2020 (5) TMI 153 - HC - Companies Law

Adjournment of conducing Annual General Meeting (AGM) - stay on result of election and/or voting - Ex parte ad interim or interim order - scope of an appeal - three appeals are against ad interim orders when only the parties to the testamentary suit were present before the Court - Order 41 Rule 22 of the Code of Civil Procedure, 1908 - HELD THAT - The impugned order dated 2nd August, 2019, as clarified by the order dated 5th August, 2019, is, therefore, not sustainable in view of the fact that orders and/or directions were passed interfering with the holding of AGM by Companies which are separate juristic entities without first deciding the issue of jurisdiction. Even if the deceased held shares in such Companies, which are subject matter of the bequest under the Will in question, the jurisdiction to pass orders in respect thereof had to be decided first when specifically raised. The order dated 9th August, 2019, which is a subsequent order wherein the learned Single Judge has exercised probate jurisdiction when the issue of inherent lack of jurisdiction was kept pending for decision, is also not sustainable on the same ground. The order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019 is set aside on the ground that the jurisdiction as to the authority of the probate Court to pass orders against Companies which are third parties to the testamentary suit should have been decided first before passing any other order as the issue relates to inherent lack of jurisdiction and goes to the root of the matter, particularly in view of the fact that a probate Court only in an extreme case can pass an order of injunction. So far as the order dated 9th August, 2019 is concerned, the same also is set aside on two grounds. It is a subsequent order again passed without first deciding the issue of jurisdiction prior to interfering with the AGM of a third party Company as also for being devoid of reasons. The ad interim orders/ ex-parte ad interim orders continued for around eight (8) months but when it involves an inherent lack of jurisdiction the said orders have to be set aside. The same is our conclusion even if the order is treated as an ad interim order. Appeals allowed.

Issues Involved:
1. Person aggrieved and the appellant’s right to maintain the appeals.
2. Jurisdiction of the probate court.
3. Requirement of reasons in ex parte ad-interim orders.
4. Balance of convenience.

Issue-wise Detailed Analysis:

a) Person aggrieved and the appellant’s right to maintain the appeals:
The respondents argued that the appellants were not "persons aggrieved" as they were not wrongfully deprived of any rights. However, the court found that since the appellants were bound by the orders and could be held in contempt for violating them, they were indeed "persons aggrieved" and thus entitled to file and maintain their appeals.

b) Jurisdiction:
The court examined whether the probate court had jurisdiction to interfere with the AGMs of companies where the deceased held shares. The court noted that the issue of inherent lack of jurisdiction should have been decided at the threshold. The probate court's jurisdiction is limited to deciding the genuineness of the will and does not extend to interfering with the functioning of companies. The court concluded that the probate court erred in passing orders without first deciding on its jurisdiction.

c) Reasons to be contained in ex parte ad-interim orders/ad-interim orders:
The court emphasized that reasons are mandatory in ex parte ad-interim orders, especially when they affect third parties. The orders dated 2nd August 2019, 5th August 2019, and 9th August 2019 were found to be lacking in reasons. The court held that a judge of a Chartered High Court does not have the privilege of not assigning reasons while passing such orders. The absence of reasons rendered the orders unsustainable.

d) On conveniences:
The court highlighted that the estate of the deceased is protected by an Administrator pendente lite and that a shareholder is not the owner of the company's assets. Interference with the AGMs of companies was deemed uncalled for without first deciding the jurisdiction. The court found that the balance of convenience did not favor the respondents and that the probate court should have first decided on its jurisdiction before passing any orders affecting the companies.

Conclusion:
1. The orders dated 2nd August 2019, 5th August 2019, and 9th August 2019 were set aside due to the probate court's failure to first decide on its jurisdiction and the lack of reasons in the orders.
2. The appeals were allowed, and the learned Single Judge was directed to hear the matter on all issues, giving the appellants an opportunity to present their cases.
3. The court clarified that its findings were only for the purpose of deciding the appeals and should not influence the learned Single Judge's decision.

Later:
A prayer for stay of the operation of the order was made by the respondents and was rejected by the court.

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