Companies Act Case Law
Pranab Kumar Pal Vs M/s. LTZ. Investment Pvt. Ltd.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2654 of 2009
(Arising out of SLP (C) No. 6597 of 2006)
Pranab Kumar Pal ….Appellant
M/s. LTZ. Investment Pvt. Ltd. and Ors. ….Respondents
Dr. ARIJTI PASAYAT, J.
1. Leave granted.
2. Challenge in this appeal is to the order passed by a learned Single
Judge of the Delhi High Court. By the impugned Judgment the High Court
held as follows:
“1. In respect of this contract awarded by Tui-Nordic to Across
India, Across India shall file its statement of account every month
giving the income/receipts and expenditure on the said project.
(2) It shall also give every three months, statement indicating the
progress in the said project
(3) Across-India and/or Mr. Pal shall jointly and severally furnish
security of Rs.2.85 crores with the CLB to its satisfaction, so that in
the event the petition succeeds and it is held that these appellants
have made unlawful gains at the cost of the company, the company
is able to recover the said loss without any further process. In such
form such a security is to be given is to be decided by the CLB.
(4) CLB would be entitled to put the appellant to such other similar
terms, as it thinks fit, in order to protect the rights of the
3. By order dated 23.1.2006 certain clarifications were made.
4. Factual position as highlighted by the appellant is as follows:
The Respondent No. l filed a Petition before the Company Law Board
under Sections 398, 402, 403, 235 and 237 of the Companies Act, 1956 (in
short the `Act’) alleging inter alia, diversion of corporate opportunity by the
appellant herein. The Company Law Board vide its Order dated 09.06.2005
held that it prima facie finds that a possible corporate opportunity had been
taken away from the Respondent No.l company and thereafter directed that
the Respondent No.l should nominate three Directors on the Board of
Respondent No. 10 company and that status quo be maintained. The
Company Law Board further directed that the Petitioner should be
restrained from resigning as a Director of the Respondent No.2 company.
The appellant being aggrieved by the said Order filed an Appeal before the
High Court being Co. A. (SB) No. 12 of 2005 and Respondent No.10
company filed an Appeal being Co. A. No.(SB) 13 of 2005. After hearing,
the High Court vide it composite Order dated 05.12.2005 in Co. A. No. (SB)
No. 12 of 2005 and Co. A. No.(SB) 13 of 2005 set aside the Order dated
09.06.2005 passed by the Company Law Board. The High Court has further
held that the appellant has a right to resign as a Director of the Respondent
No.2 company. However, several conditions have been imposed by the High
Court. Pursuant to the said Order, the appellant resigned on 12.1.2006.
Thereafter the Respondent No.1 filed a Clarification Application which was
disposed of by the High Court vide the impugned Order dated 23.01.2006,
by holding that “it is also informed that he has already resigned as a
Director. It is made clear that his resignation would come into force on the
date security is accepted by the CLB. This CA is disposed of ”
5. The appellant’s stand is that he is gravely prejudiced by the impugned
orders dated 05.12.2005 and 23.01.2006 which is completely antithetical to
the freedom of employment of an individual enshrined in Section 27 of the
Indian Contract Act, 1872 (in short `Contract Act’) read with Section 14 and
Section 41 of the Specific Relief Act, 1963 (in short `Specific Relief Act’)
in that it purports to fetter the same by the imposition of conditions such as
the provision of security.
6. After hearing learned counsel for the parties we dispose of the appeal
with the following directions:
(1) CLB shall decide the matters afresh within a period of three
months from today.
(2) All issues placed before the parties shall be decided by the
(3) The directions to deposit as given by the High Court will be
subject to the decision of CLB.
(4) The contempt proceedings shall remain in abeyance till the
decision is given by CLB.
7. We make it clear that we have not expressed any opinion on merits
because of the protection given by this Court.
8. The appeal is accordingly disposed of.
(Dr. ARIJIT PASAYAT)
(ASOK KUMAR GANGULY)
April 20, 2009