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2025 (1) TMI 955 - AT - Companies LawMaintainability of the company petition - non-compliance of Section 244(1) of the Companies Act 2013 was wrongly rejected by Ld. NCLT - Petition filed by legal representatives of a deceased shareholder - locus standi of the respondents to file the petition - HELD THAT - Admittedly the consent terms were taken on record in such Testamentary Suit No.883/2014 also. Admittedly all legal heirs who had entered the consent terms were Class II legal heirs of Late Smt Tanna and it was noted in the order dated 04.05.2017 in view of consent terms Probate was not required. Now the Probate was only required when all legal heirs had wished to act under the Will of Late Smt Tanna but admittedly they never acted under such Will. Thus to say the Respondents No.1 and 2 could not have acted under the consent terms is not correct. A bare perusal of the impugned order in the facts of this case pleaded before us depicts of no infirmity. Admittedly the shareholding of the deceased Smt Tanna have been brought from 66% to 6% after her death and the reason given is she could not invest more money after her death. Looking at the conduct of Respondent No.3 who was in control of appellant company after the death of Smt Tarla Tanna it gives all the more reason that her Estate be represented by someone who could protect the interest of legal heirs either per Consent Terms and/or under a Will if Respondent No.3 succeeds in any of the cases but till such time her Estate and her shareholding needs to be protected and for this reason there must be someone to represent her estate/shareholding in the company. Conclusion - The respondents have the locus standi to maintain the company petition under Section 241. The NCLT did not exceed its jurisdiction and the pending legal proceedings do not preclude the petition s maintainability. The allegations of oppression and mismanagement warrant examination and the respondents are justified in representing the deceased s estate. Appeal dismissed. The legal judgment from the National Company Law Appellate Tribunal (NCLAT) principally addresses the maintainability of a company petition filed under Section 241 of the Companies Act, 2013, by Respondents No.1 and 2, who claim to be legal representatives of a deceased shareholder, Mrs. Tarla Girish Tanna. The appeal challenges an order by the National Company Law Tribunal (NCLT) that upheld the locus standi of the respondents to file the petition. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSISIssue 1: Locus Standi of RespondentsRelevant Legal Framework and Precedents: The primary legal framework involves Section 241 of the Companies Act, 2013, which allows members to file petitions against oppression and mismanagement. The precedent case of M/s Worldwide Agencies Pvt. Ltd. vs. Margaret T. Desor was considered, where the Supreme Court held that legal representatives of a deceased member could maintain such petitions. Court's Interpretation and Reasoning: The NCLAT found that the respondents derived their authority from Consent Terms executed before the Bombay High Court, which authorized them to act as representatives of the deceased's estate. Key Evidence and Findings: The Consent Terms, which were part of a settlement in prior litigation, were central to the respondents' claim. The terms explicitly allowed the distribution of shares among certain parties, including the respondents. Application of Law to Facts: The tribunal applied the precedent from M/s Worldwide Agencies Pvt. Ltd., determining that the respondents could act on behalf of the deceased's estate, despite not being registered shareholders. Treatment of Competing Arguments: The appellant argued that the Consent Terms were under legal challenge and that the respondents were not formally recognized as legal representatives. However, the tribunal noted that no stay or order had been issued against the Consent Terms. Conclusions: The tribunal concluded that the respondents had the locus standi to file the petition as they were acting under the authority of the Consent Terms, which had not been invalidated. Issue 2: Jurisdiction and Pending Legal ProceedingsRelevant Legal Framework and Precedents: The jurisdiction of the NCLT to decide on matters involving succession and shareholding was questioned, with reference to the Indian Succession Act. Court's Interpretation and Reasoning: The NCLAT held that the NCLT did not overstep its jurisdiction as the issue of share succession was not sub judice in the pending civil suit or testamentary proceedings. Key Evidence and Findings: The pending Suit No.1075/2019 focused on immovable property and did not address the shares in question. The tribunal found no orders restraining the effect of the Consent Terms on the shares. Application of Law to Facts: The tribunal applied the principles of equity and justice, emphasizing the need to protect the deceased's estate from alleged oppression. Treatment of Competing Arguments: The appellant's argument that the NCLT should not have entertained the petition due to pending legal challenges was dismissed, as no injunctions were in place. Conclusions: The tribunal concluded that the NCLT acted within its jurisdiction and that the pending legal proceedings did not preclude the respondents from maintaining the petition. Issue 3: Allegations of Oppression and MismanagementRelevant Legal Framework and Precedents: Sections 241 and 242 of the Companies Act, 2013, provide remedies for oppression and mismanagement. Court's Interpretation and Reasoning: The tribunal found that the drastic reduction in the deceased's shareholding posthumously raised legitimate concerns of oppression, warranting examination by the NCLT. Key Evidence and Findings: The shareholding of the deceased was reduced from 66% to 6% after her death, allegedly without proper representation of her estate. Application of Law to Facts: The tribunal considered the reduction in shareholding as indicative of potential oppression, justifying the need for the deceased's estate to be represented in the proceedings. Treatment of Competing Arguments: The appellant's justification for the shareholding change was found insufficient, particularly given the absence of the deceased's legal heirs in the decision-making process. Conclusions: The tribunal concluded that the allegations of oppression and mismanagement merited investigation by the NCLT, and the respondents were entitled to represent the deceased's estate in this context. 3. SIGNIFICANT HOLDINGSVerbatim Quotes of Crucial Legal Reasoning: "When a member dies, his estate is entrusted in the legal representatives. When, therefore, these vesting are illegally or wrongfully affected, the estate through the legal representatives must be enabled to petition in respect of oppression and mismanagement and it is as if the estate stands in the shoes of the deceased member." Core Principles Established:
Final Determinations on Each Issue:
The appeal was dismissed, affirming the NCLT's decision to allow the company petition to proceed.
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