2019 (11) TMI 1170 - AT - Companies Law

Tribunal affirms maintainability of Pankaj Oswal's petition under Companies Act

The Tribunal affirmed the maintainability of Mr. Pankaj Oswal's petition under Sections 241 and 242 of the Companies Act, 2013. It recognized his ... Maintainability of petition - Oppression and mismanagement - whether the 1st Respondent/ Petitioner is not a shareholder? - eligibility in terms of Section 244 of the Companies Act, 2013 - HELD THAT:- The right arising out of an instrument does not vest with nominee automatically on the death of the original holder of the instrument. Nominee does not mean that the amount or the share belongs to the nominee. On the death of the holder of the instrument, the amount/ share vests with the legal heirs, the nominee merely holds the amount/ share herein till the matter of vesting is decided in favour of the legal heirs. In view of the decision of the Hon’ble Supreme Court in WORLD WIDE AGENCIES PVT. LTD. AND VERSUS MRS. MARGARAT T. DESOR AND ORS [1989 (12) TMI 245 - SUPREME COURT] whereby the Hon’ble Supreme Court affirmed the decision of the Hon’ble Delhi High Court, we hold that the application under Sections 241, 242 & 244 of the Companies Act, 2013 was maintainable at the instance of Mr. Pankaj Oswal (1st 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. Issues Involved:1. Maintainability of the petition under Sections 241-242 of the Companies Act, 2013.2. Entitlement of Mr. Pankaj Oswal to exercise rights over the shares of Late Mr. Abhey Kumar Oswal.3. Interpretation of Section 72 of the Companies Act, 2013 regarding nomination.4. Legal standing of heirs under the Hindu Succession Act, 1956 in relation to shares.5. Application of precedents and statutory provisions in determining the rights of nominees and legal heirs.Issue-wise Detailed Analysis:1. Maintainability of the Petition under Sections 241-242:The Appellant questioned the maintainability of the petition filed by Mr. Pankaj Oswal under Sections 241-242 of the Companies Act, 2013, arguing that he was not a shareholder. The Tribunal dismissed these objections, deeming Mr. Pankaj Oswal eligible under Section 244 of the Companies Act, 2013. The Tribunal's decision was based on Mr. Oswal's claim to more than 10% of the company's shares as one of the four heirs of Late Mr. Abhey Kumar Oswal.2. Entitlement to Exercise Rights Over Shares:The Appellant contended that due to the nomination made by Late Mr. Abhey Kumar Oswal in favor of Mrs. Aruna Oswal, Mr. Pankaj Oswal could not claim any rights over the shares. The shares were registered in Mrs. Aruna Oswal's name following the nomination. The Appellant relied on Section 72(1) and (3) of the Companies Act, 2013, arguing that the nominee is entitled to all rights in the securities to the exclusion of all other persons.3. Interpretation of Section 72 Regarding Nomination:Section 72 allows a shareholder to nominate a person to whom the securities will vest upon their death. The Appellant argued that this nomination supersedes any testamentary document or other law, thereby entitling Mrs. Aruna Oswal to the shares exclusively. Rule 19(8) of the Companies (Share Capital and Debentures) Rules, 2014, was also cited, emphasizing that a nominee becomes entitled to the securities and associated rights upon the death of the holder.4. Legal Standing of Heirs Under Hindu Succession Act:Mr. Pankaj Oswal, represented by his counsel, argued that as a Class I legal heir under the Hindu Succession Act, 1956, he acquired ownership interest in 1/4th of the shares held by Late Mr. Abhey Kumar Oswal. He claimed that the shares were part of the deceased's estate and that the company illegally transmitted all shares to Mrs. Aruna Oswal based on the nomination. The Supreme Court's decision in 'M/s. World Wide Agencies Pvt. Ltd. v. Margarat T Desor' was cited, supporting the view that legal representatives of a deceased shareholder can maintain a petition under Sections 241 and 242 of the Companies Act, 2013.5. Application of Precedents and Statutory Provisions:The Tribunal referred to the Supreme Court's decision in 'M/s. World Wide Agencies Pvt. Ltd. v. Margarat T Desor,' which held that legal representatives of a deceased member are entitled to petition under Sections 397 and 398 of the Companies Act, 1956 (now Sections 241, 242, and 244 of the Companies Act, 2013). The decision emphasized that succession is not kept in abeyance and the property vests in the legal representatives upon the death of the member. The Tribunal concluded that Mr. Pankaj Oswal's application was maintainable and that the case warranted a waiver under Section 244(4) of the Companies Act, 2013.Conclusion:The Tribunal dismissed the appeals, affirming the maintainability of Mr. Pankaj Oswal's petition under Sections 241 and 242 of the Companies Act, 2013. The Tribunal recognized his claim to the shares pending the outcome of the Partition Suit and granted a waiver under Section 244(4), allowing the application to be heard on its merits. No costs were awarded.