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TMI Blog2013 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... er delivered on 27th August, 2010 on two applications GA 3714 of 2008 and GA 3718 of 2008 filed in connection with PLA No. 242 of 2004 whereby those were disposed of by putting the estate for the time being in the custody of three independent persons who would act as Joint Administrators pendente lite in and over all the estates left by the deceased. The relevant portion of the said judgment is noted below:- ".......They will make inventory of the estate and take possession of the same except the properties which are under possession of the Joint Special Officer for the time being. They shall submit report of inventory within four weeks from the date of assumption of charges. They will take custody of all original share scripts of all the companies and other valuable documents viz. Boards, fixed deposits' receipts etc. which belonged to and held by the said deceased, shall operate the bank account or accounts and collect dividends, and meet outgoings both statutory and non-statutory which are due and payable by the estate of the said deceased. In one words they will take all lawful steps for general Administration of the estate left by the said deceased. In the process they will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es referred to in Annexure "C".............." Priyamvada Devi Birla (for short "PBD") died on 3rd July, 2004. Incidentally, Madhav Prasad Birla ("MPB" for short) her husband had expired on 30th July, 1990. PDB had executed her Will dated 18th April, 1999 (the 1999 Will) and got it registered. In the said Will Rajendra Singh Lodha (for short "RSL") was appointed as the sole executor. RSL was the legatee of the Will with the direction that: "4. I, by this will and testament, nominate Sri Rajendra S. Lodha, a devoted friend of the family and a chartered accountant of repute, to take over the management-administrative, financial, legal - and every other aspect relevant to complete the ownership, control and full management of all the business and properties possessed or owned by me, either directly or indirectly, and the entire right, title and interest of all of which I hereby bequeath to him ......" PDB also executed a codicil/document dated 15th April, 2003. After the death of PDB, application for probate was filed by RSL. Caveats were filed. Some of the caveats filed were discharged by the High Court and the judgment was upheld by the Supreme Court in Krishna Kumar Birla vs. Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sible. 76. Of course they must consult and take the views of Lodha in each and every step while taking decision. If his views and advice are accepted by the Administrators then the views of the contesting defendants shall be taken and if there is a difference in the two views the matter should be placed before the Court for obtaining direction. They shall remain in the office of the Administrator, pendente lite, for a period of two years or till the disposal of the probate proceedings whichever is earlier. Therefore, Lodha shall hand over all the charges to the aforesaid appointed Administrators, pendente lite. Interim order passed earlier will continue till possession is taken by the Administrator." Aggrieved appeals being APO No 153 of 2006 and APO No 197 of 2006 were preferred. By judgment and order dated 11th October, 2007 the Division Bench set aside the judgment and order of the learned Single Judge, the relevant portion of which is reproduced hereunder:- "307. Therefore, on that question also, after considering the facts and circumstances of the case and the materials on record placed before us. We have to come to the conclusion, with utmost respect to His Lordship, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners do not press these petitions. The special leave petitions are dismissed as not pressed." Subsequently, RSL expired on 3rd October, 2008 and was succeeded, inter alia by his son, Harsh Vardhan Lodha ("HVL" for short). Thereafter, as quoted at the outset, the second set of applications for appointment of APLs (G.A Nos 3714 and 3718 of 2008) were filed by Birlas, the defendants in the testamentary suit. HVL too filed an application (G.A No 3731 of 2008) for appointment of APL. Such applications were heard and disposed of by common judgment and order declared on 27th August, 2010 (which has already been taken note of at the very outset of this judgment). While appeals were being heard, by an order dated 19th January, 2012 a committee of APL was appointed as Joint Administrators substituting the Committee of APL appointed as Joint Administrators by the learned Single Judge. Now the only point to be decided is the powers of the Committee of APL visà- vis the exercise of nature of rights relating to the shares which form major part of the estate. In so far as the appellants are concerned it is contended that when subsisting interim orders passed in the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly those three categories of persons can claim to be legal representative or personal representative of the testatrix in whose name the shares stand recorded in the register of members of the companies. There is no question of grant of Probate or Letter of Administration with a copy of the Will annexed or issuance of a Succession Certificate in favour of any party at this interlocutory stage without deciding the question of validity of the Will of the deceased. The shares should not be registered in the name of the 3 APLs without any Succession Certificate or Letters of Administration with copy of the Will annexed or Probate, in circumvention of provisions of the Indian Succession Act, 1925. Learned counsel appearing for the appellants has submitted that the APLs are merely Receivers and, therefore, they will not be competent to act as legal representatives or personal representatives of the deceased and step into her shoes so as to get the shares registered in their names. It is contention of the learned counsel for the respondents that the Joint APLs will be entitled to exercise all rights arising out of holding of shares as was valuable to the deceased. It is the appellants' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an officer of Court can at all be empowered to apply to the Companies and get the major portion of the assets of the Estate (shares) transferred to them by an interlocutory order during the pendency of the Testamentary Suit? It is submitted that the interim order passed by the Court preserving the status quo in respect of estate of PDB which is existing for last seven years if continued will serve the purpose. Therefore, no direction should have been issued in terms of the impugned order. It is submitted that right to vote in respect of shares is a of a company is a statutory right and is to be exercised in terms of the statute. Section 87 of the Companies Act- confers right to vote only upon members i.e. holder of shares whose name appears in the register of members can only have voting right. According to the appellants, the deceased member cannot vote because he/she is no longer alive. The name of the deceased member will continue in the register of members, until the name of the deceased member is substituted in the register of members of the company in accordance with law i.e. provisions of the Companies Act, 1956. It is therefore submitted that this is possible only in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be passed regarding substitution of name of the members as recorded in the register of members of the company in favour of the person appointed by the Court in a suit where company is not a party. It is submitted that the shares are recorded in the name of the testator in the register of members of various companies who were not parties to the proceedings. Therefore, considering all the circumstances Probate Court cannot direct recording of shares in favour of APL. It is submitted that application can be made to the companies for recording of shares only by an applicant, who has obtained Succession Certificate under Section 373 of the ISA or has obtained grant of Letters of Administration on the seal of Court with copy of the Will annexed (Section 290) or who is an Executor under the Will to whom Probate has been granted (Section 222). Only those three categories of persons can claim to be legal representative or personal representative of the testatrix in whose name the shares stand recorded in the register of members of the companies. There is no question of grant of Probate or Letter of Administration with a copy of the Will annexed or issuance of a Succession Certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration under Section 290. Therefore, General Administrator under Section 247 cannot have the rights and powers to acquire ownership over property over which he is appointed. He is only to generally manage the property of the deceased for the purpose of preservation and protection of the estate. It is submitted that learned Single Judge having accepted the position of APL that he cannot be equated with executor or administrator to whom probate or Letters of Administration has been granted finally and the Trial Court after so holding have inconsistently coined a new and unknown concept that APL would be akin to administrator appointed by Court under Section 211. Status of an Administrator Pendent elite, who has been appointed by the Court for temporary period pending final determination of Testamentary suit is clearly different and they cannot be equated with an Administrator to whom Letters of Administration has been granted by the Court upon final adjudication of Testamentary Suit. Learned counsel for the appellant has placed several decisions in support of their submission which are enumerated below: a) Balkrishan Gupta & ors. vs. Swadeshi Polytex Ltd. & anr. (AIR 1985 SC 520) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or pendente lite It was held that - the appointment is purely discretionary as the word 'may' in the section clearly indicates but that discretion has to be exercised judicially and not arbitrarily. In the opinion of the Court, the Court has to be satisfied as to the necessity of such an administration and as to the fitness of the proposed administration and it must also be satisfied that it is just and proper under the circumstances of the case to appoint an administrator before subjecting the estate to the cost of such administration. The Court has, apart from the Succession Act, general jurisdiction to appoint a receiver in any case in which it may appear just and convenient to do so. Such an appointment cannot be claimed as of right merely because the proceedings are contested, but whenever there is a bonafide dispute and a case of necessity has been made out, the Court in its discretion generally makes grant. The general principle is that the Court does not as a rule appoint a receiver as against executors whenever they have obtained probates unless there is gross misconduct or mismanagement and waste on their part. If they are rightly in possession and there is no dispute a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an administrator and an executor. An administrator derives his title wholly from the Ecclesiastical Court. He has none until the letters of administration are granted and the property of the deceased vests in him only from the time of the grant. An executor, on the other hand, derives his title from the will itself and the property vests in him from the moment of the testator's death. f) Bibhu Bhusan Dutta & ors. vs. Anadi Nath Dutt & ors. (AIR 1934 Cal 87) On vesting - Mere transference of management of control is not enough to satisfy requirement of vesting- Limitation Act, 1908, Section 10 It was held that merely placing the property in the possession or control of a person does not amount to the vesting of the property in him, it cannot be that the word 'vesting' is to imply ownership because a trustee cannot be the owner of the Trust property. While transfer of proprietary rights is not intended, mere transference of management or control is not enough to satisfy the requirements of 'vesting' as contemplated by Section 10, a right to call for a transfer and to possess the property for the purposes of the trust and also a power to dispose of it according to terms of the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n limited companies incorporated under the Companies Act, 1956. According to them, does preserve and protect principle in such a case is satisfied merely by keeping the safe custody of the shares in their physical form and by receiving dividends and not exercising the other rights which flow from section like inter alia, voting rights or accepting bonus shares etc. ? The other propriety rights flowing from the shares and particularly where the estate is holding a controlling block. Right to vote is the more important right and other rights which flow from the shares will have to be vested in the administrator. According to the respondents since the APL is appointed over the estate, he must exercise the voting rights attached to the shares to ensure that the value of the shares i.e. the estate, is not depleted. Similarly, the Administrator must necessarily take advantage of the rights/bonus issues to augment the value of the estate. It is contended that the administrator has several rights and powers under the different provisions of the ISA, including the right to distribute the estate. These rights under the ISA which the APL may be required to exercise will depend on the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it may be held, in the case of a Hindu, that the adya sraddha ceremony is a part of the funeral ceremonies and that the expenses in connection therewith are parts of the funeral expenses. But it cannot possibly be contended that the sapindakaran sraddha which is to be performedo n the first anniversary of the day of death is part of the funeral. In my opinion, sections 316 or section 320 cannot be relied upon to sanction the prayer for Rs. 1,00,000 for meeting the expenses for sapindakaran sraddha. If the section is to be read and understood in this sense then it follows that the expenses of sapindakaran sraddha of the testator which is not compulsory 'and is not generally performed an, therefore, not such a religious object as may be regarded as reasonable and proper cannot possibly be sanctioned under this section. The administrator pendente lite is not in the same position as a Hindu widow and is under no obligation to perform any sraddha or to incur any expenses thereon. To provide funds to the heir for any sraddha except as part of the funeral ceremonies under sections 316 and 320 is nothing but distribution of part of the estate to the heir to enable him to discharge his ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs those cases where a person or authority acquires an interest in the property, by operation of law without any voluntary act on his part. (para 19) c) Balkrishan Gupta & ors. vs. Swadeshi Polytex Ltd. & anr. [(1985) 2 SCC 167] Reliance is also placed by appellants, however the respondents emphasis is on rights of a Shareholder- Rights denoted by the term- It was held that in- the Companies Act the expressions 'a member', 'a shareholder' or 'holder of a share' are used as synonyms to indicate the person who is recognized by a company as its owner for its purposes. The right of ownership comprises benefits which may be curtailed by the disadvantages in the form of burdens attached to it. The owner possesses that right which ultimately enables him to enjoy all rights in the thing owned by attracting towards himself those rights in the thing owned which for the time being belong to others by getting rid of the corresponding burdens (para 17) d) Jermyn Street Turkish Baths Ltd. [(1971) 3 All ER 184]; To substantiate the contention that APL has a right to intervene in case. The affairs of a company could only be said to have been conducted in a manner oppressive to some part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Receiver under Succession Act, 1925, Section 247. It was held that- the position of an administrator pendente lite is similar to that of a receiver, with this distinction that the administrator pendent elite represents the estate of the deceased for all purposes except distribution i) Bajranglal Khemka & ors. vs. Smt. Sheela Devi & ors. [(1970) 74 CWN 444]; It was held that under-Section 247 of the Indian Succession Act, 1925, the administrators pendent elite has all the powers of a general administrator and under Section 211 of the said Act all the properties of the deceased vest in him. The difference between the position of a Receiver or a sequestrator on the one hand and that of a general administrator of a deceased on the other, is that while the estate of the deceased vests in the general administrator, no property vests in a receiver or a sequestrator. j) In Buchan's case [(1879) 4 App Cases 583] it was held that - transfer of shares of the testator into the name of his executor, the transfer has to be authorized by a distinct and intelligent request on the part of the executor that the shares should be dealt with in this way, and that reasonable opportunity was affo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ean that upon the death of the last holder of shares, in law, there is an instantaneous transfer of ownership to the heirs of the last holder, and the property therein must vest in the heirs from the moment of death onwards. This would happen by virtue of operation of the law of succession. This position, that ownership of property rights vis-à-vis the shares held by the deceased is transferred to the heirs of a deceased holder, is recognized by necessary intendment by the proviso to Section 108 of the Companies Act, 1956. On its true construction, Section 210 of the Companies Act, 1948 (U.K) (corresponding to Section 397 of the Companies Act, 1956) requires that the word "member" should include the personal representatives of the deceased member on whom title to his shares devolved by operation of law. m) (1970) 1 WLR 1194, Jermyn Street Turkish Baths Ltd.; No particular form is required by statute or under the articles of this company for registration of personal representatives in the register of members of the company. The nature of the entry in the company's register must depend on the contention of the parties. All that is required is "a distinct and intelligent req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961, observed: "Therefore, when a suit was pending touching the validity of the will there was nobody to give a legal discharge and in that context it was observed that the administrator pendente lite had the estate vested in him and it did not mean that the property became vested in the administrator pendente lite beneficially and for all purposes and the income of the beneficiary became the income of the administrator pendente lite. Reliance was also placed on certain observations of the Division Bench of this Court in the case of Bajranglal Khemka vs. Smt. Sheila Devi [1970] 74 CWN 444, where the court observed that the administrator pendente lite had all the powers of a general administrator that the estate of the deceased vested in him. The attention of the court was not drawn to the fact that the administrator pendente lite did not have the power to distribute the assets that the general administrator had as we have noted from the section itself. But the said observations, in our opinion, do not in any way affect the position as to whether the administrator spoken of in the Explanation to Section 168 is an administrator pendente lite or not. But the rights vested i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act may be a precedent for the purpose of Section 168 of the Income Tax Act but cannot be considered as a precedent under the Succession Act which is the general Act relating to Probate and Letters of Administration, including Section 247 of the ISA. The two Acts are not cognate Acts and do not relate to each other - they cover entirely different fields and a collateral decision under Section 168 of the Income Tax will not be a binding precedent under the ISA which directly deals with the rights and powers of APL in Section 247. We have heard the learned counsel for parties at length and considered the authorities cited before us. The jurisdiction to appoint and grant administration to APL vests in the Court of Probate and no other Court, where the necessity for the grant is made out. The position of an APL is similar to that of a Receiver, with this distinction that the APL represents the estate for all purposes (except distribution) whereas the Receiver does not represent the estate nor the parties but simply holds the estate for the benefit of the successful litigant. In our opinion, the rights and powers of the General Administrators over the estate of the deceased depends on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to exist as representative of the beneficiaries till the matter is finally decided by the Court and in their capacity as APL. Nothing prevents them to exercise all the rights, powers and privileges incidental to the ownership of the shares and stocks except that of distributing such estate to the legatees/beneficiaries which is required to be finally determined by the Court. Therefore, even though they are appointed by the Court as APL nothing prevents them in their capacity as representatives of the beneficiaries to exercise all such rights which flow from the ownership of the shares and so enjoyed by the deceased during her life time. Therefore, we have no hesitation to hold that in their capacity as representative of the deceased the estate of the deceased vests in them for that limited purpose of administering the same for the benefit of estate of which succession is in abeyance. It is true that in order to enjoy certain rights flowing from the shares and stocks of the companies held by the deceased they will have to apply to the respective companies to obtain such benefit viz. in case the company comes out with rights issue and/or bonus shares which otherwise can only be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. Further this is not going to cause any prejudice to the parties to the suit as they will have every right to approach the Court to seek appropriate direction or order in case the Joint Administrators deviate from the trust and faith reposed in them to enable them to exercise all the rights and powers of a General Administrator qua the estate of the deceased including rights of shareholding and stock subject to the exception of distributing such estate to any person for which they are accountable to the Court. To conclude, we find that the parties for the purpose of administration of the estate having agreed to appointment of 3 Member Committee as Joint Administrators they shall be entitled to exercise of the rights and powers of General Administrators over the estate of the deceased other than the right of distributing such estate and we, therefore, direct them i) to prepare and file an inventory of the assets of the estate and appraisal of the value of such assets and ii) to take over possession of the assets of the estate in the manner provided under the law considering the nature of the property. a) From Receivers and Special Officers appointed by the Probate Court; b) F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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