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TMI Blog2023 (8) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... the conduct of Majority Shareholders, was Oppressive to Minority, as Members, and this requires that the events are to be considered as part and parcel of sequential narration. The Hon ble Supreme Court of India, in the decision SHANTI PRASAD JAIN VERSUS KALINGA TUBES LTD. [ 1965 (1) TMI 17 - SUPREME COURT] , had held that the Law, has not defined Oppression and it is left to the Court, to decide on facts of each case, whether there is such Oppression, requiring action. A Succession Certificate, can be granted, not only in respect of the Debt, but also in regard to the Shares, in a Company. Where a Succession Certificate, was granted in respect of Shares, in a Company, the Company, cannot insist upon production of Probate or Letters of Administration. The 4th Respondent / 2nd Respondent / 2nd Petitioner, seeking Equitable Reliefs, under Section 241 of the Companies Act, 2013, on account of Oppression of their Rights, as Shareholders, and a Systematic Exclusion, from knowing / participating in the Management and the Affairs of the Appellant / 3rd Respondent / 1st Respondent Company. Further, the Petition, arose, in respect of the Family run Appellant / 3rd Respondent Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication was filed by the Applicants before Hon ble NCLAT seeking to implead the 1st and 2nd Applicant herein in the placed of late Mrs. M V Valli Murugappan and the Hon ble NCLAT vide its order dated 23.03.2022 has passed the following order: Heard both sides. It comes to be known that I.A.No.129 of 2022 in Comp App (AT) (CH) No. 54 of 2021 is filed by the Applicants / Legal Heirs of First Respondent Mrs. M.V. Valli Murugappan and its is averred in I.A.No. 129 of 2022 in Comp App (AT) (CH) No. 54 of 2021 that they are the Legal Heirs of the deceased Second Respondent and as such, they are entitled to inherit their Shares ; in the First Respondent / company. Therefore, it is the fervent plea of the Applicants they are entitled to be substituted in place of the deceased Second Respondent in main Comp App (AT) (CH) No.54 of 2021. No Reply / Response is filed to the I.A. No.129 of 2022 by the Respondents. Considering the fact that the Applicants are daughters of the deceased Second Respondent, this Tribunal , taking note of the fact that the deceased Second Respondent is only survived by the Applicants , at this stage, simpliciter is of the earnest opinion that I.A.N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal , another Waiver Application vide CP/95/CHE/2021 (2nd Waiver Petition, u/s. 244 of the Act), was filed seeking the same relief, as prayed for in CP/29/2020. Later, after filing of the aforesaid Waiver Application , namely CP/95/CHE/2021, CP/29/2020 was sought to be withdrawn, and the same was permitted by the Tribunal , as per Order , dated 29.09.2021. Against the said Order dated 29.09.2021, the Appellant , had filed Comp. App (AT) (CH) No. 54 of 2021, before this Tribunal . 6. On behalf of the Appellant, it is brought to the fore that Mrs. M.V. Valli Murugappan, had died on 21.01.2022, and later the Respondent Nos. 1 and 2 / Petitioners, filed IA/14/CHE/2022 and IA/15/CHE/2022 in CP/95/CHE/2021, on 09.02.2022, before the Tribunal , seeking Relief of Substituting their names, as Petitioners , for change of Power of Attorney . Besides this, the Respondent Nos. 1 and 2, had preferred IA/129/2022 and IA/130/2022 in Comp App (AT) (CH) No. 54 of 2021, praying for Substituting their Names , in place of 3rd Respondent in the Appeal, and also for Change of Power of Attorney . In fact, IA Nos.129 130 of 2022, were filed in Comp. App (AT) (CH) No. 54 of 2021, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed to be a Member of the Appellant Company . However, the Tribunal , had allowed the IA/14/CHE/2022 in CP/95/CHE/2021, ignoring the facts and material evidences, placed in the Counter , and that the Tribunal , had only placed reliance upon the Order of this Appellate Tribunal , dated 23.03.2022, whereby and whereunder, the Application , filed by 1st and 2nd Respondents, substituting their Names (in place of their late Mother), in Comp. App (AT) (CH) No. 54 of 2021. 11. The grievance of the Appellant is that, the Tribunal , should have taken an independent view, while deciding IA/14/CHE/2022 in CP/95/CHE/2021 (2nd Waiver Petition). Also that, it is projected on the side of the Appellant that Section 241 of the Companies Act, 2013, begins with a sentence Any Member of the Company and Section 244 of the Act, begins by The following Members of the Company shall have a right , to apply , under Section 241 , and both these Sections, clearly point out that the legislative intent , is that, the right , under Section 241 of the Companies Act, 2013, can be exercised, only by a Member of a Company , and by any other Person . 12. According to the Appellant, the 2nd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Comp. App (AT) (CH) No. 53 of 2022, by setting aside the impugned order , dated 01.06.2022, in IA/14/CHE/2022 in CP/95/CHE/2021, passed by the National Company Law Tribunal , Division Bench-I, Chennai. Appellant s Citations: 18. The Learned Counsel for the Appellant, cites the decision of this Tribunal dated 21.09.2017, in Cyrus Investments P. Ltd. Anr. v. Tata Sons Ltd. Ors., reported in (2019), 212 Comp Cas 269, at Spl Pg: 319, NCLAT, wherein, at Paragraph 146, it is observed as under: 146. Normally, the following factors are required to be noticed by the Tribunal before forming its opinion as to whether the application merits 'waiver' of all or one or other requirement as specified in clauses (a) and (b) of sub-section (1) Section 244 : (i) Whether the applicants are member(s) of the company in question? If the answer is in negative i.e. the applicant(s) are not member(s), the application is to be rejected outright. Otherwise, the Tribunal will look into the next factor. (ii) Whether (proposed) application under Section 241 pertains to 'oppression and mismanagement'? If the Tribunal on perusal of proposed application under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company, subject to the condition that the applicant or applicants has or have paid all calls and other sums due on his or their shares; (b) in the case of a company not having a share capital, not less than one-fifth of the total number of its members: Provided that the Tribunal may, on an application made to it in this behalf, waive all or any of the requirements specified in clause (a) or clause (b) so as to enable the members to apply under section 241. Explanation. For the purposes of this subsection, where any share or shares are held by two or more persons jointly, they shall be counted only as one member. (2) Where any members of a company are entitled to make an application under subsection (1), any one or more of them having obtained the consent in writing of the rest, may make the application on behalf and for the benefit of all of them. 20. The Learned Counsel for the Appellant, falls back upon the decision of the Hon ble Madras High Court, in S. Varadarajan v. Venkateswara Solvent Extraction (P) Ltd. Ors., reported in 1992 SCC OnLine Mad. 410, wherein at Paragraph 23, it is observed as under: 23. Further I, may add that very strangely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompelled to dismiss the petition. Even then, it is open to the court to consider the merits of the case without dismissing the petition. Section 399(3) of the Act permits an individual member to make an application 'on behalf and for the benefit of all' members of a company entitled to move the court. He acts clearly in a representative capacity. Rule 9 of the Companies (Court) Rules, 1959, declaring inherent powers of the court gives the court authority to transpose the other party as applicant in the interest of justice. 21. The Learned Counsel for the Appellant, refers to the decision in Prafulla Kumar Rout v. Orient Engineering Works P. Ltd. Ors., reported in (1986) 60 Comp Cas 65 (Orissa), wherein, at Paragraphs 4 and 13, it is observed as under: 4. I need not make a mention of all the objections taken in the counter-affidavit as by order dated December 14, 1984, an inquiry was directed on the preliminary issue as to whether the petitioner has the locus standi to maintain this application. In the counter-affidavit, it has been alleged that the petitioner has transferred all his shares in the company and has voluntarily resigned from the directorship of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany petition does not make out a case of oppression or mismanagement. The subsequent sale of the property had the approval of the Board and the valuation appears to be reasonable. No relief under section 402(f) could be granted since the CP is filed three months after the date of sale. In view of the finding recorded above, I do not think it necessary to go into details regarding the genuineness of the sale deed, undervaluation, etc. Those issues are beyond the purview of this CP, since a consideration of oppression and mismanagement arises only if the petitioners are found to be shareholders of the company. That issue being held against them the other issues pleaded in the CP do not arise. The petitioners had been indulging in forum shopping with some ulterior motive probably to extract money from respondents-M S P Plantations (supra). I have no hesitation to hold that they have approached this Bench with unclean hands and they are not entitled to any equitable reliefs. The attempt of the petitioners to re-agitate the concluded issues is nothing but an abuse of the process of the court. The company petition is devoid of any merits. Accordingly issues (b) to (e) are found against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by himself could not have presented a petition under Section 397 for want of required share qualification. The court has to only consider whether the petition was a valid petition at the time of his presentation. If a valid petition has been presented, any shareholder can ask for substituting himself as the petitioner. Contentions of Respondent Nos. 1 2 : 24. The Learned Counsel for the Respondent Nos. 1 and 2 submits that on the death of a person , the Legal Representative of the Deceased , represents the rights and estate of the Member , whose name, is on the Register of Members , and when the Member , dies, the rights and estate of the Deceased , is entrusted with the Legal Representative . 25. According to the Learned Counsel for the Respondent Nos. 1 and 2, the Legal Representatives of the Deceased / 3rd Respondent , are entitled to come on record, for Protection of the Rights and Cause of the Deceased / 3rd Respondent , that their Family Group , are excluded from the decision making and management of the Appellant , which is in complete disregard , to the legitimate expectation . 26. The Learned Counsel for the Respondent N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estate through the legal representatives must be enabled to petition in respect of oppression and mismanagement and it is as if the estate stands in the shoes of the deceased member. We are of the opinion that this view is a correct view. It may be mentioned in this connection that succession is not kept in abeyance and 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. 29. The Learned Counsel for the Respondent Nos. 1 and 2, contends that the impugned order , dated 01.06.2022, was passed by the Tribunal in IA/14/CHE/2022 in CP/95/CHE /2021, after providing Full Hearing , to all the Parties , and proper analysis of the Facts and Law , and the same was a Reasoned one. 30. The Learned Counsel for the Respondent Nos. 1 and 2, forcefully submits that the Appellant , through its conduct , is prevented from taking such plea of non-substitution , of the Legal Heir , and further, in a proceeding, in Comp. App (AT) (CH) No. 54 of 2021, before this Appellate Tribunal , the Respondent Nos. 1 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. But it is argued that as 13 of the members who had consented to the filing of the application had, subsequent to its presentation, withdrawn their consent, it thereafter ceased to satisfy the requirements of the statute, and was no longer maintainable. We have no hesitation in rejecting this contention. The validity of a petition must be judged on the facts as they were at the time of its presentation, and a petition which was valid when presented cannot, in the absence of a provision to that effect in the statute, cease to be maintainable by reason of events subsequent to its presentation. In our opinion, the withdrawal of consent by 13 of the members, even if true, cannot affect either the right of the applicant to proceed with the application or the jurisdiction of the court to dispose of it on its own merits. 36. According to the Respondent Nos. 1 and 2, although the Transferred Shares , held in the name of the 4th Respondent ( Hindu Undivided Family ), the real / actual Beneficiaries of the Hindu Undivided Family , are the Respondent Nos.1 and 2 . 37. Continuing further, it is projected on the side of the Respondent Nos.1 and 2 that on the Register of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Company Law Board. Since they were registered as shareholders of the company on the date of filing of the petition and they held the requisite number of shares in the company, they could maintain the petition. 40. The Learned Counsel for the Respondent Nos. 1 and 2 / Petitioners, cites the decision of the Hon ble Supreme Court of India, in S. Varadarajan v. Venkateswara Solvent Extraction (P) Ltd. (1994) SCC OnLine Mad. 410, wherein, at Paragraph 23, it is observed as under 23. Further I, may add that very strangely Mr. Dorairaj, whose appointment as managing director is one of the subject-matters of the agenda of the extraordinary general meeting, has not chosen to raise his little finger on the above plea. It is the individual and personal right of Mr. Dorairaj to continue as managing director and it is for him to come and approach this court and seek appropriate redressal if there is a threat to disturb his continuance as managing director of the company. The said Dorairaj is either in deep slumber or adopting an attitude of supine indifference. His cause, if any, cannot be espoused or projected by the applicant who is neither a director nor the managing director. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Rajendra Keshwani, (2009) SCC OnLine CLB 14, wherein, at Paragraphs 12 and 13, it is observed as under: 12. I have considered the pleadings and the annexures thereto as well as the arguments and the case law cited by the parties. I have considered the applicants/respondents' reliance upon the judgements wherein it is observed that : (a) Similar to transfer of shares without being registered in the company, it was held that he was holder of the shares . . . It is now a well-settled legal position that the articles of association of a private company is a contract between the parties . . . No transfer of any share in the capital of the company shall be made or registered without the previous sanction of the directors . . . We are unable to agree with learned counsel. The concept of previous sanction of the directors connotes that there should be a written resolution accepting the transfer from Mr. Malhan in favour of Bhagat and such previous sanction should be preceded by handing over of the shares. In this case, such an action was not done and, therefore, even the transfer of the shares held by Mr. Malhan in favour of the appellant is not valid in law.' (John ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an v. Venkateswara Solvent Extraction P. Ltd. [1994] 80 Comp Cas 693 (Mad) ; [1995] 4 Comp LJ 287 (page 712): : The requirement as to the share qualification is relevant and material only at the time of institution of the proceedings. ' (Ranjit Singh v. Madan Mohan Cold Storage P. Ltd. (MANU/CL/61/2007): [2009] 147 Comp Cas 513, 528, 529, 530 (CLB) refers) (c) 'Since the petitioners are not members, they have no rights and interest of members in these companies to be able to complain of lack of probity or unfair conduct of the respondents, if any, being prejudicial to the petitioners in their legal and proprietary rights as shareholders. The provisions of section 397/398 of the Act cannot be attracted in the present petitions'. (Suruchi Chand v. Mahalaxmi Glass Works P. Ltd. (MANU/CL/53/2007) : [2009] 148 Comp Cas 496, 531 (CLB), refers) (d) 'In view of my foregoing conclusions, the petitioner' s assertion of being a shareholder of the company must fail, having found that the acquisition of 23,200 shares by the petitioners is in gross violation of the articles of association of the company, the petitioners have no right to apply under sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble Apex Court held that any subsequent reduction in the number would not affect the petition. Secondly, the case before the Hon'ble Supreme Court was not one in which the petitioners had ceased to be shareholders of the company, which is the position in the present case the sole petitioner has ceased to be the shareholder of SESA Goa. 43. The Learned Counsel for the Respondent Nos. 1 and 2 / Petitioners, cites the decision of the Hon ble Punjab and Haryana High Court, in Shri. Jagdish Chander Mehra Ors. v. The New India, Embroidery Mills (1946) Pvt. Ltd. Ors., reported in (1964) SCC OnLine Punj. 30., wherein, at Paragraphs 7 8, it is observed as under: 7. Mr. S.M. Sikri has taken up a preliminary objection that the main petition, that is, a Civil Original No. 95 of 1962, is no longer competent because after the withdrawal of petitioners 1 to 3, the only petitioner left on the record being S.C. Davessar, petitioner No.4, the qualifications as laid down in section 399 of the Act are no longer fulfilled. To this the reply given by Mr. K.L. Sachdev is that the maintainability of the petition is to be decided on the basis of the facts as they were at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impleadment application is allowed. This need not hold up the hearing of the main T.P. 445/KB/2019. Hence, C.A. No.77/KB/2021 is allowed and the legal heirs of the Respondent No.4 are allowed to be impleaded in T.P. No.445/KB/2019 as Respondent No. 4A and Respondent No. 4B. 45. The Learned Counsel for the Respondent Nos. 1 and 2, refers to the Order , dated 03.05.2021 of the National Company Law Tribunal, Guwahati Bench, in IA No. 28 of 2020 in Cont. Appln. No. 1 of 2020 in TP No. 26/GB/2016 (CP No. 80 of 2000), between Pravir Kumar Roy v. Bogidhola Tea Trading Co. Pvt. Ltd. Ors., wherein at Paragraph 13 (vide Sub-Para 13 and 14), it is observed as under: 13. However, I am of the opinion that, to protect the interest of the heirs, legal representatives have to come on record immediately after the demise of deceased, or else the precious right of hearing will be lost. There is no mandate under any law saying that LRs shall not become a party to the proceedings unless he has become a member of the company. Since, the parties are at loggerheads for several years, it cannot be construed that company would consider his transmission application immediately after it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the LRs of the Deceased Member , whose name, is still on the Register , are entitled to file a Petition for Oppression and Mismanagement . 53. In this connection, this Tribunal , pertinently points out the decision of the Hon ble Supreme Court of India in Chiranjilal Shrilal Goenka v. Jasjit Singh, reported in (1993) 2 SCC Page 507, where it is observed that the term Legal Representative , is wide and inclusive of not only the Heirs , but also intermeddlers of Estate of the Deceased , as well as the persons who in Law , represent the Estate of the Deceased . Also that, the Executors , Administrators , Assignees or Persons , acquiring interests by devolution under Or XXII Rule 10 of the C.P.C. or Legatees , under a Will are Legal Representatives . 54. In the decision, in K. Shankarappa v. K.G. Gangadharaiah, reported in AIR (2001), the Hon ble High Court of Karnataka, had held that the definition of Section 2(11) of the C.P.C. , includes intermeddlers and prayer of Substitution , cannot be refused, simply because, they were Strangers . 55. That apart, a Legatee , under a Will , who inturn represent the Estate of Deceased Testator , be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Furthermore, Transmission means Devolution of Title to Shares , other than by Transfer . Holder of a Share : 62. The words Holder of a Share , are really equal to the word Shareholder and the term Holder of a Share , connotes in so far as a Company , is concerned, only who as a Shareholder , has his Name , entered on the Register of Members . Representative in Character : 63. It is to be pointed out that the Proceedings, under Section 397 and 398 of the Companies Act, 1956 (Section 241 and 242 of the Companies Act, 2013, are Representative in Character , and as such, an Order , permitting a Third Party to Implead a Co-Petitioner , can be passed, as per decision in Malleswara Finance Investments Co. Pvt. Ltd. v. Company Law Board Ors, reported in (1994) 81 Comp. Cas 66 (Mad). 64. Also that, in L.Rm.K. Narayanan Anr. v. Pudhuthotam Estates Limited (1992) 74 Comp. Cas 30 (Mad), it is among other things, held that once there is a valid Petition, before the Court , there are ample powers with the Court , to permit others to join in the Petition , as Co-Petitioner . Maintainability of Petition: 65. The Maintainability of a P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enied. 70. Moreover, the 3rd Respondent / 1st Respondent / 1st Petitioner M/s. M.V. Valli Murugappan, was passed away, due to natural causes , on 21.01.2022. The Respondent Nos. 1 and 2 / Petitioners / Legal Heirs of the 1st Petitioner, are the daughters of the Deceased 3rd Respondent / 1st Respondent Mrs. Valli Murugappan (Deceased) and that the Husband of the 3rd Respondent / 1st Respondent, had predeceased her, during 2017. 71. According to the Respondent Nos.1 and 2 / Petitioners, the 3rd Respondent / 1st Respondent (Deceased), had executed a Will , dated 17.12.2015, as amended by Codicil , dated 10.04.2018, in terms of which, the Shares of the 3rd Respondent / Deceased 1st Respondent , in the Appellant / 3rd Respondent Company , devolves on the Petitioner in IA/14/CHE/2022 in CP/95/CHE/2021. That apart, steps to Probate the Will , are being undertaken, etc. 72. According to the Respondent Nos.1 and 2 / Petitioners, they are the Legal Heirs of the Deceased 3rd Respondent M/s. M.V. Valli Murugappan , and hence, are entitled to inherit her Shares , in the Appellant / 3rd Respondent / Company . Further, the Respondent Nos. 1 and 2 / Petitioners, are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legal Representatives , but, the contra is untrue. Also that, all Legal Representatives , are not necessarily Legal Heirs at Will , as per decision in Kalu Ram v. Charan Singh AIR 1994 Rajasthan Page 31. 78. It comes to be known that the Deceased / 3rd Respondent and the 4th Respondent, had filed a Company Petition , on 09.08.2021, before the Tribunal , claiming Equitable Reliefs , in terms of Section 241 of the Companies Act, 2013 on account of Oppression of the Rights , as Shareholders and Systemic Exclusion , from knowing by participating , in the Management and Affairs of the Appellant Company and Mismanagement of the Appellant at the instance of Respondent Nos. 5 to 17. 79. Further, because of the required Shareholding , for maintaining the Company Petition, under Section 241 of the Companies Act, 2013, was not fulfilled, the 3rd and 4th Respondents, had also filed an Application , bearing CP/95/CHE/2021 (Waiver Application), praying for Waiver of the 10% Shareholding requirement , for maintaining the Application , under Section 241 of the Companies Act, 2013. 80. It is brought to the fore, that while the Waiver Application , is pending, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative , turns out to be the Member of the Company . 85. It cannot be forgotten that Rule 53 (2) of the NCLT Rules, 2016, specifically mentions that in case of Death of a Party , during the pendency of proceedings, before the Tribunal , the Legal Representative of the Deceased Party , may apply , within 90 days of the date of such Debt , for being brought on record . 86. It cannot be brushed aside that even in respect of Oppression and Mismanagement Proceedings , if an Application / Petition , for Substitution of Legal Heirs , is permitted by the Court / Tribunal , the fact that, the aspect of a Legal Representative , has no bearing, whatsoever , in the said Application , as opined by this Tribunal . 87. As far as the present case is concerned, even though, on behalf of the Appellant , a plea is taken that the 2nd Respondent, who inherited 62,851 Shares, held by her Deceased Mother , through Transmission of Shares , on 18.02.2022, had transferred the 62,851 Shares, which were inherited on 04.03.2022, in the Appellant / Company , and therefore, the Substitution of the name of the 2nd Respondent , who is not a Member , as a Petitioner in CP/95/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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