2021 (1) TMI 816 - HC - Companies Law

Seeking modification and/or clarification and also for further direction in support of the interim orders earlier passed - Seeking direction that the voting in relation to resolution no. 5 and 6 of the notice dated 1st July, 2019 for convening the Annual General Meeting of Birla Corporation Ltd. be stayed - HELD THAT - From Section 247 it appears that a probate Court also takes the responsibility to administer the properties as left by the deceased and to preserve the status quo of such properties left by the Will through Administrator Pendente lite and such Administrator Pendente Lite shall be subject to the immediate control of the Court and shall always act under the Court's direction by which it has been appointed. In the present case such Administrator Pendenti Lite was appointed consisting of three members. Two nominated by plaintiffs and defendants and the third member was being a neutral person, a retired Judge of the Supreme Court was appointed initially and lastly Justice Mohit S. Shah, a retired Chief Justice of Calcutta and Bombay High Court. Administrator Pendenti Lite adopted various resolution and lastly on 19th July, 2019 and 30th July, 2019 in the interest of the estate so that the estate is preserved in its original form and it can be distributed to the rightful person. Since the Administrator Pendente Lite is under the immediate control of the court and its decision has not been implemented or could not be implemented by reason of objection by the nominee member of the plaintiff and while it is argued by the plaintiffs that the decision not being unanimous the plaintiffs are not inclined to implement the same the defendant/petitioner have come up with a prayer for a direction upon the parties to implement the decision of APL holding that the decision passed by the APL by majority is a good decision for all purpose and it should be carried out. The deceased had controlling shareholding in the investment Companies either by direct investment or along with other Investment companies. APL while exercising its authority over the estate of the deceased does not appear to have violated the order dated 23rd August, 2012 and therefore, it cannot be said that parties are not bound by the decision of the APL unless a contrary is proved. If a party is aggrieved by the decision of APL, it can reasonably be concluded now that since, the APL without any specific order from the Court has taken decision by majority instead of unanimity the same could have been agitated long before but having accepted the same and having subjected itself to the jurisdiction of the APL Committee recognizing that APL has got the authority to exercise within the scope of the order dated 23rd August, 2012, it is now an absurd proposition raised by the plaintiffs that since the APL has not taken any unanimous decision the same cannot be either implemented or be made binding upon the parties. Once the parties allowed themselves and they participated in the meeting without raising any objection that its decision if not unanimous cannot be deliberated in the meeting and after resolution has been adopted by majority it is no more open for the plaintiffs to agitate that the APL's decision 'by majority' is not binding on them - It is apparent that within its power and authority APL Committee, have right to exercise all such powers and perform all such acts as late PDB would have exercised had she been alive. PDB had controlling shareholding in the investment companies either by direct investment or along with other investment companies and PDB as the investment companies together with manufacturing companies through cross shareholding had controlling interest in all those manufacturing companies. This view has been confirmed by both Division and Single Bench of this Court and in view thereof APL Committee is well within its power to ask all entities which were under the control of PDB to exercise their voting right in regard to their investment in the share capital of any of the companies which were under the control of PDB, in the manner considered by the APL as beneficial to the interest of the Estate. All these entities of the group would have exercised their voting right in accordance with the directions of PDB had she been alive. Accordingly, now such entities would exercise voting right flowing from their investment in the companies controlled by PDB in the manner to be guided by the APL Committee. The phrases, Prima facie case , balance of convenience and irreparable loss are to be considered based on the facts of each particular case and to meet myriad situations presented by man's ingenuity in given facts and circumstances, it is to be decided with sound exercise of judicial discretion to meet the ends of justice. Prima facie case is that which raises substantial question, of course bona fide, which needs investigation and, ultimately, a decision on merits - A case of temporary injunction is an action preventive in nature and a specie of precautionary justice intended to prevent apprehended wrong or anticipated mischief which if allowed to happened may not be un done and cannot be compensated by money. This Court is of the view that the defendant/petitioners have made out sufficient case to get an interim order/temporary injunction to preserve and protect the interest of the ultimate beneficiaries under the Will of PDB concerning the estate of the deceased and this Court in aid of the final relief in the Testamentary Suit in exercise of the power conferred under section 247 of Indian Succession Act, passes the following orders (a) The plaintiffs shall implement the decision dated 19th July, 2019 and 30th July, 2019 of the APL Committee taken by majority as also all consequential decisions of the APL in furtherance of the said decisions and shall be restrained from drawing any benefit personally from out of the assets of the estate of the deceased during pendency of the Testamentary Suit. (b) Plaintiffs are also restrained from interfering with the decisions of the APL and any decision which might be taken by it in future by majority if the same directly or indirectly relates to the estate of the deceased and further the plaintiff no. 1, Harsh Vardhan Lodha is restrained from holding any office in any of the entities of M.P. Birla Group during pendency of the Suit. (c) Defendants are also restrained by an order of temporary injunction from interfering with the APL's decision by majority during pendency of the suit. Application disposed off.

Summary

Issues Involved:
1. Jurisdiction of Probate Court.
2. Validity of APL Committee decisions.
3. Implementation of APL Committee decisions by plaintiffs.
4. Interim injunctions against plaintiffs and companies.
5. Rights and powers of the APL Committee.
6. Role and actions of plaintiffs in relation to the estate.
7. Controlling interest and shareholding in MP Birla Group companies.
8. Compliance with Companies Act and SEBI regulations.

Detailed Analysis:

1. Jurisdiction of Probate Court:
The Court examined whether the Probate Court has jurisdiction to pass orders affecting companies not party to the probate proceedings. It was held that the probate court has jurisdiction under Section 247 of the Indian Succession Act to protect and preserve the estate of the deceased, including issuing orders to ensure the smooth functioning of the Administrators Pendente Lite (APL). The Court emphasized that the probate court's role extends to overseeing the administration of the estate and ensuring no dissipation of assets.

2. Validity of APL Committee Decisions:
The APL Committee, consisting of three members, took decisions by majority rather than unanimously. The Court upheld the validity of these decisions, stating that the APL Committee has the right to make decisions by majority in the absence of unanimity, as supported by the Division Bench's order and relevant legal principles. The Court rejected the plaintiffs' contention that decisions must be unanimous.

3. Implementation of APL Committee Decisions by Plaintiffs:
The Court directed the plaintiffs to implement the APL Committee's decisions dated 19th July 2019 and 30th July 2019. The plaintiffs were restrained from drawing any personal benefit from the estate's assets and from interfering with the APL's decisions. The Court emphasized that the APL's decisions are binding on the parties involved.

4. Interim Injunctions Against Plaintiffs and Companies:
The Court granted interim injunctions to preserve the estate's interests. The plaintiffs, particularly plaintiff no. 1, were restrained from holding any office in any MP Birla Group entities during the pendency of the suit. The Court also restrained the defendants from interfering with the APL's majority decisions. However, the Court clarified that no orders could be passed against the noticee companies (Birla Corporation, Birla Cable Limited, and Vindhya Telelinks Limited) as they were not parties to the probate proceedings.

5. Rights and Powers of the APL Committee:
The APL Committee was empowered to exercise all rights and perform acts that the deceased, PDB, could have exercised. This includes exercising voting rights in the companies controlled by PDB. The Court affirmed that the APL Committee's decisions are valid and enforceable, and the plaintiffs must comply with them.

6. Role and Actions of Plaintiffs in Relation to the Estate:
The Court noted that the plaintiffs, particularly plaintiff no. 1, had been obstructing the APL Committee's functioning. The plaintiffs were found to be acting against the estate's interests, and the Court's orders aimed to prevent further interference and ensure the estate's preservation.

7. Controlling Interest and Shareholding in MP Birla Group Companies:
The Court recognized that PDB had a controlling interest in the MP Birla Group companies through direct and indirect shareholding. The APL Committee, representing the estate, was entitled to exercise this controlling interest. The Court rejected the plaintiffs' arguments against the APL's authority over these shares.

8. Compliance with Companies Act and SEBI Regulations:
The Court addressed the noticee companies' contention that only registered members could exercise voting rights. It clarified that the APL Committee, as the estate's representative, could direct the exercise of voting rights. The Court emphasized that the Companies Act and SEBI regulations support the APL's authority to manage the estate's interests in the companies.

Conclusion:
The Court upheld the APL Committee's decisions and directed the plaintiffs to implement them. Interim injunctions were granted to protect the estate, and the APL Committee's authority over the estate's assets was affirmed. The noticee companies were not subjected to direct orders as they were not parties to the probate proceedings.