2020 (4) TMI 277 - AT - Companies Law

Sale of Land of a company - proper authorization - order passed by NCLT covering alleged impugned Board Resolution of Board Meeting dated 01st August, 2015 as well as registration of document for land measuring 9 Acres 18 Guntas with the Sub-Registrar as specified in the petition as null and void - HELD THAT - The Appellant has failed to adduce any evidence relating to the presence of Respondent no.2 at the Board Meeting held on 01.08.2015. Therefore, in terms of the provisions of section 17 of the Limitation Act, 1963, the petition was filed by Respondent No.2 within time and is not barred by limitation - Audit Report and relevant financial statement is not reflecting sale of the said land. No board meeting dated 01.08.2015 was held as per the annual return (2015-2016) of the company. Moreover, due diligence was not done by the appellant to verify that the board resolution was passed on 01.08.2015. The original board resolution was not shown to the Appellant and he purchased the land on the basis of certified copy of the board resolution. A perusal of financial statement shows that balance sheet is at historical cost basis and not on replacement cost basis apparently, hence there may be purchase of land not sale of land as reflected under Fixed Assets in Balance Sheet. Sale of the property of a company requires board resolution to that effect. The sale alleged to have been executed is only on the basis of board resolution dated 01.08.2015 which itself cannot be relied upon. Therefore, the sale of the said land seems to have been executed without proper authorization of the board - Order of NCLT upheld. Appeal disposed off.

Summary

Issues Involved:
1. Validity of the Board Resolution dated 01.08.2015.
2. Legitimacy of the sale deed No. 15747/2015 dated 04.09.2015.
3. Allegations of fraud and limitation period applicability.
4. Directions for repayment of amounts with interest.
5. Removal and disqualification of a director.

Detailed Analysis:

1. Validity of the Board Resolution dated 01.08.2015:
The Appellant claimed that the Respondent No.3 represented himself as authorized to execute the sale deed based on a Board Resolution dated 01.08.2015. However, Respondent No.2 denied any knowledge of such a meeting, asserting that no notice was received for the alleged Board Meeting. The judgment noted that the annual return for 2015-2016 did not reflect any such meeting, and the balance sheet did not indicate any sale of land. The Tribunal found that the Board Resolution was a fake and fabricated document, thus invalidating the sale.

2. Legitimacy of the Sale Deed No. 15747/2015 dated 04.09.2015:
The Tribunal declared the sale deed null and void, as it was executed based on the invalid Board Resolution. The Appellant's failure to verify the authenticity of the Board Resolution and reliance on a certified copy without due diligence further supported this decision. The Tribunal emphasized that the sale of company property requires a valid Board Resolution, which was absent in this case.

3. Allegations of Fraud and Limitation Period Applicability:
Respondent No.2 alleged fraud, claiming the Board Resolution was fabricated. Under Section 17(1)(b) of the Limitation Act, 1963, the limitation period in cases of fraud begins from the date of knowledge of the fraud. Respondent No.2 became aware of the sale a month before filing the petition when people started inspecting the land. The Tribunal accepted that the petition was filed within the limitation period, as the fraud was discovered only recently.

4. Directions for Repayment of Amounts with Interest:
The Tribunal directed the Sub-Registrar to cancel the registered document dated 04.09.2015 and restore the property in the name of M/s J&A Avenues India Private Limited. The company was ordered to return ?4,36,50,000 with 8% interest per annum to the Appellant. Additionally, Respondent No.3 and the company were directed to return ?7,91,00,000 with 8% interest per annum to Mr. Y. Naga Satish within 60 days. These directions aimed to rectify the financial transactions resulting from the invalid sale.

5. Removal and Disqualification of a Director:
The Tribunal declared Mr. V. Lakshmi Chenchu Venkata Siva Prasad Satya unfit to hold the post of Director and barred him from directorship for five years. The company was instructed to convene an extraordinary general meeting within 60 days to appoint a new director in his place, ensuring compliance with the Companies Act.

Conclusion:
The Tribunal upheld the NCLT's decision, confirming the invalidity of the Board Resolution and the sale deed, recognizing the fraud, and ensuring appropriate financial and managerial rectifications. The appeals were disposed of accordingly, maintaining the integrity of company operations and governance.