TMI Blog2010 (8) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... operties of the deceased. 3. In G.A. 3718 of 2008 the following interlocutory reliefs are claimed (a) An Administrator Pendente lite and/or Receiver be appointed to take over possession of all movable and immovable assets and properties of Priyambada Devi Birla, the deceased above named including the shareholding of those companies as specified in the schedule annexure marked 'B' by substituting his name in stead and place of the deceased abovenamed R.S. Lodha wherever his name appears in place of the deceased abovenamed. (b) Such Administrator Pendente lite and/or Receiver be directed to take all decisions and exercise all rights in regard to shareholdings of Priyambada Devi Birla in the Companies referred to in annexure 'C'. 4. Both the aforesaid first mentioned two applications were filed on or about 20th November 2008. 5. The aforesaid two applications were made at a point of time when executor R.S. Lodha in connection with the testamentary instrument of 1999 died and there was no person to take control and possession of the estate left behind by the Priyambada Devi Birla, since deceased (hereinafter referred to the said deceased). The said appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espective parties advanced argument. 8. Mr. A.K. Mitra learned senior advocate appearing with Mr. Pratap Chatterjee senior advocate and other learned Advocates in support of the application being G.A. No. 3731 of 2008 submits that no-one is now disputing that upon death of R.S.L., the executor appointed by the last Will of 1999, there is necessity for appointment of Administrator Pendente Lite (in short APL) for protecting and preserving the estate of Privambada Devi Birla (hereinafter referred to as the said deceased). 9. He submits that the estate left behind by the said deceased were and still are well preserved and protected and for this purpose no third party is required to be appointed. He informs this Court that there are three Special Officers appointed by this Court over the gold coins and other valuable items. The gold coin and other valuable items have been kept in a Bank Locker by the joint Special Officers. The main estate of the said deceased are the shares held by her, of the various companies. He submits that 'APL' is to be appointed for preservation and protection of these shares. Besides shares in every Birla Group of Companies there are some bonds, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Birla Group of Companies as the regulation framed under the SEBI and other provision of SEBI clearly safeguard the interest of the shareholders. As such, there is no possibility of clandestine dilution of M.P. Birla Group of Companies. Interim measure taken by this Court in the judgment and orders of this Court reported in 2005 WBLR (Cal) 311 and confirmed by the Division Bench, will be good enough during pendency of the testamentary suit, as this injunction order is adequate for protection and preservation of M.P. Birla Group of Companies. According to him, 'APL' cannot lawfully be authorised to take steps for exercising of voting rights in respect of the shares held by the deceased. The companies are not and cannot be made party to the above probate proceedings, therefore, no direction can be given for registration of shares in those companies who are strangers to the proceedings. This proposition of law has now been well settled by following decisions of the Supreme Court: (i) AIR 1953 SC 385, (ii) AIR 1985 SC 520 : (1985) 2 SCC 167 (paragraph 2). Indeed in the judgment of this Court reported in AIR 2006 Cal 259 (para 1) it has been held that probate Court has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the law a party to the proceedings is not appointed Receiver. The experience of 'HVL' in business management and his standing have been made out in the petition. Moreover, he submits that in the Will itself vide Clause 6 provides that in absence of 'RSL', 'HVL' will take up the management. This desire of testatrix should be considered for appointing 'HVL'. 18. According to him the 'APL' should not be appointed in any proceeding or any application save and except on the application made by his client and in the Testamentary Suit 6 of 2004. The applicants of G.A. No. 3718 of 2008 in connection with PLA No. 242 of 2004 have no locus standi to make any application. Similarly, the application in G.A. No. 3714 of 2008 in connection with the Will of 1982 cannot be entertained at this stage for one of the executors namely G.P. Birla died and another executor Pradip Kumar Khaitan who was joint applicant has taken an adverse stand hence this application cannot be entertained and considered by this Court. 19. The decision rendered by the Division Bench earlier reported in ILR 2007 (2) Cal 377 on the question of APL over shares, will operate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rights and power under section 247 of the general Administrator other than right of distribution of the estate for the purpose of protection of the estate. 24. He submits Supreme Court has consistently held that voting rights is an essential and impartible adjunct of the share. He cited the following Supreme Court decision in support of his contention: (i) AIR 1951 SC 41, (ii) (1985) 5 SCC 167, (iii) AIR 1966 SC 1370, (iv) (1988) 2 SCC 299, (v) (1989) 6 CC 5 and (vi) AIR 1990 SC 737. 25. He submits that it is also settled law that voting right attached to a share can be exercised by a person other than a shareholder in given situations . In this context he refers to two decisions of English Court reported in [1982 (1) All ER 449, 1955 (2) All ER 330 at 332]. 26. He submits that there is fundamental distinction between transfer of shares and transmission of shares. The former is an act of inter vivos between two persons, while the latter by operation of law. 27. The moment transmission of shareholding takes place by operation of law no rectification is necessary as has been held so in a decision of the Supreme Court reported in (1988) 2 SCC 299 paragraph 74. While ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the Supreme Court in the judgment reported in (1989) 1 SCC 101, paragraph 11. 30. He further submits that the judgment cannot be read as a statute it has to be read in its perspective and this is also settled by the Supreme Court in the following decisions (1996) 6 SCC 44, AIR 2005 SC 2677. 31. Hence, he submits that 'APL' should be appointed over the entire estate including controlling block of shares held by the said deceased along with all the rights that are attached to such shares. There is no question of appointing 'APL' for the limited and misconceived purposes has been contended by HVL' in para 52 of the instant application. As to the personnel of 'APL' it is settled principle that a party to the suit should not be appointed as an 'APL'. In this connection he has relied on the following decisions: AIR 1933 Bom 348 (at page 346), AIR 1952 Cal 418 (38), AIR 1952 Nag 253 (12). 32. He concludes urging that 'HVL' being a party to the testamentary suit should not be appointed as 'APL'. 33. Mr. Hirak K. Mitra, learned senior counsel appearing on behalf of the defendant Nos. 1(b) and 2 submits that while opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Birla Group of Companies as such APL has to be appointed over the same also. 38. He points out during the period when RSL was administering changes had been brought in the Board of Directors of the M.P. Birla Group of Companies by RSL even after the death of RSL family members of RSL would continue to exercise control over the company of MP Birla Group behind. He has referred to section 211 of the Indian Succession Act and submits that the Administrator of a deceased person is his legal representatives for all purpose and all properties of the deceased. 39. His contention is that powers of the Administrator on certain properties is the same as the power of an executor, although the source of such power are different as the executor derives his power from the will and whereas the APL derives his power from the statute. In this case immediately after death of the said deceased RSL transferred shares of the said deceased in the investment companies in his own name RSL. To justify the said action of RSL it was submitted by the learned counsel for the Lodha before the Division Bench that RSL was duty bound and obliged as executor, to take control of the shares and transmission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 73 of his petition and the prayer made therein? (3) Will APL be appointed to function as Administrator for amongst other to take possession of the share scripts held by the said deceased and also to exercise all rights and discharge obligations arising from the share holding? 42. It is contended by Mr. Mitra that Division Bench of this Court in its judgment reported in 2007 ILR (2) Cal 377, while rejecting the prayer for appointment of APL specifically held in paragraph 280 at page 562 of the report that without giving notice to the share holders of the company in the probate proceedings the Court has no power to appoint APL over the shares owned by the said deceased. 43. He, therefore, submits dmt the aforesaid findings of the Division Bench not only operates as binding precedent but issue raised herein is hit by the principle of res judicata. In order to hold a particular judgment to be precedent it must be seen amongst other that the same is not an obiter. In case of Municipal Corporation of Delhi v. Gurnam Kaur (1989) 1 SCC 101 the Supreme Court in paragraph 10 has laid down proposition of law amongst others that: ............Quotability as 'law' applies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the context of the aforesaid legal proposition I have carefully examined the decision of the Division Bench cited above, rendered refusing to affirm the appointment of APL earlier in respect of the same estate. To my mind the ratio decided by the Division Bench is that in order to pass order of appointment of APL removing executor there must be a case of necessity being made out and this will appear from paragraphs 240, 242, 244, 245. 262, 287, 288, 290, 282, 293 and 308 of the report wherein diverse situations have been referred relying on a number of the decisions of the Courts. It was further ratio of the decision that principle for appointment of Receiver should be followed in case of appointment of APL. 50. In my reading no specific argument was advanced on earlier occasion from either side before the learned trial Judge nor it was issue that the Probate Court has no power to appoint, APL over shares rather it appears from the said judgment that the Division Bench has accepted and recognised that the controlling block of shares do form the major asset and estate of the said deceased. The observation in paragraph 280 cannot be said to be ratio decidendi for in the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int APL over the estate of the deceased pending any proceedings in which the validity of the will of the deceased person is questioned, or for obtaining or revoking probate or grant of Letters of Administration. The said section also provides that power of appointment of APL is not only conferred upon the probate Court, but the Civil Court too is clothed with power to appoint in any suit adjudging the validity of the will of a deceased person. The aforesaid power has been supplied by the legislature to the Court undoubtedly to take interim measure pending final disposal of the proceeding. 54. It is contended by Mr. Mitra that APL can take possession of the share scripts only for limited purpose viz. to collect dividends and to meet the outgoings of the estate, and not for any other purpose. In other words APL cannot have any right, as ownership of shareholding does not vest in him, unlike official assignee in case of insolvency of any person. This contention is advanced with the support of the judgment of the Supreme Court reported in AIR 1985 SC 520 : (1985) 2 SCC 167. This judgment of the Supreme Court is clearly distinguishable as it has been rendered examining power of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n section 28(2) of the Provincial Insolvency Act, 1920 which states that on the making of an order of adjudication, the whole of the property of the insolvent would vest in the Court or in the Official Receiver. Sub-section (4) of section 182-A of the Land Revenue Act provides that Rules 2 to 4 of Order XL of the Code of Civil Procedure, 1908 shall apply in relation to a Receiver appointed under that section. A Receiver appointed under Order XL of the Code of Civil Procedure only holds the property committed to his control under the order of the Court but the property does not vest in him. The privileges of a member can be exercised by only that person whose name is entered in the Register of Members. A Receiver whose name is not entered in the Register of Members cannot exercise any of those rights unless in a proceeding to which the company concerned is a party and an order is made therein. In Mathalone v. Bombay Life Assurance Co. Ltd. 1954 SCR 117 : (AIR 1953 SC 385) it has been laid down clearly that a Receiver appointed by a Court in respect of certain shares which had not been duly entered in the Register of Members of the company concerned as belonging to him could not acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y) as the Court thinks fit, duly to account for what he shall receive in respect of the property; (b) submit his accounts at such periods and in such form as the Court directs; (c) pay the amount due from him as the Court directs; and (d) be responsible for any loss occasioned to the property by his wilful default or gross negligence. 60. It is plain from Rule 1 of XL of the Code it provides for creation of office of Receiver, but he can not get all powers with the appointment axiomatically, he may be conferred with all or any of the powers mentioned therein, by the Court. Naturally the Receiver acts in terms of the power conferred by the Court. But in case of APL, his power emanates from section 247 of Act 1926 itself meaning thereby with the appointment he is to administer the estate with all the rights and powers of general administrator subject to exception mentioned therein, without any specific empowerment by the Court unlike Receiver. This views of mine find support of an old English decision in case of In re Toleman (Westwood v. Booker) reported in (1897) 1 Ch 866 at page 870. He has power to file suit or can be sued without any leave from the Court. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra, still I feel to quote some authorities. 65. In the case of Balkrishan v. Swadeshi Polytex Ltd. reported in AIR 1985 SC 520 the apex Court in paragraph 17 has explained legal position amongst other, that a person who is a shareholder, has the right to vote at all meetings under section 87 of the Companies Act 1956. In LIC v. Escorts Ltd. and others (AIR 1986 SC 1370) in paragraph 84 it is almost exhaustively laid down what is the nature of the property resides in share holding and rights attach thereto which includes to participate in the Board meetings to elect Directors, to vote on resolutions at meetings of the Company. 66. In two English decisions reported in 1982 (1) All. E.R. 449 and 1955 (2) ALL ER 330 it is held that voting right attached to a share can be exercised by a person other than shareholder in certain given situation including when devolution takes place. One of such instances is transmission of share which is quite distinct and different from transfer of shares. The distinction between transfer of shares and transmission of shares has been clearly explained by judicial pronouncement. Transmission is a devolution by operation of law when death of the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited purpose to represent the estate in a situation like this when no one can legally take charge of the estate. It is legally incorrect to urge that appointment of Administrators over estate including shares of deceased amount to appointment to take control of the companies for Board of Directors of each and every company run the company. Apprehension of the affectation of business of running company with appointment of Administrator during analogy of Receiver is in my opinion misplaced here at the moment. Hence decisions reported in AIR 1987 Cal 194 and 1998 CLT 61 are inapplicable in this case. I accordingly answer second and third issues in the negative. I repeat appointment would be over entire estate. 72. Next point is that who is or are to be appointed as APL being the first issue. Mr. Hirak Mitra in this connection urges that even in terms of the 1999 Will HVL has no right in any sense. So he will be stranger without interest. It is his contention that it is incorrectly projected HVL as legatee became heirs and legal representative of RSL who is also incorrectly projected as universal legatee cum executor. According to him RSL had no legacy and he was simply given the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken view with following expression of law: But the general rule is that a party unconnected with the suit is the most proper person to be appointed Administrator pendente lite. A party to the suit is not, as a rule, appointed, unless, all other parties consent .......... 77. In the application HVL has stated that he is experienced and having expertise in the working and he has also mentioned that he is the trusted person of the said deceased as mentioned in the 1999 Will, and this factor entitle HVL for appointment of APL. I am of the view that whatever may be his capability as claimed, but it does not automatically as a matter of course entitle him to be appointed as APL after all he is claiming right as legatee so he has interest. Moreover this suit is seriously contested. Even if letters of administration is granted, the same would be subject to result of the application for probate in respect of the 1982 Will which is described to be a mutual one. It is settled law if it is established the said documents of 1982 are mutual will and if it is probated then obviously he as grantee of Letters of Administration may have to discharge obligation in terms of the disposition of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstitution of Board of Directors they shall give prior intimation to this Court in the form of report indicating the reason and need for appointment of new Director and constitution or reconstitution of Board of Directors of the Companies in which the deceased had shareholdings wherever possible under law. They shall submit accounts of receipts and outgoing, arising out of and in connection with the property of the said deceased in every three months in the Court. All the persons concerned who are (is) in custody of the original share scripts and other documents relating to Bank Account are directed to hand over the same to the Joint Administrations. The Joint Administrator will act ordinarily jointly, but in case of non-availability of any of the Joint Administrators remaining Administrators or Administrator will act however ratification of the Court is to be obtained later at the earliest. They will be entitled to following initial remuneration. P.K. Mullick ₹ 90,000/-- Dr. Asish Kumar Bhattacharyya without remuneration for the time being Mr. Sukumal Chandra Basu ₹ 60,000/-- 79. Above remuneration shall be paid by all the parties in this suit in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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