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2013 (10) TMI 60 - HC - Companies LawPowers of Company Law Board - Whether the Company Law Board, after having granted leave to the parties to the proceedings to institute a civil suit, could have usurped the powers of the Civil Court to find out whether the transfer of right in an immovable property was right or wrong - Held that - though the Company Law Board was entitled to decide the validity of the transfer, despite granting leave to the parties to go to the Civil Court, it should not have decided the same, without impleading the appellant as a party. The benefit of the order of the Company Law Board has enured to both respondents 1 to 4 and respondents 6 to 8 alike. This is why, respondents 6 to 8 have supported the stand taken by respondents 1 to 4 in the above appeal. In this process, a Public Financial Institution viz., the State Bank of India, has become the casualty. Since this cannot be allowed to happen, I am of the view that the opportunity given to respondents 10 and 11, cannot be considered as sufficient to protect the interests of the appellant herein. The appellant, by itself, is entitled to have an opportunity to satisfy the Company Law Board that they have bona fide entered into a transaction. - Decided in favour of appellant.
Issues Involved:
1. Maintainability of the appeal. 2. Powers of the Company Law Board (CLB) under Sections 397 and 402 of the Companies Act, 1956. 3. The validity of the transfer of property and whether the CLB could decide on it. 4. Whether the purchaser was a bona fide purchaser for valuable consideration without notice. 5. The necessity of impleading the appellant (State Bank of India) in the proceedings. Issue-wise Detailed Analysis: 1. Maintainability of the Appeal: The respondents argued that the appeal was barred by law since a previous appeal (C.A.No.30 of 2009) against the same order was dismissed by the court. However, the court noted that the previous appeal was dismissed on facts and not on the questions of law. The appellant (State Bank of India) was not a party to the previous appeal, and the questions of law raised were not answered. Therefore, the court rejected the objection to the maintainability of the appeal. 2. Powers of the Company Law Board (CLB) under Sections 397 and 402 of the Companies Act, 1956: The court emphasized that the powers of the CLB under Sections 397 and 402 are wide enough to pass any order to protect the interests of the company, including setting aside transactions. The court cited several precedents, including the Supreme Court's rulings in Bennet Coleman and Co. vs. Union of India and Cosmosteels P. Ltd vs. Jairam Das Gupta, which affirmed the broad powers of the CLB to grant relief against oppression and mismanagement. 3. The Validity of the Transfer of Property and Whether the CLB Could Decide on It: The court held that the CLB has the power to decide the validity of a transaction, including whether a transfer was bona fide. The court noted that the CLB's powers are akin to those of a civil court, and it can adjudicate on the validity of transactions, even in summary proceedings. The court also pointed out that the CLB's decision to set aside the sale was within its jurisdiction, given its wide powers under Section 402. 4. Whether the Purchaser was a Bona Fide Purchaser for Valuable Consideration Without Notice: The court concluded that the CLB has the jurisdiction to determine whether a purchaser was bona fide for valuable consideration without notice. Despite the summary nature of the proceedings, the CLB is empowered to take evidence and decide on the validity of transactions. The court affirmed that the CLB's powers include adjudicating on such defenses. 5. The Necessity of Impleading the Appellant (State Bank of India) in the Proceedings: The court found that the failure to implead the appellant (State Bank of India) in the proceedings before the CLB was a violation of the principles of natural justice. The appellant had a significant interest in the property as a mortgagee and should have been given an opportunity to present its case. The court noted that the CLB's decision affected the appellant's interests, and it was essential to hear the appellant before passing the order. Conclusion: The appeal was allowed, and the impugned order of the CLB was set aside. The matter was remitted back to the CLB for fresh disposal after giving an opportunity of hearing to the appellant (State Bank of India). The court emphasized the importance of natural justice and the necessity of giving all affected parties an opportunity to present their case.
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