TaxTMI 
TaxTMI 
2013 (1) TMI 8
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....These are appeals arising out of the common judgment and order delivered on 27th August, 2010 on two applications GA 3714 of 2008 and GA 3718 of 2008 filed in connection with PLA No. 242 of 2004 whereby those were disposed of by putting the estate for the time being in the custody of three independent persons who would act as Joint Administrators pendente lite in and over all the estates left by the deceased. The relevant portion of the said judgment is noted below:- ".......They will make inventory of the estate and take possession of the same except the properties which are under possession of the Joint Special Officer for the time being. They shall submit report of inventory within four weeks from the date of assumption of charges. They will take custody of all original share scripts of all the companies and other valuable documents viz. Boards, fixed deposits' receipts etc. which belonged to and held by the said deceased, shall operate the bank account or accounts and collect dividends, and meet outgoings both statutory and non-statutory which are due and payable by the estate of the said deceased. In one words they will take all lawful steps for general Administration of....
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....and exercise all his rights in regard to shareholdings of P Birla in the companies referred to in Annexure "C".............." Priyamvada Devi Birla (for short "PBD") died on 3rd July, 2004. Incidentally, Madhav Prasad Birla ("MPB" for short) her husband had expired on 30th July, 1990. PDB had executed her Will dated 18th April, 1999 (the 1999 Will) and got it registered. In the said Will Rajendra Singh Lodha (for short "RSL") was appointed as the sole executor. RSL was the legatee of the Will with the direction that: "4. I, by this will and testament, nominate Sri Rajendra S. Lodha, a devoted friend of the family and a chartered accountant of repute, to take over the management-administrative, financial, legal - and every other aspect relevant to complete the ownership, control and full management of all the business and properties possessed or owned by me, either directly or indirectly, and the entire right, title and interest of all of which I hereby bequeath to him ......" PDB also executed a codicil/document dated 15th April, 2003. After the death of PDB, application for probate was filed by RSL. Caveats were filed. Some of the caveats filed were discharged by the High....
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...., decide to dissolve the Board if necessary under law for the benefit of the Companies, wherever possible. 76. Of course they must consult and take the views of Lodha in each and every step while taking decision. If his views and advice are accepted by the Administrators then the views of the contesting defendants shall be taken and if there is a difference in the two views the matter should be placed before the Court for obtaining direction. They shall remain in the office of the Administrator, pendente lite, for a period of two years or till the disposal of the probate proceedings whichever is earlier. Therefore, Lodha shall hand over all the charges to the aforesaid appointed Administrators, pendente lite. Interim order passed earlier will continue till possession is taken by the Administrator." Aggrieved appeals being APO No 153 of 2006 and APO No 197 of 2006 were preferred. By judgment and order dated 11th October, 2007 the Division Bench set aside the judgment and order of the learned Single Judge, the relevant portion of which is reproduced hereunder:- "307. Therefore, on that question also, after considering the facts and circumstances of the case and the materials....
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....peal No. 2277/2008 & other connected appeals, Mr. Ram Jethmalani and other learned senior counsel appearing on behalf of the petitioners do not press these petitions. The special leave petitions are dismissed as not pressed." Subsequently, RSL expired on 3rd October, 2008 and was succeeded, inter alia by his son, Harsh Vardhan Lodha ("HVL" for short). Thereafter, as quoted at the outset, the second set of applications for appointment of APLs (G.A Nos 3714 and 3718 of 2008) were filed by Birlas, the defendants in the testamentary suit. HVL too filed an application (G.A No 3731 of 2008) for appointment of APL. Such applications were heard and disposed of by common judgment and order declared on 27th August, 2010 (which has already been taken note of at the very outset of this judgment). While appeals were being heard, by an order dated 19th January, 2012 a committee of APL was appointed as Joint Administrators substituting the Committee of APL appointed as Joint Administrators by the learned Single Judge. Now the only point to be decided is the powers of the Committee of APL visà- vis the exercise of nature of rights relating to the shares which form major part of the....
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....n the seal of Court with copy of the Will annexed (Section 290) or who is an Executor under the Will to whom Probate has been granted. Only those three categories of persons can claim to be legal representative or personal representative of the testatrix in whose name the shares stand recorded in the register of members of the companies. There is no question of grant of Probate or Letter of Administration with a copy of the Will annexed or issuance of a Succession Certificate in favour of any party at this interlocutory stage without deciding the question of validity of the Will of the deceased. The shares should not be registered in the name of the 3 APLs without any Succession Certificate or Letters of Administration with copy of the Will annexed or Probate, in circumvention of provisions of the Indian Succession Act, 1925. Learned counsel appearing for the appellants has submitted that the APLs are merely Receivers and, therefore, they will not be competent to act as legal representatives or personal representatives of the deceased and step into her shoes so as to get the shares registered in their names. It is contention of the learned counsel for the respondents that the....
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....nd the responsibility of running the M.P. Birla Group of Companies will be thrust upon them. According to them, the main question is whether APL, who is an officer of Court can at all be empowered to apply to the Companies and get the major portion of the assets of the Estate (shares) transferred to them by an interlocutory order during the pendency of the Testamentary Suit? It is submitted that the interim order passed by the Court preserving the status quo in respect of estate of PDB which is existing for last seven years if continued will serve the purpose. Therefore, no direction should have been issued in terms of the impugned order. It is submitted that right to vote in respect of shares is a of a company is a statutory right and is to be exercised in terms of the statute. Section 87 of the Companies Act- confers right to vote only upon members i.e. holder of shares whose name appears in the register of members can only have voting right. According to the appellants, the deceased member cannot vote because he/she is no longer alive. The name of the deceased member will continue in the register of members, until the name of the deceased member is substituted in the re....
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....bers of the Company. Another important contention of the appellants is that in view of the fact that the companies are not parties to the testamentary suit no order can be passed regarding substitution of name of the members as recorded in the register of members of the company in favour of the person appointed by the Court in a suit where company is not a party. It is submitted that the shares are recorded in the name of the testator in the register of members of various companies who were not parties to the proceedings. Therefore, considering all the circumstances Probate Court cannot direct recording of shares in favour of APL. It is submitted that application can be made to the companies for recording of shares only by an applicant, who has obtained Succession Certificate under Section 373 of the ISA or has obtained grant of Letters of Administration on the seal of Court with copy of the Will annexed (Section 290) or who is an Executor under the Will to whom Probate has been granted (Section 222). Only those three categories of persons can claim to be legal representative or personal representative of the testatrix in whose name the shares stand recorded in the registe....
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....ors are officers appointed by the Court and, therefore, the estate does not vest in him as an APL is appointed under Section 247 of the ISA while the Court grants Letters of Administration under Section 290. Therefore, General Administrator under Section 247 cannot have the rights and powers to acquire ownership over property over which he is appointed. He is only to generally manage the property of the deceased for the purpose of preservation and protection of the estate. It is submitted that learned Single Judge having accepted the position of APL that he cannot be equated with executor or administrator to whom probate or Letters of Administration has been granted finally and the Trial Court after so holding have inconsistently coined a new and unknown concept that APL would be akin to administrator appointed by Court under Section 211. Status of an Administrator Pendent elite, who has been appointed by the Court for temporary period pending final determination of Testamentary suit is clearly different and they cannot be equated with an Administrator to whom Letters of Administration has been granted by the Court upon final adjudication of Testamentary Suit. Learned counsel....
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....strued so that the same can enable a company to function and not cease functioning. (para 37) c) Pandurang Shamrao Laud & ors. Dwarkadas Kalliandas & ors. (AIR 1933 Bom 342) On appointment of administrator pendente lite It was held that - the appointment is purely discretionary as the word 'may' in the section clearly indicates but that discretion has to be exercised judicially and not arbitrarily. In the opinion of the Court, the Court has to be satisfied as to the necessity of such an administration and as to the fitness of the proposed administration and it must also be satisfied that it is just and proper under the circumstances of the case to appoint an administrator before subjecting the estate to the cost of such administration. The Court has, apart from the Succession Act, general jurisdiction to appoint a receiver in any case in which it may appear just and convenient to do so. Such an appointment cannot be claimed as of right merely because the proceedings are contested, but whenever there is a bonafide dispute and a case of necessity has been made out, the Court in its discretion generally makes grant. The general principle is that the Court does not as a rul....
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....that - The property of a deceased person vests in his executor from the time of his death, in an administrator from the time of the grant of the letters of administration. There is a manifest distinction between the case of an administrator and an executor. An administrator derives his title wholly from the Ecclesiastical Court. He has none until the letters of administration are granted and the property of the deceased vests in him only from the time of the grant. An executor, on the other hand, derives his title from the will itself and the property vests in him from the moment of the testator's death. f) Bibhu Bhusan Dutta & ors. vs. Anadi Nath Dutt & ors. (AIR 1934 Cal 87) On vesting - Mere transference of management of control is not enough to satisfy requirement of vesting- Limitation Act, 1908, Section 10 It was held that merely placing the property in the possession or control of a person does not amount to the vesting of the property in him, it cannot be that the word 'vesting' is to imply ownership because a trustee cannot be the owner of the Trust property. While transfer of proprietary rights is not intended, mere transference of management or control is ....
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....54 Pat, 175) On the other hand, it is the case of the respondent that in order to ascertain what rights and powers should the Administrator appointed under Section 247 exercise to preserve and protect the estate, major part of which consist of shares in limited companies incorporated under the Companies Act, 1956. According to them, does preserve and protect principle in such a case is satisfied merely by keeping the safe custody of the shares in their physical form and by receiving dividends and not exercising the other rights which flow from section like inter alia, voting rights or accepting bonus shares etc. ? The other propriety rights flowing from the shares and particularly where the estate is holding a controlling block. Right to vote is the more important right and other rights which flow from the shares will have to be vested in the administrator. According to the respondents since the APL is appointed over the estate, he must exercise the voting rights attached to the shares to ensure that the value of the shares i.e. the estate, is not depleted. Similarly, the Administrator must necessarily take advantage of the rights/bonus issues to augment the value of the esta....
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....ministrators. Does sapindakaran sraddha come within the expression 'the necessary funeral ceremonies' in section 316 or do the expenses of such sraddha come within the expression 'funeral expenses' in section 320? By stretching the provisions of sections 316 and 320, it may be held, in the case of a Hindu, that the adya sraddha ceremony is a part of the funeral ceremonies and that the expenses in connection therewith are parts of the funeral expenses. But it cannot possibly be contended that the sapindakaran sraddha which is to be performedo n the first anniversary of the day of death is part of the funeral. In my opinion, sections 316 or section 320 cannot be relied upon to sanction the prayer for Rs. 1,00,000 for meeting the expenses for sapindakaran sraddha. If the section is to be read and understood in this sense then it follows that the expenses of sapindakaran sraddha of the testator which is not compulsory 'and is not generally performed an, therefore, not such a religious object as may be regarded as reasonable and proper cannot possibly be sanctioned under this section. The administrator pendente lite is not in the same position as a Hindu widow and is under no obligat....
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....iving shares by operation of law include Executor or Administrator of a deceased member, any person becoming entitled to a share in consequence of the death, bankruptcy or insolvency of any member or in consequence of marriage of any female member. Transmission by operation of law covers those cases where a person or authority acquires an interest in the property, by operation of law without any voluntary act on his part. (para 19) c) Balkrishan Gupta & ors. vs. Swadeshi Polytex Ltd. & anr. [(1985) 2 SCC 167] Reliance is also placed by appellants, however the respondents emphasis is on rights of a Shareholder- Rights denoted by the term- It was held that in- the Companies Act the expressions 'a member', 'a shareholder' or 'holder of a share' are used as synonyms to indicate the person who is recognized by a company as its owner for its purposes. The right of ownership comprises benefits which may be curtailed by the disadvantages in the form of burdens attached to it. The owner possesses that right which ultimately enables him to enjoy all rights in the thing owned by attracting towards himself those rights in the thing owned which for the time being belong to oth....
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.... was transmission of shares by the operation of law, rectification was not necessary. (Para 74) g) Williams Harold Gibbs vs. Deva Prosad Roy (85 CLJ 280); An Administrator pendent elite has the estate of the deceased vested in him. h) AIR 1933 Bom 342, Pandurang Shamrao Laun & ors. vs. Dwarkadas Kalliandas & ors.; APL and Receiver under Succession Act, 1925, Section 247. It was held that- the position of an administrator pendente lite is similar to that of a receiver, with this distinction that the administrator pendent elite represents the estate of the deceased for all purposes except distribution i) Bajranglal Khemka & ors. vs. Smt. Sheela Devi & ors. [(1970) 74 CWN 444]; It was held that under-Section 247 of the Indian Succession Act, 1925, the administrators pendent elite has all the powers of a general administrator and under Section 211 of the said Act all the properties of the deceased vest in him. The difference between the position of a Receiver or a sequestrator on the one hand and that of a general administrator of a deceased on the other, is that while the estate of the deceased vests in the general administrator, no property vests in a receiver or....
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....d till the decision in a probate proceeding as Personal representative of deceased Member on whom title to his shares devolved by operation of law- Is 'member' for purposes of Section 397- Companies Act, 1956, Section 397. "Transmission" means an immediate or instantaneous sending across In this sense, when one is dealing with transmission of shares, it must mean that upon the death of the last holder of shares, in law, there is an instantaneous transfer of ownership to the heirs of the last holder, and the property therein must vest in the heirs from the moment of death onwards. This would happen by virtue of operation of the law of succession. This position, that ownership of property rights vis-à-vis the shares held by the deceased is transferred to the heirs of a deceased holder, is recognized by necessary intendment by the proviso to Section 108 of the Companies Act, 1956. On its true construction, Section 210 of the Companies Act, 1948 (U.K) (corresponding to Section 397 of the Companies Act, 1956) requires that the word "member" should include the personal representatives of the deceased member on whom title to his shares devolved by operation of law. m) (197....
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.... the appellants have relied on the judgment of a Division Bench of this Hon'ble Court in Mahamaya Dassi vs. Commissioner of Income Tax reported in (1980) 126 ITR 748, for the purpose of submitting that the estate of the deceased does not vest in an APL. According to them, in Mahamaya Dassi (supra) the Division Bench of this Court in the context of Section 168 of the Income Tax Act, 1961, observed: "Therefore, when a suit was pending touching the validity of the will there was nobody to give a legal discharge and in that context it was observed that the administrator pendente lite had the estate vested in him and it did not mean that the property became vested in the administrator pendente lite beneficially and for all purposes and the income of the beneficiary became the income of the administrator pendente lite. Reliance was also placed on certain observations of the Division Bench of this Court in the case of Bajranglal Khemka vs. Smt. Sheila Devi [1970] 74 CWN 444, where the court observed that the administrator pendente lite had all the powers of a general administrator that the estate of the deceased vested in him. The attention of the court was not drawn to the fact tha....
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....e Indian Succession Act and in view of the circumstances under which administrator pendente lite can be made, an administrator pendente lite is not an administrator as contemplated by section 168 of the Income Tax Act and Section 168 will not apply to him." It is, therefore, contended that observations made in Mahamaya Dassi (supra) in the context of Explanation to Section 168 of the Income Tax Act may be a precedent for the purpose of Section 168 of the Income Tax Act but cannot be considered as a precedent under the Succession Act which is the general Act relating to Probate and Letters of Administration, including Section 247 of the ISA. The two Acts are not cognate Acts and do not relate to each other - they cover entirely different fields and a collateral decision under Section 168 of the Income Tax will not be a binding precedent under the ISA which directly deals with the rights and powers of APL in Section 247. We have heard the learned counsel for parties at length and considered the authorities cited before us. The jurisdiction to appoint and grant administration to APL vests in the Court of Probate and no other Court, where the necessity for the grant is made out. ....
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.... various companies with the assured object of its protection and preservation, it cannot be said that the Joint Administrators would be mere spectators, if they are expected and/or permitted to collect dividend accruing out of these stocks and shares there is no reason why they should not be eligible and entitled to other privileges incidental to the ownership of such shares and stocks according to the exigencies found to exist as representative of the beneficiaries till the matter is finally decided by the Court and in their capacity as APL. Nothing prevents them to exercise all the rights, powers and privileges incidental to the ownership of the shares and stocks except that of distributing such estate to the legatees/beneficiaries which is required to be finally determined by the Court. Therefore, even though they are appointed by the Court as APL nothing prevents them in their capacity as representatives of the beneficiaries to exercise all such rights which flow from the ownership of the shares and so enjoyed by the deceased during her life time. Therefore, we have no hesitation to hold that in their capacity as representative of the deceased the estate of the deceased v....
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....state of the deceased appointed by the Court and to take all necessary steps to enjoy rights and privileges incidental to the ownership of the shares and stocks which consists of controlling power in M.P. Birla Group of Companies and safeguard the interest of the ultimate beneficiaries. This we say is necessary for the administration of the estate by way of an equitable relief and in the larger interest of the ultimate beneficiaries. Further this is not going to cause any prejudice to the parties to the suit as they will have every right to approach the Court to seek appropriate direction or order in case the Joint Administrators deviate from the trust and faith reposed in them to enable them to exercise all the rights and powers of a General Administrator qua the estate of the deceased including rights of shareholding and stock subject to the exception of distributing such estate to any person for which they are accountable to the Court. To conclude, we find that the parties for the purpose of administration of the estate having agreed to appointment of 3 Member Committee as Joint Administrators they shall be entitled to exercise of the rights and powers of General Administrato....