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Issues: (i) Whether the Company Law Board had jurisdiction under sections 402 and 403 of the Companies Act, 1956 to set aside the sale of immovable property standing in the name of an individual in favour of the appellant. (ii) Whether the Company Law Board exceeded its jurisdiction in directing restoration of a portion of the property to the company.
Issue (i): Whether the Company Law Board had jurisdiction under sections 402 and 403 of the Companies Act, 1956 to set aside the sale of immovable property standing in the name of an individual in favour of the appellant.
Analysis: The relief under sections 397 and 398 is wide, but the power under section 402 to regulate or set aside transfers is confined to property belonging to or standing in the name of the company and to transactions of the relevant period. The record showed that the property was purchased and held in the name of the sixth respondent as an individual, that the company did not establish ownership over it, and that the respondents had long known of the individual title. In these circumstances, the transfer by the registered owner to the appellant could not be annulled by the Company Law Board on the footing that the company itself had transferred the property. The plea of lis pendens could not enlarge the Board's jurisdiction to set aside a sale of property not shown to belong to the company.
Conclusion: The Company Law Board had no jurisdiction to set aside the sale in favour of the appellant.
Issue (ii): Whether the Company Law Board exceeded its jurisdiction in directing restoration of a portion of the property to the company.
Analysis: The direction to restore 40 per cent of the property proceeded on the assumption that the company owned a corresponding share in the land, although the sale deed stood in the name of the sixth respondent individually and the company had not taken timely steps to challenge that title. The Board treated the subsequent sale to the appellant as the operative transfer and ignored the earlier registered ownership in favour of the sixth respondent. Such a partial restoration order effectively assumed a power to adjudicate title and partition rights beyond the limited jurisdiction available in proceedings under sections 397 and 398.
Conclusion: The Company Law Board exceeded its jurisdiction in ordering restoration of a portion of the property to the company.
Final Conclusion: The appeal succeeded, the order of the Company Law Board was set aside, and the company petition under sections 397 and 398 was dismissed.
Ratio Decidendi: In proceedings under sections 397 and 398, the Company Law Board cannot set aside or partially restore immovable property unless the property is shown to belong to the company and the statutory limits on its corrective powers are satisfied.
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