TaxTMI 
TaxTMI 
2010 (8) TMI 1142
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....endente lite and/or Receiver be appointed to take over possession of all movable and immovable assets and properties of the deceased. 3. In G.A. 3718 of 2008 the following interlocutory reliefs are claimed (a) An Administrator Pendente lite and/or Receiver be appointed to take over possession of all movable and immovable assets and properties of Priyambada Devi Birla, the deceased above named including the shareholding of those companies as specified in the schedule annexure marked 'B' by substituting his name in stead and place of the deceased abovenamed R.S. Lodha wherever his name appears in place of the deceased abovenamed. (b) Such Administrator Pendente lite and/or Receiver be directed to take all decisions and exercise all rights in regard to shareholdings of Priyambada Devi Birla in the Companies referred to in annexure 'C'. 4. Both the aforesaid first mentioned two applications were filed on or about 20th November 2008. 5. The aforesaid two applications were made at a point of time when executor R.S. Lodha in connection with the testamentary instrument of 1999 died and there was no person to take control and possession....
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....Lodha, since deceased (hereinafter in short R.S.L.). 7. In view of the aforesaid factual position all the three applications were heard by this Court and the learned counsel of the respective parties advanced argument. 8. Mr. A.K. Mitra learned senior advocate appearing with Mr. Pratap Chatterjee senior advocate and other learned Advocates in support of the application being G.A. No. 3731 of 2008 submits that no-one is now disputing that upon death of R.S.L., the executor appointed by the last Will of 1999, there is necessity for appointment of Administrator Pendente Lite (in short APL) for protecting and preserving the estate of Privambada Devi Birla (hereinafter referred to as the said deceased). 9. He submits that the estate left behind by the said deceased were and still are well preserved and protected and for this purpose no third party is required to be appointed. He informs this Court that there are three Special Officers appointed by this Court over the gold coins and other valuable items. The gold coin and other valuable items have been kept in a Bank Locker by the joint Special Officers. The main estate of the said deceased are the shares held by her, of the var....
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....to ruin rival companies through the method of appointment of 'APL'. 13. He submits that there are complete safeguards against dilution of controlling block of shares in M.P. Birla Group of Companies as the regulation framed under the SEBI and other provision of SEBI clearly safeguard the interest of the shareholders. As such, there is no possibility of clandestine dilution of M.P. Birla Group of Companies. Interim measure taken by this Court in the judgment and orders of this Court reported in 2005 WBLR (Cal) 311 and confirmed by the Division Bench, will be good enough during pendency of the testamentary suit, as this injunction order is adequate for protection and preservation of M.P. Birla Group of Companies. According to him, 'APL' cannot lawfully be authorised to take steps for exercising of voting rights in respect of the shares held by the deceased. The companies are not and cannot be made party to the above probate proceedings, therefore, no direction can be given for registration of shares in those companies who are strangers to the proceedings. This proposition of law has now been well settled by following decisions of the Supreme Court: (....
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....rofits were earned. Same situation continues even after the death of 'RSL'. 17. His client 'HVL'' in his application has been able to make out a special case for his appointment though under the law a party to the proceedings is not appointed Receiver. The experience of 'HVL' in business management and his standing have been made out in the petition. Moreover, he submits that in the Will itself vide Clause 6 provides that in absence of 'RSL', 'HVL' will take up the management. This desire of testatrix should be considered for appointing 'HVL'. 18. According to him the 'APL' should not be appointed in any proceeding or any application save and except on the application made by his client and in the Testamentary Suit 6 of 2004. The applicants of G.A. No. 3718 of 2008 in connection with PLA No. 242 of 2004 have no locus standi to make any application. Similarly, the application in G.A. No. 3714 of 2008 in connection with the Will of 1982 cannot be entertained at this stage for one of the executors namely G.P. Birla died and another executor Pradip Kumar Khaitan who was joint applicant has taken an adverse stand hence th....
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....ng block or minority. There cannot be truncated rights and privileges attached to shares while appointing 'APL' over shares held by the deceased. More so because an 'APL' has been given wide rights and power under section 247 of the general Administrator other than right of distribution of the estate for the purpose of protection of the estate. 24. He submits Supreme Court has consistently held that voting rights is an essential and impartible adjunct of the share. He cited the following Supreme Court decision in support of his contention: (i) AIR 1951 SC 41, (ii) (1985) 5 SCC 167, (iii) AIR 1966 SC 1370, (iv) (1988) 2 SCC 299, (v) (1989) 6 CC 5 and (vi) AIR 1990 SC 737. 25. He submits that it is also settled law that voting right attached to a share can be exercised by a person other than a shareholder in given situations . In this context he refers to two decisions of English Court reported in [1982 (1) All ER 449, 1955 (2) All ER 330 at 332]. 26. He submits that there is fundamental distinction between transfer of shares and transmission of shares. The former is an act of inter vivos between two persons, while the latter by operation of la....
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..... He submits that it is settled law of precedent what is binding is the ratio of judgment and not the obiter dicta or other observation that are not necessary for arriving at conclusive decision and this has been explained by the Supreme Court in the judgment reported in (1989) 1 SCC 101, paragraph 11. 30. He further submits that the judgment cannot be read as a statute it has to be read in its perspective and this is also settled by the Supreme Court in the following decisions (1996) 6 SCC 44, AIR 2005 SC 2677. 31. Hence, he submits that 'APL' should be appointed over the entire estate including controlling block of shares held by the said deceased along with all the rights that are attached to such shares. There is no question of appointing 'APL' for the limited and misconceived purposes has been contended by HVL' in para 52 of the instant application. As to the personnel of 'APL' it is settled principle that a party to the suit should not be appointed as an 'APL'. In this connection he has relied on the following decisions: AIR 1933 Bom 348 (at page 346), AIR 1952 Cal 418 (38), AIR 1952 Nag 253 (12). 32. He concludes urging t....
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....y, who would have to be selected from different disciplines for the purpose of administering and managing vast estate of the said deceased. 37. He submits that the main estate is the controlling block of shares of the M. P. Birla Group of Companies as such APL has to be appointed over the same also. 38. He points out during the period when RSL was administering changes had been brought in the Board of Directors of the M.P. Birla Group of Companies by RSL even after the death of RSL family members of RSL would continue to exercise control over the company of MP Birla Group behind. He has referred to section 211 of the Indian Succession Act and submits that the Administrator of a deceased person is his legal representatives for all purpose and all properties of the deceased. 39. His contention is that powers of the Administrator on certain properties is the same as the power of an executor, although the source of such power are different as the executor derives his power from the will and whereas the APL derives his power from the statute. In this case immediately after death of the said deceased RSL transferred shares of the said deceased in the investment companies in his ....
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.... (1) Who is to be appointed as APL in respect of the estate? (2) To what extent the appointment of APL should be made? - Should it be restricted to the power and duties as alleged by Mr. Mitra's client in paragraph 73 of his petition and the prayer made therein? (3) Will APL be appointed to function as Administrator for amongst other to take possession of the share scripts held by the said deceased and also to exercise all rights and discharge obligations arising from the share holding? 42. It is contended by Mr. Mitra that Division Bench of this Court in its judgment reported in 2007 ILR (2) Cal 377, while rejecting the prayer for appointment of APL specifically held in paragraph 280 at page 562 of the report that without giving notice to the share holders of the company in the probate proceedings the Court has no power to appoint APL over the shares owned by the said deceased. 43. He, therefore, submits dmt the aforesaid findings of the Division Bench not only operates as binding precedent but issue raised herein is hit by the principle of res judicata. In order to hold a particular judgment to be precedent it must be seen amon....
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....5(7) Bom. LR 995 at page 997 as appropriately cited by Mr. Pal on the concept of precedent that when a lower Court is faced with a judgment of a immediately higher Court, which is in conflict with the judgment of Apex Court the lower Court must follow the principle laid down by the Apex Court. 49. In the context of the aforesaid legal proposition I have carefully examined the decision of the Division Bench cited above, rendered refusing to affirm the appointment of APL earlier in respect of the same estate. To my mind the ratio decided by the Division Bench is that in order to pass order of appointment of APL removing executor there must be a case of necessity being made out and this will appear from paragraphs 240, 242, 244, 245. 262, 287, 288, 290, 282, 293 and 308 of the report wherein diverse situations have been referred relying on a number of the decisions of the Courts. It was further ratio of the decision that principle for appointment of Receiver should be followed in case of appointment of APL. 50. In my reading no specific argument was advanced on earlier occasion from either side before the learned trial Judge nor it was issue that the Probate Court has no power t....
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....rom above provision that all the powers of General Administrator are conferred upon APL, only exception that unlike executor and Administrator, APL cannot give assent to legacy or distribute assets or estate in terms of the Will. 53. It would further appear from the said section that the Probate Court has power to appoint APL over the estate of the deceased pending any proceedings in which the validity of the will of the deceased person is questioned, or for obtaining or revoking probate or grant of Letters of Administration. The said section also provides that power of appointment of APL is not only conferred upon the probate Court, but the Civil Court too is clothed with power to appoint in any suit adjudging the validity of the will of a deceased person. The aforesaid power has been supplied by the legislature to the Court undoubtedly to take interim measure pending final disposal of the proceeding. 54. It is contended by Mr. Mitra that APL can take possession of the share scripts only for limited purpose viz. to collect dividends and to meet the outgoings of the estate, and not for any other purpose. In other words APL cannot have any right, as ownership of shareholding d....
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....n the appointment of a person as a Receiver the property in respect of which he is so appointed vests in him similar to the provision in section 17 of the Presidency Towns Insolvency Act, 1909, where on the making of an order of adjudication the property of the insolvent wherever situate would vest in the official assignee, or in section 28(2) of the Provincial Insolvency Act, 1920 which states that on the making of an order of adjudication, the whole of the property of the insolvent would vest in the Court or in the Official Receiver. Sub-section (4) of section 182-A of the Land Revenue Act provides that Rules 2 to 4 of Order XL of the Code of Civil Procedure, 1908 shall apply in relation to a Receiver appointed under that section. A Receiver appointed under Order XL of the Code of Civil Procedure only holds the property committed to his control under the order of the Court but the property does not vest in him. The privileges of a member can be exercised by only that person whose name is entered in the Register of Members. A Receiver whose name is not entered in the Register of Members cannot exercise any of those rights unless in a proceeding to which the company concerned is a ....
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..... 2. Nothing in this rule shall authorise the Court to remove from the possession or custody of property any person whom any party to the suit has not a present right so to remove." 59. Duties of the Receiver is provided in Rule 3 of the same order and the same is set out hereunder: "3. Duties.- Every receiver so appointed shall - (a) furnish such security (if any) as the Court thinks fit, duly to account for what he shall receive in respect of the property; (b) submit his accounts at such periods and in such form as the Court directs; (c) pay the amount due from him as the Court directs; and (d) be responsible for any loss occasioned to the property by his wilful default or gross negligence." 60. It is plain from Rule 1 of XL of the Code it provides for creation of office of Receiver, but he can not get all powers with the appointment axiomatically, he may be conferred with all or any of the powers mentioned therein, by the Court. Naturally the Receiver acts in terms of the power conferred by the Court. But in case of APL, his power emanates from section 247 of Act 1926 itself meaning t....
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....s taken finally by the Court but his status would be akin to administrator appointed by the Court under section 211 of the Indian Succession Act with exception mentioned in section 247. 64. Law is now well settled by the Supreme Court by a large number of decisions that voting right is essentially impartible adjunct to the share as correctly pointed out by Mr. Pal. This proposition of law cannot be disputed nor has been disputed by Mr. Mitra, still I feel to quote some authorities. 65. In the case of Balkrishan v. Swadeshi Polytex Ltd. reported in AIR 1985 SC 520 the apex Court in paragraph 17 has explained legal position amongst other, that a person who is a shareholder, has the right to vote at all meetings under section 87 of the Companies Act 1956. In LIC v. Escorts Ltd. and others (AIR 1986 SC 1370) in paragraph 84 it is almost exhaustively laid down what is the nature of the property resides in share holding and rights attach thereto which includes to participate in the Board meetings to elect Directors, to vote on resolutions at meetings of the Company. 66. In two English decisions reported in 1982 (1) All. E.R. 449 and 1955 (2) ALL ER 330 it is held that voting rig....
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....esting, hence, incident of vesting inheres in section 247 temporarily. 71. Thus, I think that the appointment of APL as suggested by Mr. Mitra's client, HVL, in his prayer or in the body of the petition for limited purpose is neither acceptable nor tenable under law. When the statute provides for the power of general administration it encompasses all powers and it cannot be truncated as suggested. No authority has been cited as APL will act for limited purpose to represent the estate in a situation like this when no one can legally take charge of the estate. It is legally incorrect to urge that appointment of Administrators over estate including shares of deceased amount to appointment to take control of the companies for Board of Directors of each and every company run the company. Apprehension of the affectation of business of running company with appointment of Administrator during analogy of Receiver is in my opinion misplaced here at the moment. Hence decisions reported in AIR 1987 Cal 194 and 1998 CLT 61 are inapplicable in this case. I accordingly answer second and third issues in the negative. I repeat appointment would be over entire estate. 72. Next point is tha....
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....impartial person as an administrator pendente lite,....." 76. Similar view has been taken by Nagpur High Court in the decision reported AIR 1952 Nag. 253 in paragraph 12 independent person should be appointed for administration of estate pending final disposal of the proceedings. This Court in the case of Sudhirendra Nath Mitter v. Arunendra Nath Mitter (In the goods of Brojendra Nath) reported in AIR 1952 Cal 418 in paragraph 38 of the report has taken view with following expression of law: But the general rule is that a party unconnected with the suit is the most proper person to be appointed Administrator pendente lite. A party to the suit is not, as a rule, appointed, unless, all other parties consent .......... 77. In the application HVL has stated that he is experienced and having expertise in the working and he has also mentioned that he is the trusted person of the said deceased as mentioned in the 1999 Will, and this factor entitle HVL for appointment of APL. I am of the view that whatever may be his capability as claimed, but it does not automatically as a matter of course entitle him to be appointed as APL after all he is claiming right as legatee so....