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TMI Blog2013 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be finally determined by the Court. As representative of the shareholder they can always apply to the company to subscribe for such shares in their capacity “as representative of the deceased in the estate” and not as owners in their own names. In order to enjoy privileges incidental to the ownership of the shares an application will have to be made to the company as required by law to record their names in the Register of members and the companies will have to consider such an application in accordance with their Articles of Association and the provision of law which governs the same. Parties for the purpose of administration of the estate having agreed to appointment of 3 Member Committee as Joint Administrators they shall be entitled to exercise of the rights and powers of General Administrators over the estate of the deceased other than the right of distributing such estate and we, therefore, direct them i) to prepare and file an inventory of the assets of the estate and appraisal of the value of such assets and ii) to take over possession of the assets of the estate in the manner provided under the law considering the nature of the property. a) From Receivers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et outgoings both statutory and non-statutory which are due and payable by the estate of the said deceased. In one words they will take all lawful steps for general Administration of the estate left by the said deceased. In the process they will take steps in accordance with law for their participating in all the meetings of Shareholders of the companies and also take all lawful steps as shareholders in accordance with law. However while exercising voting rights for the purpose of appointment of any Director or Constitution or reconstitution of Board of Directors they shall give prior intimation to this Court in the form of report indicating the reason and need for appointment of new Director and constitution or reconstitution of Board of Directors of the Companies in which the deceased had shareholdings whereever possible under law .. In this context it is appropriate to mention that before the learned Single Judge parties had prayed for appointment of Administrator Pendente Lite ( APL for short ) as evident from their respective applications. In application being GA 3731 of 2008, the relevant prayers are as follows:- a) The petitioner No.1, Harsh Vardhan Lodha, be specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, 2003. After the death of PDB, application for probate was filed by RSL. Caveats were filed. Some of the caveats filed were discharged by the High Court and the judgment was upheld by the Supreme Court in Krishna Kumar Birla vs. Rajendra Singh Lodha: (2008)4 SCC 300. Caveats of GPB and two sisters of MPB were retained. The probate matter was marked as Testamentary Suit No.6 of 2004. After the conclusion of hearing of the application for discharge of caveats and when judgment was awaited, the Birlas and Newar filed before the High Court three separate applications for appointment of APL on the ground that RSL was not managing the estate properly including the companies stated to be part of the M.P Birla group of companies. The said applications for appointment of APL were disposed of by the learned Single Judge by the judgment and order dated 19th May, 2006, the relevant portions of which are extracted hereunder:- 73. Under such circumstances I feel that those facts and bundle of facts and law as discussed above, supported by the documents. Constitute the absolute necessity appointment of the Administrator, pendente lite, at least for a brief period. 74. Allegations and cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hereunder:- 307. Therefore, on that question also, after considering the facts and circumstances of the case and the materials on record placed before us. We have to come to the conclusion, with utmost respect to His Lordship, that His Lordship has mis-appreciated the fact and held that the Estate is in medio . Such conclusion of His Lordship, in our opinion, cannot be sustainable in the eye of law in the facts and circumstances of this case. 308. The further question that whether the Court has jurisdiction to apply discretion in the facts and circumstances of this case, it is needless to mention here that the Court will apply its discretion providing that the case is being made out by the parties calling for such discretion in a case where the case of necessity for appointment of Administrator Pendente Lite has been made out. 309. Hence, we are unable to find out such situation in this matter and unable to uphold the decision of His Lordship and according to us, the Court has not appreciated the facts of the case properly and has not exercised its discretion properly in appointing the Administrator Pendente Lite. 310. Hence, we pass an order of injunction restrainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Committee of APL vis - vis the exercise of nature of rights relating to the shares which form major part of the estate. In so far as the appellants are concerned it is contended that when subsisting interim orders passed in the instant proceeding have shown to be adequate to preserve the Estate and safeguard the status quo as prevailing on the date of death of PDB, is there any necessity for conferring powers on the APL to get the shares recorded in their names and to take over the responsibility of running the MPB Group of Companies. Even if the subsisting orders are held to be not adequate, which have not been held by the Trial Court, does the Probate Court have jurisdiction and power to authorize APLs to apply and get the shares comprised in the Estate transferred in their names so that they would have voting right and take over management and control of MPB Group of companies. It is submitted that the interim orders passed by the Court is to maintain status quo as prevailing on the date of filing of the legal proceeding and not to create new state of affairs, which will disturb the status quo as prevailing during the last seven years. There is no necessity for confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares registered in their names. It is contention of the learned counsel for the respondents that the Joint APLs will be entitled to exercise all rights arising out of holding of shares as was valuable to the deceased. It is the appellants case that he (Harsh Vardhan Lodha) may be appointed as APL so as to operate bank account and for collection of dividend and all other incomes of the estate of late PDB and deposit of the same in the said account and submission of Income Tax and Wealth Tax returns pertaining to estate of late PDB so also and submission of account to the estate of late PDB in terms of the order of the Hon ble Division Bench dated 11th October, 2007 of this Court. Whereas on behalf of the respondents it is sought that an APL and/or receiver be appointed to take over possession of all movable and immovable assets and properties of PDB including the share holdings of those companies as specified in the Schedule Annexure Marked B by substituting instead and in place of RSL wherefrom his name appears and/or directed to take all decisions and because all rights in the company referred to in Annexure A . It is the contention of the learned counsel appeari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue in the register of members, until the name of the deceased member is substituted in the register of members of the company in accordance with law i.e. provisions of the Companies Act, 1956. It is therefore submitted that this is possible only in case of : a) a person who has obtained transfer of shares in accordance with the provisions of Companies Act, 1956 from a member whose name appears on the register of members and ; b) a person in whose favour there has been transmission of shares by operation of law : Section 108(1) of the Companies Act. And as the deceased share holder cannot obviously execute the deed of transfer and therefore, in the absence of such transfer in favour of APL they have no right to get their names recorded in the register of members. The other category is in case of a person and can happen only when there has been transmission by operation of law and, therefore, the APL are not personal representative of the testatrix as shares and other properties of a dead person are transmitted by operation of law only to his/her personal representative and personal representative of a deceased person is the person on whom the property of the decease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonal representative of the testatrix in whose name the shares stand recorded in the register of members of the companies. There is no question of grant of Probate or Letter of Administration with a copy of the Will annexed or issuance of a Succession Certificate in favour of any party at this interlocutory stage without deciding the question of validity of the Will of the deceased. The shares should not be registered in the name of the Joint APLs without any Succession Certificate or Letters of Administration with copy of the Will annexed or Probate, in circumvention of provisions of the of the ISA and, therefore, the order impugned directing the Joint Administrators to get their names recorded in the register of members of the Companies is not sustainable. Particularly, when the shares have not been transferred to them in accordance with provision of Section 108 of the Companies Act nor the shares have been transmitted to them by operation of law. It is submitted that there is a clear distinction in so far as the English law and the Indian Law on the subject. Under the English Law viz. Section 163 of the Supreme Court of Judicature Act as well as Administration of Estates Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by the Court upon final adjudication of Testamentary Suit. Learned counsel for the appellant has placed several decisions in support of their submission which are enumerated below: a) Balkrishan Gupta ors. vs. Swadeshi Polytex Ltd. anr. (AIR 1985 SC 520) On appointment of a Receiver and his powers wherein it was held - A Receiver appointed by a Court or authority in respect of a property holds it for the benefit of the true owner subject to the orders that may be made by such Court or authority. A Receiver appointed by a Court in respect of certain shares which had not been duly entered in the Register of Members of the company concerned as belonging to him could not acquire certain newly issued shares which could be obtained by the members of the company. (Mathalore Vs. Bombay Life Assurance Co. Ltd. 1954 SCR 117). Although a Receiver is not the assignee or beneficial owner of the property entrusted to his care, it is an incomplete and inaccurate statement of his relation to the property to say that he is merely its custodian. This whatever may be the other powers of a Receiver dealing with the property which is in custodia legis while in his custod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretion generally makes grant. The general principle is that the Court does not as a rule appoint a receiver as against executors whenever they have obtained probates unless there is gross misconduct or mismanagement and waste on their part. If they are rightly in possession and there is no dispute as to their title they will not be replaced by the grounds. Their appointment itself shows that the testator had confidence in them, and the Court gives effect to the expression of the confidence reposed in parties by one who knew them best. The Court refuses to appoint an administration pendent elite where there is a person named in the will as executor whose appointment is not questioned and who can discharge the function of an administrator. It is in the interests of all the parties to appoint an impartial person as an administrator pendent elite, and the Court receiver is an Officer of the Court who is independent of and is bound to be indifferent between the contesting parties. Moreover under Section 247 all powers that he exercises are subject to the immediate control of the Court and he acts under its direction. d) Adapala Subba Reddy anr. vs. Adapala Andemma ors. (AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of proprietary rights is not intended, mere transference of management or control is not enough to satisfy the requirements of vesting as contemplated by Section 10, a right to call for a transfer and to possess the property for the purposes of the trust and also a power to dispose of it according to terms of the trust without reference to the owner are the essentials that constitute the vesting . g) Fazulbhoy Jaffar vs. Credit Bank of India Ltd. (AIR 1914 Bom 128) As regards: Rights and liabilities of registered share-holders stated- Companies Act, 1882, Section 151 It was held that - it has been settled law in England for many years that a registered holder of shares in a statutory company is a person with vested interest in property which may be burdened with an obligation to pay calls in the future. The registered members cannot keep the interest and prevent the company from having it and dealing with it as their own without being bound to bear the burden attained to it. [London N.W. Ry. Co. vs. M. Michael (3)] h) R. Mathalone ors. vs. Bombay Life Assurance Co. Ltd. ors. (AIR 1953 SC 385), On the point as to who can acquire new shares of a company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust necessarily take advantage of the rights/bonus issues to augment the value of the estate. It is contended that the administrator has several rights and powers under the different provisions of the ISA, including the right to distribute the estate. These rights under the ISA which the APL may be required to exercise will depend on the nature of the assets comprised in the estate. For example where the estate consists of shares the APL will exercise the right to vote at the meeting of the company and to receive dividend accruing in relation to the shares etc. Therefore, in order to effectively exercise these rights, the APL s name will have to be registered in the register of members of the concerned company in his capacity as APL. It is submitted that the APL has all the rights and powers of a general administrator and the prefix general before the word administrator in Section 247 of the ISA cannot, therefore, operate to limit the rights and powers of an APL vis- -vis an administrator is provided in Section 247 itself namely the APL cannot distribute the estate. Thus Section 247 incorporates all the rights and powers conferred on the administrator under the aforesaid chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nte lite is not in the same position as a Hindu widow and is under no obligation to perform any sraddha or to incur any expenses thereon. To provide funds to the heir for any sraddha except as part of the funeral ceremonies under sections 316 and 320 is nothing but distribution of part of the estate to the heir to enable him to discharge his obligation to perform the sraddha of his deceased ancestor. I am, therefore, clearly of opinion that I have no power or jurisdiction to direct the administrator pendente lite to pay any sum to the applicant for performing the sapindakaran sraddha of the deceased Raja Bahadur . (emphasis supplied) It is contended that APL is also the legal representative of the deceased for all purposes and the entire estate of the deceased vests in the APL as such. But the vesting is limited in duration i.e. till the suit comes to an end and an administrator is finally appointed by a decree. On the passing of such decree the rights and powers of an APL come to an end and the administrator takes over charge and administers the estate and completes the administration upto the distribution of the estate. Learned counsel for the respondents have placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself those rights in the thing owned which for the time being belong to others by getting rid of the corresponding burdens (para 17) d) Jermyn Street Turkish Baths Ltd. [(1971) 3 All ER 184]; To substantiate the contention that APL has a right to intervene in case. The affairs of a company could only be said to have been conducted in a manner oppressive to some part of the members of the company where shareholders, having a dominant power in the company, either exercised that power to procure that something was or was not done in the conduct of the company s affairs or procured by an express or implied threat of an exercise of that power that something was not done in the conduct of the company s affairs; to amount to oppression such conduct must be unfair or burdensome, haul and wrongful, to the other members of the company or some of them and lack that degree of probity which they were entitled to expect in the conduct of the Company s affairs. e) Kali Kumar Chatterji vs. Rash Vehari Banerji [ILR (1947) 2 Cal 1950]; On rights and powers of an APL. The administrator pendente lite is subject to the directions of the Court in the matter of exercising the rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceased vests in the general administrator, no property vests in a receiver or a sequestrator. j) In Buchan s case [(1879) 4 App Cases 583] it was held that - transfer of shares of the testator into the name of his executor, the transfer has to be authorized by a distinct and intelligent request on the part of the executor that the shares should be dealt with in this way, and that reasonable opportunity was afforded to the executor to transfer the shares to a purchaser in the ordinary course of administration of the estate, if he did not wish to have them placed in his own name. Therefore, according to the respondent the shares can be registered in the names of APL as representation of the deceased share holder on such request being made. k) Betty Suresh Mahindra vs. Marthanda Singh Mahindra (ILR (1991) Kar 735); Administrator pendente lite-powers of general administration except right to distribute and subject to immediate control of High Court-Not analogous to appointment of Receiver-Even if Receiver appointed in original suit between parties, probate Court can appoint Administrator pendente lite, if just and proper- Indian Succession Act, 1925, S.247. Held: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on whom title to his shares devolved by operation of law. m) (1970) 1 WLR 1194, Jermyn Street Turkish Baths Ltd.; No particular form is required by statute or under the articles of this company for registration of personal representatives in the register of members of the company. The nature of the entry in the company s register must depend on the contention of the parties. All that is required is a distinct and intelligent request on the part of the executors. What the administrators were requesting was not merely to have a note of the letters of administration entered on the register, but to be registered themselves as members of the company. n) AIR 1986 SC 1370, Life Insurance Corporation of India vs. Escorts Ltd. ors.; On transfer of rights of a shareholder- Transfer of shares-Transferee becomes owner of beneficial interest-Legal title continues with transferor until transfer is registered in books of company- Companies Act, 1956, Section 111. It was held that - a share is transferable but while a transfer may be effective between transferor and transferee from the date of transfer, the transfer is truly complete and the transferee becomes a shareholder in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in him. The attention of the court was not drawn to the fact that the administrator pendente lite did not have the power to distribute the assets that the general administrator had as we have noted from the section itself. But the said observations, in our opinion, do not in any way affect the position as to whether the administrator spoken of in the Explanation to Section 168 is an administrator pendente lite or not. But the rights vested in an administrator pendente lite are limited as have been mentioned in Section 247 of the Succession Act and it is analogous to the rights of a receiver under Order 40 of the Code of Civil Procedure. It is submitted that the ratio of Mayamay Dassi (supra) is that APL is not an administrator as contemplated in the Explanation to Section 168 of the Income Tax Act, 1961. It is submitted that in subsequent cases like Champ Properties (P) Ltd. vs. CIT reported in 166 ITR 367, the ratio of Mahamaya Dassi (supra) has been stated by the Division Bench of this Hon ble Court for the following proposition: Assessment was one of the processes open in law to adjudicate the title of the parties or the shares of the parties. Assessment could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, where the necessity for the grant is made out. The position of an APL is similar to that of a Receiver, with this distinction that the APL represents the estate for all purposes (except distribution) whereas the Receiver does not represent the estate nor the parties but simply holds the estate for the benefit of the successful litigant. In our opinion, the rights and powers of the General Administrators over the estate of the deceased depends on the nature of the property both movable and immovable and the respective statute which governs acquisition and enjoyment of such property. In so far as stocks and shares of the companies are governed by the Companies Act. In the light of the rules and regulations under the Companies Act, there are two modes by which shares of a company can be obtained i.e. by transfer and/or transmission as provided under Section 108 of the Companies Act to be entered into the register of members. In the fact situation of the case the stocks and shares which forms major part of the estate left by the deceased are the subject matter of administration of the estate, and the only manner these can be administered is by exercising propriety rights in the sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deceased the estate of the deceased vests in them for that limited purpose of administering the same for the benefit of estate of which succession is in abeyance. It is true that in order to enjoy certain rights flowing from the shares and stocks of the companies held by the deceased they will have to apply to the respective companies to obtain such benefit viz. in case the company comes out with rights issue and/or bonus shares which otherwise can only be subscribed by the shareholder. Therefore, as representative of the shareholder they can always apply to the company to subscribe for such shares in their capacity as representative of the deceased in the estate and not as owners in their own names. In order to enjoy privileges incidental to the ownership of the shares an application will have to be made to the company as required by law to record their names in the Register of members and the companies will have to consider such an application in accordance with their Articles of Association and the provision of law which governs the same. We do not want to discuss the various facets of such exercise of rights of ownership of shares by the Joint Administrators as we think i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and powers of General Administrators over the estate of the deceased other than the right of distributing such estate and we, therefore, direct them i) to prepare and file an inventory of the assets of the estate and appraisal of the value of such assets and ii) to take over possession of the assets of the estate in the manner provided under the law considering the nature of the property. a) From Receivers and Special Officers appointed by the Probate Court; b) From Executor s legal heirs; c) From the present Institution and companies as the case may be The Receivers and Special Officers, appointed by the learned Single Judge (Probate Court) will hand over the assets to the Joint Administrators. Receivers/Special Officers appointed by the Probate Court will on handing over the assets out of the estate of the deceased for which they were appointed will stand discharged on their submission and settlement of accounts by the Court. The appeals and applications stand disposed of, however there shall be no order as to costs. (J.N. Patel, C.J.) I agree (Soumitra Pal, J.) Later: After pronouncement of the judgment, the learned senior counsel Mr. Chatterjee app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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