Petitioner-Co. Couldn’t Block Sale of Land by Foreign Investors as It Was Transferred Under CLB’s Exit Formula & RBI Approval

Case Details: Cheran Enterprises (P.) Ltd. v. Union of India - [2025] 170 taxmann.com 691 (HC-Madras)

Judiciary and Counsel Details

• N. Seshasayee, J.
• Darius Khambata, Gopal Sankaranarayanan, Senior Advs. & N. Ramakrishnan for the Petitioner.
• Venkataswamy Babu, Central Government Standing Counsel, T. Poornam, V.S. Rishwanth, K.G. Raghavan, J. Sivanandaraj, P. Wilson, Senior Advs., K. Gowtham Kumar, Aditya Vikram Bhat, Ms Ridhima Sharma & Nithyaesh Natraj for the Respondent.

Facts of the Case

In the instant case, the petitioner company and its group companies entered into a joint venture agreement with the respondent, foreign investors, but both sides assembled before the Company Law Board (CLB), accusing each other of oppression and mismanagement.

The CLB evolved an exit formula for the foreign investors to quit the petitioner company. As per the said formula, the petitioner company was to return money invested by the foreign investors, together with the interest.

While making the payment, the petitioner company was to ensure that at least 25% of the amount due was paid in every quarter and till the payment was made, the petitioner company was not to alienate its properties.

If the petitioner company failed to discharge its obligation to pay foreign investors, then its land was to be sold to foreign investors. Further, on the performance of any one of these conditions, the foreign investors were to surrender their share certificates, pursuant to which, there was to be a reduction in the share capital of the petitioner company.

The petitioner company was under an obligation to pay the said sum. In the eventuality of the petitioner company defaulting in making payments as stipulated, the CLB had provided an alternate mode of settling the liability.

Thereafter, the petitioner company filed a writ petition to stop the sale of its immovable property through its plea of share-pricing. It was noted that the petitioner company was trying to develop a strategy to deny foreign investors the benefit of the exit formula, but it was unfair.

High Court Held

The High Court observed that when the vesting of title in lands of the petitioner company in foreign investors had become conclusive, they were free to deal with it the way they considered appropriate.

The High Court held that the petitioner company had no legal or moral foundation to aim for money that foreign investors had obtained by the sale of their respective properties.

Further, the High Court held that, when the RBI had permitted the sale of the petitioner company’s land to foreign investors, what had been done pursuant to it had attained finality. Thus, the instant petition was to be dismissed.