No Oppression or Mismanagement Found in Selling Land Below Market Value Due to Unclear Titles, Urgency, and Mortgage | NCLT

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  • Last Updated on 16 April, 2024

mortgaged to SBI

Case Details: Arun Kumar Kedia v. Om Shiv Shakti Iron Industries (P.) Ltd. - [2024] 161 461 (NCLT - Hyd.)

Judiciary and Counsel Details

  • Dr Venkata Ramakrishna Badarinath Nandula, Judicial Member & Charan Singh Technical Member
  • S. Radha Krishnan, PCS for the Applicant. 
  • A. VenkateshHari Krishna & Mayur Mundra for the Respondent.

Facts of the Case

In the present case, the petitioner, a shareholder of the company (i.e. Om Shakti) had filed a petition under sections 397 and 398 of the Companies Act, 1956 alleging that respondent directors of the company had illegally sold different parcels of land at a throw-away price. To substantiate the said claim, the petitioner also filed a valuation report from the government-approved valuer.

The petitioner also alleged allotment of certain equity shares to respondents without any offer to them, being existing shareholders.

It was noted that the valuation report filed by the petitioner could not be relied upon in view of the facts that first of all valuation report was filed without seeking any permission from the Tribunal, secondly valuation report contains many caveats in it and also it was not exactly for the same properties under dispute.

As far as the issue of selling properties at a lower than market value was concerned, there was no illegality in it since stamp duty had been paid at applicable valuation and rates.


The NCLT noted that it was a common practice that many companies/individuals make conscious decisions to sell the property at a lower price than market value in view of exigency and other factors.

Further, it was clear from the facts produced that the company was in urgent need of funds at that point of time. Further, land parcels were not clear and marketable (mortgaged to SBI) and admittedly properties which were not clear and marketable would fetch a lower than market value.

The NCLT held that sub-section 3 of section 81 of the Companies Act, 1956 which deals with further issues of capital clearly says that this condition would not apply to a private company, and thus, the said allotment was not illegal and did not necessitate any need for rectification of register of members. Therefore, the instant petition being devoid of any substance was to be dismissed.

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