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TMI Blog2019 (11) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent) otherwise also, in view of the matter that his claim relating to the shares of Late Mr. Abhey Kumar Oswal which is pending in a suit before the Court of Competent Jurisdiction, we hold that this is a fit case for waiver under sub-section (4) of Section 244 of the Companies Act, 2013 and for that the application under Sections 241, 242 should be heard on merit. Appeal dismissed. - Company Appeal (AT) Nos. 410-412 of 2018 - - - Dated:- 14-11-2019 - S.J. Mukhopadhaya, Chairperson and Mr. A.I.S. Cheema Member (Judicial) For Appellant : Mr. Amish Tandon, Mr. Sameer Abhyankar, Mr. Ayush Beotra and Mr. Akshay Joshi, Advocates. For Respondents: Mr. Sudipto Sarkar and Mr. Arun Kathpalia, Senior Advocates with Mr. Mayank Mishra, Mr. Raghav Sabharwal and Mr. Ashish Joshi, Advocates. JUDGMENT Mr. Pankaj Oswal (1 st Respondent) filed a petition under Sections 241, 242 and 244 of the Companies Act, 2013, alleging certain acts of oppression and mismanagement in the affairs of M/s. Oswal Agro Mills Limited . 2. On appearance, the Respondent/ Appellant herein raised the question of maintainabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the said proceedings, Mr. Pankaj Oswal did not hold 10% of the total issued, paid-up and subscribed capital of the Appellant Company in his own name. He, however, did not seek any waiver in terms of Section 244 of the Companies Act, 2013 but claimed that he was entitled to more than 10% of the issued, subscribed and paid-up capital of the company on the basis that he was one of the four heirs on intestacy of Late Mr. Abhey Kumar Oswal and thus was entitled to claim 1/4 th of 5,35,30,960 shares which were registered in the name of Late Mr. Abhey Kumar Oswal during his lifetime and on that basis claimed that he had more than 10% of the shareholding in the Appellant Company. From an order dated 21 st May, 2018 passed in Company Petition, Mrs. Aruna Oswal preferred an appeal being C.A. No. 172 of 2018 is which an order was passed by this Appellate Tribunal on 29 th May, 2018 directing that maintainability issue should be heard first. The issue of maintainability was decided in favour of Mr. Pankaj Oswal by the impugned order dated 13 th November, 2018. 4. According to the Appellant, in view of the nomination filed by Late M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be registered himself or to transfer the securities, and if the notice is not complied with within ninety days, the Board may thereafter withhold payment of all dividends or interests, bonuses or other moneys payable in respect of the securities, as the case may be, until the requirements of the notice have been complied with . 7. Therefore, according to the Appellants, on plain reading of the aforesaid provisions Section 72(1) (3) read with Rule 19(8), the title to securities vests in the nominee and the nominee is entitled to all the rights in the securities, nominee i.e. Mrs. Aruna Oswal to the exclusion of all other persons. Only she is entitled to receive the dividends, interest and other advantages as the registered holder of such securities would be entitled to. 8. Learned counsel for the Appellants relied on Section 2(81) of the Companies Act, 2013 which defines Securities as under: 2. Definitions. .(81) securities means the securities as defined in clause (h) of Section 2 of the Securities Contract (Regulation) Act, 1956 (42 of 1965) . 9. Reliance has also been placed on Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding standing in the name of Late Mr. Abhey Kumar Oswal at the time of his death as any allotment of any part of the Estate of Late Mr. Abhey Kumar Oswal in favour of his heirs can only be decided in the Partition Suit and cannot be claimed as a matter of right in proceeding under the Companies Act, 2013. 15. According to Mr. Sudipto Sarkar, learned Senior Counsel appearing on behalf of Mr. Pankaj Oswal- 1 st Respondent/ Petitioner, Late Mr. Abhey Kumar Oswal was a Hindu by religion and was a member of M/s. Oswal Agro Mills Limited . At the time of death, he was holding approximately 40% shares in the Company i.e. 5,35,30,960 shares. He died intestate on 29 th March, 2016 and is survived by four Class I legal heirs i.e. his widow, two sons and a daughter. Mr. Pankaj Oswal being the eldest son of Late Mr. Abhey Kumar Oswal is one of the four legal heirs. 16. According to the 1 st Respondent, all heirs of Late Mr. Abhey Kumar Oswal acquired the ownership interest in 13382740 shares each i.e. 1/4 th of 53530960 shares in the Company by operation of law on 29 th March, 2019. However, on 16 th April, 2016, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is a specific statutory right, is given only to a member of the company and until and unless one is a member of the company, there is no right to maintain application under Section 397 of the Act. Mr Nariman contended that there was no automatic transmission of shares in the case of death of a shareholder to his legal heir and representatives, and the Board has a discretion and can refuse to register the shares. Hence, the legal representatives had no locus standi to maintain an application under Sections 397 and 398 of the Act. Mr Nariman submitted that the rights under Sections 397 and 398 of the Act are statutory rights and must be strictly construed in the terms of the statute. The right, it was submitted, was given to any member of a company and it should not be enlarged to include any one who may be entitled to become a member . 13. In order to decide the question involved, it would be necessary to examine certain provisions of the Act. Section 2(27) of the Act states that member in relation to company does not include a bearer of a share-warrant of the company issued in pursuance of Section 114 of the Act. Section 41 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company a notice in writing signed by him stating that he so elects. (2) If the person aforesaid shall elect to transfer the share, he shall testify his election by executing a transfer of the share. (3) All the limitations, restrictions and provisions of these regulations relating to the right to transfer and the registration of transfers of shares shall be applicable to any such notice or transfer as aforesaid as if the death or insolvency of the member had not occurred and the notice or transfer were a transfer signed by that member. 28. A person becoming entitled to a share by reason of the death or insolvency of the holder shall be entitled to the same dividends or other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the company: Provided that the Board may, at any time, give notice requiring any such person to elect either to be registered himself or to transfer the share, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the property of the deceased member vests in the legal representatives on the death of the deceased and they should be permitted to act for the deceased member for the purpose of transfer of shares under Section 109 of the Act. 25. In some situations and contingencies, the member may be different from a holder . A member may be a holder of shares but a holder may not be a member . In that view of the matter, it is not necessary for the present purpose to examine this question from the angle in which the learned Single Judge of the Calcutta High Court analysed the position in the case of Kedar Nath Agarwal v. Jay Engineering Works Ltd. [(1963) 33 Com Cas 102 (Cal)] , to which our attention was drawn. 26. Admittedly in the present case, the legal representatives have been more than anxious to get their names put on the register of members in place of deceased member, who was the Managing Director and Chairman of the company and had the controlling interest. It would, therefore, be wrong to insist their names must be first put on the register before they can move an application under Sections 397 and 398 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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