TaxTMI 
TaxTMI 
2019 (8) TMI 1473
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....ght for the following reliefs; (a) Declare that the acts of the Respondent 2 are prejudicial to the interest of the Respondent No. 1 Company and are oppressive against the petitioner; (b) Declare the Sale of land admeasuring acres 9-18 Guntas of the Respondent No. 1 Company made vide Registered Document No. 15747/2015 dated 04.09.2015 in the office of the Sub-Registrar, Sangareddy is null and void; (c) Direct Respondent No. 4 to cancel the illegal sale of land made vide Registered Document No. 15747/2015 dated 04.09.2015 and restore the name of the Respondent No. 1 Company in their records as owner of the said land admeasuring Acres 9-18 Guntas; (d) Prohibit Respondent No. 2 from holding any post of Directorship or any office in the Respondent No. 1 Company. 2. The brief averments made in the petition are stated under: 1. That the Company was incorporated on 26.12.2012 under the Companies Act, 1956 (hereinafter called the Act, 1956) under the name and style of M/S. Envision Agritech Private Limited and subsequently the name of the Company was changed to M/S. J & A Avenues India Private Limited. ii. That the Company was acquir....
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....eting was convened on 01.08.2015. The same is evident from the MGT 7 filed by the Company duly signed by the Respondent No. 2. The board has never authorized the Respondent No. 2 to sell the property of the Company. vi. That the impugned property is under control of the Petitioner even today. There is a temple of Lord Shiva and the Petitioner is taking care of the said temple by appointing a priest. It was noticed that some people were coming and seeing the property and upon enquiry the petitioner came to know that the Respondent No. 3 proposed to sell the land and on further verification of the petitioner and her daughters, they came to know that the Respondent No. 2 in collusion with the Respondent No. 3 illegally transferred the said land to the Respondent No. 3 on the basis of a false board resolution dated 01.08.2015. The sale deed was registered for Rs. 45,00,000/- per acre and whereas on the date of illegal registration, the market value of the land was more than Rs. 1,00,00,000/- per acre. The Respondent No. 2 in collusion with Respondent No. 3 illegally transferred with an ulterior motive to deprive the petitioner and her daughters who are also equal beneficial ow....
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....s. An amount of Rs. 1,00,00,000/- was lent to the Respondent No. 2 on 19.10.2013 through a cheque bearing 27570. An amount of Rs. 30,00,000/-was further lent on 07.06.2014 through a cheque bearing No. 32707 and the mother of Mr. Naga Satish had also lent to the tune of Rs. 35,00,000/-on 07.06.2014 through a cheque bearing No. 24085. The total money lent by Mr. Naga Satish and his mother was Rs. 1,65,00,000/-and the said money is to be repaid with interest in a short period. ii. At the request of Mr. Naga Satish, the Company agreed to sell an extent of Acres 9 - 28 guntas of the Company's land to Mr.Naga Satish for a total sale consideration of Rs. 12,27,65,000/- with an understanding that the loan amount of Rs. 1,65,00,000/- availed by the Respondent No. 2 from Mr. Naga Satish and his mother would be treated as an advance. After adjusting the advance amount of Rs. 1,65,00,000/- Mr. Naga Satish was required to pay Rs. 11,62,50,000/- in one or more tranches. However, on the date of registration, Mr. Naga Satish requested to execute the sale deed in favour of the Respondent No. 3 in which he is a director. iii. Out of the balance consideration, Rs. 7,91,00,000/- ....
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....te, City Criminal Courts, Nampally, Hyderabad under section 173(8) of CRPC. In the said matter, his driver gave a false evidence. However, the said case was dismissed on merits. Again Mr. Naga Satish filed a Crl R P No. 230 of 2017 against Crl MP No. 844 of 2017, and the said court disbelieved the statement of the evidence of the driver and the report of Mr Naga Satish stated before the police as false. vil. Mr.Naga Satish filed Crl P No. 10562 of 2017 before the Hon'ble High Court, Andhra Pradesh, however, he has withdrawn the same and filed a Crl P No. 996 of 2018 with the same relief and allegations. The Hon'ble High Court heavily came on Mr.Naga Satish and found that Mr. Naga Satish forged and fabricated alleged agreement of sale dated 16.02.2015 before the police. viii. Mr.Naga Satish also filed OS No. 16 of 2016 on the file of I Additional District Judge, Sanga Reddy for specific performance of the alleged agreement for sale dated 16.02.2015 and the said case is pending. ix. The petitioner is aware of all the proceedings, filed in the present petition taking advantage of the fact that by mistake while filing the Form MGT 7, the Company....
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....rd resolution dated 01.08.2015 to Mr. Naga Satish, the director of the Respondent No. 3 company and the Respondent No. 3 Company on the basis of the authorization given to the Respondent No.2 entered into the sale transaction with the Company and thus the Respondent No, 3 is protected under the "Doctrine of Indoor Management". (g) The allegations made in the petition are disputed questions of fact and that cannot be adjudicated upon before this Tribunal in the present proceedings which are summary in nature and the allegations can only be established or disproved before the Competent Trial Court. Therefore, the present petition is not maintainable before the Tribunal. (h) The Respondent No. 3 is protected under the provisions of Section 41 of the Transfer of Property Act. It is the contention of the petitioner that the Respondent No. 2 was not authorized to sell the property of the Company and applying principles of the provisions of section 41 of the Transfer of Property Act, the sale cannot be invalidated merely because the Respondent No.2 did not have the authority to execute the sale deed. (i) The Respondent No.3 purchased the property legally and the....
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....ndent No. 2 in order to settle the dispute between the Respondent No. 2 and Mr. Naga Satish pending in OS No. 16/2016. IV. The Respondent No. 3 is a separate legal entity and it has no connections with the criminal proceedings between the Respondent No. 2 and Mr. Naga Satish. The learned Counsel for the Respondent No.3 relied upon the following case law in support of hiss submissions: (2000) 7 Supreme Court Cases 702 In the matter of Dilboo(smt) (Dead) by LRS and others Vs Dhanrsaj (smt) (Dead) and others - wherein it is held that in other cases where a fact could discovered by due diligence then deemed knowledge would be attributed to the plaintiff because a party cannot be allowed to extend the period of limitation by merely claiming that he had no knowledge. The learned Counsel for the Respondent No. 3 while reiterating the averments made in the counters submitted that the Respondent No. 3 is the bonafide purchaser of the property and it is not a party to the internal dispute of the shareholders of the Company. Therefore, he prayed for the dismissal of the petition. 6. The petitioner filed Rejoinder for the Counter of the Respondent No. 3 a....
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....ied or the persons interested in immovable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorized to make it; provide that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer , has acted in good faith. In the present case the Respondent No. 2 is only the director and shareholder of the company and he cannot be considered as ostensible owner of the property as the same belongs to the Company. Therefore the property of the company neither can be sold by Respondent No. 2 nor can be purchased by the Respondent No. 3 under guise of good faith. Therefore, the Respondent No. 3 cannot invoke the provision of section 41 of the Transfer of Property Act in the instant case. 7. The petitioner also filed a rejoinder to the counter filed by the Respondent No. 2 and inter-alia made the following averments and that are: (a) The Respondent No. 2 has not been authorized by the Company to sell the property of the Company. The very fact that the major part of the sale consideration was received by the....
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....ndent No.2. B. The R2 executed the illegal sale deed on 04.09.2015 in favor of R3 Company based on fabricated Board Resolution claiming that R2 was authorized to sell the immovable property of the RI Company at a Board Meeting allegedly held on 01.08.2015. C. There was no Board Meeting on 01.08.2015. No notice was issued to the Petitioner for the said Board meeting. D. The Petitioner was not present at such alleged Board Meeting and therefore there was no quorum at the impugned meeting as there are only two Directors and Respondent no. 2 alone could not have constituted quorum. E. Section 173(3) of the Companies Act, 2013 and the Secretarial Standards mandate compulsory issuance of notice for a Board Meeting. F. Any Board meeting held without notice is non est, invalid and void and consequently any decision taken thereat is non est, invalid, inoperative and void. In Parmeshwari Prasad Gupta Vs Union of India (AIR1973SC2389), the Supreme Court held as follows: "12. In Hasbury'sLaws ofEngland, Vol. 9, p. 46, it has been stated that it is essential that notice of the meeting and of the business to be transacted should ....
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.... Tribunal shall have, for the purposes of discharging their functions under this Act I["or under the Insolvency and Bankruptcy Code, 2016"], the same powers as are vested in a civil court under the Code of Civil Procedure, 1908". In SAS Hospitality Pvt. Ltd. And Ors. Vs. Surya Constructions Pvt. Ltd And ors. [2019]149C LA124 (Delhi), the Delhi High Court held as under: 10. Before going into the question as to whether this Court has the jurisdiction to entertain and try the present suit and grant reliefs prayed for, it is necessary to analyze the scheme ofthe Companies Act, 2013, along with the constitution ofthe NCLT. The NCLThas been vested with powers that are far reaching in respect of management and administration of companies. The said powers of the NCLTincIude powers as broad as "regulation ofconduct of affairs of the company" under Section 242(2)(a), as also various other specific powers. NCLT is a tribunal which has been constituted to have exclusive jurisdiction in the conduct ofaffairs of a company and its powers can be contrasted with that of the CLB under the unamended Companies Act, 1956. 11. In the 2013 Act, Sections 407 onwards deal with th....
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....& B. 327. In this case, the directors ofa company had issued a bond to Turquand. They had the power under the articles to issue such bond provided they were authorized by a resolution passed by the shareholders at a general meeting of the company. But no such resolution was passed by the company. It was held that Turquand could recover the amount of the bond from the company on the ground that he was entitled to assume that the resolution was passed. The doctrine of indoor management is in direct contrast to the doctrine or rule ofconstructive notice, which is essentially a presumption operating in favour of the company against the outsider. It prevents the outsider from alleging that he did not know that the constitution of the company rendered a particular act or a particular delegation of authority ultra vires. The doctrine ofindoor management is an exception to the rule of constructive notice. It imposes an important limitation on the doctrine ofconstructive notice. According to this doctrine, persons dealing with the company are entitled to presume that internal requirements prescribed in memorandum and articles have been properly observe, therefore doctrine of indoor manageme....
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....r any such powers. M. The Board Resolution dated 01.08.2015 is fabricated and forged document and there is no authorization to R2 to execute the sale deed and hence the sale deed is void, invalid , inoperative and is liable to be set aside by the Tribunal by exercising powers under section 242 of the Act. Hon'ble NCLATin Gangadhar Madupu and Ors. Vs. Katta Corp P. Ltd. and Ors. (MANU/NL/0127/2018) held as under: 14.1 Going through the above reasonings of the learned National Company Law Tribunal and the submission now made before us, we do not find that any grounds have been raised or documents shown to find fault with the reasoning so as to interfere with these findings. When major part ofproperty of the company has been shown as sold off by respondent No. 2 who had tendered resignation as director but went ahead to execute the sale deed, there was oppression and mismanagement on the part of respondents Nos. 2 to 4. Respondent No. 7 was mother-in-law of respondent No. 3 who is brother ofrespondent No. 2. Looking to such relationship of these parties and the fact that it is private limited company, keeping in view the contradictory pleadings claiming ....
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....ndent No.2 was authorised to deal with and alienate the subject property to third parties. It is pertinent to note that this board resolution was signed by the Petitioner herein. (b) Then, after receiving majority of the sale consideration, Respondent No. 1, represented by Respondent No.2, executed a registered sale deed on 4th September, 2015 in favour of Respondent No.3, thereby alienating the subject property to Respondent No.3 conclusively. Therefore, the allegation by the Petitioner that she did not sign any board resolution dated 01.08.2019 is incorrect and bereft of any truth. (c) Realizing this difficult being faced by third parties, the Hon'ble Supreme Court following the English decision Royal British Bank v. Turquand has adopted the doctrine of Indoor Management into the Indian company law. The Doctrine of Indoor Management states that while a third party is dealing with a company, the third party is not bound to know the internal procedure of a company. This doctrine is an exception to the rule of constructive notice which states that every individual who deals with a company must have knowledge about the internal documents of a company such as the....
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....Respondent No. 1 and Rs. 4,36,50,000/- was paid into Respondent No. 1 company's bank account. This is evidenced by the bank statements filed by Respondent No.3 at annexure 2 of its counter. ii. Therefore, it can be conclusively established that Respondent No. 1 company received valuable consideration for the sale of the subject property and recorded the receipt of the consideration for the subject property under the head of Advances for lands in its balance sheet for the year ending 2015-2016. iii. It is also pertinent to note here that on last page of the balance sheet for the year ending 2015-2016 filed by the Petitioner herein at Note 14 it is clearly stated that the Respondent No. 1 company executed a sale deed for the subject land. This balance sheet has been signed by the Petitioner herein and Petitioner does not dispute this signature of hers. Therefore, this further clearly and conclusively establishes that the Petitioner herein had knowledge about the sale of subject property in 2015 itself and choose not to challenge the execution of the sale deed iv. Reiterating above, the counsel for R3 prayed to dismiss the Present petition. 10. Heard ....
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....eeting purportedly held on 01.08.2015 by the Respondent No.2 on the Petitioner. Though it was argued that the petitioner had signed the balance sheet, dated 31.03.2016, as rightly pointed out by the Counsel for the Petitioner, if the sale of land has taken place during the Financial Year 2015-16, then the same ought to have been recorded as revenue in the Profit & Loss Account of the Respondent No. 1 Company. However, the income from operations in the Profit & Loss Account of the R-1 Company for the year 2015-16 do not reflect the revenue from the impugned sale of land. The contention of the Petitioner throughout has been that the subject land was sold without her knowledge, upon coming to her knowledge about the same, she approached this Tribunal for appropriate reliefs. Therefore, in terms of the provisions of section 17 of the Limitations Act, 1963, the present petition is well within time and not barred by limitation. 14. With regards to the plea of the Doctrine of Indoor Management, it is observed that there were several disputes between the Respondent No.2 and Mr. Y. Naga Satish who is the Director of Respondent No.3 Company and that such disputes were in existence even pr....
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....ts Powers are dealt under Section 173 of Companies Act, 2013. Apart from conducting Board Meetings on periodical schedule, proviso 3 of Section 173 says ' A meeting of the Board shall be called by giving not less than seven days in writing to every director at his/her address by hand delivery or by post etc . Section 174 of the Act, 2013 prescribe quorum for conducting Board meetings. 16. In the instant case, admittedly, there are only two shareholders and two Directors i.e., petitioner and Second Respondent. Therefore, question of conducting any valid Board meeting in RI Company does not arise, without participation of petitioner or the Respondent No. 2. Even the Respondent No. 2 and 3 did not produce any notice of the impugned Board meeting at which the impugned Resolution dated 01.08.2015 was passed. As there was no Board meeting conducted and the Respondent No. 1 Company also did not furnish those details in the Form MGT-7 filed with Registrar of Companies. Therefore, it is to be held that there was no Board Meeting held on 01.08.2015, so as to authorize the Respondent No. 2 to transact the impugned sale of the property of the Respondent No. 1 Company and thus the impugn....
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....er rightly contended that neither the Respondent No. 3 nor Mr. Naga Satish have nowhere contacted the Company for verifying the authenticity of the resolution submitted by the Respondent No. 2. Therefore, it is clear that the resolution filed by the Respondent No.3 along with the memo dated 09.05.2019 is not a original and it is only a fabricated copy of the board resolution. Since, the Respondent No. 3 failed to do a due diligence, it could not claim that it is a bona-fide purchaser of the property of the Company. 19. It was contended by the Respondent No. 3 that the total consideration for the lands of the company was Rs. 4,36,50,000/- and it is an admitted fact that an amount of Rs. 7,91,00,000/- was paid to the Respondent No. 2. It is the contention, that Rs. 7,91,00,000/- was paid to the Respondent No. 2 for other sale of properties which is not connected with the impugned sale of land, whereas the Respondent No. 3 relies on the entry made towards advances received during the said financial year by the Respondent No. 1 Company. This statement is contrary to the statement that it has paid the total consideration of Rs. 4,36,50,000/- towards the total consideration for the sa....
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....istrict Judge. 22. The impugned sale deed on 04.09.2015 is executed in respect of 3 properties, which include the Respondent No. 1 Company property and other two (2) namely Shri Venkataramana ReddyKetireddy and ShriVontela Ravinder Reddy. In the normal consequences, as per principle of natural justice, every transaction should be registered separately, especially the Company properties. However, for the reason best known to the Respondent No.3, three (3) properties were put together and registered by common sale deed. Whenever Joint Sale Deed is in question, such sale deed cannot be segregated and examine separately. Therefore, even the common sale deed clubbed the property of Respondent No. 1 Company along with others is also not at all tenable and contrary to the basic principle of law. Moreover, when the Agreement of Sale of the impugned sale deed in question and the same was also recorded in the financial statement as detailed supra, the impugned sale deed is illegal. The actions of Respondent No. 2 and 3 are not only illegal but also not in compliance with the provisions of the Act, 1956 and 2013. 23. Therefore, I am of considered view that the actions of Respondent No. ....