2021 (3) TMI 766 - AT - Insolvency and Bankruptcy

Execution of lease - Section 167 (1)(b) of the Companies Act, 2013 - leasing and alleged transfer of possession of the land - HELD THAT - The purpose of looking at various issues connected with the signing of the lease deeds dated 03.12.2019 and 25.06.2020 and the connected circumstances has been a limited one- i.e. the interest of the company itself. The act of creating document after document of lease deed in doubtful circumstances with common director hobnobbing on both sides and declaring possession taken, and facts and documents as discussed above, are sufficient for NCLT to step in to protect property of the company from forces within, in the interest of the Company and its shareholders. Transfer of possession would require animus and also corpus. Common Directors - Respondent No. 4, with or without his son present on land of the Company would not be sufficient to show animus. Further evidence would be required. Here it appears to be instant paper possession. Fault cannot be found if NCLT did not accept the claim of possession of Appellant and passed orders. The transfer of entire substratum of Company would adversely affect the interests of its shareholders. Appeal dismissed.

Issues Involved:
1. Legality of the Board Meeting dated 03.12.2019.
2. Compliance with Section 188(1)(d) and Section 180 of the Companies Act, 2013.
3. Validity of the lease deeds dated 03.12.2019 and 25.06.2020.
4. Non-registration of the lease deed under Section 17(1)(d) of the Registration Act, 1908.
5. Alleged fraudulent actions and collusion.
6. Impact of Section 242(2)(g) of the Companies Act, 2013.
7. Interest Free Security Deposit and unauthorized bank account.
8. Protection of company property and shareholders' interests.

Detailed Analysis:

1. Legality of the Board Meeting dated 03.12.2019:
The legality of the Board Meeting held on 03.12.2019 by Respondent No. 3 Company was questioned. The Respondents argued that no notice was sent for the meeting, making the resolution invalid. The Appellant claimed that Mam Chand Goyal was no longer a director due to non-attendance, thus no notice was required. However, no evidence was provided to show that notice was served, leaving the issue open for decision. The Supreme Court's judgment in Parmeshwari Prasad Gupta v. Union of India was cited, emphasizing the necessity of notice for the validity of resolutions.

2. Compliance with Section 188(1)(d) and Section 180 of the Companies Act, 2013:
The Board Resolution for the lease deed was challenged as it involved related parties without proper consent, violating Section 188(1)(d). Anil Kejriwal, a common director in both companies, and his son were the only shareholders in the Appellant Company. Compliance with Section 180, requiring a special resolution for leasing 100% of the company's land, was also questioned. The Resolution's validity was further contested based on the agreement dated 23.07.2007, requiring Mam Chand Goyal's presence at the meeting.

3. Validity of the Lease Deeds dated 03.12.2019 and 25.06.2020:
The lease deed dated 03.12.2019 was for five years and unregistered, while the deed dated 25.06.2020 was for 29 years. The discrepancy in the lease period and land area raised questions about the legitimacy of the deeds. No fresh Board Resolution was provided to justify the changes, reinforcing doubts about the lease deeds' validity.

4. Non-registration of the Lease Deed under Section 17(1)(d) of the Registration Act, 1908:
The lease deed dated 03.12.2019 was not registered, violating Section 17(1)(d) of the Registration Act, 1908. The Supreme Court's judgment in Anthony vs. K.C Ittoop and Sons held that an unregistered lease deed is null and void, supporting the Respondents' argument.

5. Alleged Fraudulent Actions and Collusion:
The Respondents alleged that the Board Meeting and lease deed execution were fraudulent, with related parties acting in collusion. The Appellant's incorporation just 30 days before the lease deed execution and the unseemly haste in completing the paperwork suggested malafide intentions. The unauthorized bank account opened for the Interest Free Security Deposit further indicated fraudulent actions.

6. Impact of Section 242(2)(g) of the Companies Act, 2013:
The Appellant argued that the Company Petition was barred under Section 242(2)(g) as it was filed after more than three months. However, the Tribunal found many gaps in legal compliance, indicating that Section 242(2)(g) would not aid the Appellant.

7. Interest Free Security Deposit and Unauthorized Bank Account:
The Appellant claimed to have given ?3 crores as an Interest Free Security Deposit. However, the amount was deposited in an unauthorized bank account, opened without proper authorization, suggesting fraudulent intentions.

8. Protection of Company Property and Shareholders' Interests:
The Tribunal found that the lease deeds and related actions were not in the company's or shareholders' interest. The unregistered lease deed, discrepancies in lease terms, and unauthorized bank account indicated malafide intentions. The NCLT's restraining order was deemed necessary to protect the company's property and shareholders' interests.

Conclusion:
The appeal was dismissed, and the NCLT's order was upheld to protect the company's property and shareholders' interests. The observations made were prima facie and would not affect the pending Company Petition.

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