2024 (12) TMI 887 - HC - Companies Law

Refusal of prayer of the plaintiffs/appellants for interim injunction - locus standi of the plaintiffs/appellants to initiate the suit - seeking declaration that the decision taken by the defendants/respondent-Company to obtain leasehold rights in their favour is illegal, null and void - limited scope of interference in a Letters Patent appeal, which is a unique power vested in the High Courts, more particularly, Chartered High Courts. Locus standi of the plaintiffs/appellants to initiate the suit - Whether the plaintiffs, as universal legatees of the estate of Late Smt. Priyamvada Debi Birla, have the legal standing to initiate the suit? - HELD THAT - Section 104 of the 1925 Act provides that the legatee has a vested interest in the estate of the deceased testator from the date of death of the testator. However, the said Section is circumscribed by Section 211 of the said Act which operates to vest all the property of the deceased person in the Executor or Administrator, as the case may be. Since the APL Committee has been appointed by order of the Testamentary Court in respect of the estate of late PDB, Section 211 vests the property of the estate in the said APL. Also, as per Section 211(1) of the 1925 Act, it is the APL which is the legal representative of the estate for all purposes. Thus, the plaintiffs, in the capacity of universal legatees of the estate, cannot jump the queue bypassing the APL and directly assert their rights in respect of the estate. Section 332 of the 1925 Act provides that the assent of the executor or administrator is necessary to complete a legatee‟s title to his legacy. Thus, although the rights of legatees relate back to the date of death of the testator, such right/title is conferred only upon probate/Letters of Administration being granted and assent to the legacybeing completed by distribution of the property by the Executor or Administrator as the case may be - Hence, it is premature for the universal legatees to assert their rights by bypassing the total control of the APL over the estate through the testamentary court. Jurisdiction of the Civil Court in relation to the Companies Act, 2013 - HELD THAT - Section 247 of the 1925 Act, under which the APL has been appointed, stipulates that the APL shall have all the rights and powers of a general administrator other than distribution of the estate and shall be subject to the immediate control of the (testamentary) court and act under its direction. Hence, the appropriate remedy for the universal legatees, if at all aggrieved by the functioning of the APL, would be to approach the testamentary court. The mere fact that as per the Division Bench order passed in connection with the testamentary matter no injunction can be passed or intermeddling can be undertaken by the testamentary court or the APL in respect of third-party properties is not sufficient justification for approaching the Civil Court. The dissenting/minority APL member could not seek to achieve indirectly through the plaintiffs/universal legatees what he could not obtain directly by contravening the majority decision of the APL. Admittedly, one of the major components of the cause of action pleaded in the plaint by the plaintiffs/appellants is the instigation caused by the letter of the dissenting member of the APL with regard to difference of opinion with the decision of the majority members. The Civil Court cannot grant its blessings to such attempt on the part of the dissenting member to frustrate the majority decision of the APL. At best, if aggrieved and otherwise entitled in law, the legatees could approach the testamentary court in that regard - From the Company Law perspective, the plaintiffs are not members of the defendant-companies and, as such, cannot invoke the jurisdiction of the NCLT under Sections 241 and 242 of the 2013 Act. A careful perusal of the impugned order refusing interim relief shows that all the above aspects were duly considered by the learned Single Judge. Hence, let alone meet the strict yardsticks and parameters of interference in an Intra-Court Appeal, the order impugned does not call for interference even by way of a regular first appeal. The learned Single Judge having taken a plausible and justified view backed by cogent reasons, there arises no occasion to interfere with the same. Application dismissed.

Summary

Issues Involved:

1. Locus standi of the plaintiffs/appellants to initiate the suit.
2. Jurisdiction of the Civil Court in relation to the Companies Act, 2013.
3. Validity of the impugned decision by the Board of Directors of the defendant companies.
4. Appropriateness of the refusal of interim injunction by the learned Single Judge.

Detailed Analysis:

1. Locus Standi of the Plaintiffs/Appellants:

The primary issue revolves around whether the plaintiffs, as universal legatees of the estate of Late Smt. Priyamvada Debi Birla, have the legal standing to initiate the suit. Under Section 104 of the Indian Succession Act, 1925, a legatee has a vested interest from the testator's death, yet Section 211 vests the estate's property in the Executor or Administrator. The APL Committee, appointed by the Testamentary Court, holds the estate's legal representation, preventing the plaintiffs from asserting rights independently. The plaintiffs' rights are contingent upon the APL's assent and distribution of the estate, making their current claim premature. The court emphasized that any grievances with the APL's functioning should be addressed through the Testamentary Court, not a civil suit.

2. Jurisdiction of the Civil Court:

The court examined the jurisdictional bar under Section 430 of the Companies Act, 2013, which precludes civil courts from entertaining suits concerning matters within the NCLT's purview. Sections 241 and 242 of the Act allow only "members" of a company to challenge internal affairs, excluding third parties like the plaintiffs. The court reinforced that the plaintiffs, lacking membership status, cannot invoke NCLT jurisdiction or challenge the companies' internal management through civil litigation.

3. Validity of the Impugned Decision:

The decision by the Board of Directors to lease the seventh floor was scrutinized. The plaintiffs argued that the decision was commercially unviable and detrimental to the estate's interests. However, the court noted that the BoDs, including APL nominees, legitimately exercised their authority under Section 179 of the Companies Act. The plaintiffs' claim of derivative action was dismissed as irrelevant, given their status as third parties. The court found no contravention of company law provisions in the impugned resolution, affirming the BoDs' autonomy in business decisions.

4. Appropriateness of Refusal of Interim Injunction:

The court upheld the learned Single Judge's refusal to grant interim relief, emphasizing the limited scope of interference in intra-court appeals. The judge's decision was deemed plausible and justified, considering the legal framework and facts presented. The plaintiffs' arguments failed to demonstrate any perversity or patent illegality warranting appellate intervention. The court highlighted that the plaintiffs' approach to bypass the APL's majority decision through civil litigation was inappropriate and unsupported by legal standing.

Conclusion:

The appeal was dismissed, affirming the learned Single Judge's order. The court reiterated that the plaintiffs, as universal legatees, must navigate through the Testamentary Court and the APL, respecting the legal hierarchy and jurisdictional boundaries established by the Indian Succession Act and the Companies Act. The decision underscored the autonomy of company boards and the procedural propriety required in challenging such decisions.