
Its terms and conditions were contained in the MOF A and the Transfer
Document which expressly formed an integral part of the order itself. A
consent decree has been held to be a contract with the imprimatur of the
Court superadded. It is something more than a mere contract and has the
elements of both a command and a contract. (See: Wentworth v. Bullen, 141 E
ELR 769; C.F. Angadi v. Y.S. Hirannayya, [1972] 1 SCC 191, 197). As was
said by the Privy Council as early as 1929, "The only difference in this
respect between an order m~de by consent and one not so made· is that the
first stands. unless and until it is discharged by mutual agreement or is set
aside by another order of the Court; the second stands until and unless it is
discharged on an appeal (See: Charles Hubert Kinch v. Edward Keith Walcott F
and Ors., AIR (1929) Privy Council 289).

It is nobody's case that the order dated 19th August, 1999 was a nullity.
The respondents had filed an application for recalling the order dated 19th
August, 1999. The Company Law Board dismissed that application. An appeal G
has been filed before the Patna High Court which is said to be pending.
However, it has not been drawn to our attention by the respondent that the
application for recal\ was founded on the submission that the order dated
19th August, 1999 was a nullity. In the absence of such an issue being raised
and decided, the Company Law Board was bound to execute the order. If the
Board found that the decree or any of its terms called for interpretation, it H
r

112 SUPREME COURT REPORTS [2006] 3 S.C.R.

A was within the Board's jurisdiction to interpret that particular term and to
execute the decree on the basis of such interpretation. As was said by this
Court in Topanmal Chhotamal, v. Mis. Kundomal Gangaram and Ors., AIR
( 1960) SC 388, 390, if a decree is ambiguous, it is the duty of the Executing
Court to construe the decree. (see also Central Bank of India v. Rajagopalan,
B AIR (1964) SC 743,748).

Both the Company Law Board and the High Court in fact interpreted
Clause 4.1.1.11 and came to definite, albeit different, conclusions as to what
the clause meant. It may be that the conclusion was not what was being
·-
contended for by the appellants. It may also be that the interpretation put on
C the clause by the Board or the High Court was not in the contemplation of
the parties. Nevertheless once having agreed to particular terms of settlement
which were incorporated in a decree, the parties concerned are bound to
comply with the terms as may be interpreted by the executing Court. Once
the interpretation is done the decree must be executed as interpreted.

D The effort of the executing Court must be to see that the parties are
given the fruits of the decree. The mandate is reinforced when it is a consent
decree and doubly reinforced when the consent decree is a family settlement.
Clauses 3.1 and 3.6 of the MOFA make it clear that the agreements were
arrived at between the parties to resolve finally long pending disputes between
E the family members relating to jointly owned assets. The clauses read as
follows:-

"For the sake ofresolving the disputes of the Sharma Family and the
Companies owned by them and to regain the harmony, peace, love
and affection amongst the two groups and for the welfare and
F prosperity of the Sharma Family and the Companies owned by them;

The Memorandum of Family Arrangement will also take into its fold
and include the Transfer Document Relating to the Assets of Ram
Bahadur Tha.kur Ltd. (RBTL), executed as per the directions of the
CLB, Annexed hereto and marked as Schedule
G
5. The above mentioned Transfer Document Relating to the Assets of
Ram Barn Bahadur Thakur Ltd. is in implementation of and forms an
integral part of this Memorandum of Family Arrangement."

It has been repeatedly emphasized in several decisions that family
H settlements are governed by a special equity and are to be enforced if honestly
MANISH MOHAN SHARMA v. RAM BAHADUR THAKUR LTD. (RUMA PAL, J.] J J 3

made. This would be so "even if the terms may have been agreed to on the A
basis of an error of the parties or originate in a mistake or ignorance of fact
as to what the rights of the parties actually are, or of the points on which their
rights actually depend". This is because the object of an arrangement is to
protect the family from long drawn out litigation, and to bring about harmony
and goodwill in the family (see Kale v. Deputy Director of Consolidation, B
(1976] 1 SCR202,122,123,125). The courts lean heavily in favour of family
arrangements and, "matters which would be fatal to the validity of similar
transactions between strangers are not objections to the binding effect of
family arrangements". This view has been reiterated recently in Amteshwar
Anand v. Virender Mohan Singh & Ors., (2006] 1 SCC 148.

In our opinion both the Company Law Board and the High Court erred
c
in refusing to execute the order dated 19th August, 1999 under Section 634A
of the Companies Act. They have thereby failed to exercise the jurisdiction
with which they were vested. The failure is heightened given the nature of
the order which they were bound to execute. They have erroneously proceeded
upon principles applicable to contracts. alone and have ignored the fact that D
the agreement between the parties had culminated in a consent order of the ·
Company Law Board. The plea of the respondents that this Court should not
interfere in the matter under Article 136 by reason of any alleged misconduct
on the part of the appellants in managing the 5 estates is unacceptable. The
appellant's alleged lack of efficiency in running of the five tea estates is not E
a material consideration for deciding whether the order dated 19th August,
1999 should be enforced.

The respondent's contention that the appellants were not themselves
willing to abide by the terms of the consent order appears to us to be erroneous.
The application under Section 634A was for implementation of the order p
dated 19th August, 1999 if necessary by appointing a Special Officer to carry
it into completion. In fact even while the application under Section 634A was
pending in the Company Law Board, the Vice Chairman had suggested to the
appellants that they waive their claim in respect of the accrued gratuity under
clause 4.1.1 .11 of the Transfer Document and a certain portion of the interest
claimed under the Transfer Document. The appellants confirmed that they G
. would accept the Vice Chairman's suggestion but would do so on the basis
that a consent order was passed in terms thereof on the same date. This was
recorded by the appellant's advocates in their letter dated 19th December,
2000 addressed to the Company Law Board and its Members and the Advocate
for the respondents and has not been disputed before us as not reflecting the H
114 SUPREME COURT REPORTS [2006] 3 S.C.R.

A correct position. This is not the conduct of a party which is not willing to
abide by the terms of the decree.

On the question whether the appellants had defaulted in payment of
purchase price simultaneously with the completion in terms of Clause 4 of
the Trans fer Document, this again relates to an interpretation of the terms of
B the MOF A and the Transfer Document. According to the respondents, there
was no default on their part as the respondents were required not only to
settle all outstanding claims relating to the five estates prior to giving of the
completion Notice but also to annex the necessary documents evidencing that
the sale estates could be transferred free from all encumbrances to the MMS
C group by the respondent No. I. The Company Law Board and the High Court
have proceeded on the basis that the only dispute between the parties was as
to the interpretation of Clause 4.1.1 11. Elaborate arguments have however
been addressed to us on the merits of the four contentions noted by us earlier
by both parties. We were initially of the view that the dispute should be
resolved by us finally. However on a reconsideration, we deem it fit to
D remand this issues for determination by the Company Law Board if it is
satisfied that the issues could be said to have been fairly raised by the parties
before it. We make it clear that whatever interpretation may be put by the
Company Law Board on the clauses of the MOFA and Transfer Document,
the Board must implement the clauses as interpreted.
E Moreover Clause 4 which relates to the payment of the purchase price
by the MMS group specifically mentions the total amount payable by them
to the respondent No. I namely Rs. 7,24,67,708.90 less certain deductions. As
far as the deductions are concerned, some of the clauses have quantified the
deductions, whereas others have left them undetermined in the sense that no
F quantum has been mentioned. In the first category are Clause 4.1.1.1 to
Clause 4.1.1.5. Under Clauses 4.1.1.6 to 4. I. 1.11 the amounts were required
to be determined. This exercise will have to be carried out by the Board. The
figures mentioned in Clauses 4.1.1.1 to 4.1.1.S and 4.1.1. I\ were also subject
to verification under Clause 4.1.1.12 by the independent auditor appointed by
the Company Law Board. The Company Law Board had by order dated 19th
G August, 1999 appointed Mr. M.C. Joseph, Chartered Accountant. We have
not been told whether the independent auditor has carried out the verification.

We ourselves do not propose to go into the issues raised by the parties,
namely whether the completion notice was valid nor the quantification of the
H deductions under Clause 4 of the Transfer Document. These are issues that
MAN!SH MOHAN SHARMAv. RAM BAHADUR THAKUR LTD. [RUMA PAL, J] 115

must be worked out by the Company Law Board in executing the consent A
order in terms of the MOFA and Transfer Document. It is unnecessary for us
to go into the powers of the parties to rescind the settlement (assuming that
such rescission were at all possible at this stage) as neither of the groups have
taken any steps to issue any notice of rescission till today.

We note that the MOFA and Transfer Document were the outcome of B
the commendable and determined efforts on the part of the Company Law
Board to bring to an end disputes between the parties in a manner which
would have been in the interest of the respondent No. I given the impasse
between the two blocks of shareholders and saved the parties a lot of
unnecessary harassment, expenditure and acrimony. We also sought t-0 bring C
an end the dispute by proposing measures which might be acceptable to both.
However, such resolution does not appear to be possible. Therefore it must
be left to the Company Law Board to execute its order dated 19th August,
1999 in accordance with the settled principl_es of law and in terms of the
opinion expressed by us in this judgment. The impugned decisions of the
Company Law Board and the High Court are for the reasons earlier stated set D
aside. The appeals are allowed and the matter remanded back to the Company
Law Board for completing the implementation of the order dated 19th August,
1999 by executing the same.

There will be no order as to costs.
E
v.s. Appeals allowed.