2020 (10) TMI 1243 - HC - Companies Law

Testamentary suit for grant of probate of the alleged last will - submission is that the APLC can only decide upon and regulate the voting power within the limit of the voting rights as regards the shares which are referable to the estate of the testatrix enlisted in the affidavit of assets - HELD THAT - It is well settled that the position of Administrator pendente lite (APL) in terms of Section 247 of the Succession Act is that the APL represents the estate of the deceased for all purposes, except distribution of the estate. APL shall be subject to the immediate control of the probate Court and shall act under its direction. Except to the limit it is circumscribed by the last limb of Section 247, the control of the Court over the APL and the extent of its authority to issue directions to the APL spreads through the scope and extent of the statutory purpose for which APL can be appointed in terms of Section 247. It is fundamental that the eligibility of a share-holder; either if it is only one share or bulk of shares and stocks; the voting rights and the involvement in the company on the strength of the shares would stand regulated, primarily by Sections 47 and 88 of the Companies Act - The power of the Probate Court under Section 247 of the Succession Act necessarily includes the power to regulate and permit such shares which are in the domain of commercial activity to be utilised to generate appropriate income and to better utilise the same in the best interest of the affairs of the estate of PDB, which would ultimately reflect on the end beneficiaries, which also includes charitable trust, educational institutions and other such activities. The prayer for ad interim stay of the judgement and order impugned dated September 18, 2020 is declined.

Issues Involved:

1. Jurisdiction and authority of the Administrator pendente lite Committee (APLC).
2. Impact of the impugned order on the appellants' companies under the Companies Act, 2013.
3. Membership and authority of Harsh Vardhan Lodha (HVL) in the companies and society.
4. Compliance with the impugned order and its implications on the companies.
5. Allegations of jurisdictional overreach and misapplication of law by the trial court.
6. Legal precedents relevant to testamentary jurisdiction and company law.
7. Arguments by the defendants in support of the impugned order.
8. Determination of interim relief and stay of the impugned order.

Issue-wise Detailed Analysis:

1. Jurisdiction and Authority of the APLC:
The appellants challenged the directions given in the impugned order, arguing that the APLC had been given superlative authority over the appellants' companies, which contravenes the Companies Act, 2013. They contended that the APLC's decisions dated July 19, 2019, and July 30, 2019, should not override the statutory position of the Board of Directors and shareholders' voting rights. The court noted that the APLC represents the estate of the deceased for all purposes except distribution and acts under the probate court's direction, as per Section 247 of the Indian Succession Act.

2. Impact on Appellants' Companies:
The appellants argued that the impugned order disabled them from acting in accordance with the Companies Act, 2013, and undermined the authority of the Board of Directors and shareholders. They highlighted that the APLC's decisions interfered with the companies' management and voting rights. The court recognized the fundamental principle that shareholding and voting rights are regulated by Sections 47 and 88 of the Companies Act, 2013, and that controlling interest is an incident of holding majority shares.

3. Membership and Authority of HVL:
The society argued that PDB's membership ceased upon her death and that HVL was neither a trustee nor part of the managing committee. The appellants contended that HVL had been a director in his individual capacity and became the elected Chairman since 2007-2010. The court noted that the impugned order restricted HVL from holding any office in the M P Birla Group entities during the pendency of the suit, based on shares referable to PDB's estate.

4. Compliance with the Impugned Order:
The appellants produced emails from the APLC seeking compliance with the impugned order and urged for an interim stay to protect the companies' operations. The court acknowledged the appellants' concerns but emphasized that the APLC's power to control and administer PDB's estate had been repeatedly asserted through judicial orders.

5. Allegations of Jurisdictional Overreach:
The appellants argued that the trial court's order suffered from inherent lack of jurisdiction, non-application of mind, and misconception of law. They contended that the probate court could not issue orders affecting non-defendant companies and that the APLC could not interfere with the companies' affairs beyond the estate's shareholding. The court examined the impugned order and found it within the probate court's jurisdiction under Section 247 of the Indian Succession Act.

6. Legal Precedents:
The appellants referred to several legal precedents, including Priyamvada Devi Birla vs. Ajay Kumar Newar, Shashi Prakash Khemka vs. NEPC India Ltd., and Bacha F Guzdar vs. Commissioner of Income Tax, to support their contentions. The court noted these precedents but deferred detailed consideration to the final hearing of the applications and appeals.

7. Arguments by Defendants:
The defendants argued that HVL had acted against PDB's estate's interest and that the impugned order was necessary to preserve the estate. They contended that the probate court's jurisdiction under Section 247 of the Succession Act was appropriate and that the impugned order should not be stayed. The court considered these arguments and found no reason to issue an interim stay.

8. Determination of Interim Relief:
The court declined the prayer for an interim stay of the impugned order, noting that the order reflected judicial consideration and determination within the probate court's jurisdiction. The court clarified that the word "implement" in the impugned order meant "abide by" and restricted HVL from holding office in the M P Birla Group entities based on shares referable to PDB's estate.

Conclusion:
The court declined to stay the impugned order, emphasizing the APLC's authority under Section 247 of the Indian Succession Act and the need to preserve PDB's estate's interests. The court directed the filing of affidavits and set the matter for final hearing, keeping all issues open for further consideration.

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