2015 (7) TMI 622 - Board - Companies Law

Application u/s 398 read with section 402 and 403 of the Companies Act, 1956 - Dispute in relation to sale deeds - Appointment of an Administrator forthwith to take charge of the assets of the company - To Convene a general body meeting of the shareholders - Authenticity of Equitable mortgage - Held that - Appointment of an Administrator - The status of the company is not aware to the Bench whether the company is functioning and carrying out any business and whether the company is having any Assets. The petitioner has not produced any documents with regard to the functioning of the company and the Assets standing in the name of the company. In absence of the documents in relation to status of the company and its Assets, it is too late to appoint an Administrator to take charge of assets of the company in absence of the details of the assets whether moveable or immoveable which the company holds and possess. Authenticity of Equitable mortgage & holding of general body meeting - This Bench does not have the jurisdiction to go into the veracity of the mortgage Deed. In respect to the holding of general body meeting, the company is duty bound to convene its meetings as per law, however non holding of meetings as required under law is violation of the provisions of the Companies Act, and the company and its officers will be in default. In this regard sufficient provisions have been made in the Companies Act, 1956 to take necessary action against the company and its officers in default. The petitioner has not made out any prima facie case regarding to this relief. Other allegations / reliefs requested - I do not see any malafides with respect to the transaction between the R1 Company and R8. Even the petitioner has admitted the fact that the 8th respondent had advanced the amounts to M/s. Maxworth Home Ltd. Therefore the allegations made by the petitioner against these respondents are baseless and liable to be rejected. With regard to the appointment of respondents 5 to 7 as directors of the R1 Company is concerned, the company stated that the respondents 5 to 7 have been appointed by the company as directors as per the procedure and necessary Form 29 and 32 have been filed with the concerned ROC. The petitioner has not made out any case with regard to the illegality in appointment of respondents 5 to 7 and no documents have been produced to establish the said allegation. The 9th respondent is a Nationalized Bank. It is stated that they are not aware of the civil suit filed by the 8th respondent and stated that the 9th respondent is a bonafide purchaser of the plots and paid the entire sale consideration and the R1 has executed the sale deeds in its favour even prior to the suit filed by the 8th respondent. Since the counter affidavit has been filed by the authorised persons of the 9th respondent the averments made in the counter affidavit cannot be disputed. Being a Nationalized Bank the R9 could have been verified all the documents before purchasing the property from the R1 Company. The respondent No.9 admittedly purchased the property and got registered the property in its favour even prior to filing of the suit. The Bench is of the view that the transaction between the R1 and R9 is a concluded contract. With regard to the other sale deeds executed by the company and its authorised persons are concerned. the petitioner has not made out any prima facie case against the respondents. Therefore the averments and allegations made by the petitioner cannot be sustained on mere statement without producing any documents in its support. Further the sale deeds executed in favour of 9th respondent and respondents 13 to 15 are to be declared as null and void is concerned, apparently the sale deeds have been executed in the year 2004 and in the year 2002. As per section 402 of the Companies Act, 1956 this Bench has power to set aside the sale deeds if found illegal after adjudication of the matter. However as per sub section (f) of Section 402 one has to challenge the said sale/ transaction within a period of three months from the date of the said sale execution before the Bench. The Bench after adjudicating the matter under section 397 or 398 may pass the order provided, the Bench comes to a conclusion that the said sale is within time and proved as illegal and void. In the instant case even this criteria has not been fulfilled in the petition. Therefore the petitioner has not made out any case on mismanagement and the petition is miserably failed and liable to he dismissed. - Decided against the appellant.

Summary

Issues Involved:
1. Validity of the appointment of directors.
2. Legality of the sale deeds executed by unauthorized persons.
3. Legitimacy of the equitable mortgage created in favor of the 8th respondent.
4. Allegations of mismanagement and the request for the appointment of an Administrator.
5. Conduct of Annual General Meetings and the dissemination of financial information.

Detailed Analysis:

Issue 1: Validity of the appointment of directors
The petitioner argued that respondents 2 to 4 were not validly appointed directors and sought their removal and surcharge for any losses caused to the company. However, the company countered that respondents 5 to 7 were legally appointed as directors, with necessary forms filed with the Registrar of Companies. The petitioner failed to provide evidence of any illegality in the appointment process. Hence, the claim regarding the invalid appointment of directors was rejected.

Issue 2: Legality of the sale deeds executed by unauthorized persons
The petitioner contended that sale deeds executed by Thangachan Thomas on behalf of the company were unauthorized and should be declared null and void. The company confirmed that Thangachan Thomas was not authorized to execute any sale deed, and his actions were fraudulent. The 9th respondent, a nationalized bank, claimed to be a bona fide purchaser and had verified all necessary documents before the purchase. The court found the transaction between the company and the 9th respondent to be a concluded contract, and the petitioner did not provide sufficient evidence to challenge the sale deeds. Therefore, the relief sought by the petitioner to declare the sale deeds null and void was denied.

Issue 3: Legitimacy of the equitable mortgage created in favor of the 8th respondent
The petitioner sought to declare the equitable mortgage created by respondents 5 to 7 in favor of the 8th respondent as null and void. The court noted that it did not have jurisdiction to examine the veracity of the mortgage deed. The 8th respondent had advanced money to the company and received title deeds as collateral security. The court found no malafides in the transaction between the company and the 8th respondent. Consequently, the petitioner's request to nullify the mortgage was rejected.

Issue 4: Allegations of mismanagement and the request for the appointment of an Administrator
The petitioner requested the appointment of an Administrator to take charge of the company's assets, alleging mismanagement by the directors. However, the petitioner failed to provide evidence of the company's current status, its assets, or any ongoing business activities. Without such information, the court found it inappropriate to appoint an Administrator. Thus, this relief was denied.

Issue 5: Conduct of Annual General Meetings and the dissemination of financial information
The petitioner claimed that the company did not convene Annual General Meetings (AGMs) in a timely manner and did not provide financial statements to shareholders. The court acknowledged that the company is statutorily obligated to hold AGMs and board meetings. However, the petitioner did not provide specific instances or evidence of non-compliance. The court noted that failure to hold meetings as per the law constitutes a violation of the Companies Act, and appropriate actions can be taken against the company and its officers. Since the petitioner did not establish a prima facie case, this relief was also rejected.

Conclusion:
The petition was dismissed on all counts. The court found no merit in the allegations of unauthorized sale deeds, invalid director appointments, or mismanagement. The petitioner's requests for declarations of nullity regarding sale deeds, the mortgage, and the appointment of an Administrator were all denied. The court also noted that the petitioner failed to provide sufficient evidence regarding the non-holding of AGMs and dissemination of financial information. All interim orders were vacated, and the petition was dismissed with no orders as to costs.