2012 (10) TMI 1265 - HC - Companies Law

Summary

Issues Involved:
1. Plaintiff's entitlement to 1/2 share in the estate of the deceased father.
2. Validity of the transfer of shares to Defendant No. 2.
3. Jurisdiction of the High Court vs. Company Law Board (CLB).
4. Limitation period for filing the suit.

Summary:

1. Plaintiff's Entitlement to 1/2 Share in the Estate:
The Plaintiff sued for a declaration of his 1/2 share in the estate of his deceased father, particularly focusing on 49010 shares of KNK Trading Pvt. Ltd. The Plaintiff's father executed a Will in 2003 bequeathing the shares equally to the Plaintiff and Defendant No. 1. The Plaintiff challenged the transfer of shares to Defendant No. 2 as fraudulent, citing discrepancies in the annual returns filed u/s 169 of the Companies Act. The court noted email exchanges indicating ongoing negotiations about the property, suggesting the transfer was not bona fide. The Plaintiff's share in the estate required protection pending the Notice of Motion.

2. Validity of the Transfer of Shares:
The Plaintiff contested the transfer of shares to Defendant No. 2, alleging it was fraudulent and not executed by the deceased. The court observed that the Will, accepted by both brothers, indicated the father held the shares until his death. The court also noted that the Plaintiff's share in the property needed protection pending the suit.

3. Jurisdiction of the High Court vs. Company Law Board (CLB):
Defendant No. 5 raised the issue of the High Court's jurisdiction, arguing it was barred u/s 10E(4C) r/w Sec. 111(4) and (7) of the Companies Act, 1956. The court held that the inherent jurisdiction of the High Court was not barred. It was determined that the CLB could not adjudicate on the title of the shares, which involved complicated questions of fact and allegations of fraud. The court cited precedents indicating that such matters should be decided by the Civil Court.

4. Limitation Period for Filing the Suit:
Defendants 1 to 3 claimed the suit was barred by the Law of Limitation, arguing the Plaintiff knew about the transfer of shares in 1999. The Plaintiff contended he became aware of the fraudulent transfer in January 2012. The court noted that oral evidence would need to be led on the issue of limitation and adjourned the suit for further consideration.

Ad-Interim Order:
Defendants 1, 2, and 3 were ordered to deposit Rs. 7.5 Crores in the court towards the Plaintiff's share within 4 weeks. If not deposited, Defendants were restrained from disposing of, alienating, or creating third-party rights in the properties listed in Exhibit-C to the plaint pending the Notice of Motion.

Conclusion:
The court protected the Plaintiff's share in the estate, determined its jurisdiction over the matter, and addressed the limitation issue, ensuring the Plaintiff's interests were safeguarded pending the final resolution of the suit.