Single non-revenue generating property, even exceeding 20% net worth, is not an 'undertaking' under Section 180(1)(a) Companies Act, 2013; requires special resolution only for disposal of business as going concern, not isolated assets.

JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

This appeal is filed by the appellant against the common judgement and order dated 02.05.2025 passed by the Ld. NCLT, Mumbai Bench in CA No.129/2024 as well as IA No.82/2024.

2. It is stated the appellant is a part of the group forming minority shareholding in the Respondent No.1 company and allegedly it was mismanaged by its directors and its majority shareholders. It is alleged while the Company Petition No.64/2022 was pending, the Respondent company under the control of majority, sold one of the two properties of the company being land bearing Final Plot No.887A/21, (TPS-1, Bhamburda, Pune, varied final) ad-measuring 446.16 sq.mts, carved out of S.No.198 A/6 and S.No.192/2 together with an old two-story residential building constructed thereon admeasuring 366.02 sq. mts built up inclusive of garage, situated at Village Bhamburda (Shivaji Nagar) of City of Pune namely Saakar Bungalow Property.

3. It is alleged the said property forms over 20% of the undertaking of the company; was sold in gross violation of Section 180 of the Companies Act, 2013 and at a grossly undervalued rate to a related party. It was argued the sale was carried out during the pendency of Company Appeal (AT) No.196/2023 wherein the appellant had challenged the order vacating the interim stay in Company Petition No.64/2022, despite hearing being complete. It is argued this Tribunal vide its order dated 06.03.2024 had directed the parties to maintain status quo till the Company Petition is decided but whereas the Ld. NCLT disposed of the two IAs and confirmed the sale of the property, rather than disposing of the company petition. Further it is argued the purchaser also acted mala fide.

4. Thus the first argument raised by the appellant is non-compliance of Section 180(1)(a) read with Explanation to the section, of the Companies Act, 2013. The provision is as under:-

“180. Restrictions on powers of Board.—(1) The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution, namely:—

(a) to 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, of the whole or substantially the whole of any of such undertakings.

(b) Explanation. —For the purposes of this clause, —

(i) “undertaking” shall mean an undertaking in which the investment of the company exceeds twenty per cent. of its net worth as per the audited balance sheet of the preceding financial year or an undertaking which generates twenty per cent. of the total income of the company during the previous financial year;

(ii) the expression “substantially the whole of the undertaking” in any financial year shall mean twenty per cent. or more of the value of the undertaking as per the audited balance sheet of the preceding financial year;

5. It is the submission of the learned counsel for the appellant the net worth of the company viz share capital plus reserves as shown in the last relevant balance sheet was Rs.20.89 crores and whereas the subject property was sold at value of Rs.9.50 crores, thus being more than 20% of the net worth of the company and as such it could not have been sold except with the consent of the company by a special resolution. The learned counsel for the appellant has referred to the