State the provisions of the Companies

X Ltd. desires to sell off to Y Ltd. the confectionery unit in Vadodara along with the liabilities attached to the unit and the full work force and staff working in the unit. This is aimed at X Ltd. concentrating more on its core activity of ice-cream manufacture. State the provisions of the Companies Act, 1956 which are attracted to give effect to this proposal. Draft the resolution and explanatory statement, if any, to give effect to this proposal. X Ltd. desires to sell off to Y Ltd. the confectionery unit in Vadodara alongwith liabilities attached to the Unit and -the full work force and staff working in the Unit with a view to concentrate more on its core activity of a part of the undertaking thereby attracting the provisions of Section 293 (1) (a) of the Companies Act, 1956.Section 293
(1) (a) provides that the Board of Directors of a company, or of a private company which is subsidiary of a public company, shall not-except with the consent of .said company in general meeting-sell, leave or otherwise dispose of the whole or substantially the whole or any undertaking of the company or where the company owns more than one undertaking the whole or substantially the whole of any such undertaking.
This section restricts the power of the Board to sell off any part or whole of the undertaking without the consent of the company at general meeting. The Board is, however, not bound to exercise this power even though the company passes resolution in respect of the exercise of such power [pothen vs. Hindustan Trading Corpn. (P) Ltd.; (1967) 37 Compo Cases 266 (1966) 2 Compo L. J 252 (Ker)].
Board cannot exceed the powers in the hope that the general body will ratify their action.
The power is exercisable only with the prior consent of the Company in general body meeting.
Resolution for sale of undertaking under Section 293(1) (a) of the Companies Act, 1956 :
“Resolved that consent of the Company pursuant to the provisions of Section 293 (1)
(a) of the Companies Act, 1956, be and is hereby given to the Board of Directors to sell off to X Ltd. the entire confectionery unit in Vadodara alongwith all the liabilities attached to
the unit and the full work force and the staff working in the unit for a price being not less than Rs. 3 crores on such terms, conditions and stipulations as the Board may in its discretion deem fit in the interest of the Company.
Resolved further that the Board of Directors be and is hereby authorised to execute agreements and to do all such things in the name and on behalf of the company as may be necessary for fully effectuating the sales.”
Explanatory Statement. Your company’s core activity is ice cream manufacturing and its plants for manufacture of ice-creams are located in Vadodara. In view of the increasing competition in ice-cream industry, the directors of your company wish to concentrate fully on its core activity of ice cream manufacturiQg. It is, therefore, proposed to sell off its confectionery unit in Vadodara, which is in fact not generating enough profits for the company.
M/ s. y Ltd., the purchasers are willing to purchase the confectionery unit alongwith all the liabilities, work force and staff working in the unit for a price of Rs. 3 crores. Section 293 (1) (a) of the Companies Act, 1956 requires the consent of the members to be given for effecting the above transaction. Hence, the proposed resolution, none of the Directors is interested in the resolution.
P. 29. (i) In a meeting of the Board of Directors, only 3 directors were present out of 11 directors. None of the 3 directors was interested in any of the items of the agenda. Examine the validity of the meeting.
(ii) In another meeting of the Board of Directors, though 7 directors were present, only 2 directors were not interested in one of the transactions. How should the meeting. deal with the matter?
(iii)In a meeting of the Board of Directors, one of the directors did not disclose his interest in a matter which was approved. What are the consequences?[C.S. (Final) June, 1995J