2015 (10) TMI 265 - SC - Companies Law

Scope of power under Section 111 of the Companies Act, 1956 Rectification of share register - Transmission and transfer of shares on the basis of succession certificate, transfer deed and revalidation letter issued by the ROC High Court held that the succession certificate issued by the competent court had to be taken as conclusive evidence under Section 381 of the Indian Succession Act - Court had refused to grant any interim injunction in favour of UD Group and other plaintiffs - whether there is any real dispute between the parties about the entitlement of DR Group to have the shares transferred in their favour and whether the exercise of jurisdiction by the High Court is beyond the scope of Section 111 of the Companies Act. Held that - there is no real dispute between the parties as held by the High Court. DR Group has furnished the succession certificate as well as the transfer deed executed by GD in their favour. The same had to be acted upon - DR Group followed the due procedure. It had the succession certificate in its favour apart from the transfer deed from GD, who admittedly inherited rights from LMJS. Will in favour of GD is beyond any dispute. Thus, the DR Group derived rights from the GD by documents executed by her in her lifetime and conveyed to the Company. Even if the Will of GD is not taken into account, for purposes of issue of rectification, the documents executed by GD clearly entitled the DR Group to have the rectification made - CLB had no justification to reject the claim of the DR Group and the High Court rightly reversed the said order Decided against appellant.

Issues Involved:
1. Scope of power under Section 111 of the Companies Act, 1956.
2. Validity of the Succession Certificate dated 19th February, 2009.
3. Entitlement of DR Group to the shares of LMJS.
4. Jurisdiction of the Company Law Board (CLB) versus Civil Court.
5. Impact of the Will dated 23rd June, 1996 and subsequent Will dated 10th May, 2009.
6. Interim orders and their effect on the succession certificate.

Detailed Analysis:

1. Scope of Power under Section 111 of the Companies Act, 1956:
The primary issue is the scope of power under Section 111 of the Companies Act, 1956, which allows for rectification in the share register of a company. The Supreme Court examined whether the Company Law Board (CLB) could adjudicate complex questions of title in summary proceedings under Section 111. It was concluded that while the jurisdiction under Section 111 is summary in nature, it includes the power to decide questions of title unless the complexity warrants relegating the matter to a civil court. The High Court had allowed the rectification, finding no real dispute necessitating a detailed trial.

2. Validity of the Succession Certificate Dated 19th February, 2009:
The succession certificate dated 19th February, 2009, issued jointly in favor of Gayatri Devi (GD) and the DR Group, was a central piece of evidence. The High Court treated this certificate as conclusive evidence under Section 381 of the Indian Succession Act. The Supreme Court upheld this view, noting that the certificate had to be acted upon unless successfully challenged, which had not occurred as the civil court had declined to grant an interim injunction against it.

3. Entitlement of DR Group to the Shares of LMJS:
The DR Group claimed entitlement to the shares based on the succession certificate, a transfer deed executed by GD, and a subsequent Will dated 10th May, 2009. The High Court found that the DR Group had a clear right to the shares, as GD had inherited them from LMJS through an undisputed Will dated 23rd June, 1996, and had transferred her rights to the DR Group. The Supreme Court agreed, noting that the DR Group had followed due procedure and that there was no real dispute over their entitlement.

4. Jurisdiction of the Company Law Board (CLB) versus Civil Court:
The CLB had dismissed the DR Group's appeals, stating that the matter involved complex questions of law and fact that should be decided by a civil court. However, the High Court reversed this decision, holding that the disputes raised by the respondent group were illusory and did not affect the title of the shareholding. The Supreme Court upheld the High Court's view, emphasizing that the CLB had the jurisdiction to decide the matter as it did not involve any real dispute requiring a detailed trial.

5. Impact of the Will Dated 23rd June, 1996, and Subsequent Will Dated 10th May, 2009:
The Will dated 23rd June, 1996, by LMJS in favor of GD was undisputed. GD's subsequent Will dated 10th May, 2009, in favor of the DR Group, was contested by the UD Group. The High Court found that the reason for disinheriting the DR Group in the 1996 Will was against the estranged wife of LMJS, not the DR Group. The Supreme Court noted that GD had executed transfer deeds and communicated them to the Board of Directors, thereby transferring her rights to the DR Group. The challenge to the 2009 Will did not bar the DR Group's claim.

6. Interim Orders and Their Effect on the Succession Certificate:
The UD Group argued that the succession certificate was void due to an interim stay order dated 20th August, 2008. The High Court rejected this plea, noting that the stay order was obtained by GD herself, who later sought rectification in favor of the DR Group. The Supreme Court concurred, stating that the interim order could not bar the DR Group's claim, especially when the civil court had declined to grant an interim injunction against the succession certificate.

Conclusion:
The Supreme Court dismissed the appeals, affirming the High Court's decision to allow the rectification of the share register in favor of the DR Group. The Court held that the CLB had no justification to reject the DR Group's claim in summary jurisdiction, as there was no real dispute requiring a detailed trial. The appeals were dismissed with costs quantified at Rs. 5 lakhs in each of the appeals.

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