TMI Blog2008 (4) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... estraining defendant No. 5, who is the purchaser of the company's property under a deed of conveyance dated December 13, 2007, from selling alienating, creating third party rights, developing or carrying out any construction or parting with the possession the properly purchased by it (hereinafter referred as "suit property") till the disposal of the suit. Though a relief for appointment of receiver is also claimed in the motion, the same is not pressed. The facts giving rise to the dispute are that defendant No. 1 is a company incorporated registered 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 form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eting sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or where the company owns more than one undertaking the whole or substantially the whole of any such undertaking. Counsel for the plaintiff submitted that the suit property was practically the whole or substantially the whole of the undertaking of defendant No. 1 company at Mumbai and defendant No. 1 company had no other undertaking in Mumbai. Defendant No. 1 company of which defendants Nos. 2, 3 and 4 are the directors of the company could 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder of the company would not normally have a right to file a suit on behalf of the company as the person aggrieved is the company and not a shareholder. More than one and a half century ago, in Foss v. Harbottle [1843] 2 Hare 461, the court laid down the rule that normally an individual shareholder would not be entitled to bring an action for a wrong allegedly done to die company. It is the company who alone can bring an action for a wrong done to it. The rule however has been subjected to more than one exceptions. In BSN ( UK ) Ltd. v. Janardan Mohandas Rajan Pillai [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 execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that accidental omission to give notice to one or some of the members of the company does not vitiate the notice of the meeting. However, it is not the case of the defendants that the omission to give notice to the plaintiff was on account of accidental omission. It appears to be a case where no notice was given to any member at all. This is clear from the averments made in paragraph 15 of the plaint which are not rebutted in the affidavit in reply. Furthermore, the notice of the meeting and agenda is stated to be of the same date as that of the meeting. Section 171 of the Companies Act, 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 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of sale was Rs. 6.85 crores, the true market value was much higher at Rs. 18.28 crores as for the Government valuation. Secondly, section 293 of the Companies Act, 1956, provides that where a company has more than one undertaking, the board of directors of a company shall not sell any of such undertakings without consent of the company in a general meeting. Therefore, even if it is assumed that defendant No. 1 company had two undertakings, one at Mumbai and another at Aurangabad, neither of the said undertakings could be sold without consent of the company obtained in the general body 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a clear breach of a provision of a statute, the doctrine of indoor management laid down in Royal British Bank v. Turquand [1856] 6E B 327, cannot apply. In the event of a breach of a statutory provision, the consequences of the breach would follow and it would be no defence to hold that the person dealing with the company, including purchaser in the present case, was entitled to assume that all statutory requirements were complied with. 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. There is therefore, no merit 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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