A company cannot seek cancellation of transactions without first challenging the validity of the Board resolution authorizing those transactions.

The present Second Appeal is filed questioning the judgment and decree, dated 10.04.2023, passed by the II Additional District Judge, Sanga Reddy, in AS.No.81 of 2018, whereunder and whereby the judgment and decree dated 02.06.2016 passed by the Senior Civil Judge, Sangareddy, dismissing the suit in O.S.No.337 of 2006, was confirmed.

2. The appellant is the plaintiff and the respondents are the defendants in the suit. For convenience, hereinafter the parties are referred to as they are arrayed in the suit.

3. The factual matrix of the case, in brief, which led to filing of the Second Appeal is that the plaintiff-company has been incorporated under the Companies Act and duly registered on 25.11.1997 before the Registrar of Companies. Its object apart from others is to purchase movable and immovable properties of any kind. In that course of business, the plaintiff-company purchased the suit schedule property under a registered sale deed dated 13.08.1999 for a sale consideration of Rs.3,11,000/-.

4. Defendant Nos.1 and 2, who are some of the Directors of the plaintiff-company, with a dishonest intention hatched a plan to convert the plaintiff-company’s assets into their personal properties, fabricated a Board meeting resolution dated 14.07.2004, where the plaintiff-company is said to have given an authorization to them to sell the suit schedule property for consideration of Rs.3,51,000/- and accordingly, defendant Nos.1 and 2 transferred the suit schedule for property in the names of defendant Nos.3 to 5, who are their relatives, under a registered sale deed dated 29.11.2004. Thereafter, in the year 2005, defendant Nos.3 to 5, in collusion with defendant Nos.1 and 2, have transferred the suit schedule property in the names defendant Nos.6 to 9, who are also their relatives, through a registered sale deed dated 09.03.2005 for a consideration of Rs.3,70,500/-. The plaintiff-company does not have any knowledge about the said transactions, but as per its knowledge, no consideration has been passed under the above said registered sale deeds.

4.1. Having come to know about the fraud played by defendant Nos.1 and 2 in selling the plaintiff-company lands, one Sri Ratan Jawahar Shah, who is one of the Directors of the plaintiff- company, called for a meeting of Board of Directors on 12.11.2006 to discuss about functioning of the plaintiff-company, the properties held by it and their appreciation value. The plaintiff served personal notice to all the twelve Directors of the plaintiff- company fixing the Agenda for meeting. All the Directors received the said notice except defendant Nos.1 and 2 who refused to take notice and did not attend the said Board meeting. In the said Board meeting, it was discussed and found that defendant Nos.1 and 2, in collusion and in conspiracy with defendant Nos.3 to 9, have committed/criminal breach of trust and thereby, cheated the plaintiff-company for their personal gains causing wrongful loss to the plaintiff- company.

4.2. That being so, defendant Nos.6 to 9 have got the suit schedule property partitioned through a registered partition deed vide document No.25990/2006 with an ulterior motive and further, cheated the plaintiff-company. As such, the plaintiff-company passed resolution on the same day authorizing-Ratan Jawahar Shah to initiate appropriate civil and criminal actions against defendant Nos.1 and 2 as the aforesaid acts done by them are against the interest of plaintiff-company. Hence, the present suit is filed for the following reliefs.

“(1) For a decree of declaration that the partition deed bearing Document No.25990/2006 dated 08.11.2006 registered before the Sub-Registrar, Sangareddy, Medak District, be null and void.

(2) For a decree to set aside registered sale deed bearing No.13104/2004 dated 29.11.2004 executed by defendant Nos.1 and 2 by way of a consequential relief. (3) For a decree to set aside the registered sale deed bearing No.2654/2005 dated 09.03.2005 executed by the defend