TMI Blog2020 (5) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... on was kept pending for decision, is also not sustainable on the same ground. The order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019 is set aside on the ground that the jurisdiction as to the authority of the probate Court to pass orders against Companies which are third parties to the testamentary suit should have been decided first before passing any other order as the issue relates to inherent lack of jurisdiction and goes to the root of the matter, particularly in view of the fact that a probate Court only in an extreme case can pass an order of injunction. So far as the order dated 9th August, 2019 is concerned, the same also is set aside on two grounds. It is a subsequent order again passed without first deciding the issue of jurisdiction prior to interfering with the AGM of a third party Company as also for being devoid of reasons. The ad interim orders/ ex-parte ad interim orders continued for around eight (8) months but when it involves an inherent lack of jurisdiction the said orders have to be set aside. The same is our conclusion even if the order is treated as an ad interim order. Appeals allowed. - GA NO. 1 OF 2019 APO NO.95 OF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right on behalf of the said Committee with regard to the shares belonging to the estate an held in the Companies of which the Annual General Meeting [in short, AGM] were scheduled to be held pursuant to the notices issued as aforesaid. The learned Single Judge also directed that the election process in such companies shall continue and shall be completed within the time schedule but the result of the election shall not be made publish until expiry of six weeks from the date or without the leave of the Court, whichever happens earlier. Directions for filing of affidavits were also given. 3) The matter upon being mentioned by defendant nos. 1[d] and 1[(c], on 5th August, 2019 it was clarified that the word election mentioned in the order dated 2nd August, 2019 shall mean the election in terms of two notices dated 16th May, 2019 another dated 17th May, 2019 and one other notice dated 1st July, 2019 all being part of annexure F of the said application being G.A. No. 1735 of 2019. 4) It will, therefore, appear from the order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019 that the election result and the voting right on behalf of the APL Committee meant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e basis of the papers annexed to the stay applications as we were told that all documents before the learned Single Judge were annexed to the stay petitions filed in each of the appeals. We also, with the consent of the parties, decided to hear out the three appeals as aforesaid, altogether as we found the three orders being the subject matter of the three appeals to be interlinked and arose out of the application being GA No.1735 of 2019 and interim application being GA No.1845 of 2019. 11) The respondent nos. 1 and 2 have filed several compilations before us mostly containing orders passed in various proceedings arising out of the Testamentary Suit by this Court or in offshoot proceedings wherein orders have been passed by CLB and appeals arising therefrom. We have considered such orders contained in different volumes of the compilations as referred to by the parties at the time of hearing. B) Submission of the appellant, Birla Corp. in APO No.95 of 2019 : 1) The appellants say that they have challenged only the order dated 9th August, 2019 because the incorporation of the words result of election and/or voting prejudiced its rights. The appellants say that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th August, 2019 which was restricted only to the publication of the results of the election and, as such, the appellant did not prefer any appeal against the said two orders. So far as directors remuneration is concerned, the appellant says that the APL committee will be voting at the AGM in respect of shares of the deceased. If the said shares in effect control the majority shares in the Birla Corp. as alleged by the respondents nos.1 and 2, then such agenda will be defeated by majority votes. In view of the check guard such action will in no way cause any prejudice to the respondent nos. 1 and 2 as payment to HBL is not easily possible so as to deplete the share value or the value of the estate as alleged by the respondents no.1 and 2. 3) The appellants further submit that the order dated 9th October, 2019 is without any reason. A Court is bound to give reasons when it grants an ad interim order, particularly when the same is an ex parte order. Birla Corp., the appellant is not a party to the Testamentary Suit. The name of Birla Corp. does not figure in the Master s Summons being the application and the affidavit in support thereof affirmed on 31st July, 2019 as also in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s impermissible in law. The appellants say that the order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019 was only related to the publication of the results of election. The respondent nos.1 and 2 being the defendant nos.1[d] and 1[c], who had made the application being GA No.1735 of 2019, on 5th August, 2019 at the time of seeking clarification of the order dated 2nd August, 2019, did not seek inclusion of the words result of the election and/or voting , which they sought for by the interim application being GA No.1845 of 2019. The application being GA No.1845 of 2019, therefore, in effect and substance is an application for review. In support of this contention the appellant has relied upon two decisions, one reported in [2004] 12 SCC 706 [paragraphs 14 17, 19 23] and [2004] 5 SCC 353 [paragraph 4]. 7) The appellant further raised the question of jurisdiction of a probate Court. It was submitted that the probate Court has a limited jurisdiction and does not decide the question of title with regard to the properties, both movable and immovable comprising the estate and the subject matter of the Will. The probate Court only decides whether the Will i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad no right in the assets of Birla corp. In support of this, the appellant has cited a judgment reported in AIR 1955 SC 74 [paragraph 7]. 9) The further submission of the appellant is that the shareholders cannot direct the Company or its directors and, as such, Courts do not have any power to direct the Board of the Directors of the Company at the instance of the said respondents. The probate Court in securing the shares being the subject matter of bequeath under the Will, therefore, also cannot pass directions in like manner to interfere with the AGM of a company wherein the estate holds shares. This is also a fact, even if, the Company involved is a Government Company, though Birla Corp. is not a Government Company. In this regard, the appellant has cited two decisions, one reported in AIR 1986 SC 1370 [paragraphs 97 97] and the other reported in [1982] 1 SCC 125 [paragraph 21 ]. The appellant has also submitted that the petition does not contain any ground alleging that the resolutions in the notice dated 1st July, 2019 are illegal and there is no supportive evidence even to, prima facie, establish the same. 10) Moreover, the balance of convenience is not in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th August, 2019 are as follows: i] Without jurisdiction; ii] Without reasons, though it was mandatory to give reasons; iii] No order can be passed against a third party in a suit; iv] Reliefs claimed are not in aid of the final reliefs claimed in the suit; v] Shareholders have no right in the assets of the Company; vi] Shareholders cannot direct the Company or its Directors hence, the Courts do not have the power to direct the Board/Director. Therefore, probate Court also does not have the jurisdiction to pass the order impugned; vii] No ground in the application that the resolutions in the notice in holding AGM are illegal; viii] The balance of convenience is overwhelmingly tilted in favour of the appellant and, as such, the order impugned should not have been passed. In respect of the above issues VTL and BCL have adopted the submissions made by Birla Corp. in APO No.95 of 2019 by relating them to the order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019. They have also relied upon the same set of judgments as referred to by Birla Corp. D) Submission of the respondent nos.1 and 2 : (Defendant nos. 1(c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the remuneration as proposed the same will adversely effect the amount left out of dividend that may be ultimately declared. Since the same will reduce the amount of money that will be left for paying the dividend for the shares comprised in the estate such share value will be diminished. As the value of the shareholding being the subject matter of the Estate is likely to go down for this reason it will adversely affect the estate by diminishing its value which the Probate Court is entitled to protect by passing necessary orders. The remuneration proposed to be given to HBL as a Director will reduce the profits of the Company and in effect will leave the Company with lesser sum to be distributed as dividend amongst the shareholders. This is likely to effect the share price of the companies apart from reducing the amount of dividend, which will be awarded in respect of the shares being the subject matter of the estate. The said value of the estate will, therefore, also get reduced on both counts. The estate by holding about 12.58% of shares in Birla Corp. in effect controls about 98% of the shares in Birla Corp. HBL being in control of the said Company is trying all means to reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uphold the order or may even supplement its findings based on the materials on records on being satisfied that the end result is sustainable. In this regard, the appellant has cited two Division Bench judgments of this Court, are reported in 1999 [2] CLT 347 [paragraphs 22 33] and the other reported in 2012 [3] CHN 172 [paragraph 26]. [In which one of us Dr. Sambuddha Chakraborty was a party]. 5) The said respondents then say that a Court does not become incompetent to grant an interim order merely because a question of jurisdiction is raised. It is submitted that the jurisdiction of the probate Court being raised by the plaintiffs at the time of passing the order dated 2nd August, 2019 or at the time of passing the order dated 9th August, 2019 (on another ground) did not disentitle the learned Single Judge from passing the impugned order as the learned Single Judge was satisfied after considering the materials before him that an order is needed to preserve the status quo and only thereafter passed the impugned orders. The learned Single Judge has kept the issue of jurisdiction live for being considered later on after completion of affidavits. In this context, the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther way the said shares are required to be protected. This can be done by interfering with the affairs of the said companies operated at the whims of HBL. 8) It is further submitted that in view of an earlier order dated 10th May, 2013 [at pages 59 to 82 of the compilation (Vol II) filed by the said respondents] passed in an appeal preferred under the provisions of Section 10F of the Companies Act, 1956 against an order passed by the Chairman, Company Law Board [in short, CLB] dated 9th February, 2019 there is a specific finding that the jurisdiction to decide as to the rights flowing from the shares owned by PDB of and in various Companies has largely shifted from the domain of CLB to the Probate Court and the Court for trial of the suits. Relying upon such finding the said respondents in order to counter the submission of the appellant that the probate Court had no jurisdiction to issue orders as claimed by the respondent nos.1 and 2, the said respondents submit that the probate Court had the jurisdiction to pass the order impugned. E) Reply of Birla Corp. : 1) It is submitted by Birla Corp. that after the order of CLB dated 25th April, 2005 (Serial No. 1 of vol. II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llegality. 3) So far as an ex parte ad interim or interim order are concerned a party aggrieved may either approach the Court passing such order by filing an application for modification or variation of the order before the Court passing it or can prefer an appeal against such order. 4) Being mindful about the scope of the appeal we cautioned the parties to restrict their submission only in respect of the grounds that can be agitated in an appeal from an ad interim order or an ex parte ad interim order. However, despite our best endeavor, the parties entered into the controversies relating to the merits of the matter. The respondent nos.1 and 2. in order to sustain the order on the ground that the same is based on the materials available before the Court referred to several documents viz. the minutes of the APL Committee, its direction and compliance particularly to show the conduct of the plaintiff and that the appellants are nothing but the alter ego of the plaintiffs. This expanded the scope of the submission of the appellant in reply while dealing with such points. 5) We, however, did not allow the other respondents being the plaintiffs in the Testamentary Suit to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot parties to this proceeding but they are bound by the orders dated 2nd August, 2019 as clarified by the order dated 5th August, 2019 and the order dated 9th August, 2019. If at the end it is found that the probate Court did not have the jurisdiction to pass such orders then also according to the said judgment, the appellants can be hauled up in contempt for violating the said orders or directions given therein. In such a situation the appellants should have an avenue to ventilate their grievances. We are, therefore, of the opinion that the appellants are persons aggrieved and are entitled to file and maintain their respective appeals. b) Jurisdiction : 1) A testamentary suit is different from a suit of civil nature. A suit of civil nature is defined in Section 9 of the Code to be a suit in which right to property or an office is contested. This is not a testamentary suit where genuineness of the Will is decided. A suit of civil nature is commenced with the filing of a plaint as provided in Order IV Rule 1 of the Code. The various forms of suits are described in Appendix A of the First Schedule of the Code. In a suit of civil nature there are two types of jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d interfere with the AGM of the Companies in question as prayed for in the Master s Summons. This point was raised by the plaintiffs and several decisions for and against were cited. The issue raised was, therefore, inherent lack of jurisdiction of the Probate Court to pass orders interfering with the AGM s of the Companies and their functioning wherein the deceased held shares and now forms part of the estate. It is, therefore, not an issue as to territorial or pecuniary jurisdiction but goes to the root of the jurisdiction of the Court to pass orders. Similar to specific bar of institution of suit of civil nature as specified in Section 9 of the Code. 4) The jurisdiction of a Court as held in 1969 [1] All England Report 208 [Anisminic Ltd. vs. The Foreign Compensation Commission Anr.] and relied upon AIR 1972 SC 2379 [M. L. Sethi vs. R.P. Kapur] has been held is a verbal coat of many colours, jurisdiction originally seems to have had the meaning to entitle to enter upon an inquiry in question. These two judgments have been referred to at paragraph 18 of the decision reported in 2001 CHN 614 Supratik Ghosh [supra] cited by the appellant for the purpose [reasons to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate jurisdiction in respect of the properties involved in the testamentary suit after satisfying himself. It was, therefore, incumbent upon the learned Single Judge to first decide on his jurisdiction when an issue of inherent lack of jurisdiction as to the Court passing orders with regard to the third parties (Companies) to the testamentary suit in which the estate holds share was pointed out which goes to the root before passing such an order of injunction which can be done in only extreme case. 5) We have also considered the order dated 10th May, 2013 relying upon which the said respondents have contended that the Probate Court should decide all issues as to control of the shares comprised in the estate and its effect with regard to the third party companies wherein such shares are held. We could not gather from such judgment any convincing finding to this effect. We, therefore, reject such contention of the said respondents. c) Reasons to be contained in an ex parte ad interim order/ad interim order: 1) Reasons have been defined in the judgment reported in AIR 1974 SC 87 as links between the materials on which certain conclusion are based and the actual condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assigning reasons by a Court while passing an ex parte ad interim order is mandatory. 2) In order to counter the appellants, the respondent nos.1 and 2 have cited two judgments reported in 1999 [2] CLT 347 [NEPC Micon Ltd. vs. Magma Leasing Ltd.] and [2012] 3 CHN 172 [Bhaskar Gayen vs. Subhodip Mullick Ors.] [in which one of us, Dr. Sambuddha Chakraborty was a party] to contend that failure to give reasons solely would not be the ground for setting aside an ex parte ad interim order or an ad interim order. After perusing the judgment in NEPC Micon [supra] we find that the same has been delivered in the context of an order passed by a judge of a Chartered High Court. Relying upon Muktakeshi Dawn [supra] the Division Bench held that reasons are not mandatorily required to be given by a judge of a Chartered High Court since it is exercising jurisdiction under clause 15 of the Letters Patent, 1865 and not under Order 41 of the Code. One should keep in mind that the ex parte ad interim or an ad interim order of injunction is passed in exercise of jurisdiction under Order 39 Rules 1 and 2 and, as such, other provisions of the said Order 39 are required to be also complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reading the order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019 as also the order dated 9th August, 2019 in the context of the judgment cited by the respective parties and those referred to hereinabove and the materials referred to by the learned Single Judge we cannot say that there is absolutely no link between the materials on which the conclusion were based and the actual conclusion in case of the order dated 2nd August, 2019 though it is lacking in elaborating reasons which were needed when passed in the context as discussed above. As a result whereof, we cannot conclusively say that the orders were devoid of reasons though the same is scanty. However, we find no reasons assigned while passing the order of classification dated 5th August, 2019 and the order dated 9th August, 2019. The order dated 9th August, 2019 read in the context as aforesaid is, however, absolutely devoid of any reasons. There is no finding why the result of election and/or voting was introduced instead of results of the election as contained in the order dated 2nd August, 2019 as clarified by the order dated 5th August, 2019. 7) Moreover, in view of the proposition laid down i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom what has been held in 1986 (1) SCC 264 while deciding a case under the Companies Act, 1956 the provisions of which have mostly remained unchanged in the 2013 Act. The respondents / applicants would not have been prejudiced if the jurisdiction was first decided. Unless the jurisdiction of the probate Court is decided as to its authority to pass orders against Companies in which the Estate holds shares the interfering with their AGM was uncalled for on the ground of convenience and inconvenience leading to preserving the Status quo. The learned Single Judge was, therefore, more so required to decide on his jurisdiction before passing directions against Companies wherein the deceased PDB held shares and not parties to the proceedings. Our Conclusion : 1) The impugned order dated 2nd August, 2019, as clarified by the order dated 5th August, 2019, is, therefore, not sustainable in view of the fact that orders and/or directions were passed interfering with the holding of AGM by Companies which are separate juristic entities without first deciding the issue of jurisdiction. Even if the deceased held shares in such Companies, which are subject matter of the bequest under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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