2016 (5) TMI 983 - HC - Companies Law

Application for grant of probate - Application filed by the predecessor-in-interest of the present plaintiffs who, as executor and/or propounder applied for grant of probate of the Will published by one Priyamvada Devi Birla in short P.D.B on 18th April, 1999 along with the codicil dated 15th April, 2003 to the said Will - Held that - Board of Directors of a company is authorized to exercise its power on behalf of the company by means of resolution passed in a meeting of the Board to take over a company or acquire a controlling or substantial stake in another company even by borrowing money subject to the restriction imposed under Section 180(1)(C) of the Companies Act. There is no allegation in the petition that even the decision for implementation of the said project by borrowing money was taken by the Board of Directors contravening the provision of Section 180(I)(C) of the Companies Act, 2013. As informed that the application filed by the applicants for making APL functional is awaiting consideration before the Appeal court. In our view the parties should approach the Appeal Court for making the APL functional immediately, so that APL can exercise its power of control over the management of the B.C.L by following the provisions prescribed under the Companies Act and in case the APL fails to discharge its duty, Probate Court can pass necessary direction upon APL for taking steps in accordance with law, whenever such direction needs to be passed for preserving the estate of the deceased. This Court has no hesitation to hold that the Probate Court cannot pass any injunction order against a third party as third party who has no caveatable interest in the probate proceeding cannot be allowed to be added as party in the probate proceeding and also for the reason that no order can be passed effecting the right of the stranger without adjudicating his right and adjudication of his rights in the probate proceeding is impossible as Probate Court cannot decide any foreign issue unconnected with the probate proceeding. Respectfully agree with the submission of Mr. Mitra, learned Senior Counsel appearing for the plaintiffs/ Lodhas that Probate Court cannot pass any injunction order against any person who is not a party to the proceeding. However, without discussing the other contention of Mr. Chidambaram cannot arrive at this ultimate conclusion. If the averment made in the application is read conjointly with the statements made in the supplementary affidavit which were made part of these applications, this Court cannot hold that the application is devoided on any cause of action. That apart find much substance in the contention of Mr. P. Chidambaram, learned Senior Counsel that at the stage of considering the demurrer of this application, the party objecting to the maintainability of such application should demonstrate before the Court that the application is not entertainable by the Court even by accepting all the statements made in the said application as true and correct. Thus, cannot agree with the submission of Mr. Mitra, learned Senior Counsel, that the applications are devoided of any cause of action. To conclude, hold that since the decision of the Board of Directors in taking over four cement manufacturing units of Reliance Infrastructure is not subject to the control of the promoters controlling power over the management of the said company and further since the Probate Court cannot pass any direction and/or injunction order against any person who is not a party to the probate proceeding and further since no adjudication of a foreign issue is possible before the Probate Court in the absence of any party who has no caveatable interest in the probate proceeding, this Court holds that the reliefs claimed by the applicants in these applications, cannot be granted. The applications are thus, rejected with the observation that the estate of the deceased cannot be left uncontrolled and since the APL has now become defunct, the parties may approach before the appropriate forum for making such APL functional so that whenever the Probate Court feels necessary, the probate Court can pass appropriate direction upon the APL for safeguarding and/or protecting the estate of the deceased. All the applications filed by the defendants and the demurrer applications filed by the plaintiffs are, thus, disposed of with the above observation.

Issues Involved:
1. Maintainability of the Defendants' Applications.
2. Jurisdiction of the Probate Court.
3. Admissibility of Newspaper Reportings.
4. Role and Powers of the Board of Directors and Promoters.
5. Appointment and Functionality of Administrator Pendente Lite (APL).

Issue-wise Detailed Analysis:

1. Maintainability of the Defendants' Applications:
The plaintiffs challenged the maintainability of the defendants' applications on the grounds that they do not disclose any cause of action and are based on inadmissible evidence from newspaper reports. The defendants argued that the applications should be examined based on the principles underlying Order 7 Rule 11 of the Code of Civil Procedure, accepting the statements in the applications as true and correct. The court agreed with the defendants that the maintainability should be assessed by assuming the truth of the statements in the applications.

2. Jurisdiction of the Probate Court:
The plaintiffs contended that the Probate Court's jurisdiction is limited to determining the genuineness of the Will and does not extend to business management issues of a company. The court agreed, stating that the Probate Court's primary duty is to examine the genuineness of the Will and ensure the estate's preservation. The court held that the Probate Court cannot interfere with the internal management of Birla Corporation Limited (BCL) or pass orders affecting its business decisions.

3. Admissibility of Newspaper Reportings:
The plaintiffs argued that newspaper reportings are hearsay and inadmissible as evidence. The court agreed, referencing Supreme Court decisions that newspaper reportings per se are not admissible unless supported by affidavits from the reporters. However, the defendants filed a supplementary affidavit with statutory notifications from BCL, which the court accepted, thereby providing a cause of action for the applications.

4. Role and Powers of the Board of Directors and Promoters:
The plaintiffs argued that the Board of Directors has exclusive powers under Section 179(3) of the Companies Act to make business decisions, including acquiring other companies, without needing approval from promoters. The court agreed, stating that the decision to acquire cement manufacturing units from Reliance Infrastructure was within the Board's jurisdiction and not subject to the promoters' control. The court held that the Probate Court cannot regulate the day-to-day business management of BCL.

5. Appointment and Functionality of Administrator Pendente Lite (APL):
The court noted that the APL, appointed to manage the estate of Priyamvada Devi Birla, had become non-functional due to the resignation of one of its members. The court emphasized the need to make the APL functional to protect the estate's interests. The court suggested that the parties approach the appropriate forum to reinstate the APL, enabling it to exercise its powers in accordance with the Companies Act.

Conclusion:
The court rejected the defendants' applications, holding that the Probate Court does not have jurisdiction to grant the reliefs sought, which pertain to the internal management of BCL. The court emphasized the necessity of making the APL functional to safeguard the estate of Priyamvada Devi Birla. The applications filed by the defendants and the demurrer applications filed by the plaintiffs were disposed of with these observations.

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