2018 (5) TMI 734 - Tri - Companies Law

Oppression and mismanagement - Whether the prime property of the company was sold to R6 and R7 for lesser value than the original value for which it was purchased? - Held that - As per the sale deed dated 14.07.2000, the sale consideration was ₹ 9.85,400/- which is the registered value and subsequently the same property was purchased by the R6 and R7 for ₹ 21,22,500/- which is more than the registered value. The learned Counsel for R1, R2 and R4 rightly contended that the registered value of consideration alone has to be taken into consideration and hold that P1 being the Director of the Company failed to attend her duties in this regard. Answer the issue No 1 in negative. Whether the property situated at Pudukkudi South Village, Thanjavur district has been sold by undervaluing the same comparing with the similarly situated land? - Held that - Learned Counsel for R1, R2 and R4 has brought to the notice that the survey No s of the land of the Pudukudi South village and the other compared property are totally different. Therefore, considering the location of the lands, I hold that petitioners have not substantiated that the said land was sold for a lesser value and therefore, answer the issue No. 2 is also in negative. Whether the R2 to R4 are disqualified under section 274(1)(g) of the Companies Act, 1956? - Held that - It is on record that the Company has filed the balance sheets as at 31.03.2001 and 31.03.2002 and due to the present litigation could not conduct any AGM except the AGM conducted as per the orders of the CLB. If it is taken that the provisions of section 274(l)(g) is applicable, it is equally applicable to the P1 who is still continuing as director of the Company. In view of the legal provisions I am inclined to answer this issue in negative. Whether the R2 s appointment as director is valid and whether she is empowered to sell the property of the Company? - Held that - R2 is empowered to sell the property particularly when the company itself in the business of real estate and for every genuine sale transaction she need not obtain the permission of the shareholders. In view of my above observations this issue is answered in affirmative. It is the duty of the Tribunal to see the paramount interest of the Company and the disputes between the parties should not affect the functioning of the Company. The case laws referred by the learned Counsel for R1, R2 and R4 squarely apply to the present case in hand whereas the case laws referred by the learned Counsel for the petitioners are not supporting, for the reasons that the facts and circumstances of the present case are otherwise. Since the petitioners have failed to make out any case of oppression and mismanagement in the affairs of the R1 Company, the petition is liable to be dismissed and accordingly the petition is dismissed

Summary

Issues Involved:
- Whether the prime property of the company was sold to R6 and R7 for lesser value than the original value for which it was purchased.
- Whether the property situated at Pudukkudi South Village, Thanjavur district has been sold by undervaluing the same compared with similarly situated land.
- Whether the R2 to R4 are disqualified under section 274(1)(g) of the Companies Act, 1956.
- Whether R2’s appointment as director is valid and whether she is empowered to sell the property of the Company.

Issue-wise Detailed Analysis:

Issue No. 1:
The Tribunal examined whether the prime property of the company was sold to R6 and R7 for a lesser value than the original purchase price. The P1 had purchased the property with defects, and only after the High Court's intervention was the sale deed registered in the company's name. The P1's contention that the property was sold for a lower value was not substantiated with sufficient evidence. The sale consideration recorded in the sale deed was ?9,85,400/-, and the subsequent sale to R6 and R7 was for ?21,22,500/-, which was more than the registered value. The Tribunal concluded that the registered value of consideration alone should be considered and found no evidence of the property being sold for a lesser value. Therefore, this issue was answered in the negative.

Issue No. 2:
The Tribunal considered whether the property at Pudukkudi South Village was sold for a lesser value compared to similarly situated land. R5 contended that the land was situated 2.5 km away from the National Highway, which affected its value. The Tribunal noted that the survey numbers of the land in question and the compared property were different. Considering the location and other factors, the Tribunal concluded that the petitioners had not substantiated their claim that the land was undervalued. This issue was also answered in the negative.

Issue No. 3:
The Tribunal evaluated whether R2 and R4 were disqualified under section 274(1)(g) of the Companies Act, 1956. It was observed that section 274(1)(g) could not be used to disqualify directors from the existing company but only to disqualify directors of a defaulting company from becoming directors in any other public company. The company had filed the balance sheets for the relevant years, and the litigation had prevented the conduct of AGMs. The Tribunal found that if section 274(1)(g) were applicable, it would also apply to P1, who continued as a director. Hence, this issue was answered in the negative.

Issue No. 4:
The Tribunal examined the validity of R2's appointment as a director and her authority to sell the company's property. The petitioners argued that R2's appointment was invalid as it was made without proper authority. However, the Tribunal noted that R2 was appointed as Managing Director in the EGM held on 16.12.2002, which implied her appointment as a director. The Articles of Association empowered the Managing Director to exercise all authorized powers, including selling property. The Tribunal concluded that R2 was empowered to sell the property without prior permission from shareholders, especially as the company was in the real estate business. This issue was answered in the affirmative.

Conclusion:
The Tribunal emphasized the paramount interest of the company and found no evidence of oppression and mismanagement in the company's affairs. The petition was dismissed with no orders as to costs.