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2018 (3) TMI 645 - MADRAS HIGH COURTValidity of the Sale Agreement - Suit filed for Specific Performance of the Agreement for Sale - Whether the third defendant and other Directors obtained consent from the plaintiff before entering into the Sale Agreement dated 14.07.2005, being a major shareholder in the company? - applicability of Doctrine of Indoor Management - Held that:- This Court is of the considered view that the sale and lease of immovable properties of the third defendant company in favour of the first defendant company is not in compliance of Section 293(1)(a) of the Companies Act. No doubt, under Ex.P22-Minutes of the Board Meeting dated 24.06.2005, plant and machineries were also directed to be sold and for effecting such sale, the plaintiff in C.S.No.877 of 2005 has no objection and thus it appears that he has taken a contradictory stand. In the considered opinion of the Court, the sale of immovable properties as well as the plant and machineries either individually or collectively would fall within Section 293(1)(a) of the Companies Act and for effecting such a sale, consent/approval of the shareholders of the company is required. Contention by the first defendant/plaintiff in that since major shares are being held by Manging Director and Directors of the company, their decision to sell the land and properties would amount to consent of majority shareholders, this Court is of the view that the said submission lacks merit in the light of mandatory nature of Section 293(1)(a) of the Companies Act and that apart, in the event of holding General Body Meeting, explanatory statement under Section 173 of the Companies Act is also to be enclosed with the notice for the meeting and as such, both the provisions have not been adhered to. Also when there is a clear breach of a provision of a Statute, the Doctrine of Indoor Management cannot apply If a Statute prescribes a mandatory procedure, the same must be complied with at peril of the action being declared void for its non compliance. Third defendant and other directors did not obtain consent from the plaintiff/Thakur J. Bakshani before entering into Ex.P6/Agreement for Sale dated 14.07.2005 No doubt, then Chairman of M/s. Nova Dyeing and Printing Mills Ltd. - Jagadish A. Sadrangani and other Directors, namely the defendants 4 and 5 had interest in the third defendant company at the time of entering into Ex.P6/Agreement for Sale, but the fact remains that the statutory mandates cast upon the third defendant company/M/s. Nova Dyeing and Printing Mills Ltd. under Section 293 (1)(a) of the Companies Act, have not been adhered to/complied with de hors their interest and in the light of the findings recorded by this Court regarding Issue No.1 in both the Suits, Issue No.3 has no relevance. The findings given by this Court in respect of Issue No.1 in both the Suits, and Issue No. 2 had sustained the legal plea that the procedures contemplated under Section 293(1)(a) of the Companies Act, have not been followed/adhered to. The plaintiff, being a founder of the company, cannot question the validity of the Agreement for Sale/Ex.P6 dated 14.07.2005 and a shareholder is entitled to question the same on the ground that the mandates cast upon M/s. Nova Dyeing and Printing Mills Ltd./third defendant under Section 293(1)(a) of the Companies Act, have not been followed and the remedy, if any available at that point of time was that the approval/ratification by the General Body of the shareholders under Ex.P22 should have been obtained and admittedly, it was not done so. If the Board Meeting under Ex.P22 would amount to signing of the shareholders of the company in the General Body Meeting for the reason that majority of the shareholders represent in their capacity as Director and Managing Director respectively, is of the considered view that they are entitled to presume that as per the Doctrine of Indoor Management, everything has taken place as per law and procedure and this Court is of the considered view that it is obligatory on the part of the first defendant as per the Memorandum and Articles of Association, to exercise due diligence and it has not been done. Admittedly, in the case on hand, consent of the shareholders in the General Body Meeting has not been obtained and that by subsequent ratification also, the exercise done by the Board of Directors in that regard under Ex.P22 has not been ratified/approved. Adherence to Section 173 of the Companies Act is also mandated. In the considered opinion of the Court, the resolution passed by the company as per Section 192(4)(eee)(i) of the Companies Act requires ratification at the hands of the Registrar of Companies and it has not been done.
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