TaxTMI 
TaxTMI 
2011 (4) TMI 1209
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....llant received a notice from the Company Law Board in a proceeding under sections 397 and 398 of the Companies Act, 1956, initiated by respondents Nos. 1 to 4 against respondents Nos. 5 to 9, ordering the appellant to deal with the property only with liberty obtained from the Company Law Board. 4. In obedience to the order passed by the Company Law Board, the sale deed was not executed in favour of Mr. Mangilal. 5. Respondents Nos. 1 to 4 filed Company Application No. 171 of 2006 in C. P. No. 7 of 2004 (T. Balan v. Unicentre Agencies Engg. (P.) Ltd. [2011] 167 Comp. Cas. 59/[2009] 96 SCL 71 (CLB-Chennai) to set aside the sale made by Thiru G. George in favour of the appellant, by claiming that the schedule property belonged to M/s. Unicentre Agencies and Engineering P. Ltd., the fifth respondent, though it was registered in the name of the sixth respondent. This was for the reason that a sum of Rs. 1,00,000 (rupees one lakh only), forming part of the sale consideration was paid by Thiru G. George from the funds of the company. Whereas a sum of Rs. 1,50,000 (rupees one lakh fifty thousand only) was paid by Thiru G. George. 6. The claim of respondents Nos. 1 to 4 was that the land....
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....59 infra) : "(a) to pass appropriate orders for the management, regulation and conduct of the affairs of the company ; (b) to supersede the present board of directors of the company and appoint an administrator to manage, regulate and conduct the affairs of the company ; (c) to surcharge respondents Nos. 2 to 5 in accordance with Schedule XI of the Act on account of misappropriation and misapplication of the company's funds ; and (d) to restore in favour of the company the immovable properties located at Gummidipoondi ('the properties') and purchased in the name of the second respondent out of the company's funds." 12. The only relief, granted by the Company Law Board to respondents Nos. 1 to 4, reads as under (page 88 infra) : "The properties have been purchased for a sum of Rs. 2.50 lakhs, which was met by the company to a tune of Rs. 1 lakh, which works out to 40 per cent. of the total consideration of Rs. 2.50 lakhs and the balance considerations was paid by the second respondent from and out of his resources. The company would therefore be entitled for 40 per cent. of the total extent of the properties, registered in the name of the second respond....
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.... sale was hit by the principles of lis pendens, still the sale executed in favour of the appellant could have been set aside by the civil court and not by the Company Law Board. Therefore, the impugned part of the order granting relief to respondents Nos. 1 to 4 is patently without jurisdiction. Learned counsel for the appellant also contended that the appellant was the bona fide purchaser for consideration without knowledge of pendency of the proceedings, therefore, sale in his favour could not be set aside even partly. 15. Though there is merit in the appeal, but the plea of bona fide purchaser is not available to the appellant, as the plea of bona fide purchaser cannot be raised in the case of lis pendens purchase. 16. There is force in the contention of learned counsel for the appellant, that the sale in favour of the appellant could not be set aside by the Company Law Board, under the provisions of sections 402 and 403 of the Companies Act, 1956. Under section 402, the jurisdiction to set aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company, can be exercised in case of sale made within three mon....
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.... claim of the appellant in this appeal for the reasons stated hereinabove. 22. Learned counsel appearing on behalf of respondents Nos. 1 to 4 supported the finding of the Company Law Board, by referring to the Board resolution, vide which, the second respondent was authorised to execute the sale deed with respect of the property on behalf of the company, and not in personal name. He also placed reliance on the annual report dated October 4, 1989, wherein, it was disclosed that 4 acres of land valued at Rs. 3,00,000 (rupees three lakhs only) had been acquired near Gummidipoondi Industrial Area. It was on April 11, 1991, that the board of directors decided to mortgage the property in favour of the State Bank of India in order to secure dues and guarantees. The sixth respondent was also authorised to execute the mortgage deed on behalf of the company. Reference was also made to the fax message dated December 4, 1993, wherein, the company secretary sent the fax message, that the land in dispute belonging to the company will be sold at minimum price of Rs. 3 lakhs per acre, and amount paid to the company and other unsecured loans due to the various parties. 23. Learned counsel for res....
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.... Durga Builders P. Ltd. [2007] 138 Comp. Cas. 935 (Delhi), and it cannot, therefore, be argued that the principle of lis pendens is not applicable to the Company Law Board proceedings. The object of doctrine of 'lis pendens' is (a) to thwart any attempts by the litigants to circumvent the jurisdiction of a court, in which disputes in relation to properties are pending, thereby removing the subject matter of the litigation from the ambit of the court's power or frustrating its decree, as held by the Supreme Court in Rajendar Singh v. Santa Singh, AIR 1973 SC 2537 ; (b) to protect a property under litigation ; and (c) not to allow any litigant to give others any property under dispute causing prejudice to the opposite party, in the light of the decision in Chinnammal v. Kuppusamy [2004] 4 CTC 794, wherein the court declared that the sale of the properties by the litigant to several others, during the pendency of the suit, is non est in the eye of law. There is a statutory bar under section 52 of the Transfer of Property Act against alienation of any property involved in a proceeding, without the authority or the prior permission of the court, as laid down in Dhanalakshmi v. P. Mohan ....
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.... reinforced and reiterated from time to time in a number of decisions discussed supra, the Company Law Board is not powerless to go into the validity of the impugned sale transaction effected by the second respondent in favour of TVP and the further sale by TVP to Mangilal. It is on record that the properties comprising of 4.01 acres of land at Gummidipundi were purchased as early as on May 15, 1989, for a sum of Rs. 2.50 lakhs. It was decided in terms of a fax communication dated February 14, 1993, of the second respondent to sell the properties at a price of Rs. 3 lakhs per acre, which would amount to Rs. 12 lakhs for the whole of properties. This would mean that the properties valued Rs. 12 lakhs as at February, 1993 were sold after a period of 13 years during the pendency of the company petition on January 5, 2006, only for an amount of Rs. 2.80 lakhs, which is highly improbable, in view of the general increase in price of landed properties at the relevant time. I may point out that the purchaser, namely, TVP, who is none other than son of the power agent of the second respondent, has further effected sale of the properties for Rs. 4.12 lakhs in favour of Mangilal, gaining Rs. ....
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....2 of the Transfer of Property Act, is comprehensive enough to include the Registrar or the arbitrator appointed by him under the Madras Act. The contention of learned counsel for respondents Nos. 1 to 4, therefore, was that the Company Law Board would also be the "court", and the principles of lis pendens will be applicable. 27. This contention cannot be disputed, but the question in this case is as to whether the Company Law Board can set aside the sale deed. The provisions of section 52 of the Transfer of Property Act was applied by this court in a pending civil suit, and not before the Registrar under the Madras Act. This judgment, therefore, has no application to the question in issue in this case. 28. Learned counsel for respondents Nos. 1 to 4, thereafter, placed reliance on the judgment of the hon'ble Supreme Court in the case of Kamal Kumar Dutta v. Ruby General Hospital Ltd. [2006] 134 Comp. Cas. 678/70 SCL 222, to contend that the directors of a company are in a position of trustee. They should conform to probity and their conduct should be above suspicion. 29. Reference on this judgment was placed to contend that the act of the sixth respondent in getting the sale dee....
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..... Learned counsel for respondents Nos. 1 to 4 has also placed reliance on the judgment of the hon'ble Delhi High Court in the case of B.R. Kundra v. Motion Pictures Association (No. 1) [1978] 48 Comp. Cas. 536 (Delhi), to contend that the Company Law Board is competent to deal with the situation arising from events occurring during pendency of petition to contend, that court can take into the transfer qua property of the company in favour of the appellant, during proceedings. 35. There can be no dispute with the proposition of law, but the question in this case is whether the sale in favour of the appellant could be set aside, without setting aside the sale in favour of the sixth respondent and whether it fell within the jurisdiction of the Company Law Board. This is where the Company Law Board has gone wrong in granting relief to respondents Nos. 1 to 4, by treating the transfer to be for the first time in favour of the appellant, by completely ignoring that registered sale deed was executed in favour of the sixth respondent in the year 1989 itself. 36. Learned counsel for respondents Nos. 1 to 4 also referred to above the decision of the Company Law Board, Additional Principal ....