Findings of Fact Cannot Be Re-Appreciated in an Appeal Under Section 10F Companies Act: Madras High Court

“Jurisdiction Under Section 10F of the Companies Act Is Limited to Substantial Questions of Law”- Madras High Court (Bench of Dr. Justice Anita Sumanth and Justice N. Senthilkumar) delivered a significant judgment in the case of Mrs. C. Mangala Vijayalakshmi vs. K.S. Kasimaris Ceramique (P) Ltd. & Others dismissing a series of appeals challenging sale transactions of company assets. The appeals were brought under Section 10F of the Companies Act, 1956, involving allegations of oppression, mismanagement, and a demand for winding up of the respondent company.

The Court emphatically held that sale transactions based on valid board resolutions passed in 1996 and 1999 were legally binding and that the High Court's appellate jurisdiction under Section 10F does not extend to reappreciating findings of fact unless they are perverse, arbitrary, or based on no evidence.

“Where There Are Valid Resolutions and No Timely Challenge, Transactions Stand Ratified”—Court Upholds Sale Deeds to 36 Purchasers

The central controversy revolved around a dispute among siblings constituting the board of directors of K.S. Kasimaris Ceramique Pvt. Ltd., a company which ceased business operations in 1976 but held substantial land assets, including 13.77 acres in Maduravoyal, Chennai.

Multiple board resolutions had authorized the sale of land to 36 purchasers, and those sale deeds were challenged by the appellant (a sister and co-director) on the grounds that they were based on fraudulent minutes and executed without proper authority.

However, the Court found that: “The board resolutions dated 12.01.1996, 10.02.1996, and 27.11.1999 were validly passed and participated in by the appellant or with her notice, and no challenge was raised at the relevant time.”

It was further noted that: “The appellant was herself a signatory to crucial minutes authorising sale, and her subsequent denial of participation lacks credibility and comes too late to disturb settled transactions.”

The Court relied heavily on the Company Law Board’s detailed factual findings and reiterated:

“We are to concern ourselves with the legal issue alone in an appeal under Section 10F, and those findings cannot be interfered with unless shown to be perverse.”

“Appeal Under Section 10F Is Maintainable Only on Questions of Law”—Reiterates Binding Precedent of V.S. Krishnan and Purnima Manthena

The Court restated the limited appellate scope under Section 10F, quoting from the Supreme Court’s decision in V.S. Krishnan v. Westfort Hi-Tech Hospital Ltd.:

“The jurisdiction of the appellate Court under Section 10F is restricted to the question as to whether, on the facts as noticed by the Company Law Board, an inference could reasonably be arrived at.”

Citing further precedent from Purnima Manthena v. Dr. Renuka Datla, the Court emphasized:

“Section 10F, thus, statutorily demarcates the contours of the jurisdictional exercise by an appellate forum depending on the nature of the order impugned.”

Accordingly, the appellant’s attempt to reopen findings related to board meetings, notice of resolutions, and execution of sale deeds were found impermissible in law, as these were purely questions of fact, already adjudicated.

“Turquand’s Rule Inapplicable Where All Directors Were Informed and Participating”—Court Rejects Plea of Ignorance by Co-Director

One of the legal pleas taken by the appellant was based on the Indoor Management Rule (also known as Turquand’s Rule), claiming that she was unaware of the internal decisions and hence not bound by the actions of other directors.

Rejecting this, the Court held:

“The records make it clear that all parties have been actively involved in the affairs of the company… they would have to assume responsibility in respect of the decisions taken.”

It was thus ruled that Turquand’s rule could not shield directors from internal corporate decisions they were privy to or had tacitly endorsed.

“Company Has Received Sale Consideration for All 36 Sale Deeds”—Findings of Company Law Board and Chartered Accountant Endorsed

A key factual contention was whether the company had received genuine consideration for the sale of its Maduravoyal property. A Chartered Accountant appointed by the High Court confirmed that:

“The total sale consideration as per 36 sale deeds amounted to ₹3,22,21,440. While there were some minor discrepancies and certain cash components, there was no material to suggest misappropriation.”

The Court agreed that:

“In light of the categoric finding to the effect that the company has received the entirety of the sale consideration… the questions relating to the title conferred by the sale deeds… are answered in favour of the company.”

“Winding Up Not Warranted Where Substantial Assets Exist”—Court Declines to Dissolve Company in Absence of Oppression

The appellant also sought winding up of the company under just and equitable grounds citing lack of business activity. However, the Court ruled that:

“Mere inactivity in business cannot justify winding up, particularly where substantial assets are held by the company.”

Referring to Shanti Prasad Jain v. Kalinga Tubes Ltd. and Hanuman Prasad Bagri v. Bagress Cereals Pvt. Ltd., the Court reiterated that:

“Oppression must involve at least an element of lack of probity or fair dealing… mere loss of confidence is insufficient.”

Accordingly, the appeal for winding up was dismissed and the company allowed to continue for the purpose of managing its remaining assets.

“Specific Performance Suit by Alleged Buyer Jayaraj Dismissed”—Only 36 Registered Sale Deeds Recognised

One of the parallel claims by a third party, Mrs. Jayaraj, based on an alternate set of minutes (Minutes III), was also rejected. The Court noted that her specific performance suit was abandoned and declared:

“No title would be conferred on the parties by virtue of any sale agreements apart from those in respect of which the 36 sale deeds have been executed.”

Thus, any other parties claiming based on unregistered agreements must approach the company afresh, as the Court recognised only registered title holders.

In this exhaustive judgment, the Madras High Court has:

• Upheld the validity of sale transactions executed by the company in favour of 36 purchasers;

• Rejected the plea for winding up, reiterating that substantial assets and absence of proven oppression cannot justify dissolution;

• Reaffirmed that appeals under Section 10F lie only on substantial questions of law, not re-evaluation of facts;

• Declined to accept post-facto denials of participation by directors who had earlier attended or consented to board resolutions.

The Court observed:

“This litigation has traversed nearly 30 years and the contours of the dispute remain the same throughout.”

In conclusion, all appeals including C.M.A.No.403 of 2007, O.S.A.Nos.430 and 431 of 2001, Company Appeal No.17 of 2009, and C.M.P.No.2007 of 2025 were dismissed.

Date of Decision: 29 August 2025