Why Property Ends Up In Individual Name
In family companies, this is common. Bank loan easier in individual name. Stamp duty saved. Or promoter says "I will hold for company". CA says "adjust later". Other directors are silent. They sign financials. For 10-15 years business runs. Then dispute arises. Minority discovers property is not in company name and files 397/398 saying mismanagement.
CLB Power Vs Civil Court Power
CLB can look at transaction to decide oppression. It can order: stop further dealing, appoint administrator, even buy-out. But can CLB declare "property belongs to company" and cancel 15 year old sale deed. No. That is title suit. Civil Court has jurisdiction. CLB can only say "this transaction was oppressive" and give relief that puts an end to matter.
Vinayaka Perumal makes this clear. HC said company knew in 1989 and 1995. They let 6th respondent mortgage as owner. So they are estopped. CLB ignored this.
Estoppel, Delay And Bonafides: The 3 Filters
CLB will apply these even in 397.
Estoppel: By conduct you accepted individual ownership. You cannot turn now.
Delay: Equitable remedy must be prompt. 15 years is too long.
Bonafides: Who is petitioner. Is it genuine minority or someone trying to grab after business failed.
If all 3 go against you, petition will fail.
How To Protect Company Assets Legally
Nominee Agreement: If property must be in name, execute agreement that he holds as nominee.
Charge: Create charge in company’s favor in ROC.
Audit: CA must flag assets not in name. Shareholder Agreement: In family companies, put clause: all assets bought from company funds belong to company. Without this, 397/398 will not help after years.
Conclusion
Property in director name 397 398 madras hc teaches one thing: equity aids vigilant, not sleeping. Vinayaka Perumal 2011 is warning to closely held companies. At Nathan & Associates we do due diligence before filing 397. If title issue exists, we file civil suit first. 397 is for governance, not for title recovery after 15 years.
