2008 (1) TMI 615 - HC - Companies Law

Interim injunction restraining the third respondent her men agents and nominees from in any manner dealing with the property more-fully described in the judge s summons - Held that - As rightly contended by learned counsel for the third respondent that being a stranger to the company and being a bona fide purchaser she is entitled to assume the internal affairs of the company are conducted properly and the officer-in-charge of the company has the necessary authorisation to do the act. Therefore on the basis of the decision of this court in Nellai Metal Rolling Mills (P.) Ltd. s case 1985 (4) TMI 284 - MADRAS HIGH COURT the third respondent s right is to be protected as she purchased the property for a valid consideration which was also admitted by the company. Therefore C.A. Nos. 1899 and 1900 of 2007 are dismissed and consequently C.A. No. 2288 of 2007 is allowed and the interim injunction granted on 27-7-2007 is vacated. The only grievance of the proposed impleading applicants is that the property should be protected as he is holding a valid agreement of sale. If that being so his interest will be very well protected in the pending suit in O.S. No. 45 of 2007 and he is an unnecessary party in the proceedings pending before this court.

Summary

Issues Involved:
1. Interim injunction against third respondent.
2. Setting aside the sale of property conveyed under the sale deed dated 27-12-2006.
3. Impleading petitioners as respondents in the applications.
4. Granting ad interim injunction against respondents from dealing with the property.
5. Vacating the interim injunction granted previously.
6. Examination of the affairs of the company under Section 237 of the Companies Act, 1956.

Detailed Analysis:

1. Interim Injunction Against Third Respondent:
C.A. No. 1899 of 2007 was filed to grant an order of interim injunction restraining the third respondent from dealing with the property described in the judge's summons. The court initially directed the third respondent not to disburse or encumber the property until further orders. However, the third respondent argued that she was a bona fide purchaser and had paid valid consideration, asserting her protection under the doctrine of indoor management. The court found that the third respondent was entitled to assume the internal affairs of the company were properly conducted and dismissed C.A. No. 1899 of 2007, vacating the interim injunction.

2. Setting Aside the Sale of Property:
C.A. No. 1900 of 2007 sought to set aside the sale of the property conveyed under the sale deed dated 27-12-2006. The applicant argued that the sale was void ab initio as the second respondent, who authorized the sale, was declared insolvent at the relevant time. The court noted that the sale deed was executed based on an agreement of sale with possession entered into by the company's senior vice-president, not the insolvent second respondent. The court found no merit in the allegation that the sale was void due to the second respondent's insolvency and dismissed C.A. No. 1900 of 2007.

3. Impleading Petitioners as Respondents:
C.A. Nos. 2284 and 2285 of 2007 were filed to implead the petitioner as respondents in C.A. Nos. 1899 and 1900 of 2007. The court observed that the impleading petitioner, Thiru Nageswara Raju, had already filed a specific performance suit (O.S. No. 45 of 2007) regarding the same property and was denied interim relief by the trial court. The court concluded that the impleading petitioner's interests would be protected in the pending suit and dismissed the applications as unnecessary.

4. Granting Ad Interim Injunction:
C.A. Nos. 2286 and 2287 of 2007 sought ad interim injunctions to restrain respondents from dealing with the property and from granting permissions or registering documents related to it. The court found these applications unnecessary as the main applications (C.A. Nos. 1899 and 1900 of 2007) were dismissed, and thus, the ad interim injunctions were not granted.

5. Vacating the Interim Injunction:
C.A. No. 2288 of 2007 was filed to vacate the interim injunction granted in C.A. Nos. 1899 and 1900 of 2007. The court, upon dismissing the main applications, allowed C.A. No. 2288 of 2007, thereby vacating the interim injunction granted on 27-7-2007.

6. Examination of the Affairs of the Company:
C.P. No. 140 of 2005 was filed under section 237(a)(ii) of the Companies Act, 1956, to declare that the affairs of the company should be investigated by inspectors appointed by the Central Government. The petitioner alleged mismanagement and prejudicial conduct by the company's chairman and managing director, who was declared insolvent. The court observed that the scope of section 237 is narrow and should not be interpreted to allow any person to start litigation unrelated to their concerns. The court emphasized that it is better for any person to approach the Company Law Board first for relief under section 237. The court did not pass orders on the main petition but highlighted the limited scope of section 237.

Conclusion:
The court dismissed C.A. Nos. 1899, 1900, and 2284 to 2287 of 2007, allowed C.A. No. 2288 of 2007, and vacated the interim injunction granted on 27-7-2007. The court emphasized the need for proper authorization in company transactions and the limited scope of section 237 of the Companies Act, 1956.