Companies Act, 2013 – ss. 241 and 242 – Respondent no. 1 C filed a partition suit claiming entitlement to one-fourth of the estate/shares of his father – The High Court directed status quo between the parties and the said suit is pending – Thereafter, respondent no.
1 filed Company petition alleging oppression and mismanagement in the affairs of respondent no. 2 company and claimed eligibility to maintain the petition on the ground of being holder of 0.03% D shareholding and legitimate expectation to 9.97% shareholding of respondent no. 2 company – The NCLT held the petition maintainable and respondent no. 1 as legal heir was entitled to one-fourth share of the property/shares – NCLAT affirmed the order passed by the NCLT – On appeal, held: The basis of petition is the claim by way E of inheritance of one-fourth shareholding so as to constitute 10% of the holding, which right cannot be decided in proceedings u/s. 241/242 of the Act – Respondent no. 1 has to firmly establish his right of inheritance before a civil Court to the extent of the shares he is claiming – The respondent no. 1 had nothing to do with the affairs of the company and he is not a registered owner – The rights F in estate/shares, if any, of respondent no. 1 are protected in the civil suit – Respondent no. 1 does not represent the body of shareholders holding a requisite percentage of shares in the company, necessary in order to maintain such a petition – It would not be appropriate given the order passed by the civil Court to treat the shareholding G in the name of respondent no. 1 by NCLT before ownership rights are finally decided in the civil suit – Therefore, the proceedings filed before the NCLT regarding oppression and mismanagement u/ss. 241/242 of the Act are directed to be dropped – The impugned orders passed by the NCLT and NCLAT are set aside. Allowing the appeals, the Court
HELD: 1. Admittedly, respondent No.1 is not holding the shares to the extent of eligibility threshold of 10% as stipulated under section 244 of the Companies Act, 2013 in order to maintain an application under sections 241 and 242. He has purchased the holding of 0.03% in respondent no. 2 company in June 2017 after filing civil suit and remaining 9.97% is in dispute, he is claiming on the strength of his being a legal representative. In respondent no. 16 company, the shareholding of the deceased was 11.11%, out of which one-fourth share is claimed by respondent No.1. Admittedly, in a civil suit for partition, he is also claiming a right in the shares held by the deceased to the extent of one-fourth. The question as to the right of respondent no.1 is required to be adjudicated finally in the civil suit, including what is the effect of nomination in favour of his mother whether absolute right, title, and interest vested in the nominee or not, is to be finally determined in the said suit. The decision in a civil suit would be binding between the parties on the question of right, title, or interest. It is the domain of a civil court to determine the right, title, and interest in an estate in a suit for partition. [Para 20] [491-H][492-A-C]
2. It is admitted by respondent no.1 that he was not involved in day to day affairs of the company and had shifted to Australia to set up his independent business w.e.f. 2001. [Para 21][492-G]
3. The basis of the petition is the claim by way of inheritance of 1/4th shareholding so as to constitute 10% of the holding, which right cannot be decided in proceedings under section 241/242 of the Act. Thus, filing of the petition under sections 241 and 242 seeking waiver is a misconceived exercise, firstly, respondent no.1 has to firmly establish his right of inheritance before a civil court to the extent of the shares he is claiming; more so, in view of the nomination made as per the provisions contained in Section
71 of the Companies Act, 2013. [Para 22][493-F-G]
4. In the instant case, this Court is satisfied that respondent no.1, as pleaded by him, had nothing to do with the affairs of the company and he is not a registered owner. The rights in estate/shares, if any, of respondent no.1 are protected in the civil suit. Thus, we are satisfied that respondent no.1 does not represent the body of shareholders holding requisite percentage of shares in the company, necessary in order to maintain such a petition. [Para 24][495-D-E]
5. In the facts and circumstances, it would not be appropriate to permit respondent No.1 to continue the proceedings for mismanagement initiated under sections 241 and 242, that too in the absence of having 10% shareholding and firmly establishing his rights in civil proceedings to the extent he is claiming in the shareholding of the companies. [Para 26][496-C-D]
Sangramsinh P. Gaekwad and Ors. v. Shantadevi P. Gaekwad (Dead) through LRs. and Ors. (2005) 11 SCC
314 : [2005] 1 SCR 624; M/s. Dale & Carrington Invt. (P) Ltd. and Anr. v. P.K. Prathapan and Ors. AIR 2005 SC 1624 : [2004] 4 Suppl. SCR 334; J.P. Srivastava & Sons Pvt. Ltd. and Ors. v. M/s. Gwalior Sugar Co. Ltd. and Ors. AIR 2005 SC 83 : [2004] 5 Suppl. SCR 648 – relied on.
Vishin N. Khanchandani & Anr. v. Vidya Lachmandas Khanchandani & Anr. (2000) 6 SCC 724 : [2000] 2 Suppl. SCR 415 – distinguished.
World Wide Agencies Pvt. Ltd. & Anr. v. Margarat T. Desor& Ors. (1990) 1 SCC 536 : [1989] 2 Suppl. SCR 545; Smt. Sarbati Devi & Anr. v. Smt. Usha Devi, (1984)
1 SCC 424 : [1984] 1 SCR 992; Ram Chander Talwar & Anr. v. Devender Kumar Talwar & Ors. (2010) 10 SCC 671 : [2010] 11 SCR 897 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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