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TMI Blog2008 (4) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... stered under the Companies Act, 1956. Defendants Nos. 2, 3 and 4 are its directors. Defendant No. 5 is the purchaser of the suit property which formerly belonged to defendant No. 1 company. Defendants Nos. 6 and 7 are the directors of defendant No. 5. Defendant No. 1 company is said to be a sick industrial undertaking. In view of the accumulated losses, defendant No. 1 approached the Board for Industrial and Financial Reconstruction (for short "the BIFR") under the Sick Industrial Companies (Special Provisions) Act, 1985. The BIFR came to the conclusion that defendant No. 1 was not viable and has recommended its winding up. However, no formal order of winding up has yet been passed by the court and defendant No. 1 still continues to be managed by its board of directors which consists of three directors, viz., defendants Nos. 2, 3 and 4. Defendant No. 1 company has its undertaking at the suit property. On March 23, 2007, a resolution was purportingly passed by defendant No. 1 company in its general meeting to sell the suit property. In pursuance of the said resolution, defendant No. 1 company sold and transferred the suit property to defendant No. 5 for a consideration of Rs. 6 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have sold the suit property which was the whole of the undertaking of the company at Mumbai without proper resolution of the company passed in a general meeting. Counsel therefore submitted that it was necessary to protect the suit property pending final decision of the suit wherein the declaration has been sought that the sale is void. Mr. Kamdar, learned counsel for defendants Nos. 5 to 7 submitted that section 293 of the Companies Act is not applicable inasmuch as the company had undertakings not only in Mumbai but also at Aurangabad. The value of the undertaking and property at Aurangabad was nearly Rs. 10 crores which was much more than value of the Mumbai property which was Rs. 6.95 crores. The sale effected by defendant No. 1 through its directors, viz., defendants Nos. 2, 3 and 4 was not of the whole or substantially the whole of the undertaking of the company. He further submitted that the plaintiff as a shareholder of defendant No. 1 company was not entitled to maintain an action on behalf of the company for the alleged wrong done to defendant No. 1 company. If at all the suit property was sold without the necessary resolution under section 293 of the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llai [1993] 3 Bom. CR 228 ; [19%] 86 Comp Cas 371 , this court while upholding the rule that it is the company which is entitled to maintain an action for wrong allegedly done to it and a shareholder has no locus standi to maintain the suit, affirmed one of the exceptions to the aforesaid rule that where a shareholder can show that the wrong doers are in control of the defendant company and hence the company would be unable to maintain the action, he can maintain an action. In the present case, the sale has been effected though in the name of the company by defendants Nos. 2, 3 and 4 who have signed and executed the sale deed. Defendants Nos. 2, 3 and 4 are the only directors of the company. Though action for winding up is pending, no order for appointment of a provisional liquidator has been made and defendants Nos. 2, 3 and 4 continue to be in charge of affairs of defendant No. 1 company. Defendants Nos. 2, 3, and 4 who are the only directors of defendant No. 1 company and in charge of defendant No. 1 company, being the signatories to the sale deed executed in the name of the company are unlikely to maintain an action in the name of defendant No. 1 company for setting aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1956, requires notice of at least 21 days to be given prior to a general meeting. No material has been produced on record to show that 21 days notice was ever issued before the alleged general meeting on March 23, 2007. Furthermore, under section 173 of the Companies Act, an explanatory statement is required to be annexed to the notice of the meeting. No explanatory statement under section 173 of the Companies Act was attached to the alleged notice dated March 23, 2007. In fact, the explanatory statement is dated December 13, 2007, which is long after the date of the alleged general meeting dated March 23, 2007. In sub-paragraph No. (iv) of paragraph No. 15, the plaintiff has stated that the place of meeting as stated in the alleged notice was an open ground. He has further stated that no arrangements for the meeting had ever been made at that open space and any such meeting was held and could not be held on the open space. Neither a register of members present at the meeting nor any other material was produced to show that any meeting was held on March 23, 2007. No minutes appear to have been prepared and aimed by the chairman as required under section 193 of the Companies Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y meeting. I have already held that there was no valid general meeting held on March 23, 2007 and consequently there was no consent of the company obtained in a general meeting for the sale of the whole of the undertaking at Mumbai, The deed of conveyance dated December 13, 2007, is, prima facie, void and being contrary to section 293 of the Companies Act. Alleged protection under section 46 of the Companies Act Section 46 of the Companies Act, 1956, lays down the form of contract to be made by the company and provides that any contract made by the company in accordance with section 46 shall bind the company. Mr. Kamdar submitted that the deed of conveyance was a kind of contract, though a completed or an executed contract. The suit property stood conveyed and transferred by the said contract. As the contract was made in accordance with the form prescribed by section 46 the contract was binding on the company. I am unable to agree. Section 46 only prescribes the form of the contract to be made by the company ; Every contract made by a company must fulfil other conditions, if any, imposed by the other provisions of the Companies Act. Section 293 of the Companies Act imposes a cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erit in this contention also. Defence of bona fide purchasers In my view, at this inter-locutory stage, defendant No. 5 is not entitled to any protection on the alleged ground that it is a bona fide purchasers for value without notice, for reasons more than one. Firstly, whether defendant No. 5 at all is a bona fide purchaser is a question of fact which would be required to be determined on appreciation the evidence to be adduced at the trial. At this stage, it cannot be held that defendant No. 5 had no knowledge of the illegality. Whether defendant No. 5 had made appropriate enquiries before purchase of the property is also a question of fact which can be determined only at the stage of trial. Secondly, in my prima facie view the defence of bona fide purchaser would not be available in case of breach of a statutory bar on the board of directors from selling the undertaking of a company without permission of the company obtained in a general meeting. Hence, at this stage, in my view, defendant No. 5 cannot claim any benefit on the ground that he is a bona fide purchaser for value without notice. Regarding direction to defendants Nos. 1 to 4 to deposit money As regards the reque ..... X X X X Extracts X X X X X X X X Extracts X X X X
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