TaxTMI 
TaxTMI 
2020 (4) TMI 156
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....nd 2nd Respondents herein) filed Company Petition 30(ND) of 2006 before the Company Law Board, P:rincipal Bench, New Delhi under Section 397, 398,399 read with Section 237(b), 402 and 403 of the Companies Act, 1956 (now Section 241, 242 of the Companies Act, 2013) against M/s Jai Mahal Hotels (Pvt) Ltd, Maharaj Prithvi Raj, Rajkumar Vijit Singh and another alleging oppression and mismanagement on their part. They raised dispute in relation to the 5050 equity shares of Jai Mahal Hotels (Pvt) Ltd (1st respondent company/appellant herein). It was alleged that additional shares of the company were raised by denying right of the petitioners (1st and 2nd respondent herein). The challenge was made on the ground that the same was not informed to Maharani Gayatri Devi and not to the petitioners (1st and 2nd respondent herein). 2. National Company Law Tribunal, Bench III, New Delhi vide judgement dated 01.08.2018 allowed the company petition and passed the following orders:- "I) All the resolutions which have been passed in the meetings of the Board of Directors, or in the Extraordinary General Meeting or Annual General Meeting with regard to appointment of Respondent No.4 to Res....
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....candidature of all or any of the persons of the Board re-constituted as per (IV) above and to choose such persons to the Board of the company in accordance with law, to manage the affairs of the 1st respondent company thereafter. VI) No major policy decision in relation to the affairs of the 1st respondent company shall be taken by the existing Board consisting of Respondents No.2 and 3 till the Board of the Company is re-constituted in terms of paragraph (IV) as above. VII) Mr. Amarjit Chopra, FCA, Chartered Accountant having Mobile No.098101-00299 is hereby appointed as an independent auditor to conduct a Special Audit in respect of the accounts of the 1st respondent company and the said audit shall be carried out from 05.02.1997, being the date of demise of Late MJS, until the period 31.03.2018. The purpose of the Special Audit shall be in relation to identifying any siphoning of amounts of the 1st respondent company by the other respondents as well as in relation to identifying transactions, if any prejudicial to the interest of the 1st respondent company. The amounts so identified resulting in the siphoning or leakage of funds and thereby loss to the 1st resp....
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....lenged the aforesaid order dated 1st August, 2018 passed in Company Petition No.30/2006. 5. In the aforesaid background, we will deal with the relevant facts and case of Jai Mahal Hotels Pvt Ltd, to understand the dispute between the parties. Jai Mahal Hotels (Pvt) Ltd Facts of the Case: 6. At the age of 8 years, Late Maharaj Jagat Singh was given in adoption by late Maharani Gayatri Devi and Late Maharaja Sawai Man Singh to Late Maharaj Bahador Singh as adopted son. 7. Rajkumar Devraj and Rajkumari Lalitya (1st and 2nd Respondent), the children of Late Maharaj Jagat Singh have claimed to have got several properties mutated in their names belonging to Late Maharaj Bahadur Singh's family claiming that Late Maharaj Jagat Singh was the adopted son of Late Maharaj Bahadur Singh. 8. Late Maharaj Jagat Singh was married on 10.05.1978 to a Thai National. The marriage was not successful and two children were born namely Rajkumar Devraj and Rajkumari Lalitya (1st and 2nd Respondent), who are holding Thai Passports and stayed all along in Thailand away from Late Maharaj Jagat Singh. 9. In the covenant entered into by Late Maharaja Sawai Man Singh Ji, amongst various prop....
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.... Singh executed a Will dated 23.06.1996 by which he bequeathed his entire property and estate to his biological mother Late Maharani Gayatri Devi, thereby specifically disinherited his children i.e. Rajkumar Devraj and Rajkumari Lalitya (1st and 2nd Respondent). Subsequently, Rajkumari Lalitya (2nd Respondent), attained the age of majority on 03.02.1997. Immediately thereafter Maharaj Jagat Singh passed away on 05.02.1997. 17. On 27.03.2001, Special Resolution was passed which increased the authorised share capital of the Appellant company. According to appellants on this date the contesting Respondents were not legal heirs of Late Maharaj Jagat Singh and had no rights etc in the 5050 shares. Maharani Gayatri Devi was the sole legal heir and due notice was given to the legal representatives of Late Maharaj Jagat Singh. 18. Maharani Gayatri Devi by her letter dated 10.04.2001 addressed to appellant company, declined to subscribe to any further allotment of shares and requested the company to offer the shares to other existing shareholders. All actions of the appellant company were specifically approved by her. 19. The case of the appellant is that the Tribunal sought ....
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....view of the Will dated 23.06.1996. Maharani Gayatri Devi applied for such transfer of 5050 shares as they were standing in the name of Late Maharaj Jagat Singh which were transferred. Subsequently, Maharani Gayatri Devi expressly approved the further allotment of further shares in 2001 and expressly declined to subscribe to any further allotment of shares as is evident from her letter dated 10.04.2001. 25. Maharani Gayatri Devi filed an application before the District Judge, Jaipur being Probate Petition No.327 of 2006 for grant of probate on the basis of the aforesaid Will in May 2006 after discovering the Will sometime in March, 2006. Maharani Gayatri Devi also withdrew her earlier statement on 26.04.2006 in the Succession Case No.134 of 1996. 26. The Appellant Company replied to Maharani Gayatri Devi on 03.07.1996 expressing its difficulty to transmit the shares lying in the name of Late Maharaj Jagat Singh to Maharani Gayatri Devi or any other Claimant till resolution of pending disputes. 27. Case No.134/1998 for succession and Case No.327/2006 being heard simultaneously but separately, Maharani Gayatri Devi filed an application for consolidation before the District Ju....
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....n of shares till the time the said disputes were resolved by a court of competent jurisdiction. The contesting respondents preferred a petition before the Company Law Board sometime later under Section 111 of the Companies Act, 1956. 35. On 29.09.2009 Maharani Gayatri Devi passed away. 36. On 07.11.2009, application under Section 111 of the Companies Act, 1956 was filed by the contesting Respondents challenging the appellant's refusal to transfer shares of Late Maharaj Jagat Singh to them and for seeking transmission of shares in their favour, being C.P. No.16/111/2009 before the Company Law Board, New Delhi Bench. 37. Princess Urvishi Devi's group subsequently applied on 15.6.2010 to company for transfer of shares as Legal Representatives of Late Maharaj Jagat Singh/Maharani Gayatri Devi 38. Appellant sent letter dated 09.07.2010 to Urvashi Devi's Group declining transmission of shares. 39. On 21.09.2010, application for implementation on behalf of Princess Urvashi Devi's group filed in Section 111 proceedings initiated by contesting Respondents before Company Law Board. 40. Princess Urvashi Devi's group also filed petition under Section 111 of the Companies Act bei....
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....nd any dispute. Thus, the DR Group derived rights from the GD by documents executed by her in her lifetime and conveyed to the Company. Even if the Will of GD is not taken into account, for purposes of issue of rectification, the documents executed by GM clearly entitled the DR Group to have the rectification made. 21. The decisions in Mulraj, Manohar Lal, Ajudh Raj and Chiranjilal Shrilal Goenka (supra) are of no relevance to a situation where the beneficiary of the interim order itself opts to proceed with the matter in respect of which stay is granted by the higher court. In the present case, GD having settled the matter and having herself sought rectification, the interim order granted at her instance could be no bar against the DR Group. The decisions sought are thus, of no relevance to such a situation. 22. We sum up our conclusion as follows: (i) LMJS executed Will in favour of the mother-GD which is not in dispute. (ii) GD and DR jointly obtained succession certificate;" (iii) GD signed the transfer deeds and communicated the same to the Board of Directors; and (iv) The civil court vide order dated 28th July, 1991 declined to gra....
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.... was further submitted that conduct of the proceedings is based on entire wrong averments which has been relied upon by the Respondents before the Tribunal and are not based on record. Further according to appellants the past and concluded actions of the appellant company completed in the year 2001, are not open to any challenge by the contesting respondents who became shareholders of the company only in 2015 and acquired interest in the shares on 14.11.2008 and 19.2.2009 only. The company petition is also barred by limitation. 49. The stand of the contesting respondents, Rajkumar Devraj and Rajkumari Lalitya (1st and 2nd Respondent), is summarised as follows:- a) Maharaj Jagat Singh owned 5050 shares representing 99% of the issued and subscribed capital of the company. Maharaj Jagat Singh expired on 05.02.1997 leaving behind 1st and 2nd Respondent, Rajkumar Devraj and Rajkumari Lalitya, and Maharani Gayatri Devi, mother, as his Class I legal heirs as per the Schedule to the Hindu Succession Act, 1956. b) Upon the death of Maharaj Jagat Singh, the shares belonging to him devolved equally upon the 3 Class I legal heirs as per the general rules of succession prov....
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.... Maharaj Prithvi raj and his son Rajkumar Vijit Singh in their own favour behind the back of the persons representing 99% shareholding of the Company. The company did not benefit in any manner from the above. Only Maharaj Prithvi Raj and his son Rajkumar Vijit Singh benefited at the expense of the Company. k) The contesting respondents had a pre-emptive right to participate in the above issue and allotment of shares. However, no notices as required under law, were sent to them. The above issue and allotment was mala fide and the only motive was to gain control of the Company. As such the entire allotment ought to be set aside. Reliance was placed on decision of Hon'ble Supreme Court in Dale & Carrington Vs PK Prathapan (2005) 1 SCC 212). l) This illegal feat of creating a new majority was achieved by the following acts: i) The Board composition was changed by inducting the wife of Rajkumar Vijit Singh and two others on the Board. None of these Directors were shareholders. ii) The changed Board composition was used tgo dramatically increase the authorised capital of the Company tenfold from Rupees Ten Lakh to Rupees One crore. ....
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.... her grandchildren followed by her Will had bequeathed the said share holding thereafter in favour of her grandchildren i.e. the petition group......" 52. The Hon'ble Supreme Court vide Judgement dated 23.9.2015 categorically upheld and further clarified the above legal position as follows: "9...The GD (Gayatri Devi) who was the legatee herself bequeathed her rights in favour of the DR (Dev Raj)Group by duly signing the transfer deeds and communicating the same to the Board of Directors. She also executed Will dated 10th May, 2009. Mere fact that the same had been challenged was no bar to the claim of the DR Group." 53. In fact, the Hon'ble Supreme Court in its para 20 has settled the chain of succession vis-à-vis the 5050 shares of Late Maharaj Jagat Singh as follows: "...20 The DR Group followed the due procedure, it had the succession certificate in its favour from the transfer deed from GD, who admittedly inherited rights from LMJS. Will in favour of GD is beyond any dispute. Thus the DR Group derived rights from the GD by documents executed by her in her lifetime and conveyed to the Company. Even if the Will of GD is not taken into account, for p....
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....ee as the heir of the deceased, but only furnishes him with authority to collect his debts and allows the debtors to make payments to him without incurring any risk. In order to succeed in the succession application the applicant has to adduce cogent and credible evidence in support of the application. The respondents, if they so chooses, can also adduce evidence to oppose grant of succession certificate. The trial court erroneously held that the documents produced by the respondents were not sufficient or relevant for the purpose of adjudication and DNA test was conclusive. This is not a correct view. It is for the parties to place evidence in support of their respective claims and establish their stands. DNA test is not to be directed as a matter of routine and only in deserving cases such a direction can be given, as was noted in Goutam Kundu's case (supra). Present case does not fall to that category. High Court's judgment does not suffer from any infirmity. We, therefore, uphold it. It is made clear that we have not expressed any opinion on the merits of the case relating to succession application." 56. In view of the aforesaid position of law we hold that Rajkumar ....
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....tary of Maharani Gayatri Devi has filed an affidavit rebutting the validity of the letter dated 10.4.2001 by which the Maharani Gayatri Devi had specifically declined to subscribe to any further allotment of shares and approved all actions of the company. Maharani Gayatri Devi's Secretary stated to have alleged in an affidavit that the document dated 10.4.2001 was forged and fabricated. However, on record no such averment was made in the petition or rejoinder by the contesting respondents neither any such affidavit was ever in the record of the Tribunal let alone being a part annexed to any proceedings. This is a mysterious and perverse finding of fact given by Tribunal and it is not known as to why the Tribunal referred to such affidavit and the rejoinder when in fact there is none. It may be noted that the Respondents have not dealt with either the letter dated 10.4.2001 of Maharani Gayatri Devi or the imaginary affidavit filed by the so-called Secretary of Maharani Gayatri Devi either in the pleadings or in the arguments. 61. Maharani Gayatri Devi by her letter dated 10.04.2001 specifically records the following:- a) That she herself had received the notice in her ca....