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TMI Blog2019 (11) TMI 1170X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the National Company Law Tribunal ("Tribunal" for short), Chandigarh Bench, Chandigarh by impugned order dated 13th November, 2018 and the Tribunal held that the 1st Respondent- Mr. Pankaj Oswal is eligible in terms of Section 244 of the Companies Act, 2013. 3. The brief facts of the case are as follows: Late Mr. Abhey Kumar Oswal during his life time held 5,35,30,960 shares in 'M/s. Oswal Agro Mills Limited' being the Appellant herein, which is a listed Company. During his lifetime, Late Mr. Abhey Kumar Oswal, on or about 18th June, 2015 filed a nomination in terms of Section 72 of the Companies Act, 2013 in favour of Mrs. Aruna Oswal, the Appellant in Company Appeal (AT) No. 411 of 2018 and the 2nd Respondent in the instant appeal. The nomination was witnessed by two witnesses in the prescribed manner and specifically provided "This nomination shall supersede any prior nomination made by me/ us and also any testamentary document executed by me/ us". Late Mr. Abhey Kumar Oswal expired on 29th March, 2016. Mrs. Aruna Oswal, in terms of nomination, made a request on 4th April, 2016 to be registered as the holder of the shares held by Late Mr. Abhey Kumar Oswal. In accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72(1) which relates to nomination of members and Section 72(3) which prescribes vesting of rights of securities, as follows: "72. Power to Nominate.− (1) Every holder of securities of a company may, at any time, nominate, in the prescribed manner, any person to whom his securities shall vest in the event of his death. xxx xxx xxx (3) Notwithstanding anything contained in any, other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of the securities of a company, where a nomination made in the prescribed manner purports to confer on any person the right to vest the securities of the company, the nominee shall, on the death of the holder of securities or, as the case may be, on the death of the joint holders, become entitled to all the rights in the securities, of the holder or, as the case may be, of all the joint holders, in relation to such securities, to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner." 6. It was further submitted that as per Rule 19(8) of the 'Companies (Share Capital and Debentures) Rules, 2014', the vesting of securities and right owing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of Late Mr. Abhey Kumar Oswal at the time of his death to the exclusion of all persons. 12. According to the Appellants, Section 241 of the Companies Act, 2013 is a statutory right and benefit given to a shareholder in a company under the Companies Act, 2013. As the name of Mrs. Aruna Oswal is entered in the Register of Members of the Appellant Company pursuant to the nomination in accordance with Section 72 of the Companies Act, 2013, it is Mrs. Aruna Oswal alone who is entitled to exercise all rights in respect of the said shares including the right to institute proceedings under Sections 241 and 242 of the Companies Act, 2013. 13. Reliance was placed on the decision of the Hon'ble Delhi High Court in "Dayagen Private Limited v. Rajendra Dorian Punj & Anr.− 2008 (105) DRJ 29" wherein the Hon'ble High Court held that Section 109A of the Companies Act, 1956 which is in pari-materia with Section 72 of the Companies Act, 2013 overrides the general law of succession and vests the nominee upon the death of the shareholder with full and exclusive ownership rights in respect of the shares. According to the decision of the Hon'ble Delhi High Court which relates to proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession Act, 1956 and the decision of the Hon'ble Supreme Court in "M/s. World Wide Agencies Pvt. Ltd. and Another v. Margarat T Desor and Others− (1990) 1 SCC 536". 20. Initially, the case aforesaid was filed before the Hon'ble Delhi High Court by 'Worldwide Agencies (P) Ltd. & Anr' against 'Margaret T. Desor and Others'. The Division Bench of the Hon'ble Delhi High Court by its judgment dated 31st August 1989 (1989 SCC OnLine Del 318) while discussing the provisions of Sections 397, 398 & 399 of the Companies Act, 1956 held: "24. The Supreme Court referred to its earlier decision in the case of Howrah Trading Co. Ltd. v. CIT [1959] 29 Comp Case 282 and observed that even where the holder of a share whose name is entered in the register of members hands over his share with blank transfer forms duly signed, the transferee would not be able to claim the rights of a member as against the company concerned until his name is registered in the register of members." 21. The aforesaid decision was challenged before the Hon'ble Supreme Court in "M/s. World Wide Agencies Pvt. Ltd. and Another v. Margarat T Desor and Others− (1990) 1 SCC 536" wherein the Hon'ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the death of a member the survivor where the member was a joint holder, and his legal representatives where he was a sole holder, shall be the only persons recognised by the company as having any title to his interest in the shares. (2) Nothing in clause (1) shall release the estate of a deceased joint holder from any liability in respect of any share which had been jointly held by him with other persons. 26. (1) Any person becoming entitled to a share in consequence of the death or insolvency of a member may, upon such evidence being produced as may from time to time properly be required by the Board and subject as hereinafter provided, elect, either - (a) to be registered himself as holder of the share; or (b) to make such transfer of the share as the deceased or insolvent member could have made. (2) The Board shall, in either case, have the same right to decline or suspend registration as it would have had, if the deceased or insolvent member had transferred the share before his death or insolvency. 27. (1) If the person so becoming entitled shall elect to be registered as holder of the share himself, he shall deliver or send to the company a notice in writi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresentatives under Section 439(4)(b) of the Act but not the other. This does not appear to be logical. It appears to us that to hold that the legal representatives of a deceased shareholder could not be given the same right of a member under Sections 397 and 398 of the Act would be taking a hyper-technical view which does not advance the cause of equity or justice. The High Court in its judgment under appeal proceeded on the basis that legal representatives of a deceased member represent the estate of that member whose name is on the register of members. When the member dies, his estate is entrusted in the legal representatives. When, therefore, these vestings are illegally or wrongfully affected, the estate through the legal representatives must be enabled to petition in respect of oppression and mismanagement and it is as if the estate stands in the shoes of the deceased member. We are of the opinion that this view is a correct view. It may be mentioned in this connection that succession is not kept in abeyance and the property of the deceased member vests in the legal representatives on the death of the deceased and they should be permitted to act for the deceased member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not members. In that view of the matter, it is not necessary for us to consider the decision of this Court in Rajahmundry Electric Supply Corpn. Ltd. v. A. Mageshwara Rao [AIR 1956 SC 213 : (1955) 2 SCR 1066 : 36 Com Cas 91] . In view of the observations of this Court in Life Insurance Corporation of India v. Escorts Limited [(1986) 1 SCC 264 : AIR 1986 SC 1370, 1412] it is not necessary, in our opinion, to consider the contention as made on behalf of the appellant before the High Court that the permission of the Reserve Bank of India had been erroneously obtained and consequently amounts to no permission. In the present context, we are of the opinion that the High Court was right in the view it took on the first aspect of the matter." 23. The right arising out of an instrument does not vest with nominee automatically on the death of the original holder of the instrument. Nominee does not mean that the amount or the share belongs to the nominee. On the death of the holder of the instrument, the amount/ share vests with the legal heirs, the nominee merely holds the amount/ share herein till the matter of vesting is decided in favour of the legal heirs. 24. In view of the dec ..... 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