TaxTMI 
TaxTMI 
2024 (4) TMI 307
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....een the three children of the testator and cancelled the allotment of 9800 shares in the name of appellant No. 2 - Late Mr. HPS Chawla (respondent No. 2 before the CLB). 2. Likewise, the CLB in Company Petition No. 9/111/2010 directed equal division (1/3rd each) of the 5 shares of the appellant company - Earl Chawla & Company (P) Limited, between the three children of the testator and cancelled the allotment of 990 shares in the name of appellant No. 2 - Late Mr. HPS Chawla (respondent No. 2 before the CLB). 3. It is clarified that these appeals arise from separate judgments but emanate from a common factual matrix except to the extent of the paid up capital of each company and the appeals raise common questions of law and facts, and therefore, can be conveniently decided together. However, for the sake of convenience, the appeal bearing CO.A(SB) 59/2015 is taken to be the lead case. FACTUAL BACKGROUND: 4. Mrs. Ram Piari Chawla, born in 1909, had five children, namely Raj Sahni Chawla, TPS Chawla, NPS Chawla, Nirmal Daniere and HPS Chawla. The appellant Company viz., Vantage Construction Private Limited [Company] was incorporated on 19.02.1986 under the aegis of Mr. H.P....
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....ed that HPSC would not dispute any part of the Will nor claim exclusive title to any of the properties covered by the said Will, and on that broad understanding, the Supreme Court referred the parties to mediation vide order dated 14.01.2009. 7. It is pertinent to mention that the Supreme Court, vide order dated 15.07.2010, converted the said SLP into a Civil Appeal bearing No. 5452/10. Respondents No. 1 and 2 arrived at a mutual consensus and prepared a 'Joint Memo' recording the terms and deliverables with regard to the disposal of the estate of their mother - late Ram Piari Chawla. Consequently, the Appeal was disposed of by taking on record the 'Joint Memo' recording the consent terms arrived at and agreed to by the parties. 8. However, there was no quietus to the disputes between the parties, as evidently, HPSC dilly dallied the issue of transfer of 1/3rd shares each in favour of NPSC and NCD inter alia asserting that the said 100 shares are not a part of the estate of late Smt. Ram Piari Chawla, which would be evident from the reading of the Will itself, wherein every movable and immovable property was enlisted apart from the shares in question, regardin....
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....r months from the date of making claim. Here, R-2 caused delay in dragging the litigation over the probate proceedings. It is obvious that the Petitioners could not file an application for transmission of the shares unless probate proceedings are decided. The Petitioners approached this Bench within time after the mediation centre disposed it off. 13. R-2 himself admittedly stated that he has not refused transmission of shares except asking succession certificate and other proofs identifying them as legal heirs of his mother. 14. In the company, usually these conditions are to be complied with when the claimants are some strangers, here they are none other than real brother and real sister of R-2, and so the question of identifying will not arise. More so, he has not mentioned anywhere they are not his brother and sister. He has also not mentioned his mother has not executed a Will in favor of them bequeathing all moveable and immoveable assets of her to the Petitioners and R-2. Thereby, R-2 should not take the shelter of technicalities and refuse transmission of shares to the petitioners as bequeathed by their mother. 15. In view of it, I am of the opini....
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....sly arrived at the conclusion that the shares held by the deceased testatrix were also included within the meaning and scope of the 'movable properties' in the Will dated 04.07.1986, overlooking the patent fact that the "list of movable and immovable properties" contained in the Will was an exhaustive one and that the shares were not a part of the estate of late Smt. Ram Piari Chawla. Further, it is stated that the CLB did not consider the fact that late Smt. Ram Piari Chawla was 77 years of age when the appellant company was incorporated and that she had no role in its affairs whatsoever, so much so that for all practical purposes, the appellant company has always been run in the nature of a sole proprietorship by HPSC; and that even in the Probate Petition No. 22/1991 there was no specific mention of the 100 shares of the appellant company as property belonging to and left behind by the testatrix; and that by all means the deceased was holding the shares in her name only in trust, for and on behalf of her son HPSC. 12. Additionally, it is urged that the CLB committed a grave jurisdictional error in proceeding under Section 111 of the Act and cancelling the allotment of 9800 sh....
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....rned counsel for the appellants relied on the decisions in Bakshi Ram v. Brij Lal 1994 Supp (3) SCC 198, Shyam Telelink Ltd Now Sistema Shyam Teleservices Limited v. Union of India (2010) 10 SCC 165 and Commissioner of Customs, New Delhi v. Caryaire Equipment India Private Limited (2012) 4 SCC 645. 16. Per contra, Mr. Mahajan, learned counsel for the respondents has vehemently urged that after the demise of HPSC on 03.04.2014, the appellants-legal heirs are now setting up a new case, which was never canvassed or argued by the deceased - HPSC himself. It was pointed out that respondent No. 1/NPSC in Probate Case No. 22/1991 vide paragraph (4) had categorically made an averment that his mother had invested some amount in the two companies viz., Earl Chawla & Company Private Limited and Vantage Construction Private Limited, that was being managed and run by HPSC and she had also lent some amounts to HPSC but the latter had failed to render accounts of the same, despite several reminders. 17. It was further urged that Company Petition No. 8/111/10 as well as No. 9/111/10 had been filed before the CLB on 11.05.2010, when the matter was already in mediation before the Delhi High Co....
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.... communication of the decision or the order, and such appeal shall be on any 'question of law' arising out of such order. The period of 60 days is further extendable by the High Court by another 60 days on being satisfied that the appellant had been prevented by sufficient cause in not filing the appeal within the initial prescribed period of 60 days. 22. First things first, ex facie, the present appeal, which is primarily assailing the substantive order dated 24.06.2013, was instituted on 20.11.2015 and no leave of the Court has been taken for permitting condonation of delay on any sufficient grounds or otherwise; and the appeal appears to have been filed consequent to the order dated 29.09.2015 passed by the CLB in purported exercise of its powers under Section 634-A^3 of the Act for enforcement of its order dated 24.06.2013. However, the issue as regards the present appeal having been filed beyond the prescribed period of limitation has not been raised during the course of arguments, but there is no gainsaying that the said issue goes to the root of the matter and impacts the jurisdiction of this Court. Needless to state that this Court can suo motu determine as ....
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....ier. This is imperative, more particularly in the exercise of the appellate jurisdiction qua a decision on discretion rendered at an introductory stage of any proceeding, otherwise awaiting final adjudication on merits following a full contest. It is settled that no adjudication at the preliminary stage of a proceeding in a court of law ought to have the attributes of a final verdict so as to prejudge the issues at that stage, thereby rendering the principal determination otiose or redundant. This is more so, if the pleadings of the parties are incomplete at the threshold stage and the lower forum concerned seeks only to ensure a working arrangement vis-à-vis the dissension and postpone fuller and consummate appreciation of the rival assertions and the recorded facts and the documents at a later stage. 50. Section 10-F of the Act engrafts the requirement of the existence of a question of law arising from the decision of CLB as an essential precondition for the maintainability of an appeal thereunder. While the language applied therein evinces that all orders, whether final or interlocutory, can be the subject-matter of appeal, if it occasions a question of law, in o....
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....t had been set out in the Annexure D thereto." In the list of properties filed by NPSC in Probate Case No. 22/1991, vide Item No. 4, there was mention of the deceased having invested some amounts in the two companies i.e. Earl Chawla & Company Private Limited and Vantage Construction Private Limited, which was being managed and run by HPSC, besides having lent some money to HPSC; and it was averred that despite several reminders, HPSC failed to render accounts. 26. At the cost of repetition, there was no challenge by HPSC to the legality and validity of the Will left behind by his mother and even in appeal before the Division Bench and Supreme Court his grievance was that he had not been made an Executor of the Will despite a categorical dictate of the testatrix. A perusal of the order dated 20.09.2006 in the proceedings before the Supreme Court would show that the counsel for HPSC made a statement at the Bar that "so far as Will is concerned, he does not dispute any part of the Will nor does he claim exclusive title to any of the properties covered by the Will. The respondents also do not dispute this position. The only concern of the parties at this stage is to dispose of the ....
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....ntitled to l/3rd share in these 100 shares. These 100 shares comprise 10% of each of the Companies. At the same time, I will be sending you a demand of the 2/3rd share of the Losses, incurred by both these companies, for the last 18 years since Mother's demise. Interest at the rate of 24% per annum will also be liable by the Estate, and will have to be settled prior to any distribution of assets of the estate. The detailed accounts will follow shortly, as the records for the last 18 years have to be collated." 29. HPSC then sent another letter on 15.12.2009 to NPSC but this time addressing him as 'Sir' instead of 'Duke' and it would be expedient to reproduce the entire letter, which is as under:- December 15, 2009 "Dr. N.P.S. Chawla, 37 Prithvi Raj Road, New Delhi 110011 Ref: Transfer of Shares in the name of late Mrs. Ram Piari Chawla Sir, This is in reference to your letter dated 7th November 2009. Regarding your request for the transfer of shares in this Company held in the name of late Mrs. Ram Piari Chawla. In this respect, we would like to inform you, that you are under the mis-conception that the late Mrs.....
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....y. Thanking you, Yours faithfully Dr. NPS Chawla" 31. Likewise, a reply dated 25.03.2010 was also sent by NCD as well to HPSC. The aforesaid correspondences evidently show that the claim of the respondents with regard to shares or shareholding of the deceased was very much the bone of contention, that led to the decision of the respondents to institute a Company Petition under Section 111 of the Act and the matter was then settled before the Supreme Court on the basis of a Joint Memo executed by the parties as reflected in the order of the Supreme Court dated 15.07.2010. It would be expedient to reproduce the entire order of the Supreme Court, which goes as under:- "Leave granted. 2. Respondent No. 2, respondent No. 1 and appellant are the sons and respondent No.3 is the daughter of late Smt. Ram Piari Chawla. She died on 27.10.1990 leaving a registered Will dated 4.7.1986. By the said Will, she disinherited her first son T.P.S. Chawla, by bequeathing only Rupee one to him and bequeathed all her assets in favour of the remaining three children - appellant and respondents 1 and 3, in equal shares. She appointed the first respondent and....
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....s: (1) The subject matter of the dispute is all properties as per the Will of late Ram Piari Chawla namely: (1) E-23, Defence Colony, New Delhi, (2) Farm House at village Jaunapur, New Delhi, as also UTI and the National Saving Certificates mentioned in the Will. The amount lying in the said Account shall be distributed immediately. (2) It is agreed between the parties that the above said properties shall be disposed of on the following terms and conditions: (a) As regard the Units and National Saving Certificate which have been encashed the proceeds of which are deposited in the account of the Estate of Smt. Ram Piari Chawla with Standard Chartered Bank, Malcha Marg, Chanakya Puri, New Delhi. These amounts shall be divided equally amongst the three legatees. (b) The two properties namely (1) E-23, Defence Colony, New Delhi and (2) Jaunapur Farm at village Jaunapur, New Delhi are valued at Rs.40.00 crores (Rupees forty crores only) and Rs.8.00 crores (Rupees eight crores only) respectively. (3) It is agreed that Shri HPS Chawla shall pay Rs. 16.00 crores each to Dr. NPS Chawla and Ms. Nirmal Daniere Chawla on or before ....
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....osts." 32. In view of the foregoing discussion, what is apparent is that the issue with regard to the shareholding of the deceased was very much alive and in the knowledge of the parties. The whole tone and tenor of the correspondence between the parties referred hereinabove would show that HPSC was always ready and willing to transfer 1/3rd shareholding in the two companies, provided both NPSC and NCD were to agree to compensate him for so called cumulative losses, which incidentally were never spelled out. Therefore, there is merit in the submission by the learned counsel for the respondents that after the death of HPSC on 03.04.2014, the legal heirs/successors of deceased HSPC are attempting to set up a new case, which was never espoused by the deceased - late HPSC. HPSC never challenged the entitlement of the respondents as regards 1/3rd shareholding in the company with regard to the shares left behind by the deceased - Smt. Ram Piari Chawla. 33. That being the case, the finding given by the CLB that the shareholding to the extent of 100 shares in Vantage Construction Private Limited and 5 shares in Earl Chawla & Company Private Limited were in the nature of movable prope....
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....level provides that a person taking advantage under an instrument which both grants a benefit and imposes a burden cannot take the former without complying with the latter. This Court fails to understand how the cited case law provides any sustenance to the case of the appellants. 37. In view of the foregoing discussion this Court finds that the impugned judgment dated 24.06.2013 passed by the CLB does not suffer from any patent illegality, perversity or incorrect approach in law. Accordingly, the present appeal is dismissed. 38. The appellant No. 1 company is hereby directed to comply with the directions passed by the CLB vide paragraph (17) and immediately comply with the directions contained in the order dated 29.09.2015, purportedly in exercise of powers under Section 634A of the Act. Before parting with this appeal, this is a fit case where the appellants be burdened with exemplary costs for racking up frivolous and unsubstantiated contradictory pleas before the Court and thereby prolong this trial resulting in wastage of precious time of this Court and efforts. The appellants are accordingly burdened with costs of Rs. 1,00,000/- (Rupess One Lac only). CO.A(SB) 60/201....
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....not go to wrong person, if one knows to whom the shares will go, then there is no need to cling to procedural compliance. Since it will not bring in anything new or additional to the knowledge of the R-2 to transmit shares to the petitioners, R-2 should not refuse transmission of shares in the name of them on the technicalities above mentioned. 24. As to second point, R-2 held board meetings and general meetings after the demise of their mother and made allotment to himself and made his daughter as a director as stated by the Petitioner counsel. it is evident under the Companies Act that a single shareholder could not hold any general meeting or make allotment to himself without taking prior permission from the Company Law Board as stated u/s 186 of the Companies Act. Here R-2 unilaterally raised his shareholding to 990 by increasing share capital from Rs 20,000 to one-lakh rupees thereafter splitting share value Rs 100 into Rs 10 each and making allotment of 9900 shares to himself is in violation of the provisions of the Companies Act. For that reason, I hold that the allotment made to R-2 and transfer of mother shares to his daughter is void under law therefore allotment....
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.... holding any meeting as required under law, therefore such increase behind the back of the petitioners is held invalid and without any sufficient cause. Even if it is considered as legal requirement to enhance paid up capital to one lac rupees, this could be complied with by rectifying the register showing further allotment to the petitioners and second respondent in proportion to the shares transmitted to the petitioners. Hence I am of the view that 990 shares shown in the register shall be deleted in the name of R-2 if law demands it to be shown as one lac rupees in the company, the same could be shown as allotted to three of them in proportion to their entitlement. 28. As to the reliefs in respect of their mother shares, R-1 Company is hereby directed to delete the name of R-3 holding 5 original shares from the register and rectify the register by transmitting the names of the petitioners and second respondent showing 1/3 each in the 5 shares held by their mother late Smt. Ram Piari Chawla in R-1 Company, as to the allotment of 990 shares shown in the name of R-2, R-1 company and R-2 are hereby directed to delete the entry of 990 shares in the name of R-2, and intimate ....
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....r or transmission or to send notice of its refusal to register the same. (3) An appeal under sub-section (2) shall be made within two months of the receipt of the notice of such refusal or, where no notice has been sent by the company, within four months from the date on which the instrument of transfer, or the intimation of transmission, as the case may be, was delivered to the company. (4) If- (a) the name of any person- (i) is without sufficient cause, entered in the register of members of a company, or (ii) after having been entered in the register, is without sufficient cause, omitted therefrom; or (b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become, or ceased to be, a member [including a refusal under sub-section (1), the person aggrieved, or any member of the company, or the company, may apply to the [Tribunal] [Substituted by Act 11 of 2003, Section 15, for "Company Law Board".] for rectification of the register. (5) The [Tribunal] [Substituted by Act 11 of 2003, Section 15, for "Company Law Board".], while dealing with an appeal preferred under sub-section (2) o....
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.... shall be accompanied by such fee as may be prescribed. (11) In the case of a private company which is not a subsidiary of a public company, where the right to any shares or interest of a member in, or debentures of, the company is transmitted by a sale thereof held by a Court or other public authority, the provisions of sub-sections (4) to (7) shall apply as if the company were a public company: Provided that the [Tribunal] [ Substituted by Act 11 of 2003, Section 15, for " Company Law Board" .] may, in lieu of an order under sub-section (5), pass an order directing the company to register the transmission of the right unless any member or members of the company specified in the order acquire the right aforesaid within such time as may be allowed for the purpose by the order, on payment to the purchaser of the price paid by him therefore or such other sum as the [Tribunal] [Substituted by Act 11 of 2003, Section 15, for " Company Law Board".] may determine to be a reasonable compensation for the right in all the circumstances of the case. (12) If default is made in complying with any of the provisions of this section, the company and every officer of the company who....