9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2005 (4) TMI 599 - Board - Companies LawImposition of certain restrictions on the share - Seeking an investigation into the membership of the company in terms of Section 247(1A) - determining the true persons who are financially interested in the success or failure of the company or who have been able to control or materially influence the policy of the company - HELD THAT - In the present case, the facts sought to be found out relate to over 60% shares in the company and if the membership relating to these shares cannot be ascertained without investigation, then, certainly, investigation can be ordered. It is an admitted fact that before the demise of Mrs Birla, even though her direct share holding in the company was negligible, by virtue of her controlling respondents 1 to 28 which held/hold over 60% shares in the company, she was not only materially interested in the company and was also able to control the company. It is a settled law, as held by the Supreme Court in Worldwide Agencies (P) Ltd v. Margaret T Desor case 1989 (12) TMI 245 - SUPREME COURT , that on the death of a shareholder, the shares devolve on the legal heirs instantaneously. Therefore, all her interest in the company and the respondents 1-19 stood devolved on the legal heirs immediately on her demise. Who is the lawful legal heir is an issue before the Calcutta High Court and this Board has no jurisdiction to enquire into the same. The petitioners have not shown that there had been any change in the shareholdings in the respondents 1 to 19 by which the control of these respondents had changed or there are changes in the Board of Directors of these respondents or that these respondents have transferred the shares held by them in the company. Similarly, there is no allegation that there is any change in the management of the respondents 19-28. In other words, the controlling interest in the company is still with the estate of late Priyamvada. As rightly pointed by Shri Sundaram, from the averments of the petitioners in the petition it is seen that their own case is that Shri Lodha is controlling the interests of late Mrs Birla and that is the reason why they have raised the issue of Take Over Code. Likewise, while denying that Shri Lodha is controlling the interests of the estate, the learned counsel for the respondents contended that provisions of the said Code are not applicable to a case of transmission of shares. It is seen that after the demise of Mrs Birla, there was an AGM on 15.9.2004. Shri Lodha who had been a director of the company from 1991, Shri Pracheta Majumdar and Shri Vikram Swarup appointed as additional directors during 2003-2004 came up for reelection in the AGM. All of them had been appointed as directors during the life time of late Mrs Birla. In the Directors' report for the year 2003-2004 adopted on 28-4-2004, i,e., during the life time of late Mrs Birla, the proposal for the reelection of these directors had been adopted by the Board. In the AGM, all the respondent shareholders except one had voted in favour of election of these retiring directors and they had not used their majority votes to change the composition of the Board. In the AGM, if any of these directors had been defeated or if any new person had been appointed, with the support of exercise of voting by the respondents 1 to 28, there would have been some justification in the contention of the petitioners that an investigation into the membership of the company is necessary. Thus I find that the estate of late Mrs Birla, controlling majority of the shares in the company is intact and that the said estate has not brought about any change in the composition of the Board of Directors of the company. In other words it is the estate of late Mrs Birla controlling majority shares in the company, which is found to be materially interested in the affairs of the company. Who is entitled to control the estate is an issue before the High Court for a decision and provisions of Section 247(1A)cannot be invoked to determine this issue. Thus, on an over all appreciation of the facts of this case, I find that no case has been made out to order an investigation in terms of Section 247(1A) of the Act and as such I dismiss this petition.
Issues:
Investigation into membership of a company under Section 247(1A) of the Companies Act, 1956 and imposition of restrictions on shares under Section 250(2) as interim measure. Detailed Analysis: Issue 1: Investigation into Membership of the Company The petitioners, holding a minimal percentage of shares in the company, sought an investigation into the membership of the company under Section 247(1A) of the Companies Act, 1956. They raised concerns about the control and influence over the company's policy after the demise of Mrs. Birla, who previously controlled the majority shares. The petitioners highlighted the uncertainty regarding the control of shares due to conflicting claims arising from contested wills. They argued that the appointment of Shri Lodha and the potential implications on the company's management necessitated an investigation to determine the true persons financially interested in the company's success or failure. The petitioners emphasized the need for restrictions on shares held by respondents pending the investigation. Issue 2: Response and Arguments The respondents contested the maintainability of the petition, citing pending proceedings before the Calcutta High Court regarding the contested wills. They argued that no change had occurred in the management or shareholding of the company post the demise of Mrs. Birla, and therefore, the provisions of Section 247(1A) were not applicable. The respondents emphasized that the issue of control over the shares was sub judice and should be determined by the High Court. They contended that the petition was filed for a collateral purpose of restraining voting rights at the AGM, rather than for public interest. The respondents refuted the petitioners' claims regarding Shri Lodha's control and challenged the applicability of the Takeover Code in the context of share transmission. Issue 3: Decision and Rationale The Chairman considered the arguments presented by both parties and examined the provisions of Section 247(1A) of the Companies Act. The Chairman noted that the petitioners' case primarily revolved around the control of shares post Mrs. Birla's demise and the alleged influence of Shri Lodha. However, based on the evidence presented, including the AGM results and lack of changes in shareholding or management, the Chairman concluded that no grounds existed to order an investigation under Section 247(1A). The Chairman emphasized that the issue of controlling the estate of Mrs. Birla was subject to the High Court's jurisdiction and not within the purview of the Company Law Board. Therefore, the petition was dismissed, as the Chairman found no justification for invoking Section 247(1A) in the given circumstances. In conclusion, the Company Law Board dismissed the petition seeking an investigation into the membership of the company and imposition of restrictions on shares, based on the lack of substantial grounds to warrant such an investigation under Section 247(1A) of the Companies Act, 1956. The decision highlighted the need for legal heirs to resolve the issue of controlling the estate through appropriate legal channels, emphasizing that the Board's jurisdiction did not extend to determining inheritance disputes.
|
