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TMI Blog2018 (5) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directors has no locus standi or authority to appoint the directors in violation of the AOA. The illegal appointments of the R2 and R4 as directors led to further litigations. The R2 was appointed as Managing Director in the EGM held on 16.12.2002 and this appointment is null and void as her initial appointment as director itself invalid and not enforceable. Further, in the said EGM no agenda was included to sell the immovable property and therefore, the resolution passed for selling the immovable property is null and void. The copy of the minutes of the EGM has not been filed with the ROC. It is also not mentioned in the minutes of the board meeting said to be held on 20.12.2002 that what was the consideration for the sale of the property. * The said land was purchased by the Company for ₹ 24,20,000/- including the premium. Since the sale deed was not released by the Registrar, a Writ Petition in W.P.No. 16126/2001 was filed before the High Court, Madras and as per the order dated 10.12.2001, the sale deed was received by the Company. The Annual General Meeting (AGM) for the year 2001 was not conducted due to the litigations, however, the P1 had filed statutory report of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that she was not the Managing Director as on 10.12.2002. The caveat notice issued by one of the director and the notices received from the court would also show that the Smt. T. Vembarasi was functioning as Managing Director even before 10.12.2002. * Smt. T. Vembarasi and others have forged the documents to show that an AGM was held on 17.09.2001 and filed the same with the ROC. As per the earlier records Smt. T. Vembarasi was not the Managing Director and they have started to file Annual Returns and Balance sheet for the financial years 2000-2001 and 2001-2002. A notice dated 16.08.2002 was issued for the AGM to be held on 16.09.2002 by Smt. T. Vembarasi as Managing Director whereas no such notice was issued to the shareholders of the company. But the EGM took place on 16.12.2002 and due to the harassment met out to the P1, she could not attend the board meeting and the EGM. * The Annual Return was filed by Smt. T. Vembarasi with a signature of an Auditor but the accounts did not reflect the actual goings on in the company and real balance sheet has been prepared by the P1 to show the unbridgeable discrepancies in the accounts and fraud is being played by the R2 to R4. * ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ship, but the R3 carried on the dealership without furnishing any particulars to the Company. Till date the R3 has not furnished any account to the Company and the Company has not received any report from R3 in this regard. * A Sale Deed was entered into on 04.08.2006 and registered by Smt. T. Vembarasi, Managing Director based on a board meeting allegedly conducted on 20.12.2002 and the sale was in favour of the R5 who is the wife of the R3. No notice for the said board meeting was received by the P1 Since the R2 was trying to sell the prime property of the Company for a low sum, the P1 has issued a Press Advertisement in a vernacular newspaper on 12.04.2006 through her advocate. Certain persons who had paid money for shares were complained to the police authorities and they have issued two advertisements on 23.01.2007 and 25.01.2007 inviting complaints and this would disclose the prospective purchasers have been notified about the fraud that was in offing. But ignoring the fraud, the R6 and R7 registered the sale deed executed by the R2 in respect of the prime land of the Company for a sum of ₹ 21,22,500/-, The value as on the said date was ₹ 1500/- per sq ft where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the accounts of the Company that it was made in the year 2006 and an amount of ₹ 52000/- was booked in the accounts instead of the actual amount of ₹ 26,400/- * The company is functioning in the premises of the firm which was dissolved and an amount of ₹ 1150/- was paid towards rent and out of the total amount, ₹ 6 lakhs was advanced to purchase the land for the company. Though the 7th AGM was convened, no previous general meeting except the EGM was held in the company. In the same manner no board meetings were convened by the Company except a board meeting held in the year 2002 for which the petitioner was invited. 3. The R1, R2 and R4 filed their counter and written arguments and the brief averments made therein are: * The adjudication order of 05.02.2008 made in CP 51/2007 as well as in CP No. 11/2008 would reveal that it was not a case of withdrawal of CP 51/2007 with liberty to file a fresh CP. Two separate company petitions arising from the same set of facts were filed with one overlapping prayer. Thus between 05.02.2008 and 23.04.2008 there were two company petitions on the same pleaded facts. The statement that the first company petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions 397 and 398 in which the paramount interest of the company is taken care. * It is a settled principle of law that a registered document always get preference over an unregistered document. A registered sale deed will always prevail over an unregistered agreement and section 91 of the Indian Evidence Act, 1972 support the same. The sale consideration was agreed and fixed at ₹ 9,85,400/- . In view of this the allegation that the land was sold for less than the cost of acquisition is not made out. * The business of the Company is to deal with real estate. In accordance with the first 2 main objects of the company, the Managing Director of the company was fully empowered by the Articles to exercise all powers and to do all things that the company was authorized to do. * The sale of mere asset or property which is held by the company as stock-in-trade will not be sale of an undertaking. In the present case the immovable properties held by the company were held as stock-in-trade. Therefore, the provisions of section 293(l)(a) would not be attracted. By virtue of articles of association, the managing director was fully empowered to alienate the land belonging to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners. * The P1 has filed the statutory report on 31.10.2001 on the basis of receipt and payments and the balance sheets for the year 2001 and 2002 were prepared by the P1. Since the R2 was appointed as Managing Director, the P1 has not cooperated with the R2, therefore the balance sheet for the year ending 31.03.2001 and 31.03.2002 prepared by the P1 were signed by the R2 in the capacity of MD. If there are any manipulations in the balance sheets, the P1 alone would be responsible as they same were prepared on the basis of the documents furnished by her to the auditor and it was only signed by the R2. The P1 made contrary statements in the petition with regard to the balance sheets. It is the P1 who wrote a letter to the auditor on 26.10.2002 narrating all the actual circumstances and stating that the other directors including R2 had secured all the account books even prior to 01.05.2002. The P1 is not a managing director and she has challenged the financials for the year 2001-02 in the company petition in the year 2007 more than five years later. The P1 never wrote to the company raising the slightest demur as to the balance sheets not only for 2002-02 but also for subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the P1 that she has prepared a balance sheet with another auditor would show that she has not submitted the entire accounts of the Company and she holds it. The R2 has signed the balance sheets prepared by the P1 in the capacity of MD. Though she has made allegations against the auditor, he has not been made party to the petition. * The Company has not received any notice from the Sale Tax Authorities and the P1 has stated that she has sent the photocopies of the letters to the auditor and has not submitted any proof to that effect. Since the P1 has not informed the compauy, she would be held responsible for the said lapse. * The land at Puthukudi South village is about 2.5 km away from the National Highway as against the comparison with reference to a property abetting to NH and therefore the comparison is not proper. The P1 has not submitted any proof of making payment of ₹ 1,05,850/- and the account from which it has been paid also not mentioned. The fact that no action has been initiated nor contemplated ever since 2001 to recover the money itself stands testimony to the fact that no such amount has been paid and it is only an afterthought. The sale deed was ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M was convened as per the direction of the CLB and the observer has also filed his report before the Board. The P1 has collected the share application money from the persons and so far she has not clearly stated that to whom the certificates have not been issued. The amount invested in the shares cannot be returned to the shareholders. The shareholders would get back their investment only on transfer of their shares to others or after winding up of the Company, the balance would be distributed to the shareholders. The consideration received from the sale of the property of the company is kept in a separate bank account and it has not been utilized for the purpose of litigation except one payment made to Counsel who was appeared for the R1 Company. The respondents spent their own money for the vexatious petition filed by the petitioners. The observer has not pointed out anything in his report about not allowing the petitioners to make any grievances in the AGM. The P1 has started to submit something after rendering vote of thanks for the purpose of recording the same in the observer s report and therefore it was answered that the meeting is over and the same would be dealt in the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * The Tribunal is first and foremost a court of equity. Therefore, the person who seeks equity must do equity. The P1 who has consciously abetted the undervaluation of consideration for the sake of avoiding stamp duty, now approaches this Tribunal under different legislation to complain of undervaluation in respect of sale transactions of the company. The learned Counsel for R1, R2 and R4 while reiterating the averments submitted that the petition filed by the petitioners is hit by laches, lacks bona fide and cannot be maintained on merits. The P1 is guilty of not discharging her own duties as director of the company. The acts complained of do not constitute oppression in any manner and she was in the board and has not taken any steps in all these years. She is trying to use the vast power of this Tribunal to enforce her will on the company which is not only unfair but also abuse of process of court. The learned Counsel while praying to dismiss the petition, relied on the following case laws in support of his submissions: Maharani Lalita Raja Lakshmi v. Indian Motor Co. (Hazaribagh) Ltd. AIR 1962 Cal. 127 - for the proposition that the case of the petitioners must stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de with other land which is situated abetting the four way road in the Cuddalore-Nagapattinam highway whereas the land purchased by her is situated 2.50 KM away from the highway. Though the R5 is a bona fide purchaser, she has not been able to put the land in use due to the litigation. She has prayed to dismiss the allegation made against her. 5. The R6 and R7 have filed their counter and inter alia stated that they are the bona fide purchasers of the said land situated at Devedhanam village, Trichy municipality. The title of the said land was not clear and only on the intervention of the High Court the registration was done. The land was purchased for ₹ 9,85,000/- as per the sale deed executed by M/s. New century Book House Private Limited but not for ₹ 24.20 lakhs. The land was originally belongs to a temple and it changed hands and at the time of purchase by R6 and R7 it was with the company and the same was purchased as per the prevailing market rates. The P1 has not produced any proof to show as to who was the person prepared to buy the property for ₹ 30 lakhs. The submissions of the P1 in this regard are baseless. Due to this vexatious litigation R6 and R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents. It is false that the balance sheet as at 31.03.2001 and 31.03.2002 were prepared by the P1 and they were signed only by the R2 in the capacity of MD, whereas all the documents were prepared and filed by R2 only. * The share application money was collected not only by P1 but also by other directors. Other illegal activities of the respondents had created a situation that further share certificates could not be issued and the money collected and accounts thereon were all handed over to the husband of the R2 on 01.05.2002. * As per the accounts of the partnership firm, out of ₹ 6,77,846.55 and amount of ₹ 6,75,000/- was used to incorporate the company and remaining was used to pay back to the depositors. Since the company was incorporated from the fund of the partnership firm, the accounts of the company and the accounts of the firm have to be dealt with cogently in an interlinked manner. The OS No. 1064/2002 was renumbered as OS 2185/2004 and the same is pending before the Principal District Munshiff, Tiruchirappalli and the respondents have not filed any written statement so far. * The P1 has handed over all the accounts and documents of other movable a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate Limited. The Respondents have not denied the existence of the minutes of M/s. Arunodhaya Enteiprises which is third party and not a shareholder in the Company. As such the evidence emanating from the Firm is admissible as evidence in terms of section 99 of the Evidence Act. * The sale of vacant land is covered under the caption other objects therefore the contention of the Respondents that the MOA only talks about Dwelling Units, non-dwelling units which is nothing but sale of buildings and it cannot be construed as sale of vacant land which is not covered under the main objects. When the sale of vacant, land is mentioned in the other objects, the Managing Director has no authority to sell the same without the approval in a general meeting. * The limitation point has not been raised by the Respondents in their counter and they cannot agitate the same without making any pleadings. The land of the property at Trichy was sold on 09.04.2007 and the earlier petition was filed on 23.05.2007 with the limitation period. In respect of the sale deed dated 04.08.2006, the certified copy was obtained on 27.03.2007 and the same has also been challenged within three months from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [MANU/SC/0276/2010] - for the proposition that it is a plain and basic rule of pleadings that in order to make out a case of fraud or coercion there must be (a) an express allegations of coercion or fraud and (b) all the material facts in support of such allegations must be laid out in full and with a high degree of precision. In other words, if coercion or fraud is alleged, it must be set with full particulars. Bishundeo Narain v. Seogeni Rai Jagernath AIR 1951 SC 280 - for the proposition that general allegations are insufficient even to amount an averment of fraud or which any court ought to take notice however strong the language in which are couched may be, and the same applied to undue influence and coercion. 8. Heard. Perused the pleadings and written arguments of both the sides. 9. After considering the above, the crux of the issues for consideration is: (a) 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? (b) Whether the property situated at Pudukkudi South Village, Thanjavur district has been sold by undervaluing the same comparing with the similarly situated land? (c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company failed to attend her duties in this regard. The case law Krishi Utpadan Mandi Samiti, Sahaswan s case (supra) referred by the learned Counsel for R1 and R2 and R4 squarely applies for this case and therefore I answer the issue No 1 in negative. Issue No.2: The R5 has contended that the land at Pudukudi South Village is situated nearly 2.5 KM inside in a remote village from the National Highway and any stretch of imagination it would not bring the value of land abetting to the National HighWay. The 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, I answer the issue No. 2 is also in negative. Issue No. 3: The learned Counsel for the petitioners contended that the R2 and R4 are disqualified under section 274(l)(g) of the Companies Act, 1956. The learned Counsel for R1, R2 and R4 contended that the provisions of section 274(1)(g) of the Act is not applicable to the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position as directors has been regularized in the adjourned AGM held on 17.10.2001. In case the P1 is aggrieved on the said appointment, either she should have approached the company to nullify the said appointment or should have approached any court seeking an order to declare that the appointment of R2 and R4 is null and void. But, instead the petitioners have filed the present petition in the year 2007 and questioning the very appointment of MD made during the year 2002 which is nothing but abuse of process of law. With regard to sale of property, the petitioners contended that the MD is not empowered to sell the property on her own without taking the permission in a general body meeting, whereas the contention of R1, R2 and R4 is that the Managing Director is empowered to sell the property without any prior permission. Clause 15 of Articles of Association of the Company empowers the MD to exercise all such powers and do all things as authorized by its memorandum of association or by statute. The issue decided in the referred case i.e. Ashok Kumar (supra), squarely applies to the present case as the board of directors has not restrained the R2 from performing any particular act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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