2010 (9) TMI 922 - Board - Companies Law

Dismissal of Application for Representation of Deceased Shareholder; Special Officer Appointed to Manage Company Affairs

Virendra Nath Versus ABMTM (P.) Ltd.

The application seeking representation of the deceased shareholder and the company by the legal heir was dismissed. A special officer was appointed to ... Oppression and mismanagement Issues:1. Representation of deceased shareholder and company by a legal heir.2. Authority to represent the company in the absence of the deceased chairman.Analysis:Representation of Deceased Shareholder and Company by Legal Heir:The case involved a dispute regarding the representation of a deceased shareholder and the company by a legal heir. The petitioner and the third respondent were sons of the deceased shareholder who had incorporated a private company in 1968. The petitioner alleged discrepancies in shareholding and directorial changes after the death of the deceased shareholder. The third respondent, claiming to be the legal heir through a will, sought permission to represent the deceased shareholder and the company. However, the petitioner disputed the validity of the will and argued that the third respondent could not represent the deceased shareholder or the company. The Bench noted that without probate of the will, the third respondent could not step into the shoes of the deceased shareholder. The ruling in Bali Ram Dhote's case was cited to emphasize that the title of the legatee must be proven when disputed, and no presumption can be made in favor of the legatee until probate is obtained.Authority to Represent the Company in the Absence of the Deceased Chairman:Regarding the authority to represent the company in the absence of the deceased chairman, the third respondent claimed to be the sole surviving director. However, it was highlighted that a minimum of two directors is required for board meetings. Therefore, the third respondent, as a sole director, was not considered authorized to represent the company. The Bench concluded that the third respondent was not entitled to represent either the deceased shareholder or the company in the petition due to the lack of requisite authority.Appointment of Special Officer:Due to the deadlock in the company's affairs and serious allegations of embezzlement and breach of fiduciary duties, the Bench appointed a special officer to manage the company's affairs. The special officer was tasked with overseeing the company and reporting to the Bench regularly. The decision aimed to protect the interests of the shareholders and ensure proper management of the company until further orders. The third respondent was directed to hand over the company's charge and books to the special officer for effective management.Conclusion:The application seeking representation of the deceased shareholder and the company by the legal heir was dismissed. Instead, a special officer was appointed to manage the company's affairs in light of the disputes and serious allegations raised during the proceedings. The decision aimed to regulate the company's conduct and protect the interests of the shareholders until a resolution could be reached.