Court-appointed management in company proceedings may settle sale of a closed unit without section 293 sanction where no specific restraint exists.

A court-appointed Committee of Management in a company petition under sections 397 and 398 is not bound, merely by that appointment, by the same statutory restraints as a board of directors under section 293. In relation to a closed unit, the Committee could settle and agree to sale without prior sanction absent a specific court restraint. The compromise was also treated as not requiring registration because it did not itself create or transfer immovable property rights; the operative transfer arose from the decree. On facts, irregularities such as limited advertisement or a later higher offer did not by themselves establish mala fides, and the appellants were recognised as having locus to seek impleadment.

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Issues: (i) Whether the court-appointed Committee of Management could lawfully enter into the impugned settlement for sale of the Dankuni unit without prior sanction under section 293 of the Companies Act, 1956. (ii) Whether the sale and compromise relating to the closed Dankuni unit were vitiated for want of bona fides or for non-registration of the settlement document. (iii) Whether the appellants had locus standi to seek impleadment in the company petition.

Issue (i): Whether the court-appointed Committee of Management could lawfully enter into the impugned settlement for sale of the Dankuni unit without prior sanction under section 293 of the Companies Act, 1956.

Analysis: Section 293 governs the powers of a board of directors in normal corporate management. A Committee of Management appointed by the company court in proceedings under sections 397 and 398 does not stand in the same position as the board of directors and is not, by that fact alone, subject to the same statutory fetters. The court under sections 397, 398 and 402 has wide powers to regulate corporate affairs and may give directions where necessary, but absent a specific order imposing restraint, the Committee of Management was not shown to have acted outside its authority merely by entering into the settlement. The closed status of the Dankuni unit also made the case fall outside the mischief of section 293(1)(a).

Conclusion: The Committee of Management was competent to enter into the settlement and no prior sanction under section 293 was required.

Issue (ii): Whether the sale and compromise relating to the closed Dankuni unit were vitiated for want of bona fides or for non-registration of the settlement document.

Analysis: The transaction was considered in the context of creditor-bank settlements and the company's financial distress. The absence of a more elaborate advertisement, the non-production of the valuation report, and the later emergence of a higher offer were treated as irregularities, but not as circumstances establishing mala fides. Since the compromise did not itself create or transfer an interest in immovable property, registration was not required for the settlement document; the operative transfer flowed from the decree. The fact that the Dankuni unit had remained closed for years also supported the conclusion that it was not being dealt with as a going undertaking in the relevant sense.

Conclusion: The impugned transaction was not shown to be mala fide, and the compromise document was not compulsorily registrable.

Issue (iii): Whether the appellants had locus standi to seek impleadment in the company petition.

Analysis: The company petition under sections 397 and 398 was a representative proceeding brought on behalf of the qualifying shareholders. The appellants had supported the petition at the outset, and when the principal applicant no longer pursued the challenge to the settlement, they were entitled to protect the shared interest represented by the petition. In those circumstances, the refusal to add them as parties was not justified.

Conclusion: The appellants had locus standi and the refusal to implead them was erroneous.

Final Conclusion: The settlement and the decree founded upon it were upheld, but the appellants were entitled to be added as parties in the company petition; the appeal failed in substance and succeeded only to that limited extent.

Ratio Decidendi: In proceedings under sections 397 and 398 of the Companies Act, 1956, a court-appointed Committee of Management is not bound by section 293 as a board of directors would be, and the compromise document will not require registration where it does not itself create or transfer immovable property rights.

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