A J COELHO Vs. SOUTH INDIA TEA AND COFFEE ESTATES LTD

JUDGEMENT

(1.) THIS is an application filed by the applicant/petitioner under Section 111(6) of the Companies Act, 1956 (hereinafter referred to as "the Act") praying for an order of injunction to restrain the first respondent company from in any manner alienating or disposing of or in any manner encumbering the Kulwardikhan Estate situated at Kolgame Village, Chickmagalur District in Karnataka State (hereinafter referred to as "the estate") pending disposal of the application. THIS Bench after taking into consideration the facts and circumstances of the case and the submissions made by counsel for the applicant on November 21, 1996 temporarily restrained the company from concluding any deal in respect of the disposal of the estate till December 27, 1996 directing the respondents to file their replies and rejoinder, if any, by the applicant and adjourned the further hearing to December 27, 1996. Respondents Nos. 1 and 2 have filed their replies and rejoinder by the applicant.

(2.) According to the applicant, he had received a notice dated September 24, 1996 convening the 41st annual general meeting of the company to be held on October 22, 1996. In terms of item 6 of the agenda, it was proposed to authorize and empower the board of directors of the company under Section 293(1)(a) of the Act to sell, lease or otherwise dispose of the estate on the terms and conditions as may be decided and agreed to by the board of directors in its absolute discretion. There is no necessity for the imminent disposal of the estate. The proposed sale is not conceived in the interest of the first respondent company. No upset price was fixed. No procedures were indicated for the sale as to whether the sale would be by invitation of public offers or private negotiations. The terms and conditions of the proposed sale were not disclosed. There is total lack of transparency in respect of the proposed transaction. The disposal of the estate is not for the purpose of meeting any pressing loans or liabilities of the first respondent company. On the other hand, the company is financially sound and has not even borrowed any term loan and whatever funds the company had borrowed for the purchase of the estates were fully repaid. The problem of management of the estate is imaginary.

(3.) ACCORDING to respondents Nos. 1 and 2, the applicant has approached this Bench for rectification of the register of members of the first respondent company after a lapse of over 9 years. The powers of this Bench under Section 111(6) of the Act can only extend to the impugned shares and not to the properties and assets of the company. The applicant has no prima facie case to seek an order of injunction against the respondents from alienating the estate. The estate being situated about 125 km. away from Mallesangudda Estate owned by the company, it was difficult for the company to manage the estate particularly because of the mountainous terrain and the time required to commute from one end to the other. The decision to dispose of the estate was taken in due course and in the best interest of the company. Though the annual general meeting was held on October 22, 1996, the applicant did not choose to attend the meeting nor did the petitioner authorise a proxy to attend on his behalf. At the said meeting members holding 52.92 per cent of the fully paid-up share capital of the company were present. Among other things, a resolution under Section 293(1)(a) of the Act for sale of the estate was duly proposed, seconded and passed unanimously.