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2005 (4) TMI 599 - COMPANY LAW BOARDImposition of certain restrictions on the share - Seeking an investigation into the membership of the company in terms of Section 247(1A) - determining the true persons who are financially interested in the success or failure of the company or who have been able to control or materially influence the policy of the company - HELD THAT:- In the present case, the facts sought to be found out relate to over 60% shares in the company and if the membership relating to these shares cannot be ascertained without investigation, then, certainly, investigation can be ordered. It is an admitted fact that before the demise of Mrs Birla, even though her direct share holding in the company was negligible, by virtue of her controlling respondents 1 to 28 which held/hold over 60% shares in the company, she was not only materially interested in the company and was also able to control the company. It is a settled law, as held by the Supreme Court in Worldwide Agencies (P) Ltd v. Margaret T Desor case [1989 (12) TMI 245 - SUPREME COURT], that on the death of a shareholder, the shares devolve on the legal heirs instantaneously. Therefore, all her interest in the company and the respondents 1-19 stood devolved on the legal heirs immediately on her demise. Who is the lawful legal heir is an issue before the Calcutta High Court and this Board has no jurisdiction to enquire into the same. The petitioners have not shown that there had been any change in the shareholdings in the respondents 1 to 19 by which the control of these respondents had changed or there are changes in the Board of Directors of these respondents or that these respondents have transferred the shares held by them in the company. Similarly, there is no allegation that there is any change in the management of the respondents 19-28. In other words, the controlling interest in the company is still with the estate of late Priyamvada. As rightly pointed by Shri Sundaram, from the averments of the petitioners in the petition it is seen that their own case is that Shri Lodha is controlling the interests of late Mrs Birla and that is the reason why they have raised the issue of Take Over Code. Likewise, while denying that Shri Lodha is controlling the interests of the estate, the learned counsel for the respondents contended that provisions of the said Code are not applicable to a case of transmission of shares. It is seen that after the demise of Mrs Birla, there was an AGM on 15.9.2004. Shri Lodha who had been a director of the company from 1991, Shri Pracheta Majumdar and Shri Vikram Swarup appointed as additional directors during 2003-2004 came up for reelection in the AGM. All of them had been appointed as directors during the life time of late Mrs Birla. In the Directors' report for the year 2003-2004 adopted on 28-4-2004, i,e., during the life time of late Mrs Birla, the proposal for the reelection of these directors had been adopted by the Board. In the AGM, all the respondent shareholders except one had voted in favour of election of these retiring directors and they had not used their majority votes to change the composition of the Board. In the AGM, if any of these directors had been defeated or if any new person had been appointed, with the support of exercise of voting by the respondents 1 to 28, there would have been some justification in the contention of the petitioners that an investigation into the membership of the company is necessary. Thus I find that the estate of late Mrs Birla, controlling majority of the shares in the company is intact and that the said estate has not brought about any change in the composition of the Board of Directors of the company. In other words it is the estate of late Mrs Birla controlling majority shares in the company, which is found to be materially interested in the affairs of the company. Who is entitled to control the estate is an issue before the High Court for a decision and provisions of Section 247(1A)cannot be invoked to determine this issue. Thus, on an over all appreciation of the facts of this case, I find that no case has been made out to order an investigation in terms of Section 247(1A) of the Act and as such I dismiss this petition.
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