Locus standi for purchaser of contingent preference shares denied until Company Law Board determination; intervention requires a real subsisting interest.

Applicant seeking impleadment lacked locus standi because its claimed title to preference shares remained contingent until a positive CLB determination under Section 111; the court applied the requirement that a party seeking intervention under Section 101 must show a real and subsisting interest. The shares were acquired post-CDR at a nominal consideration and susceptible to cancellation, facts indicating unresolved legal rights. Consequently the impleading application was dismissed for want of established shareholder or creditor status pending crystallization of rights by the Company Law Board.

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Issues: Whether the applicant seeking to be impleaded in Company Petition No.7/2011 has locus standi to intervene before its rights as purchaser of preference shares are crystallized by a positive order of the Company Law Board under Section 111 of the Companies Act, 1956.

Analysis: The question turns on whether the applicant can be recognised as a shareholder or creditor entitled to intervene in proceedings under Section 101 of the Companies Act, 1956 before the rival proceeding under Section 111 (Company Application No.89/2011) has produced a determination of the applicant's legal right to the purchased preference shares. Consideration is given to the fact that the shares were acquired from a bank after a corporate debt restructuring process, were purchased at a nominal price (13 paise against a face value of Rs.100), and were susceptible to cancellation under the CDR scheme. These circumstances indicate that the applicant's claim to the shares is contingent and unresolved until the CLB issues a positive order declaring the transfer or legal right. Intervention in the company petition would therefore permit a party whose legal status as shareholder or creditor is not yet established to participate in proceedings affecting the company, contrary to the requirement that a real and subsisting interest be shown for impleadment.

Conclusion: The impleading application is dismissed; the applicant does not presently possess the requisite locus standi to be impleaded in Company Petition No.7/2011 pending crystallization of its rights by the Company Law Board under Section 111 of the Companies Act, 1956.

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