TMI Blog1988 (9) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... s : Shares 1.S. Amrit Singh Saluja 5 2.S. Balwant Singh 405 3.Mrs. Surinder Kaur Saluja 450 4.Mr. Tarlochan Singh Saluja 5.Mr. Yash Pal Malhotra 250 6.Mr. Surinder Kumar Desor 550 7.Mrs. Amrit K. Singh 350 2010 The said annual returns also record that 350 shares of Tarlochan Singh were transferred to S. K. Desor on August 12, 1975, and 350 shares of Mrs. S. K. Saluja were transferred on August 7, 1975 to Mrs. Amrit K. Singh. Surinder Kumar Desor was a British national, as was Amrit Singh. Balwant Singh and Yash Pal Malhotra were Indians. As per the certified copy of the annual return of M/s. Worldwide Agencies made up to February 15, 1984, the shareholders were S. K. Desor, Mrs. Amrit K. Singh, Yash Pal Malhotra, Mrs. Amrit Gupta, Mrs. Savitri Devi Kohli, Mr. A. S. Saluja and Mr. Balwant Singh. They held the following shares : Shares 1.S. K. Desor 600 2.Mrs. Amrit Kaur Singh 545 3.Mr. Yash Pal Malhotra 250 4.Mrs. Amrit Gupta 200 5.Mrs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of directors, and petitioner No. 1 applied to the directors present, for the transfer of the shares held by her late husband, S. K. Desor, to her name as his wife and legal heir. She has also furnished an affidavit of Mrs. Kim Paul, petitioner No. 2, relinquishing her claim to the shares held by her late father. It is stated that in view of the application and the affidavit furnished by her and daughter of S. K. Desor, the board of directors have resolved that they have no objection to transmit the shares held by S. K. Desor and Mrs. Margaret Desor on executing an indemnity bond. It was resolved that actual transfer of shares, however, will take effect after permission of the Reserve Bank of India has been obtained by petitioner No. 1, and succession certificate has been obtained with regard to the properties of S. K. Desor. The board recorded that Mrs. Margaret Desor had applied for allotment of 5 shares vide her letter dated March 12, 1985, and she has undertaken to make payment within one week. The directors recorded that they have no objection to it, and it was resolved to allot her 5 shares out of the unsubscribed capital of the company, and that the shares will be issued s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts that the said suit bearing No. 430 of 1985, was filed only with a view to harass the petitioners as well as to wrongly and illegally capture the control of the affairs of the company. It is also asserted in the petition that the documents of the company were removed by Mrs. Amrit K. Singh. It is also asserted in the petition that notice was addressed to Mrs. Amrit K. Singh regarding a meeting of the board of directors to be held on March 12, 1985 at 10.00 a.m., but she did not attend the same. In these circumstances, it is said that the affairs of M/s. Worldwide Agencies Pvt. Ltd. are being managed in a manner prejudicial to the interest of the company and oppressive to the petitioners. Various other pleas are raised in the petition, and the reliefs sought in the petition are : ( i ) removal of Mrs. Amrit K. Singh from the office of the director ; ( ii ) appointing the first petitioner, Mrs. Margaret Desor as chairman-cum-managing director of the company ; ( iii ) directing the board of directors to register the transmission of shares of S. K. Desor in the name of the first petitioner; ( iv ) and directing Mrs. Amrit K. Singh to transfer 545 shares. In the alternative, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificate or the letters of administration, but the succession certificate or the letters of administration only recognises the pre-existing change of ownership from the deceased holder to the heirs, which occurs at the moment of death. This position, that ownership of property rights vis-a-vis the shares held by the deceased is transferred to the heirs of a deceased holder is recognised by necessary intendment by the proviso to section 108 of the Companies Act. It says that "nothing in this section shall prejudice any power of the company to register as shareholder or debenture-holder any person to whom the right to any shares in, or debentures of, the company has been transmitted by operation of law". This exception is carved out against the requirement of section 108 of the Companies Act, which requires that shares of a company are not to be transferred to another person without an instrument of transfer postulated by that section. Clearly, there is a difference between transfer of a share, which is a voluntary act of a shareholder to another person, and the transmission of a share to an heir by operation of law. In the instant case, it must also be borne in mind that the board of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioners as members, and that exercise of such power by the board of directors of M/s. Worldwide Agencies is bona fide and in the interest of the company. I have my reservations about the judgment of the Gauhati High Court, for what it decides, but I will not consider the matter further inasmuch as the facts of that case are different from the facts of the present case, and the judgment of the Gauhati High Court has no application to the facts of the present case. Mr. Menon then cited Ved Prakash v. Iron Traders Pvt. Ltd., AIR 1960 Punj 427, in respect of the proposition that petitions under section 397 can be maintained only by those persons who are registered as members in the register of members. Facts of that case were different from the facts of the instant case. In that case, the application for rectification of the register had been dismissed by the District Judge. The petitioners filed a petition under sections 397 and 398 of the Companies Act before the High Court. The District Judge had dismissed the petition for rectification on the ground that it could not be properly decided in summary proceedings for rectification. The Hon'ble Single Judge of the Punjab High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting had been requisitioned. The appeal before the Supreme Court was by special leave against an order of the Allahabad High Court, which had dismissed the special appeal before it, questioning the right of the requisitionists to issue notice under section 169 of the Act, to call an extraordinary general meeting. The said case having no parallel in the instant case, cannot be an authority for the proposition that the petition under section 397 is not maintainable. In fact, such a question was not there for consideration before the Supreme Court. A receiver does not, to my mind, have the same status in law as an heir. Succession of an heir to property left upon intestacy is automatic. Property vests in the heir according to law, whereas a receiver's obligations and duties are only in accordance with the order that results in his appointment. This Supreme Court judgment, is therefore, of no assistance to respondent No. 2. Mr. Menon also refers to Jawahar Singh Bikram Singh Pvt. Ltd. v. Smt. Sharda Talwar [1974] 44 Comp Cas 552 (Delhi). In that case, one Sri Kishan Talwar had instituted proceedings under sections 397 and 398 of the Companies Act. In that petition, Smt. Shard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed transmission by the board of directors of the company, could maintain a petition under section 397 of the Companies Act, 1956. Mr. Menon next relied upon Cuthbert Cooper and Sons Ltd.'s case [1937] 2 All ER 466. This is a judgment dated March 15, 1937, and even pre-dates the provision of section 210 of the English Companies Act, (which was the precursor of sections 397 and 398 of the Indian Companies Act). The said English case related to refusal of the directors to transfer shares. It was asserted by the petitioners that the directors had constantly refused to give or assign any reason for refusal to transfer shares. The court held that the persons who had suffered the refusal of the directors, and not permitted to be recorded as members of the company, could not maintain a petition for the winding up of the company. As the case related to winding up of the company, it has no application to a petition under section 397 of the Companies Act, which relates to relief in cases of oppression. The cited case, therefore, does not help respondent No. 2. In any case, it is worthy of note that a Division Bench of this court, on a construction of section 439 of the Indian Companies A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r who had died intestate can apply to the court under section 397 of the Companies Act or not, and as such the observations of the Supreme Court do not help the respondent. In the present case, what is required to be determined is whether the heirs of the deceased member who have not been refused transmission of the shares by the board of directors, can apply under section 397 of the Act. Mr. P. B. Menon then contended that a composite petition under sections 397, 398 and section 433 of the Companies Act is not maintainable, and in support of his proposition, referred to Kilpest Private Ltd. v. Shekhar Mehra [1987] 62 Comp Cas 717 , a judgment of a Division Bench of the Madhya Pradesh High Court. Mr. Menon, relying upon observations of the said court, contended that a composite petition is not maintainable under sections 397, 398 and 433 of the Companies Act. However, a contrary view has been expressed by a Division Bench of this court, which is reported as Bhaskar Stoneware Pipes (P.) Ltd s case ( supra ). In that case, the Division Bench was considering an appeal against an order passed by a single judge, whereby the learned single judge had admitted a petition under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Buckley on the Companies Act, (Fourteenth Edition, Volume 1, page 491,) where it is stated "for the purpose of a petition under this section (210 of the English Companies Act), 'member' includes the personal representative of the deceased member". Buckley refers to In re Jertnyn Street Turkish Baths Ltd. [1970] 3 All ER 57; [1970] 1 WLR 1194,' 1205, in support of these observations. Buckley adds a note that "without affecting this point, the said judgment of the single judge was reversed in [1971] 1 WLR 1042 by the Court of Appeal". Gore-Browne on Companies, 42nd edition at page 798, referred to by Mr. Bhagat, states that, "it has recently been settled that the personal representatives of a deceased member, even though they are not registered as members, are entitled to present a petition under section. 210. In In re Jermyn St. Turkish Baths Ltd., (supra) Penny-cuick J. held that, "on its true construction, section 210 required that the word ' member ' should include the personal representatives of a deceased member, on whom title to his shares devolved by operation of law". Mr. Bhagat has referred to In re Jermyn Street Turkish Baths Ltd. [1570] 3 All ER 57, decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No. 2 that the board of directors of M/s. Worldwide Agencies has refused to register the shares in the name of the petitioners. What the board of directors required was to obtain a succession certificate which the petitioners have, and also to obtain permission of the Reserve Bank of India to hold the shares that were held by S. K. Desor. It is not in dispute that after the filing of the petition, the petitioners have obtained the permission of the Reserve Bank of India to hold the shares which had been held by S. K. Desor. This, according to Mr. Bhagat, is conclusive in the observations of the Supreme Court in Life Insurance Corporation of India v. Escorts Ltd. [1986] 59 Comp Cas 548 (SC), wherein it was held that once the permission to hold shares is given by the Reserve Bank of India before or after filing of petition, it is not open to any person to question that permission. As permission of the Reserve Bank of India has been obtained in this case, the observations of the Supreme Court in Lije Insurance Corporation of India case ( supra ), are clearly applicable, and it is not open to respondent No. 2 to question the grant of that permission to the petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construed accordingly. In the facts and circumstances of the instant case, by virtue of the letter of administration, keeping in view the shareholdings of S. K. Desor as evidenced by Form 32 which has been filed by respondent No. 2, as made up to February 15, 1984, S. K. Desor had 600 shares (out of the total share capital, issued and paid-up, of 2010) which are now held between the petitioners. They have an undisputed right to hold 600 shares of the company out of total of a 2010 shares. This is considerably more than the l/10th of the shareholdings which is required to be held by the persons presenting a petition under section 397 of the Act by section 399 of the Act. These 600 shares make these petitioners the largest shareholder. Not to permit an enquiry into the assertions which have been made in this petition for oppression, which have been briefly adverted to in the earlier part of this order, could itself be a very gross form of oppression, and in my view, respondent No. 2 cannot be permitted to do that. For the reasons aforesaid, I reject the preliminary objection of respondent No. 2 that this petition is not maintainable. The petition has already been admitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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