M/S. D. CUBE CONSTRUCTIONS (P) LTD. vs V.M. RAVINDRA & ORS.

Sh. V.M. Ravindra, Smt. Jayalakshmi and Sh. Deepak, the complainants/respondents, entered into Agreements dated 09.04.1996 and 09.12.1996 with M/s. D Cube Constructions (P) Ltd., OP/petitioner, for purchase of flat Nos. 2 & 3 on the second floor and Flat No.1 in the third floor, situated at Coimbatore, each measuring 2275 sq.ft. @ Rs.800/- per sq.ft., in total, for a total consideration of Rs.27,44,000/- and the costs for the car parking was Rs.1,50,000/-.

Thereafter, the OP sent a letter dated 31.01.2000, wherein it claimed the costs of the flat @ Rs. 1,350/- per sq.ft., to pay Rs.75,000/- each, for car parking, as such, the total costs stood enhanced to Rs.47,01,150/- . The OP demanded the balance amount in the sum of Rs.23,50,000/-.

A consumer complaint was filed with the prayer that OP be directed to handover the possession of three flats and to pay Rs.20,00,000/- as compensation.

The OP contested this case. According to OP, one Mr.Thulasiram, who was holding the post of Director at the relevant time, joined hands with the complainants, connived with them and fabricated the documents, wherein it was agreed to sell the flat at Rs.800/- per sq.ft. Consequently, they have made a demand @ Rs.1,350/- per sq.yd. The said Director was removed from the Directorship. Subsequently, from 13.03.1997, the alleged agreements were not acceptable.

The District Forum allowed the complaint and directed the OP to handover and put the complainants in possession of the three flats as per the specification entered into the agreement and pay Rs.10,00,000/- as compensation and Rs.1,000/- as costs.

The OP preferred a First Appeal before the State Commission, which too, was dismissed.

It is thus clear that the OP is fighting the lost battle. Both the fora have decided the case against them. To our view, no legal question involved herewith, arises. However, the counsel for the petitioner/OP vehemently argued that Sh. Thulasiram was arrested and he has been removed from the Directorship of the company. He was working in cahoots with the complainants. He half-heartedly argued that the case is barred by limitation. The petitioner has also placed reliance on a judgment of the Hon''ble Supreme Court in MRF Limited Vs. Manohar Parrikar & Ors., (2010) 11 SCC 374 towards its para Nos. 111, 112 and 113, which are reproduced, as under :- "111 ) The doctrine of indoor management is in direct contrast to the doctrine or rule of constructive notice, which is essentially a presumption operating in favour of the company against the outsider. It prevents the outsider from alleging that he did not know that the constitution of the company rendered a particular act or a particular delegation of authority ultra vires. The doctrine of indoor management is an exception to the rule of constructive notice. It imposes an important limitation on the doctrine of constructive notice. According to this doctrine, persons dealing with the company are entitled to presume that internal requirements prescribed in memorandum and articles have been properly observed. Therefore doctrine of indoor management protects outsiders dealing or contracting with a company, whereas doctrine of constructive notice protects the insiders of a company or corporation against dealings with the outsiders. However suspicion of irregularity has been widely recognized as an exception to the doctrine of indoor management. The protection of the doctrine is not available where the circumstances surrounding the contract are suspicious and therefore invite inquiry.

112) This exception was highlighted in the English case of J.C Houghton& Co. v. Nothard, Lowe & Wills Ltd, [1927] 1 KB 246 (CA) 81where the case involved an agreement between fruit brokers and fruit importing company. There was an allegation that the agreement was entered into by the company''s directors without authority. It was held that the nature of transaction was found to have been such as to put the plaintiffs on inquiry. To this effect Lord Justice Sargant held:-

"Cases where the question has been as to the exact formalities observed when the seal of a company has been affixed, such as Royal British Bank v. Turquand, 6 E. & B. 327, or the County of Gloucester Blank v. Rudry Merthyr&Co., [1895] 1 Ch 629, are quite distinguishable from the present case. In re Fireproof Doors, Ltd., sup., tends rather against than in favour of the plaintiffs, since if a single director has as towards third parties the authority now contended for, the whole of the elaborate investigation of the facts in that case was entirely unnecessary. Perhaps the nearest approach to the present case is to be found in Biggerstaff v. Rowlatt''s Wharf, [1896] 2 Ch. 93.

But there the agent whose authority was relied on had been acting to the knowledge of the company as a managing director, and the act done was one within the ordinary ambit of the powers of a managing director in the transaction of the company''s affairs. It is, I think, clear that the transaction there would not have been supported had it not been in this ordinary course or had the agent been acting merely as one of the ordinary directors of the company. I know of no case in which an ordinary director, acting without authority in fact, has been held capable of binding a company by a contract with a third party, merely on the ground that that third party assumed that the director had been given authority by the Board to make the contract. A limitation of the right to 82 make such an assumption is expressed in Buckley on the Companies Acts, 10th Edition, at p. 175, in the following concise words: -- And the principle does not apply to the case where an agent of the company has done something beyond any authority which was given to him, or which he was held out as having."

113) This exception to the doctrine of indoor management has been subsequently adopted in many Indian cases. They are B. Anand Behari Lal v. Dinshaw and Co. (Bankers) Ltd, AIR 1942 Oudh 417 and Abdul Rehman Khan & Anr. v. Muffasal Bank Ltd. and Ors, AIR 1926 All 497. Applying the exception to the present scenario, there is sufficient doubt with regard to the conduct of the Power Minister in issuing the Notifications dated 15.5.1996 and 01.08.1996. Therefore there is definite suspicion of irregularity which renders the doctrine of indoor management inapplicable to the present case".

He has also placed on record, the case decided by this Commission, titled as City Union Bank Ltd. & Anr. Vs. R. Chandramohan, FA No. 29 of 2005, decided on 01.02.2007.

We are of the considered view that the facts of the said authorities do not dovetail with the facts of this case.

We are unable to locate substance in all these arguments. The OP has failed to prove that Sh. Thulasiram was not the authorised person or Director at the time of execution of A1 & A2, on behalf of the company and his activities as a Director of the Company were nullified with retrospective effect. There is not even an iota of evidence which may go to show that the complainants are working in cahoots with the said Director. It is not understood, how, the OP could wriggle out of the responsibilities and liabilities of the company. It is also surprising to note that the OP remained quiet, for a period of four years. The agreements in question were executed on 09.04.1996 and 09.12.1996. The notice of enhancement was sent on 31.01.2006, but the silence on their part is pernicious. In case, we accept the contention raised by the petitioner/OP, it will open a ''Pandora box'' and each company will come stating that the previous Director was not authorised to enter into the agreement and, therefore, the amount of the land should be enhanced, by leaps and bounds. It will encourage the ''service providers'' to lead the gullible persons, up the garden path. This is a matter between the Directors, inter se . There lies no rub in suing and prosecuting Sh.Thulasiram, the Ex-Director. This is a settled law that unless or until the complainants get the possession, the cause of action continues.

The OP has no bone to pluck with the complainants/ respondents. The revision petition filed by them is frivolous and vexatious. The OP is directed to handover the flats to the complainants in addition to the order passed by the State Commission, within 90 days'' from the date of receipt of copy of this judgment, as per the agreement, otherwise, it will have to pay penalty, in the sum of Rs.6,000/- per day, in respect of all the three flats, till the possession is handed over to the complainants/ respondents.

Therefore, the revision petition is dismissed, with costs in the sum of Rs.10,000/-, under Section 26 of CP Act, 1986, which be deposited by the petitioner/OP, with the Consumer Legal Aid Account of this Commission, within 90 days, from the date of receipt of copy of this order, otherwise, it will carry interest @ 9% p.a., till realisation. Thereafter, the Registry shall submit the compliance report.