2013 (6) TMI 933 - Board - Companies Law

Summary

Issues Involved:
1. Whether the recital of late Smt. Ram Piari Chawla bequeathing her moveable property includes the shares held by her in R-1 company and whether the petitioners are entitled to 1/3 shares each in the five shares lying in the name of their mother.
2. Whether R-2 could hold any board meeting making allotment to himself without any quorum.

Summary:

Issue 1: Inclusion of Shares in Movable Property and Entitlement to Shares
The court held that shares are considered movable property under the Sale of Goods Act. Therefore, the shares held by late Smt. Ram Piari Chawla, though not specifically mentioned in the Will, are included in the movables bequeathed to the claimants. Consequently, the shares should be divided equally among the petitioners and R-2, with each receiving 1/3rd as bequeathed by their mother. The court emphasized that procedural justice should not override substantial justice, especially when R-2, being a full-blood brother and aware of the rightful claimants, should not refuse the transmission of shares on technical grounds.

Issue 2: Legality of Board Meetings and Allotment of Shares
The court found that R-2 unilaterally held board meetings and general meetings after the demise of their mother, which is against the provisions of the Companies Act. A single shareholder cannot hold general meetings or make allotments without prior permission from the Company Law Board as stated u/s 186 of the Companies Act. The court declared the allotment of 990 shares to R-2 and the transfer of the mother's shares to R-3 as void ab initio. The court directed R-1 Company to rectify the register by deleting the name of R-3 holding 5 shares and transmitting 1/3rd shares each to P-1, P-2, and R-2. Additionally, the entry of 990 shares in the name of R-2 should be deleted, and if required, the share capital can be shown as allotted proportionately to the three claimants.

Conclusion:
The petition was allowed, directing the rectification of the share register to reflect the rightful ownership of shares as per the Will of late Smt. Ram Piari Chawla and declaring the allotments made by R-2 as null and void.