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TMI Blog2004 (10) TMI 344X X X X Extracts X X X X X X X X Extracts X X X X ..... d purportedly on the ground that the application for transfer of these shares was not proper and validly submitted. ( b )The company had issued rights share to the existing shareholders. As aforesaid 1,000 shares were not transmitted in favour of the respondent/executor and he had not become the owner thereof, he was denied rights share also which was ultimately issued to appellant No. 2 (respondent No. 2 before the CLB). Direction is given by the CLB to cancel the said allotment of the shares in favour of appellant No. 2 and issue these shares to the respondent herein. 2. I may state at the outset that basic objection of the company for non-transmission of these 1,000 shares in favour of the respondent was that no objection certificate from the daughters of the deceased (sisters of the respondent) was not submitted. During the proceedings that certificate is also submitted and, therefore, on 25th August, 2004, learned senior counsel for the appellants made a statement that insofar as transmission of these 1,000 shares in favour of the respondent is concerned, needful would be done. Therefore, it is not necessary to discuss the legality of this direction by the CLB. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants herein and asked for the following reliefs: ( i )The Board of Directors of the company be reconstituted and he should be made a working Director of the company. In support of this relief, he submitted that there had been an unwritten and implied agreement that both the groups would have equal say in the management of the company. His father was a director of the company till his death. However, this trust and mutual confidence was breached by the appellants 2 and 3 in a systematic manner by not allowing the respondent to participate in the management of the company and after the death of his father on 5th June, 1991 he was never allowed to be represented on the Board of Directors. ( ii )The company be directed to transmit 1,000 equity shares of his father Sh. Om Prakash in the name of executor of the Will on the basis of Will executed by Late Sh. Om Prakash. ( iii )Allotment of 19,000 equity shares in favour of appellant No. 2 be set aside and these shares be also allotted in the name of Executors of the Will. 5. There were certain other minor reliefs claimed in the petition but not pressed before the CLB. 6. The CLB vide impugned order, granted second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rights issue allotment due to my late father in the name of the Executor, Estate of Late Lala Om Prakash. The amount payable in respect of the same is enclosed herewith. This letter has been issued with the concurrence and consent of all the heirs of Late Lala Om Prakash. Should any other legal requirement be necessary, you may kindly revert back to me so that I may comply with such legal requirement, if any." 9. He also enclosed cheque for Rs. 19,000 for issue of those shares. The company sent reply dated 25th March, 2002 requesting for providing the company with a copy of the Will of (Late) Sh. Om Prakash "to enable us to act on your request to allot shares to the Executor named in the Will who would hold the shares as Trustee for the beneficiary." He was also asked to provide no objection certificate of the beneficiaries/legal heirs for the allotment of shares in the name of Executor of the Will. It was also stated that the document should reach latest by 28th March, 2002 as the share capital had to be increased by 31st March, 2002 which was the last date for this purpose. The respondent sent reply dated 27th March, 2002 enclosing therewith the copy of the Will. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the provisions of section 81 of the Act. 11. He also referred to provisions of section 41 of the Act which provide definition of "Member" and submitted that a person to be a member should be holding equity share capital of the company and whose name is entered as beneficial owner in the record of the depository. His submission was that since in respect of 1,000 shares which was in the name of (Late) Sh. Om. Prakash, as per the record the owner was still (Late) Sh. Om Prakash and the respondent had not become member in respect of these shares and, therefore, was not entitled to any rights share. He also submitted that as (Late) Sh. Om Prakash was the recorded owner letter was sent in his name even when the respondent applied for rights share on the basis of Will and he was asked to submit no objection this was not submitted by him before 31st March, 2002 and, therefore, the Board of Directors had no option but to refuse the allotment of shares. In any case, it was submitted, his request contained in letter dated 23rd March, 2002 could not be entertained as shares cannot be allotted to the executor of the Will. 12. After giving my thoughtful consideration to these submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Thereafter in four sub-paras four companies are mentioned as Lucky Star Estate (India) Pvt. Ltd., Niagara Hotels Builders (P.) Ltd., Om Apartments Pvt. Ltd. and Parabal Pvt. Ltd. The shareholding which was held by (late) Sh. Om Prakash is allocated to the respondent and his sisters on the basis of Will. Three salient aspects which can be deduced from this Memorandum of Understanding would be as under : ( a )There was a settlement between the two families as per which assets were divided between the families. ( b )This settlement categorically refers to the Will executed by (late) Sh. Om Prakash, which is acted upon as well. It is clear that the Will is not only accepted by LRs of (late) Sh. Om Prakash but by other group, namely, B.K. Abbi as well. ( c )The name of the appellants company is conspicuously absent in the entire Memorandum of Understanding. 15. It is, thus, clear that without any formalities of making application for transmission of shares, obviously treating different companies as venture of two families, the shares in the other companies were transmitted in favour of the respondent and other beneficiaries, namely, his sisters, as per the Will. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one gets is that the stance of appellants was to deny the shareholding to the respondent and/or other legal heirs of (late) Sh. Om Prakash and thus decided to allot the shares to appellant No. 2. In a non-functional company, obvious move to issue rights share and ultimately allot 19,000 shares to one of its own family members, was to disturb the shareholding equilibrium. With this move of the appellants 2 and 3 shareholding now virtually comes to 20:80. Why it is done? Obviously as the company is not functioning, if it is to be wound up, the move is to get 80 per cent share in the assets by subscribing to these shares and paying only the face value of the shares. 17. It may be mentioned, as held by the Supreme Court in the case of World Wide Agencies (P.) Ltd. v. Margarat T. Desor AIR 1990 SC 737 that even legal representatives of deceased member can move a petition under sections 397 and 398 of the Act. In this case the Supreme Court discussed the effect of section 41 as well as Article 28 of Table A Schedule I of the Companies (Court) Rules, 1959 and after taking note thereof held as under: "It is true that it must be a member and section 41 of the Act provides that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 353 of the English Companies Act. This judgment of Pennycuick, J. went up in appeal to the Court of Appeal and it was reversed. See Re Jermyn Street Turkish Baths Ltd. s case ( supra ). But on the point whether the representative of a deceased member can maintain an action under section 210 of the English Companies Act, the views of Pennycuick, J. were not reversed or modified. Mr. Nariman submitted that the observations of Pennycuick, J. were obiter for the decision of the case. We are unable to agree. Indeed, this was a point specifically referred to by Pennycuick, J. as being raised and specifically decided. But we need not detain ourselves with this controversy because the decisions of the English Courts are not binding in the Courts of India. But the observations or the reasoning are of persuasive value. We are clearly of the opinion that having regard to the scheme and the purpose of sections 397 and 398 of the Act, the reasoning on a pari materia provision of the English Act would be a valuable guide. The said construction, appears to us, to further the purpose intended to be fulfilled by petitions under sections 397 and 398 of the Act. It facilitates solution of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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