1991 (3) TMI 329 - HC - Companies Law

Summary

Issues Involved:
1. Interpretation of Section 293(1)(a) of the Companies Act, 1956.
2. Validity of the Board Resolution dated 5th February 1991.
3. Allegations of fraud and mala fides in the sale of the vessel "Boss Vishwa".
4. Adequacy of notice and agenda for the Board meeting.
5. Estoppel and subsequent conduct of the petitioners.

Summary:

1. Interpretation of Section 293(1)(a) of the Companies Act, 1956:
The primary issue is the interpretation of the term "undertaking" u/s 293(1)(a) of the Companies Act, 1956. The court held that the term "undertaking" refers to the "unit", the business as a going concern, and not merely some asset of the undertaking. The court concluded that the sale of the vessel "Boss Vishwa" does not constitute the sale of an "undertaking" as the company owns three vessels and the business can continue with the remaining vessels.

2. Validity of the Board Resolution dated 5th February 1991:
The petitioners challenged the board resolution on the grounds that it was passed without the prior consent of Deepak Fertilisers and that the notice for the board meeting was inadequate. The court found that the resolution was passed by a majority of directors and that the notice was adequate under the circumstances. The court also noted that the Sawhney group had initially consented to the sale and was estopped from challenging it later.

3. Allegations of fraud and mala fides in the sale of the vessel "Boss Vishwa":
The petitioners alleged that the sale was fraudulent and at an undervaluation. The court found no merit in these allegations, noting that the sale price of US $16 million was supported by valuation reports and approved by the Director-General of Shipping. The court also observed that the petitioners had initially consented to the sale and could not now claim it was fraudulent.

4. Adequacy of notice and agenda for the Board meeting:
The petitioners argued that the notice for the board meeting was inadequate as it did not include the agenda. The court held that the notice was adequate given the circumstances and that the directors were presumed to be aware of the purpose of the meeting. The court also noted that any procedural defect was curable and did not warrant setting aside the resolution.

5. Estoppel and subsequent conduct of the petitioners:
The court found that the petitioners and the Sawhney group were estopped from challenging the sale as they had initially consented to it and had taken steps to implement the sale. The court also noted that the petitioners had acted inconsistently by opposing the sale after having supported it initially.

Conclusion:
The court dismissed the judge's summons for an interim injunction, holding that the petitioners had not made out a prima facie case. The court also rejected the petitioners' application for an order restraining the foreign buyer from entering into any transaction of sale of the vessel with a third party. The court emphasized that there were no equities in favor of the petitioners and that the sale was in the best interest of the company.