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Case Law

Whether the CLB could vacate the interim order suo motu without any application making such prayer being filed by the respondent ???

The Hon’ble High Court Of Delhi, in the matter of Satish Sharma v. Vrinda Realtors Ltd. and Others has dismissed appeal challenging order of the Company Law Board vacating certain interim order restraining the company from alienating its assets.

Facts of the Case

v The appellant Satish Sharma was a director in the Vrinda Realtors Ltd. (Respondent company) and was holding 15,000 equity shares of Rs.10 each in respondent No.1-company.

v The appellant also lodged a complaint, on 19th May, 2012, with the Sahibabad Police Station, Distt. Ghaziabad . The appellant had stated that he was called to the office of respondent No. 2 on 11th May, 2012, when he reached the office of respondent No.2 he did not find the respondent at the said office. However, two men appeared and assaulted the appellant with slaps and fists to coerce him to sign certain documents and papers.

v The appellant states that he resisted the onslaught, but the said two men forcibly injected him with some drugs and also held a gun to him. The appellant states that, thereafter, he became drowsy and in this state his signatures were obtained on the documents. It is contended that the said documents have been used to show that the appellant had transferred his shares in the respondent No.1-company and also resigned from the Board of directors of the respondent No.1-company.

v The appellant filed a company petition under sections 397, 398, 401 and 403 of the Act, before the CLB, inter alia, seeking setting aside the alleged decisions taken in the Board meeting held on 9th May, 2012. The appellant filed the said petition on the allegations that respondent No.2 had obtained the signatures of the appellant on various documents under coercion and intoxication. It is, therefore, contended that the transfer of shares and the appointments in the respondent No.1-company are illegal and void.

v CLB passed an interim order directing the respondent-company not to alienate the fixed assets of the company until an order was passed on merits. The said restraint order was passed as the counsel for the respondent conceded to the same without prejudice to the rights and contentions of parties

v The respondent filed an application under regulation 44 of CLB Regulations, 1991 seeking dismissal of the company petition, inter alia, on the ground that the company petition was not maintainable as appellant was not a shareholder of the company.

v By the impugned order, the CLB disposed of the said application by vacating the interim order passed on 1st August, 2012

v The appellant contented that the CLB has vacated the interim order as passed on 1st August, 2012 suo motu and without any application on behalf of the respondents. It has been pointed out by the appellant that the application in which the order has been passed by the CLB was with regard to the maintainability of the company petition and not for the vacation of the interim protection as granted on 1st August, 2012. It is further contended that the CLB does not have powers under section 403 of the Act to suo motu vacate the restraint order.


On hearing the learned council in length High Court examined the controversy which had been raised in the present case. “It considered whether the CLB has erred in vacating the interim orders without any application being filed by the respondent.” Court felt that it was necessary to examine the reasons why the CLB has decided to vacate the interim order Court find no infirmity in the approach adopted by the CLB. The CLB after considering the relevant facts has not found the case of the petitioner credible enough to warrant an interim order.

Sections 397 and 398 of the Act give very wide powers to the CLB with regard to the affairs of the company. By virtue of section 397 of the Act, the CLB is empowered to make such orders as it thinks fit with a view to bring an end to the matters companied of. And, by virtue of section 398 of the Act, the CLB is also empowered to pass such orders as it thinks fit to prevent matters which are apprehended.

In view of the wide powers conferred on the CLB. It cannot be accepted that the CLB did not have the power to vacate an interim order. The contention that section 403 of the Act restricts the CLB from vacating interim orders without an appropriate application is also erroneous. The said section is also couched in wide terms and empowers the CLB to make any interim order which it thinks fit. It necessarily follows that the CLB would also have the power and discretion to modify or vacate an interim order granted earlier.

The present appeal was without merits and is, accordingly, dismissed.

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