TMI Blog2011 (4) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... 29-4-2011 - Vinod K. Sharma, J. J. Ravi Kumar for the Petitioner. R. Varada Rajan and V. John Acquinsas for the Respondent. JUDGMENT Vinod K. Sharma, J .- The appellant is the owner in possession of lands measuring 3 acres and 54 cents in S. No. 428/4A1A and 47 cents in S. No. 428/8A, totalling 4.01 acres at Gummidipoondi, as detailed in the schedule, attached to the grounds of appeal. The appellant purchased the property from Thiru G. George, sixth respondent, vide sale deed dated January 5, 2006, registered as Document No. 48 of 2006 on the file of SRO, Gummidipoondi. 2. The property purchased by the appellant was registered in the name of Thiru G. George, and was in uninterrupted possession of the property. 3. The appellant entered into an agreement on October 16, 2006, to sell the schedule property to Mr. Mangilal on receipt of sale consideration. The sale deed was to be executed by the appellant in favour of Mr. Mangilal. The appellant received a notice from the Company Law Board in a proceeding under sections 397 and 398 of the Companies Act, 1956, initiated by respondents Nos. 1 to 4 against respondents Nos. 5 to 9, ordering the appellant to dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Company Law Board, that the sale by Thiru G. George in favour of the appellant was hit by lis pendens. 10. The questions of law raised in this appeal are : "( i ) Whether the Company Law Board is within its jurisdiction under sections 402 and 403 of the Companies Act, 1956, to set aside the sale of immovable properties of an individual by such person in favour of the appellant ? ( ii ) Whether the Company Law Board exceeded its jurisdiction in ordering restoration of a portion of the subject property to the company and thereby wrongly assumed to itself the power of a civil court ?" 11. As already observed above, respondents Nos. 1 to 4, who held 50 per cent. of the issued and paid-up capital of M/s. Unicentre Agencies and Engineering P. Ltd., filed petition under sections 397 and 398 of the Companies Act, 1956, alleging acts of oppression and mismanagement by respondents Nos. 2 to 5. The relief claimed in the petition under sections 397 and 398, reads as under (page 59 infra) : "( a ) to pass appropriate orders for the management, regulation and conduct of the affairs of the company ; ( b ) to supersede the present board of directors of the company and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an end the grievances in the affairs of the company. The company shall ensure statutory obligations and compliances till completion of the process of winding up of the company in terms of this order. Ordered accordingly. With the above directions, the company petition and the connected applications are disposed of. In view of this, the interim orders stand vacated. No order as to costs. Liberty to apply in the event of any difficulty in implementation of the order." 13. Learned counsel for the appellant, vehemently contended that the property under the ownership of the appellant was standing in the name of the sixth respondent at the time of purchase, therefore, it was not open to the Company Law Board to question the sale in favour of the appellant, as the jurisdiction to set aside the sale made in favour of the third party could only be adjudicated in the civil court and not before the Company Law Board. 14. The contention of learned counsel for the appellant was that even if the sale was hit by the principles of lis pendens, still the sale executed in favour of the appellant could have been set aside by the civil court and not by the Company Law Board. Therefore, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the year 1995, which clearly proved that respondents Nos. 1 to 4 had the knowledge of property, being in the name of the sixth respondent. When the suit was filed in 1995, by the State Bank of India, it was the sixth respondent, who settled the suit and thereafter redeemed this property, by paying a sum of Rs. 7,47,000 (rupees seven lakhs forty seven thousand only). Even in the balance-sheet, filed by the company in the year 1990, the property was not shown to be under ownership of the company. The balance-sheet was duly signed by respondents Nos. 1 to 4. 21. It was also the case of the sixth respondent, that even if for the sake of argument, it is held that the Company Law Board could deal with the property, still the limitation prescribed is three months, prior to the filing of the petition. In this case, the property was purchased in the name of the sixth respondent in 1989, therefore, the Company Law Board had no jurisdiction to deal with this property. Respondents Nos. 6, 7 and 8, also supported the claim of the appellant in this appeal for the reasons stated hereinabove. 22. Learned counsel appearing on behalf of respondents Nos. 1 to 4 supported the finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1882 in Narayana Venkatachalamiah v. Putika Venkatiah, AIR 1942 Mad 24, that the Registrar or the authority appointed by him under the Madras Act 6 of 1932 is a court for the purpose of section 52 of the Transfer of Property Act, the Company Law Board being a permanent body, constituted under a statute, with the trappings of the court and vested with judicial powers and functions in terms of section 10(4C) of the Act, cannot but be a court for the purpose of section 52 of the Transfer of Property Act. Even otherwise, the principle of section 52 is based on, as held by the Delhi High Court in Lov Raj Kumar v. Dr. Major Daya Shanker, AIR 1986 Delhi 364, justice equity and good conscience and therefore, the doctrine of 'lis pendens' would apply even where the Transfer of Property Act, is inapplicable. The Company Law Board exercises equity jurisdiction under section 397/398, while bringing to an end the grievances complained of in the affairs of a company and it is a court of equity as held by this Board in Arun Mehra v. Durga Builders P. Ltd. [2007] 138 Comp. Cas. 935 (Delhi), and it cannot, therefore, be argued that the principle of lis pendens is not applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by the Supreme Court in Kamal Kumar Dutta v. Ruby General Hospital Ltd. [2006] 134 Comp. Cas. 678. The Company Law Board, by virtue of sections 402 and 403 has authority to regulate the management of a company during the pendency of a company petition under sections 397 and 398 as held in B. R. Kundra v. Motion Pictures Association (No. 1) [1978] 48 Comp. Cas. 536 (Delhi) and Chatterjee Petrochem (Mauritius) Co. v. Haldia Petrochemicals Ltd. [2007] 77 CLA 408 ; [2008] 143 Comp. Cas. 726 (CLB) and thereby, the Company Law Board is empowered to exercise jurisdiction in relation to the disputed sale transaction, being an event which has occurred subsequent to the present company petition. There is absolutely no doubt that the sale of properties during the pendency of the company petition without leave would frustrate and defeat the very object of the pending action initiated by the petitioners, seeking appropriate reliefs under sections 397 and 398. In the light of the principle of lis pendens as well as the unfettered powers enjoyed by the Company Law Board, as reinforced and reiterated from time to time in a number of decisions discussed supra, the Company Law Boar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid the respondents. The further sale of properties by TVP in favour of Mangilal, in gross contravention of the Company Law Board order dated November 27, 2006, that : '... if the intended respondent (TVP) deals with the property described in the application, by way of creation of any charge or encumbrance or sale, the same shall be done only with the leave of this Bench' in my considered view, is non est in the eye of law." 25. The contention of learned counsel for respondents Nos. 1 to 4, therefore, was that as regard to the ownership of property was concerned, the same was admitted in the reply filed. Whereas the sale in favour of the appellant was set aside, particularly for the reason that sale was hit by the principles of lis pendens. Therefore, no ground is made out to challenge the impugned order. 26. In support of this contention, learned counsel for respondents Nos. 1 to 4 placed reliance on the judgment of this court in the case of Narayana Venkatachalamiah v. Putika Venkatiah , AIR 1942 Mad 24, wherein, this court was pleased to hold that the word "court" in section 52 of the Transfer of Property Act, is comprehensive enough to include the Registrar or the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Lov Raj Kumar v. Dr. Major Daya Shanker , AIR 1986 Delhi 364, to contend that even if the provisions of section 52 of the Transfer of Property Act, are not applicable, still principle contained therein can be applied. 32. This contention of respondents Nos. 1 to 4 deserves to be noticed to be rejected for the simple reason that the question in this case is not whether lis pendens would apply or not, but whether the sale in favour of the sixth respondent could be challenged after lapse of so many years, that too before the Company Law Board. 33. On asking, learned counsel for respondents Nos. 1 to 4 was unable to read anything from the petition to show the date of knowledge with regard to registration of sale deed in favour of the sixth respondent instead of the company. Rather documents on record show that respondents Nos. 1 to 4 were knowing that the property was in the name of the sixth respondent as back as December 10, 1991, that the property was mortgaged by the sixth respondent in favour of the bank by way of collateral security by proclaiming himself to be the true owner of the property. 34. Learned counsel for respondents Nos. 1 to 4 has also plac ..... 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