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TMI Blog2023 (4) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... before NCLT. Accordingly, we are of the opinion that we may not record any finding either in favour of the sale deed executed in question or against the said transaction. If we record such finding it will amount to usurping the jurisdiction of the NCLT. From the order impugned it is reflected that NCLT at least at the time of passing interim impugned order has not accepted the valuation report of the private valuer and recorded that the land was sold to the price fixed as per ready reckner rates fixed by the Govt of Gujarat properties situated in that area. Meaning thereby that the contention of the applicant before the NCLT regarding undervalued sale was not accepted by the NCLT for passing ad interim order. It is also not reflected as to any question was raised that the appellant had not purchased the land in good faith, rather the transaction appears to have been done in good faith by the appellant. It is also not disputed that the (i) sale deed was registered on 13.7.2020; (ii) the pleading that after registration permission was obtained from competent authority for construction of the building; (iii) approval of the plan and mortgaging of the land for obtaining loan; (iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... status quo relating to remaining 227 units by not creating any third party interest and not to carry on work construction beyond 302 units till disposal of main CP. The appellant has specifically pleaded that being purchaser of the land in question he was not at all related in any manner with the Respondent No.2, who was the vendor of land in question. The appellant asserts that the appellant or its partner was neither director nor shareholder and also was not connected with the company in question. However, by the impugned order the appellant has been restrained from proceeding further with transferring/executing sale deed in respect of remaining constructed units which has been constructed much after purchase of the land in question. It is the case of the appellant that Respondent No.2 (vendor) was operating a single screen cinema in the name of Galaxy Cinema in the city of Jamnagar, Gujarat. The said theatre stood on new city survey No.361, old city survey No.361, 362 and 363, total admeasuring of 5701.18 sq mtr (hereinafter referred to as property in question). The Respondent No.1 herein, one of the shareholders of Respondent No.2 (vendor) filed an application under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the subject land and from creating any third party rights, in the interest of justice. Learned counsel for the appellant at the very outset has argued that admittedly the property in question was purchased by the appellant herein long back on 13.07.2020 through registered sale deed after payment of total consideration amount of Rs.6 crore to the vendor, the Respondent No.1 claiming to be one of the shareholder of the Respondent No.2 company (vendor) approached the NCLT with a petition filed under Section 241, 242 which was registered in the year 2023. Whereas in the meanwhile after purchasing the open land several development had taken place, construction of huge building was completed and also number of units were sold to new purchasers. Shri Dutta by way of referring to reply affidavit filed before the NCLT which starts from page 458 Volume III submitted that after getting the land in question registered on 13.07.2020 for total consideration amount of Rs.6 crore the appellant herein had constructed a cellar+Ground+3 storeyed shopping centre with 302 unit over 1,46,496 sq ft of construction, which is commercially known as Star Galaxy . The appellant for construction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit of title deeds. By way of referring to para 6.5, Page 462 Volume III of the Memo of Appeal it was submitted that the said mortgage was executed after issuing a public notice dated 6.8.2021 calling for objections. However, no objection was raised by anyone, including the applicant. By April 2022 part of the construction work completed and as such part building use permission was granted on 21.4.2022 for certain construction in the cellar ground floor and 1st floor. Again on 28.9.2022 the development permission (revised) was obtained from the Jamnagar Municipal owing to certain changes in the plan. By way of referring to para 6.8 at Page 463 learned counsel for the appellant submitted that Annexure M collectively shows the photographs showing construction and status of the Star Galaxy. According to him those photographs depicts that several work of the entire building was complete end only work of internal fitouts was going on. Total 302 units were already constructed over 1,46,496 sq ft of the total construction with 82 units on the ground floor, 90 units on the 1st floor, 89 units on the second floor and 42 units on the third floor. Third party right was also created ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since the appellant in good faith has purchased land in question, the sale is protected under the provisions of Section 180(3) (a) of the Companies Act. According to learned counsel for the appellant, the appellant in good faith without having any connection directly or indirectly with the Respondent No.2 (vendor), had purchased the land in question after making payment of full consideration amount of Rs.6 crore and as such the protection under Section 180(1)(a) was not available to the Respondent No.1 herein who was applicant before NCLT. Mr Dutta had also drawn our attention to the Page 433 Volume II of the Memo of Appeal wherein a declaration was made by the valuer and Clause 7 of the declaration states as follows:- This property is valued for personal purpose only and not for funding/court case etc. Not to produce in front of any authority Shri Dutta, further submitted that before NCLT the sale deed was questioned on one of the grounds as if sale was undervalued. He has referred to Page 428 Volume II of the Memo of Appeal which is valuation report dated 26.11.2022. It was submitted by learned counsel for the appellant that the said valuation report was enclosed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent No.3 to 8 and Ishwarlal Jadavbhai Jagani before this Tribunal which came to be registered as Company Petition No.18 of 2020. This Hon ble Tribunal, vide order dated 01.06.2020 was pleased to issue notice and directed the respondent No.3 to 8 as well as Ishwarlal Jadavbhai Jagani to maintain status quo in respect of the two theatres situated in Ahmedabad. However, the respondents flauted the said order. This Hon ble Tribunal then further ordered to continue the status quo vide order dated 21.07.2020. The petitioner begs to annex the copy of orders dated 01.06.2020 and 21.07.2020 in the Company Petition No.18/2020 at Annexure Y. By way of referring to aforesaid fact it was submitted that in respect of another property of the same company, daughter of the applicant before NCLT had filed company petition No.18/2020 in which notice was issued on 1.6.2020 to the Respondents including the Respondent No.1 in the present appeal. However, in para 48 of the petition filed before the NCLT which is at page 217 Volume II it was stated by the applicant before the NCLT at the time of filing of the petition that as if she knew about the sale of the property very recently. He has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thakumari Vs KJ Trading and para 5,6,7 of Anuragha Paultries Breeders Pvt Ltd Anr Vs. Padmavathi Ors and para 57 of Greater Noida Industrial Development Authority (GNIDA) Vs. Roma Unicon Designex Consortium which are quoted herein below: K. Santhakumari Vs KJ Trading: 12. The court below held that the Company Law Board has got very wide powers under Section 402(f) to set right the issue and has got the jurisdiction to declare the invalidity of the document executed in favour of strangers. But it is to be noted that the power to pass orders under Section 402(f) is to set aside transfers, etc., made within 3 months before the date of application under Section 397 or 398. The sale deeds in question were executed in June, 2001 and 2002. Moreover there is no provision for granting a declaratory relief, which would necessarily require further consequential reliefs also, which the civil court alone can grant. There cannot be any dispute that there is no express bar created under the Companies Act. It cannot be said that the jurisdiction of the civil court is ousted by implication also. The appellant cannot be non suited on the ground of maintainability of the suit, as lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion taken or to be taken in pursuance of any power conferred by or under this Act or any other law for the time being in force, by the Tribunal or the Appellate Tribunal. 6.A very reading of the provision shows that the bar enacted therein would apply only when the Tribunal or the Appellate Tribunal under the Act i.e., the Companies Act is empowered to determine any matter which is also the subject matter of a Civil Suit and in such event, the proceedings before the Civil Court would be barred. The Scope of the bar enacted under law was considered by a full bench by this Court in Periathambi Goundan Vs. District Revenue Officer reported in (1980) 93 LW 169 wherein the full bench explained the scope of the bar and concluded that the bar would be only to the extent of matters that are provided to be under the exclusive jurisdiction of the authorities/ Tribunals under the enactment and not otherwise. The language of Section 430 of the Companies Act is inparimateria with that of Section 16 (A) of the Tamil Nadu Agricultural Lands Record of Tenancy Rights Act, 1969 which was considered by the full bench of this Court in Periathambi Goundan referred to supra. 7. Therefore, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing was observed in paragraph 7 of the Judgement: Company Appeal (AT) (Insolvency) Nos.180, 629 630 of 2022 74 It was argued by Mr. Kolah on the strength of an observation made by Lord Anderson in Commissioners of Inland Revenue v. Forrest that an investor buys in the first place a share of the assets of the industrial concern proportionate to the number of shares he has purchased and also buys the right to participate in any profits which the company may make in the future. That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word 'assets' in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-a-vis th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o maintain the petition under Section 241 and 242 of the Companies Act. He further raised an objection that appellant is not a registered partnership firm and it is not entitled to file the present appeal. However, such submission is required to be noticed only for its rejection due to the simple reason that neither before the NCLT nor before this Tribunal any specific pleading on this issue has been raised. On the contrary it was asserted by Mr. Dutta that before the NCLT in Company Petition the applicant has arrayed appellant herein as partnership firm. There is no indication as if it was not a registered partnership firm. Mr. Dutta asserted that the appellant is a registered partnership firm. In support of his argument, Mr. Kumar appearing on behalf of Respondent No.1 has drawn our attention to para 5, 12, 14 and 15 of the impugned order and also he has drawn our attention to grounds taken by the applicant before the NCLT at Page 218 to 219 Volume II and highlighted that the husband of the applicant was illegally removed as Director from the company. He has further drawn our attention to Page 32 of the Memo of Appeal and submitted that though alleged sale deed was executed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se the working of the company and also appoint such persons as may be deemed necessary to regulate affairs of the company; (d) the powers of NCLT are wider than that of the Civil Court; and, (e) the bar under Section 430 is absolute. 19. As far as the judgments cited by the counsel for the plaintiff are concerned, (i) Dhulabhai Etc. supra was concerned with a suit instead of a writ petition under Article 226 of the Constitution of India impugning the Notifications under the Sales Tax Act on the ground of the same being violative of Article 301 of the Constitution. The suits were opposed inter alia on the ground that vide Section 17 of the Sales Tax Act, the jurisdiction of the Civil Court was barred. It was held that where a liability to tax is created by the statute which gives special and particular remedies against illegal exactions, the remedy contemplated by the statute must be followed and it is not open to the assessee to pursue the ordinary civil process of courts. However, the question of ultra vires of the statute, is always open to the Civil Court. The said judgment is found to have no application. The company is a creation of a statute and the rights and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B when approached for rectification of share register was empowered to relegate the parties to the Civil Court and thus the jurisdiction of the Civil Court could not be said to be barred. Again, the said judgment is in its own facts and which have no application to the present controversy. I may in this context also refer to the dicta of the Supreme Court in Ammonia Supplies Corporation (P) Ltd. Vs. Modern Plastic Containers Pvt. Ltd. (1998) 7 SCC 105 qua Section 111 of the Companies Act, 1956, also holding to the same effect. (vi) In Premwati supra, the Division Bench of this Court held that since the dispute raised in the suit was of inheritance of shares in a private limited company, it was eminently a dispute of a civil nature and jurisdiction was not barred. (viii) Greenline Transit System Pvt. Ltd. supra was a suit by one Joint Signatory of Account of the company against the other, for injunction restraining deposit of receipts of a contract entered into by the plaintiff in a new bank account of which the former was not a signatory. The suit was held to be maintainable. I may highlight that there were no pleas of oppression and mismanagement. (ix) Samar Kumar R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Companies Act, 2013 when the Company law provides for Oppression and Mismanagement and hence imposition of costs needs review. It is also evident that the Appellant came to know about the Board Resolution dated 04.09.2014 for the first time when Respondent No.3 has submitted its reply affidavit dated 08.03.2019 and at that juncture the Appellant wish to file a rejoinder affidavit but the NCLT refuse to allow her to do so and subsequently reserved the judgment. Since the Companies Act, 2013 provides for restrictions on powers of the Board to sell or dispose of the whole or substantially the whole of undertaking of the Company; Hence, the approval of shareholders through Extra-Ordinary General Meeting was required for selling the land being substantially the entire Assets of the Company. Extract of Section 180 of the Companies Act, 2013 is given hereunder: 180. Restriction on powers of Board.-- (1) The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution, namely:-- (a) to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to in that clause, in good faith; or (b) the sale or lease of any property of the company where the ordinary business of the company consists of, or comprises, such selling or leasing. (4) Any special resolution passed by the company consenting to the transaction as is referred to in clause (a) of sub-section (1) may stipulate such conditions as may be specified in such resolution, including conditions regarding the use, disposal or investment of the sale proceeds which may result from the transactions: Provided that this sub-section shall not be deemed to authorise the company to effect any reduction in its capital except in accordance with the provisions contained in this Act. (5) No debt incurred by the company in excess of the limit imposed by clause (c) of sub-section (1) shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and without knowledge that the limit imposed by that clause had been exceeded. Section 241 and 242 of the Companies Act, 2013 are given hereunder: PREVENTION OF OPPRESSION AND MISMANAGEMENT 241. Application to Tribunal for relief in cases of oppression, etc.-- (1) Any member o ..... 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(d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those referred to in clause (e): Provided that no such agreement shall be terminated, set aside or modified except after due notice and after obtaining the consent of the party concerned; (g) the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under this section, which would, if made or done by or against an individual, be deemed in his insolvency to be a fraudulent preference; (h) removal of the managing director, manager or any of the directors of the company; (i) recovery of undue gains made by any managing director, manager ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, or with both. 12.From the above provisions of Companies Act, 2013, it is very much evident that Members are free to file a petition/application if he or she is adversely affected or the interest of the Company is prejudicially affected, he or she is authorized to file petition/application under the Companies Act, 2013. The NCLT/NCLAT is the specialised agency to look into the impact on the members/company. Hence, there is a need to provide proper opportunity to the aggrieved members to present the genuineness or otherwise of the documents in relation to the provisions of Section 241 of the Companies Act, 2013. We are not passing any comment on the merit of the case. However, we are remanding back the matter for appropriate consideration by the NCLT, Chennai Bench. NCLT, Chennai Bench will after giving the proper opportunities to parties to pass fresh order without influenced by the earlier orders. No order as to costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly this Respondent No.2 - Katta Jagadeesh had not only resigned but also was disqualified Director having been convicted. 15.1 Going through the above reasonings of the learned NCLT and the submission now made before us, we do not find that any grounds have been raised or documents shown to find fault with the reasoning so as to interfere with these findings. When major part of property of the Company has been shown as sold off by Respondent No.2 who had tendered Company Appeal (AT) No.3 of 2018 and 409 of 2017 resignation as Director but went ahead to execute the sale deed, there was oppression and mismanagement on the part of Respondents 2 to 4. Respondent No.7 was mother-in-law of Respondent No.3 who is brother of the Respondent No.2. Looking to such relationship of these parties and the fact that it is Private Limited Company, keeping in view the contradictory pleadings claiming exchange viz-a-viz the sale deed claiming that money had been paid, the transaction in favour of Respondent No.7 was apparently suspicious and transfer without authority. Respondent No.2 could not have passed title to Respondent No.7. If Respondent No.7 did not have legal title, she could not pass it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyond 302 until disposal of the main company petition or not? In view of facts and circumstances which has emerged from the record as well as on the basis of argument advanced by the party it is not in dispute that in respect of the open land a registered sale deed was executed by the company (vendor) after receipt of payment of total consideration amount of Rs.6 crore. From the order impugned it is reflected that NCLT at least at the time of passing interim impugned order has not accepted the valuation report of the private valuer and recorded that the land was sold to the price fixed as per ready reckner rates fixed by the Govt of Gujarat properties situated in that area. Meaning thereby that the contention of the applicant before the NCLT regarding undervalued sale was not accepted by the NCLT for passing ad interim order. It is also not reflected as to any question was raised that the appellant had not purchased the land in good faith, rather the transaction appears to have been done in good faith by the appellant. It is also not disputed that the (i) sale deed was registered on 13.7.2020; (ii) the pleading that after registration permission was obtained from competent auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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