Shakti Yezdani & Anr. vs Jayanand Jayant Salgaonkar & Ors.

Held: 1956 Act does not contemplate a ‘statutory testament’ that stands over and above the laws of succession – 1956 Act is concerned with regulating the affairs of corporates and is not concerned with laws of succession – ‘Statutory testament’ by way of nomination is not subject to the same rigours as is applicable to the formation and validity of a will under the succession laws – Submission of the appellants of nomination as a ‘statutory testament’ cannot be accepted because the Companies Act, 1956 does not deal with succession nor does it override the laws of succession – It is beyond the scope of the company’s affairs to facilitate succession planning of the shareholder – In case of a will, it is upon the administrator or executor under the Succession Act, 1925, or in case of intestate succession, the laws of succession to determine the line of succession. [Para 41, 42] Companies Act, 1956 – s. 109A – Effect of term ‘vest’ in s. 109A and Byelaw 9.11.1 under the Depositories Act, 1996: Held: s. 109A of the 1956 Act (pari materia to s. 72 of the Companies Act, 2013) provides for vesting of shares/debentures of a share/debenture holder unto his nominee ‘in the event of his death’ – Byelaw 9.11.1 under the Depositories Act, 1996 provides for ‘vesting’ of the securities unto the nominee on the death of the beneficial owner – Use of the word ‘vest’ does not by itself, confer ownership of the shares/securities to the nominee – Vesting of the shares/securities in the nominee under the Companies Act, 1956 and the Depositories Act, 1996 is only for a limited purpose-to enable the Company to deal with the securities thereof, in the immediate aftermath of the shareholder’s death and to avoid uncertainty as to the holder of the securities, which could hamper the smooth functioning of the affairs of the company. [Para 34, 35]

Companies Act, 1956 – s. 109A – Non-obstante clause – Effect of: Held: Non-obstante clause in s. 109A should be interpreted keeping in mind the scheme of the Act and the intent of introduction of nomination facility u/ss. 109A and 109B wherein emphasis was laid on building investor confidence and bringing the company law in tune with policies of liberalisation and deregulation – Use of the non-obstante clause serves a singular purpose of allowing the company to vest the shares upon the nominee to the exclusion of any other person, for the purpose of discharge of its liability against diverse claims by the legal heirs of the deceased shareholder – This arrangement is until the legal heirs have settled the affairs of the testator and are ready to register the transmission of shares, by due process of succession law – As per Bye-law 9.11.7 of the Depositories Act, 1996, the non-obstante clause confers overriding effect to the nomination over any other disposition/nomination ‘for the purposes of dealing with the securities lying to the credit of deceased nominating person(s) in any manner’ – Purpose of invoking such non-obstante clause is delineated and limited to the extent of enabling the depository to deal with the securities, in the immediate aftermath of the securities holder’s death – Thus, nonobstante clause in both s. 109A(3) of the 1956 Act and Bye-law 9.11.7 of the Depositories Act, 1996 cannot be held to exclude the legal heirs from their rightful claim over the securities, against the nominee – Interpretation of statutes. [Paras 37, 38]

Interpretation of statutes – Rules of interpretation – Words and phrases – Interpretation of:

Held: General words and phrases used in a statute, regardless of their wide ambit, must be interpreted taking into account the objects of the statute – Clauses and sections within a statute are not to be read in isolation, but their textual interpretation is determined by the scheme of the entire statute – Non-obstante clause is to be considered on the basis of the context within which it is used. [Para 37]

Companies Act, 1956 – Scheme of ‘nomination’ under the 1956 Act as well as other comparable legislations-Government Savings Certificate Act 1959, the Banking Regulation Act, 1949, the Life Insurance Act, 1939 and the Employees Provident Fund and Miscellaneous Provisions Act, 1952 – Implication of – Stated. [Paras 24-26]

LIST OF CITATIONS AND OTHER REFERENCES

Harsha Nitin Kokate v. The Saraswat Co-operative Bank Limited and Others (2010) SCC Online Bom 615; Sarbati Devi v. Usha Devi [1984] 1 SCR 992: (1984) 1 SCC 424; Vishin N. Khanchandani and Anr. v. Vidya Lachmandas Khanchandani & Anr. [2000] 2 Suppl. SCR 415: (2000) 6 SCC 724; Shipra Sengupta v. Mridual Sengupta & Ors [2009] 13 SCR 407: (2009) 10 SCC 680; Ramchander Talwar & Ors. v. Devendra Kumar Talwar & Ors. [2010] 11 SCR 897: (2010) 10 SCC 671; Nozer Gustad Commissariat v. Central Bank of India & Ors (1993) 1 Mah LJ 228; Antonio Joao Fernandes v. Asst. Provident Fund Commissioner (2010) 4 Mah LJ 751; Indrani Wahi v. Registrar of Cooperative Societies and Others [2016] 4 SCR 307: (2016) 6 SCC 440; Salomon v. Salomon & Co.(1897) AC 22, 38; Fruits & Vegetable Merchant Union v. Delhi Improvement Trust [1957] SCR 1: AIR 1957 SC 344; Vatticherukuru Village Panchayat v. Nori Venkatarama Deekshithulu [1990] 3 Suppl. SCR 691: 1991 Supp (2) SCC 228; Municipal Corpn. of Greater Bombay v. Hindustan Petroleum Corpn. [2001] 2 Suppl. SCR 50: (2001) 8 SCC 143; Vishin N. Khanchandani v. Vidya Lachmandas Khanchandani [2000] 2 Suppl. SCR 415: (2000) 6 SCC 724; Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd., (1987) 1 SCC 424: [1987]

2 SCR 1; R.S. Raghunath v. State of Karnataka (1992) 1 SCC 335: [1991] 1 Suppl. SCR 387; Shanker Raju v. Union of India (2011) 2 SCC 132: [2011] 2 SCR 1 – referred to.

OTHER CASE DETAILS INCLUDING IMPUGNED

ORDER AND APPEARANCES