Fabricated board resolution and unauthorised sale of company property defeated indoor management protection and voided the conveyance.

A company property sale based on a disputed board resolution was examined on limitation, corporate authorisation, and purchaser protection. In fraud-based allegations, limitation runs from the date of knowledge, and the petition was held not time-barred because prior knowledge was not established. The alleged board resolution authorising the sale was found to be fabricated for want of notice, attendance, or reliable proof of a valid meeting, making it non-existent in law. The purchaser could not rely on indoor management or Section 41 of the Transfer of Property Act because the circumstances required inquiry and good faith was not shown. The sale deed was therefore void and liable to cancellation, with consequential restoration directions.

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Issues: (i) whether the petition was barred by limitation; (ii) whether the alleged board resolution dated 01.08.2015 authorising the sale was validly passed; (iii) whether the purchaser could claim protection under the doctrine of indoor management or Section 41 of the Transfer of Property Act; and (iv) whether the impugned sale deed dated 04.09.2015 was liable to be declared void.

Issue (i): whether the petition was barred by limitation

Analysis: The dispute was pleaded as one involving fraud and a fabricated board resolution. In such a case, limitation runs from the date of knowledge of the fraud. The record did not establish service of notice of the alleged board meeting on the petitioner, and the financial statements relied upon did not conclusively show that the petitioner had prior knowledge of the sale.

Conclusion: The petition was not barred by limitation.

Issue (ii): whether the alleged board resolution dated 01.08.2015 authorising the sale was validly passed

Analysis: The company had only two directors and two shareholders. No notice, attendance record, or reliable proof of a board meeting on 01.08.2015 was produced. The statutory scheme governing board meetings and quorum, together with the articles of association, required proper convening and participation. On the evidence, the alleged resolution was found to be fabricated and unsupported by the company records.

Conclusion: The alleged board resolution dated 01.08.2015 was invalid and non-existent in law.

Issue (iii): whether the purchaser could claim protection under the doctrine of indoor management or Section 41 of the Transfer of Property Act

Analysis: The circumstances surrounding the transaction were suspicious, including prior disputes and the absence of proper corporate authorisation. Where inquiry is plainly called for, the doctrine of indoor management does not protect the outsider. For the same reason, the purchaser could not rely on Section 41 of the Transfer of Property Act, since the transaction was not shown to have been entered into after reasonable care and in good faith.

Conclusion: The purchaser was not entitled to protection under the doctrine of indoor management or Section 41 of the Transfer of Property Act.

Issue (iv): whether the impugned sale deed dated 04.09.2015 was liable to be declared void

Analysis: A sale of company property without valid board authorisation could not bind the company. Once the underlying authorisation was found to be fabricated and the transaction unsupported by lawful corporate approval, the registered conveyance could not confer valid title. The Tribunal therefore exercised its powers under Section 242 of the Companies Act, 2013 to bring the dispute to an end by setting aside the transaction and granting consequential directions.

Conclusion: The impugned sale deed dated 04.09.2015 was void and liable to be cancelled, with consequential restoration of the company's name in the records.

Final Conclusion: The petition succeeded. The Tribunal found oppression and mismanagement in the unauthorised alienation of the company's property, set aside the impugned board resolution and sale deed, and issued consequential directions for restoration and repayment.

Ratio Decidendi: A transaction affecting company property based on a fabricated or unauthorised board resolution is void, and where surrounding circumstances raise suspicion, an outsider must make proper inquiry and cannot rely on indoor management or ostensible authority.

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