IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION APPEAL APPEAL APPEAL NO. 345 OF 2008 NO. 345 OF 2008 NO. 345 OF 2008 IN IN IN NOTICE NOTICE NOTICE OF MOTION NO. 1272 OF 2008 OF MOTION NO. 1272 OF 2008 OF MOTION NO. 1272 OF 2008 IN IN IN SUIT SUIT SUIT NO. 888 OF 2008 NO. 888 OF 2008 NO. 888 OF 2008 1. NVS New Ground Technologies Pvt. ] .. Appellants Ltd. & 2 ors. ]Org.Def.5 to 7 Versus 1. Niraj Amilal Mehta & 4 ors. ] .. Respondents (Org.Plaintiff & Def.Nos.1 to 4) Mr. Soli Cooper i/b Mr. Bipin Joshi for the appellants. Mr. Darius Khambatta, senior counsel i/b M/s. Mansukhlal Hiralal & Co. for the respondent No.1. Mr. Kevic Setalvad i/b M/s. Vimla & Co. for the respondents No.4 and 5. CORAM: S.B. MHASE & R.V. MORE, JJ. DATED: 10TH SEPTEMBER, 2008 P.C. : 1. Heard learned counsel. 2. The order dated 23rd April/25th April, 2008, passed in Notice of Motion No.1272 of 2008 in Suit No.888 of 1988 is under challenge. By this order, the learned single Judge of this court has restrained the defendants from selling, transferring, alienating, developing or parting with possession of the suit : 2 : property and interim relief in terms of prayer clause a(ii) till the disposal of the suit has been granted. The suit has been filed by one share holder and the share holder has taken out the Notice of Motion in the suit for restraining the defendants from transferring the property. The defendant No.1 is a Public Limited company and defendants No.2, 3 and 4 are the Directors of the said company. Defendant No.5 is a Private Limited company and defendants No.6 and 7 are its Directors. 3. The property of defendant No.1 was being disposed of by a Conveyance dated 13th December, 2007, to the defendant No.5, which is a Private Limited company. The plaintiff-appellant being a share holder has filed the said suit challenging the acts of the Directors of defendant No.1 which is detrimental to the interest of the shareholders. Therefore, the plaintiff has also made a prayer to follow the property of the defendant No.1 and, therefore, defendant No.5 and it’s Directors have been made a party. 4. The only submission which is made by the learned counsel for the appellant is that even though the plaintiff can challenge the action of the defendant No.1, yet he cannot follow the property. The learned : 3 : counsel for the appellant further submitted that though the plaintiff is entitled to challenge the actions of the Board of Directors of the defendant No.1, however, according to him, since the property has been transferred after passing of a valid Resolution by the General Body, the plaintiff cannot follow the property. The appellant also submitted that in view of sub-section (2) of section 293 of the Companies Act, he is further protected. 5. In reply to this, the learned counsel for the respondent No.1 submitted that the plaintiff is entitled to challenge the acts and actions of the defendant No.1. According to him, unless there is a valid Resolution passed by the General Body, the Board of Directors cannot convey the property. According to the respondent No.1, the requisite compliance of passing of General Body Resolution has not been complied with by the defendant No.1-company and, therefore, the conveyance of the property is illegal. The learned counsel, therefore, submitted that the plaintiff has approached this court challenging the action of the defendants and their Directors and further to recover the property from the defendants and their Directors. 6. From the above submissions, one thing is : 4 : certain that after passing of the Resolution of the General Body, the property can be transferred. But, the very fact that whether the General Body Resolution has been passed or not is a disputed fact. Apart from this, the defendant No.2, who is one of the Directors of defendant No.1, has filed an Affidavit on record dated 26th March, 2008, stating that no such Resolution by the General Body was passed and he has further made a statement that no meeting was held. Though the defendant No.5 and some of the Directors of defendant No.1 are contending that this Affidavit filed by the defendant No.2 is in collusion with the plaintiff, this aspect cannot be considered at this stage, specially in view of the denial of the said fact by the plaintiff. It is a matter to be thrashed out in the trial of the suit after proper appreciation of the examination-in- chief and cross-examination of the parties. However, the fact which remains on record at this stage is that one of the Directors of defendant No.1 contends that there was no meeting held and no Resolution was passed as has been contended by the defendant No.5. 7. Apart from that, what we note from the Annexures to the conveyance is that the Resolution has been passed on 23rd March, 2007. However, the Agenda, though appears to be of 23rd March, 2007, the : 5 : explanatory statement which is annexed and which is a mandatory requirement of law, appears to have been prepared on 13th December, 2007. In fact, the said statement should also have been of the date prior to 23rd March, 2007. Therefore, prima facie, it is seen that there is some manipulation of the record of which the learned single Judge has taken cognizance. 8. The Affidavit of defendant No.2 shows that the funds of defendant No.1 were siphoned off to some other company and thereafter they were used by defendant No.5 to pay the price of the conveyance and the same is reflected in paragraphs 13, 14 and 17 of the said Affidavit. Presently, we do not want to go into the genuineness of this Affidavit, but the fact remains that one of the Directors of defendant No.1 has made a statement that funds of defendant No.1 have been siphoned off and have been invested in defendant No.5 company and thus, the property of a public limited company is being siphoned off to a private limited company. Therefore, this is a serious allegation which requires investigation in the suit and hence pending the suit, the property requires to be preserved. If the property is allowed to be disposed of by defendant No.5 and/or is allowed to be developed otherwise, then in those circumstances, the remedy of the plaintiff will : 6 : become infructuous even though he may succeed on merit. It is a well settled principle of law that when it is found that there is a prima facie case in favour of the plaintiff and if the plaintiff is likely to suffer irreparable loss, injunction has to follow. In the present matter if defendant No.5 is allowed to dispose of the property and/or to develop the property otherwise, then there will be an irrevocable situation which the court probably will not be in a position to resettle and the decree will become infructuous. The court will also not be able to compensate the shareholder and/or the shareholders of the said company for whose interest the plaintiff has approached this court. 9. Under these circumstances, we find that the order passed by the learned single Judge is just, fair and proper and requires no interference at the hands of this court. We, therefore, refuse to entertain the appeal and it is, accordingly, dismissed in limini. 10. Hearing of the suit is expedited. Sd/- Sd/- [R.V. [R.V. [R.V. MORE, J.] MORE, J.] MORE, J.] [S.B. [S.B. [S.B. MHASE, J.] MHASE, J.] MHASE, J.]