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2023 (8) TMI 263
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....or Advocate For Mr. S. Manuraj, Advocate For the Respondent Nos.6 to 13 : Mr. Cibi Vishnu & Mr. Jerin Asher Sojan , Advocates JUDGMENT ( Physical Mode ) Justice M. Venugopal , Member ( Judicial ) : Introduction : The Appellant / 3rd Respondent / 1st Respondent, has filed the instant Comp. App (AT) (CH) No. 53 of 2022, before this 'Tribunal', as an 'Aggrieved Person', on being dissatisfied with the 'impugned order', dated 01.06.2022, in IA/14/CHE/2022 in CP/95/CHE/2021, passed by the 'National Company Law Tribunal', Division Bench-I, Chennai. 2. The 'National Company Law Tribunal', Division Bench - I, Chennai, while passing the 'impugned order', dated 01.06.2022 in IA/14/CHE/2022 in CP/95/CHE/2021 (Filed by the 'Respondent Nos. 1 & 2 / Applicants / Legal Heirs of 1st Petitioner), at paragraphs 18 to 21, had observed the following: 18. "In relation to IA14/CHE/2022 is concerned, it is seen that the after the demise of the original 1st Petitioner Mrs. M.V. Valli Murugappan, the 1,25,952 shares held by the 1st Petitioner were transmitted to the 1st and 2nd Applicant herein in the following manner; (i) Ms. Valli Arunachalam - 63,101 Shares (ii) Ms. Vellachi Murugappan - 6....
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....fected on 04.03.2022 and the orders were passed by Hon'ble NCLAT on 23.03.2022 and the IA/14(CHE)/2021 and IA/15(CHE)/2021 was reserved for orders by this Tribunal on 06.04.2022. It is seen that the Hon'ble NCLAT vide its order dated 22.03.2022 has allowed for substitution of the name of the Applicants in the place of late Mrs. M V Valli Murugappan." and resultantly, allowed the 'Application', by directing the 'Applicants to cause necessary amendments in the 'Cause Title', wherever, it is necessary and file the amended 'Applications'. Appellant's Submissions : 3. According to the Learned Counsel for the Appellant, the 'Tribunal', had passed the 'impugned order' dated 01.06.2022 in IA/14/CHE/2022 in CP/95/CHE/2021 (Filed under Rule 53 of the NCLT Rules, 2016, by the Petitioner / Legal heirs of the 1st Petitioner), to bring on record the 'Petitioners / Applicants', in substitution of the '1st Respondent' ('M/s. M.V. Valli Murugappan' - Deceased), in main 'Company Petition' and connected 'Applications'. 4. The Learned Counsel for the Appellant, brings it to the notice of this 'Tribunal', Mrs. M.V. Valli Murugappan, died on 21.01.2022 and M.V. Murugappan, Hindu Undivided Family, s....
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.... 4th Respondent (M/s. M.V. Murugappan, Hindu Undivided Family) and she ceased to be a 'Member' of the 'Appellant Company', with effect from 04.03.2022. 8. The Learned Counsel for the Appellant, adverts to the copy of the 'Benpos' of the 2nd Respondent, as uploaded by the 'Registrar', and 'Share Transfer Agent' (vide Page 120 of Vol. I of Appeal Paper Book - Diary No. 562 dated 04.07.2022), and points out that in the said 'Document Table', the 'Holder's Name', is mentioned as 'VELLACHI MURUGAPPAN', and at Serial No. 21, it is mentioned as 18.02.2022 (Benpos Date), 62,851 (Shares) in 'Buying' Column, the same 62,851 Shares, were shown under 'Selling' Column, as on 04.03.2022. Thereafter, the 'Shares', held by the 2nd Respondent were shown as 'Zero', in the remaining columns and that 'Benpos', is an 'Undisputed Document'. The numbers mentioned therein, are not 'denied', by the 1st and 2nd Respondents in their 'Counter'. 9. According to the Learned Counsel for the Appellant, the Respondent Nos.1 and 2, had suppressed the fact, before this 'Tribunal', on 23.03.2022, when the Comp. App (AT) (CH) No. 54 of 2021 ('Appeal', relating to '1st Waiver Petition'), was heard to the effect that ....
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....of Law', becomes vested with the 'Estate of the Deceased', or by an 'Operation of Law', is enjoined, to represent the said 'Deceased Person'. 14. In effect, the plea of the Appellant is that, in the absence of holding 'any Shares', in the Applicant's company', the 2nd Respondent, cannot be a 'Party', to a 'Petition', under Section 241 to 244 of the Companies Act, 2013, as she is neither a 'Member' of the 'Appellant Company' nor she is so authorized to do so by the 'Deceased'. 15. The Learned Counsel for the Appellant, strenuously takes a plea that in the instant 'Appeal', the 'Legal Heirs' of the 'Deceased Mrs. Valli Murugappan', Viz. Mrs. Valli Arunachalam and Mrs. Vellachi Murugappan, had already inherited the 'Deceased Shares', and after such inheritance, one of the 'Legal Heirs' / 'Mrs. Vellachi Murugappan', had transferred all her 'Shares', and her 'Shareholding', became 'NIL'. 16. To put it differently, according to the Appellant, the 'Names of the Legal Heirs', were already entered in the 'Register of Member' ('Benpos'), and after such entry name of one of the 'Legal Heirs', was deleted from the 'Register of Members' ('Benpos), by virtue of her ceasing to be a 'Member' of....
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....1 in Comp. App (AT) No. 235 of 2020 (TR), between Thyagaraja v. The Church of South India Trust Association & 11 Ors., wherein at Paragraph 12, it is observed as under: 12. "In the instant case, apart from not being a 'party' to the main 'Petition', the 'Appellant' herein is, admittedly, only a 'Member' of the Church and he has not filed any documentary evidence to substantiate that any of the requirements under Section 2(55) of the Companies Act, 2013, is met. Admittedly, there is a four layered 'Election Process' to become a 'Member' of the 'Company'. The persons acting as 'Member' of CSITA are in fact first elected by various Parishes falling under more than 20 'Dioceses' and these Parishes 'Member' elect people to the 'Diocesan Council' and also to the 'Synod Council' who in turn elect the process of the 'Company'. In this four layered process, it is not in dispute that the 'Appellant' herein has not passed through the layers to become the 'Member'. This 'Tribunal' is of the earnest view that merely because a person is a 'Member' of Church, he does not have the 'locus standi' to file a 'Petition' under Sections 241 & 242 of the Companies Act, 2013, against a 'Section 8 Compan....
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....earned counsel appearing for some of the respondents, that the present applicant cannot maintain the application because the main petition itself is not maintainable because the present applicant holds less than the required share strength as on the date even though on the date of filing of the main company petition there was satisfaction of the required strength by the present applicant and four others. In view of my decision in L, RM. K. Narayanan v. Pudhuithottam Estates Ltd., [1992] 74 Comp Cas 30 (Mad), this contention of Mr. M. Subramaniam does not deserve acceptance. In my aforesaid judgment it has been held by me as follows (head-note) : "Once a petition under sections 397 and 398 of the Companies Act, 1956, is validly presented, it is open to a shareholder to ask for substitution and prosecute the proceedings even though such a shareholder by himself could not have presented a petition under section 397 for want of the required share qualification. The court has, in such case, only to consider whether the petition was a valid petition at the time of its presentation. The requirement as to the share qualification is relevant and material only at the time of institution ....
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....oof that the petitioner has transferred all his shares in the company in favour of opposite party No. 2 as alleged in the counter-affidavit lay on the opposite parties and, therefore, the opposite parties were directed to lead evidence first. 13. On a discussion of the evidence on record, I, therefore, come to the conclusion that the petitioner has duly transferred his shares in the company in favour of opposite party No. 2 which has taken effect in the relevant registers of the company. The petitioner was, therefore, not a person having any share in the company and the petition filed by him under Sections 397 and 398 of the Act is, therefore, not maintainable." 22. The Learned Counsel for the Appellant, refers to the 'Order', dated 04.04.2012 in K. Venkatachalam and Ors. v. Premier Roller Floor Mills Ltd. & Ors., (vide Company Petition No. 36 of 2018), reported in (2013) 6 CompLJ 283 (CLB, Southern Region Bench, Chennai), wherein at Paragraphs 18 & 19, it is observed as under: 18. "Even if the petitioner's case is accepted, the petitioners are not entitled to any reliefs under sections 397 and 398, because they have derived the benefits of the arrangement between the two part....
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....f all" shareholders of a company for appropriate reliefs, with a view to bring to an end the matters complained thereof. Thus, the proceeding under Section 397 or 398 is a representative proceeding. Even if the original petitioner does not want to continue the proceedings, it is open to the CLB to consider the merits of the case without dismissing the petition. There is, therefore, in my considered view, no need for any enabling provision for substitution of any other member for the original petitioner on the lines of Section 405, for further prosecuting the petition under Section 397/398, provided there is a valid petition before the CLB. In regard to the power of substitution in a Section 397 or 398 proceeding, beneficial reference is invited to the observations made by the Delhi High Court in V.K. Mathur v. K.C. Sharma - 1987 (vol.61) CC 143, which reads as under: - 7" ...there are ample powers in the court to permit other persons to join the petition as co-petitioners. In a proper case, the court can even permit such persons to take over the prosecution of the petition from the original petitioner and substitute themselves for him in case it is found that he desires to withdr....
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....sentative of the parties or by or against the assignee, receiver or liquidator, as the case may be." and projects an argument that the 'Rule', specifically mentions that in the event of 'Death of a Party', during the 'pendency of the proceedings', before the 'Tribunal', the 'Legal Representative' of the 'Deceased Party', may 'apply', for being 'Brought on Record'. 28. The Learned Counsel for the Respondent Nos. 1 and 2, takes a 'plea' that, even in respect of 'proceedings' concerning 'Oppression and Mismanagement', the 'Impleadment' of 'Legal Heirs', are 'Allowed', and the fact that the 'Legal Representative', is not a 'Member' of the 'Company', has no 'bearing' in the 'Impleadment Petition / Application', and to support this contention, a reliance is placed on the decision of the Hon'ble Supreme Court of India in World Wide Agencies Pvt. Ltd. v. Margarat T. Desor & Ors., reported in MANU/SC/0137/1990 : AIR 1990 SC Page 737, wherein, at Paragraph 23, it is held as under: 23. " ..... It appears to us that to hold that the legal representatives of a deceased shareholder could not be given the same right of a member under Sections 397 and 398 of the Act would be taking a hyper-tec....
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....lant'. 32. Added further, it is pointed on behalf of the Respondent Nos. 1 and 2 that after the 'Order' dated 23.03.2022, passed in IA No.129 of 2022, the 'Appellant', had filed a 'Memo', in Comp. App (AT) (CH) No.54 of 2021, on 19.04.2022, 'bringing on record', before this 'Tribunal', that the 2nd Respondent, had 'transferred her 'Shareholding' in the 'Appellant', to the '4th Respondent'. Indeed, the 'aspect of Impleadment' of '2nd Respondent', was not 'agitated', before this 'Appellate Tribunal'. 33. It is represented on behalf of the Respondent Nos. 1 and 2 that the 'Appellant', had not agitated and / or has chosen to 'Waive', the point contained in their 'Memo', dated 19.04.2022 and further that once an 'Order', is passed on the basis of 'Consent of Parties', the same is not open to 'Re-agitation', 'Review' or any other 'Form of Interference'. As such, on the basis of Appellant's conduct, it can reasonably be concluded that the 'Appellant', has 'Waived', its 'Right', to 'raise such objections'. 34. The Learned Counsel for the Respondent Nos. 1 and 2 contends that the '3rd Respondent', was a 'Member' of the 'Appellant / Company', at the time of filing of the 'Company Petition....
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.... fact, the instant 'Appeal', is 'academic', 'mala fide', and filed with an 'intent' to 'harass', the 'Respondent Nos. 1 and 2'. In short, according to the Respondent Nos. 1 and 2, the instant 'Appeal', filed by the 'Appellant', is an 'abuse of process of Law', and hence, the present 'Appeal', is to be 'dismissed with costs, in limine'. 1st and 2nd Respondents' Citations: 39. The Learned Counsel for the Respondent Nos. 1 and 2 / Petitioners, relies on the decision of the Hon'ble Supreme Court of India, in Dale & Carrington Invt. (P) Ltd. & Ors. v. P.L. Prathapan and Ors., reported in (2005) 1 SCC Page 212 at Spl. Page: 235 and 236, wherein, at Paragraph 33, it is observed as under: 33. "It is to be further noted that the entire scheme regarding purchase of shares in the name of mother of Prathapan was suggested by Ramanujam himself. He saw to it that the shares were transferred by the company in the name of Prathapan and his wife. The company has recorded the transfer and corrected its register of members in this behalf which, in fact, led Ramanujam to file a petition for rectification of the register of members as a counterblast to the petition filed by Prathapan under Sections....
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.... shareholder to ask for substitution and prosecute the proceedings even through such a shareholder by himself could not have presented a petition under section 397 for want of the required share qualification. The court has, in such a case, only to consider whether the petition was a valid petition at the time of its presentation. The requirement as to the share qualification is relevant and material only at the time of institution of proceedings and once there is a valid petition and a shareholder seeks to substitute himself in order to merely continue such a valid petition, such a shareholder need not hold 10 per cent of the share capital. It is not incumbent upon the court to dismiss a petition because a proceeding under section 397 or 398 of the Act is a representative proceeding. Even if the original petitioner does not want to continue the proceedings, the court cannot be compelled to dismiss the petition. Even then, it is open to the court to consider the merits of the case without dismissing the petition. Section 399(3) of the Act permits an individual member to make an application 'on behalf and for the benefit of all' members of a company entitled to move the cour....
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....s Nos. 1 to 6 having approbated the said transactions cannot reprobate the same. The claim made in the application is barred by the principles of approbate and reprobate. The other petitioners being petitioners Nos. 7 to 11 all being brothers and sisters of respondents Nos. 2 and 3 have withdrawn from the present proceedings unconditionally and have no grievances whatsoever. In order to maintain a petition under sections 397 and 398 as per the provisions of section 399, sub-section (1), the petitioners should hold either 10 per cent, or more shares of the subscribed capital or should constitute 10 per cent, or more of total members in the company. The present petition has been filed by 11 petitioners out of which petitioners Nos. 1 to 6 had transferred their entire shareholding and tendered resignation from the board of directors including the managing director of the company. However, to maintain the petition the consent of petitioners Nos. 7 to 11 was taken. The right to maintain a petition has to be on the date of filing of the petition. For this reliance was placed on the following cases : Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao (MANU/SC/8/1955); (....
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....." 42. The Learned Counsel for the Respondent Nos. 1 and 2 / Petitioners, falls back upon the decision of the Hon'ble Bombay High Court, in Harinarayan G. Bajaj v. Union of India & Ors., (2007) SCC OnLine Bom. 1041, wherein, at Paragraph 68, it is observed as under: 68. "To further support his contention that he continued to have the locus standi to maintain and prosecute the petition, the petitioner relied upon the decision of the Hon'ble Supreme Court in the case of Rajahmundry Electric Supply Corporation Limited v. A. Nageswara Rao9, 1955 DGLS 115 : A.I.R. 1956 S.C. 213 wherein the Hon'ble Apex Court held that the validity of a petition for oppression and mismanagement filed under the Companies Act, 1913 must be judged on the facts as they were at the time of its presentation and the petition, which was valid when presented, cannot cease to be maintainable by reason of subsequent events. It is submitted that the aforesaid decision of the Hon'ble Supreme Court as well as the principle laid down therein has no application in the present case for at least two reasons. Firstly, that was a case under the Companies Act, Section 153C whereof, inter alia, provided that a ....
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....s subsequent to its presentation, and neither the right of the applicant to proceed with the application nor the jurisdiction of the Court to dispose it of on its own merits could be affected. 8. The same reasoning should fully apply to a case where some of the petitioners have been permitted to withdraw from the petition. Accordingly, the preliminary objection put forward by Mr. Sikri cannot be sustained." 44. The Learned Counsel for the Respondent Nos. 1 and 2 / Petitioners, adverts to the 'Order' dated 25.11.2021 of the 'National Company Law Tribunal', Kolkata Bench, in the matter of Prasanta Kumar Mitra & Ors. v. India Steam Laundry (P) Ltd. & Ors., in CA No. 77 / KB / 2021 in TP No. 445 / KB / 2019, wherein at Paragraphs 9 & 10, it is observed as under: 9. "The most relevant fact that is to be considered is that this has been a family company, and that each branch of the family was always represented in the company. The legal principles embodied in Order XXII CPC and its Rules have to be applied keeping this fact in view. When the time comes for pronouncement of final orders in the matter, it is better that each branch of the family is represented, so as to obviate any sc....
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....the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued. Meaning of 'Legal Representative': 49. By means of Art. 23 in Table F, on the death of a 'Member' ('Shareholder'), where the 'Member', held the 'Shares', in his 'Name', and did not 'appoint' a 'Nominee', his 'Legal Representatives', shall be only 'Persons', recognised by the 'Company', as having any 'Title', to his / her interest in 'Shares'. 50. It is relevantly pointed out that by 'Regulation 25 - Table A' of 'Schedule-I' to the 'Companies Act, 1956', upon the death of a 'Shareholder', his 'Legal Representative', is the only 'Person', who may be recognised, as having 'any Title', to his interest in 'Shares'. 51. As such, the 'Representative' of a 'Deceased Member', is given the 'Alternative', either to be 'registered' himself / herself, as a 'Member' or to 'Transfer Shares', devolving upon him. Thus, when the 'Title' to the 'Shares' of a 'Deceased Member', passes to the 'Legal Representative', he / she may get himself / herself 'registered', as a 'Member', in the 'Register of Member of a Company'. Gist of Decisions: ....
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.... Or 22 Rule 4 of the C.P.C.', 'Heirs', enter into the shoes of the 'Deceased', with all 'Rights and Liabilities', and are precluded from presenting a case, inconsistent with the fact setup by the 'Deceased'. 59. In 'Law', the 'Legal Representatives', can take the pleas of 'Original Party / Parties', 'Rights and Liabilities', that are to considered and not those of 'Legal Representatives'. The crucial question that will crop up for one's rumination is that, whether the 'Right to Sue survives'. 60. The 'Legal Representative' of the 'Deceased Member', is the 'Legal Owner', of 'Shares', held by the 'Deceased'. At this juncture, this 'Tribunal', significantly points out that the 'Legal Representatives', are entitled to what the 'Deceased Shareholder', whose 'Name', is on 'register', would be entitled to except ofcourse, in regard to attending 'Meetings', and being co-opted to the subsequent benefits like 'Allotment of New Shares' or in the event of 'Reconstruction', the 'Statutory Right', to 'dissent' or the 'Locus', to prefer a 'Petition', to 'windup' a 'Company' or 'Institute Proceedings', under Section 241 of the Companies Act, 2013. Transmission : 61. The term 'Transmission', i....
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....mpany', the 'Company', cannot insist upon 'production' of 'Probate' or 'Letters of Administration'. In fact, the 'Succession Certification', provides 'full indemnity', to the 'Company', as per decision in Pl. Tl. Thenappa Chettiar By Agent v. The Indian Overseas Bank Ltd. (1943), 13 Comp Cas 202 (Mad.). Evaluation: 69. Before the 'Tribunal' ('National Company Law Tribunal', Division Bench-I, Chennai), the Respondent Nos. 1 and 2 / Petitioners / Legal Heirs of 1st Petitioner, had filed IA/14/CHE/2022 in CP/95/CHE/2021 (under Rule 53 of the National Company Law Tribunal Rules, 2016), among other things stating that the main 'Company Petition', was filed by the '3rd Respondent / 1st Respondent / 1st Petitioner (Mrs. M.V. Valli Murugappan - Deceased)' and the '4th Respondent / 2nd Respondent / 2nd Petitioner', seeking 'Equitable Reliefs', under Section 241 of the Companies Act, 2013, on account of 'Oppression' of their 'Rights', as 'Shareholders', and a 'Systematic Exclusion', from knowing / participating in the 'Management and the Affairs' of the 'Appellant / 3rd Respondent / 1st Respondent Company'. Further, the 'Petition', arose, in respect of the 'Family' run Appellant / 3rd Resp....
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....he 'Respondent', and hence, the Name of the 2nd Respondent / 2nd Petitioner, cannot be 'Substituted', in the 'Waiver Application', that was filed by her 'Demised Mother'. 74. The Appellant / 3rd Respondent / Company, had proceeded to observe in its 'Counter' in IA/14/CHE/2022 in CP/95/CHE/2021 that the 'Name of the 2nd Respondent / 2nd Petitioner', could not be 'Substituted', in the 'Waiver Application' (although a 'Legal Heir'), as she ceased to be a 'Member' of the 'Respondent', with effect from 04.03.2022, on which date, the 2nd Respondent / 2nd Petitioner, had 'transferred all her 62,851 Shares', in favour of the '4th Respondent / M.V. Murugappan (HUF)'. 75. The Appellant / 3rd Respondent, took a plea that the 2nd Respondent / 2nd Petitioner's name, could not be 'Substituted', in the 'Waiver' and the connected 'Application', as she does not 'satisfy' the 'rudimentary requirement' of being a 'Member', i.e. 'Mandatory', as per Section 244 of the Companies Act, 2013. Also that, the 'Right', to seek 'Waiver', under Section 244 of the Act, can be exercised, by a 'Member' of the 'Company' only, and not by others. 76. The Appellant / 3rd Respondent / Company, under the aforesaid ci....
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....pellant / Company', by exercising 'Diligence', would have and should have known that the 'Appellant's Shares', were 'transferred', by the 'Respondent Nos.1 and 2', on 04.03.2022. Inspite of the same, the 'Appellant', had not opposed the 'Reliefs', that were prayed for, in IA No.129 of 2022 and indeed, by means of an 'Order', dated 23.03.2022, this 'Tribunal', had allowed the IA No. 129 of 2022 and the 'Order', relating to 'Impleadment', had attained finality. 83. It is represented on behalf of the Respondent Nos. 1 and 2, that after the 'Order', that was passed on 23.03.2022, in IA No. 129 of 2022, the 'Appellant', filed a 'Memo' dated 19.04.2022 in Comp. App (AT) (CH) (INS.) No. 54 of 2021, bring on record, before this 'Tribunal', that the '2nd Respondent', had transferred her 'Shareholding' in the 'Appellant / Company', to the '4th Respondent'. In fact, when Comp. App (AT) (CH) (INS.) No. 54 of 2021, was heard on numerous occasions, the 'aspect of Impleadment of 2nd Respondent', was not agitated, before this 'Tribunal'. 84. It is not out of place for this 'Tribunal', to make a pertinent mention that there is no command, under any 'Law', which enjoins that the 'Legal Representat....