National Company Law Appellate Tribunal
Devkaran And Co Pvt Ltd vs Shashi Tanna on 13 December, 2024
1
NATIONAL COMPANY LAW APPELLATE TRIBUNAL
PRINCIPAL BENCH
NEW DELHI
COMPANY APPEAL (AT) NO.361/2024
(Arising out of judgement and order dated 05.08.2024 passed by National
Company Law Tribunal, Mumbai, in CP(IB) No.21/MB/2024)
In the matter of:
Devkaran & co Pvt Ltd Appellant
Vs
Shashi Tanna & Ors Respondent
For Appellant:Mr Arun Kathpalia, Sr Advocate, Mr Shiyam Kapadia, Ms
Teresa Daulat, Mr Raj Kamal, Mr Aseem Atwal, Mr anuragh Chandra, Ms Rhia
Mehta, Ms Sakshi Kapadia, Mr Harneet Singh, Advocates.
For Respondent:Mr Dhruv Dewan, Ms Meghna Rajadhyaksha, Mr Saifur
Rehman Faridi, Mr Naman Kamdar, Mr Jasmeet Jolly, Ms Anushika
Bhardwaj, Ms Sanjyukta Roy, Advocates for R1 and R2.
ORDER
HYBRID MODE 13.12.2024: This is an appeal against an impugned order dated 05.08.2024 passed by the Ld. NCLT whereby the locus of Respondent No.1 and 2 herein to prefer Company Petition under Section 241 of the Companies Act, 2013 was upheld.
2. It is argued by the learned senior counsel for the appellant its primary objection qua maintainability of the company petition and non-compliance of Section 244(1) of the Act was wrongly rejected by Ld. NCLT.
3. The respondents filed company petition in their capacity as legal representatives of late Mrs Tarla Girish Tanna, an erstwhile shareholder of the appellant company. It is argued despite the Respondent No.1 and 2 herein 2 have not been declared as a legal representatives of Ms Tarla Tanna, yet the Ld. NCLT allowed them to maintain Company Petition in terms of an authority allegedly vested in respondents under the Consent Terms dated 26.04.2017.
4. It is argued by the learned senior counsel for the appellant the Ld. NCLT had failed to appreciate (a) the very legality and validity of these Consent Terms are under challenge before the Bombay High Court vide Suit No.1075/2019; (b) even assuming the said Consent Terms are lawful and valid, Respondent Nos 1 and 2's alleged authority is self-proclaimed in as much as they have suo moto appointed themselves as Tarla's legal representatives i.e., without any adjudication by any Ld.Civil Court of competent jurisdiction; and (c) Testamentary Petition No.2683 of 2023, in the form of Letter of Administration with Will annexed, is pending adjudication before the Bombay High Court and the Court is seized of the matter for legally appointing an administrator to deal with and distribute Tarla's assets.
5. It is argued the Ld. NCLT had erroneously travelled beyond its jurisdiction, sought to finally decide the question of Succession and particularly of determining the right, title and interest of Respondent No.1 and 2 in the deceased member's shares. It is argued such final relief sought in terms of the said Company Petition could not have been granted in favour of person who were neither members nor legal representatives of deceased members of the Company.
6. It is argued Ms Tarla had passed away on 22.08.2012, leaving behind her last Will and Testament dated 16.07.2010 and vide which she had 3 bequeathed her 667 shares in appellant company to specific beneficiaries which did not include Respondents No.1 and 2. In order to give effect to Tarla's testamentary intentions, a Testamentary Petition No.883 of 2014 was filed before the Bombay High Court seeking a Probate of her Will. It is argued certain beneficiaries under the Will alongwith other members of Tarla's extended family, including Respondents No.1 and 2 herein, colluded to distribute Tarla's Estate, including her 667 shares only amongst themselves to the exclusion of certain other actual beneficiaries under her Will. Such person, including Respondents No.1 and 2 herein entered into Consent Terms, whereby they colluded to interalia have the Probate Petition withdrawn, thereby to give a go-by to Tarla's testamentary intentions and instead usurp her Estate.
7. It is argued such withdrawal was a result of a strategic fraud played upon the Hon'ble Court by the aforesaid person, including Respondents No.1 and 2 wherein the Hon'ble Court was misled into believing the Consent Terms were entered into by and between all the beneficiaries under the Will. It is argued the Consent Terms were originally filed in Suit No.1210 of 2009 in which suit the signatories to the Consent Terms had originally sought partition of the alleged Estate of Late Mr Devkaran Tanna (Tarla's father-in- law) claiming that his son Mr. Girish Devkaran Tanna (Tarla's husband) and Smt Tarla Tanna had usurped the Estate of Mr Devkaran whereas to the contrary, late Mr. Devkaran Tanna had bequeathed his entire Estate to Mr Girish Tanna, the late husband of Late Mrs Tarla Tanna, to look after and also maintain family relations of Mr Devkaran Tanna. 4
8. It is argued Consent Terms are not even fully executed as several beneficiaries thereunder had not signed it, hence the alleged authority relied upon by Respondents No.1 and 2 is incomplete.
9. It is argued yet another suit No.1075/2019 was filed and is still pending and in terms of Suit No.1075 of 2019, two questions viz. (a) which person(s) is the lawful administrator/legal representative of Tarla's Estate, including of her Shares; and (b) which person(s) are entitled to the said shares, are both presently pending adjudication before the Ld. Civil Court of competent jurisdiction and will finally lead to not only a legally appointed administrator but also will set aside all illegal entitlements to Smt Tarla's Estate, fraudulently bestowed by way of the Consent Terms.
10. It is argued the Ld. NCLT had grossly erred in allowing person who are neither heirs nor legal representatives of a deceased member of the Company to maintain a petition under Section 241 and 242 of the Act.
11. The crux of the argument thus raised by the Learned senior counsel for the appellant is for seeking the status of a legal representative, especially in Mumbai, one needs to get Letter of Administration. Reference was made to Section 57(1) and 213(1) of the Indian Succession Act as under:-
57. Application of certain provisions of Part to a class of wills made by Hindus, etc.--The provisions of this Part which are set out in Schedule III shall, subject to the restrictions and modifications specified therein, apply--
(a) to all wills and codicils made by any Hindu, Buddhist, Sikh or Jaina, on or after the first day of September, 1870, within the territories which at the said date were subject to the Lieutenant Governor of Bengal or within the local limits of the ordinary original civil jurisdiction of the High Courts of Judicature at Madras and Bombay; and 5
(b) to all such wills and codicils made outside those territories and limits so far as relates to immoveable property situate within those territories or limits, [and
(c) to all wills and codicils made by any Hindu, Buddhist, Sikh or Jaina on or after the first day of January, 1927, to which those provisions are not applied by clauses (a) and (b):] Provided that marriage shall not revoke any such will or codicil.
213. Right as executor or legatee when established.--(1) No right as executor or legatee can be established in any Court of Justice, unless a Court of competent jurisdiction in 3 [India] has granted probate of the will under which the right is claimed, or has granted letters of administration with the will or with a copy of an authenticated copy of the will annexed.
12. It is the submission that in Mumbai probate of a Will is mandatory and if the Consent Terms are not as per Will and if there already there exist a suit No.1075/2019 seeking declaration of Consent Terms being void, then the Ld. NCLT ought not to have admitted the petition only in terms of M/s Worldwide Agencies (P) Ltd Vs Margaret T Desor (1190)1 SCC 536. -
13. The learned counsel for the appellant rather tried to distinguish the facts of this case from M/s Worldwide Agencies Pvt Ltd (Supra) by saying in M/s Worldwide the petition was filed by class 1 legal heir of the deceased who had already obtained letter of administration but whereas in the present case the respondents No.1 and 2 are Class II legal heirs and had not even obtained any Probate or Letter of administration.
14. Heard. Before proceeding further let us examine the consent terms incorporated in order dated 26.04.2017 in Suit No. 1210/2009 whichare as follows:-
2. Agreed and declared that in view of Section 15 read with Section 16 and Section 8 and Schedule I and II of the Hindu 6 Succession Act, the only heirs and legal representatives of late Defendant No.2 (since deceased) are the brothers and sisters of her late husband and the legal heirs of such of them who have expired viz. the Plaintiffs and Defendant Nos. 3 to 12.
6. Defendant no.21 has represented to that there were originally 200 share issued by Devkaren & Co. Pvt.Ltd. to late Girish Tanna and late defendant No.2, which were sub-divided and substituted by the company into 667 Equity shares of the said company. Defendant No.21 further represents that despite a diligent search, he is unable to locate the origina l share certificates of the originally issued 200 shares as well as the substituted 667 shares of the said Devkaren & Co.Pvt.Ltd.
Defendant N,0.21 has now handed over to Plaintiff No.2 photocopies of the 200 originally issued shares of the said Devkaren & Co.Pvt.Ltd., issued to late Girish Tanna and late defendant No.2, simultaneously with the execution of these Consent ·Terms. Agreed and declared that in partial modifications of Clause No.10 of the said Consent Terms, the said 667 shares 0f Devkaran & Co. Pvt. Ltd., shall be distributed and divided amongst the Plaintiffs and Defendant Nos. 3 to 12 in the ratio as set out in Annexure A hereto. Agreed and declared that the Plaintiffs and Defendant Nos. 3 to 12 shall be the owners of the said shares allotted and distributed to them and till such time Plaintiff No.2 shall hold the said 667 Shares for and on behalf of the Plaintiff No.2 is authorised to get the said 667 Shares effectively transferred In favour of the Plaintiffs and Defendants Nos. 3 to 12.
10. Agreed and declared that in all the matters of administration and/or distribution as above, Plaintiff No.2 Shashi Tanna with Mr. Nikhil Sayta Son of Defendant No.3 shall act as the representatives of the Plaintiffs and Defendant Nos. 3 to 12 in consultation and guidance of Shri Suresh Kotak and defendant No.17 i.e. Shri Mahendra Gelani.
12. Agreed and declared that in view of the settlement, Defendant No.21 shall not pursue the Testamentary Suit No. 127 of 2014 and the said Testamentary Suit No. 127 of 2014 shall stand disposed of in terms of these Consent Terms simultaneously upon signing and filing of these Consent Terms in the Hon'ble Court by filing separate Minutes of the Order in said Testamentary Suit No. 127 of 2014.
15. Further the order dated 04.05.2017 passed in Testamentary Suit No.887/2014 is as under:-
"1.The counsel tender consent Minutes of the order dated 4.5.2017 which is taken on record and marked "Y" for 7 identification. Order in terms of Minutes of the Order. Testamentary Suit accordingly stands disposed.
2. Counsel states that since the parties have amicably settled the matter, there is no need to grant probate and the petition also to be treated as disposed. Testamentary Petition also accordingly disposed."
16. Now though it is alleged a Civil Suit Bearing No. 1075/2019 is still pending for declaring the consent terms as void and illegal alongwith a testamentary petition No.2683/2023 filed by Respondent No.3 for obtaining Letter of Administration with Will annexed but admittedly no orders have been passed in any one of above proceedings qua not to give effect to such consent terms.
17. Further no appeal admittedly is filed either by the company or by any of its shareholder and/or by any legal heir of Late Smt Tanna challenging the consent terms etc. Moreso in M/s World Wide Agencies Pvt Ltd (supra), the Hon'ble Supreme Court had already held When a member dies, his estate is entrusted in the legal representatives. When, therefore, these vesting 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.
18. Further on perusal of this appeal, filed by the Company/appellant, we find it categorically noted that in the year 1980 Late Girish Tanna and Late Smt Tarla Tanna were holding 200 shares in the appellant company and whereas Respondent No.3 was holding only 100 shares. Later in the year 2002 the shareholding of Mr. Girish Tanna and Smt Tarla Tanna was increased to 667 shares and whereas Respondent No.3 held 333 shares. Thus 8 on 20.01.2007 at the time of death of Girish Tanna, the entire 667 shares were held by Ms Tanna. During all these years the shareholding was held in the ratio of 2:1 by Tannas and Respondent No.3 respectively. However, as Smt Tanna passed away in 2012, within two years of her death i.e. in the year 2014, when earlier litigations were still pending, the paid up capital of the appellant company was increased to Rs.10 lakh and 9000 new shares were allotted. As per the appeal Respondent No.3 had allegedly infused capital to an extent of 51.33% for issuance of new shares and Respondent No.4 infused capital to an extent of 42% and he also became a director of the appellant company. It is alleged in para xxiv of the appeal that late Ms Tarla Tanna did not infuse any additional capital and that her shareholding was decreased to 6.67%. Now admittedly Smt Tanna had expired in 2012, hence could not have infused funds and thus without bringing her legal heirs on record, in a hurry within two years of her death, her shareholding was drastically reduced from 66% to only 6% approximately. It is this act of Oppression which the legal representatives have complained of in company petition, besides other acts.
19. We have examined the consent terms and those reveal the parties in the lis had agreed not to pursue Suit No.1210/2019 and Testamentary Suit No.883/2014. Rather both were withdrawn vide orders dated 26.04.2017 and 04.05.2017 respectively. Admittedly the consent terms were taken on record in such Testamentary Suit No.883/2014 also. Admittedly all legal heirs who had entered the consent terms were Class II legal heirs of Late Smt Tanna and it was noted in the order dated 04.05.2017 in view of consent terms Probate was not required. Now the Probate was only required when all legal 9 heirs had wished to act under the Will of Late Smt Tanna but, admittedly, they never acted under such Will. Thus to say the Respondents No.1 and 2 could not have acted under the consent terms is not correct.
20. Now if we examine the pending Suit No.1075/2019 filed by Respondent No.3 before Ld. Mumbai Court challenging consent terms, it also makes an interesting reading:
1. this Suit the Plaintiff is seeking a declaration that the Consent Terms dated February 2016 and 26th April, 2017("impugned Consent Terms") entered into between Defendant Nos. 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 23; ("said Defendants") in Suit No. 1210 of 2009 are illegal, void nonest and bad In law in so far as they deal with 2 properties, in respect of which, the Plaintiff is a beneficiary under a Will dated 16th July 2010 of his ·Late sister in law Tarla Tanna, who was the wife of the Plaintiff's cousin brother .the Girish Tanna .
21. The prayer made in the said suit restricts only to two immovable properties and not to shares of Late Smt Tarla Tanna and it read as under:
40. THE PLAINTIFF THEREFORE. PRAYS:
a. That this Hon'ble Court be: pleased to hold and declare that the Consent Terms dated February 2016 -and 26th ·· April· 2017 passed in Suit No. 1210 :of 2009, ·Testamentary Suit No. 127 of 2014 and Testamentary Petition No. 883 of 2014 are illegal, non-est~ void and bad in-law~ in so far as, they purport to deal with 2 properties viz. (i) Flat No. 63/64, 6th Floor, Umang ~ Building, Kashibal Navrange Marg, New . Gamdevi, Mumhai-400 007 and (ii) · Assets and properties of the Sole Proprietary Concern of M/s. Nenshi Monji; b. That this Hon'ble Court be pleased to hold and declare that Defendant Nos. 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 22 and 23 have perpetrated a fraud on the Plaintiff by deciding and/or dealing· with the 2 properties viz. (i) Flat No. 63/64, 6th Floor, Umang Building~ Kashibal _Navrange Marg, New Gamdevi, Mumbai 400 007 and (ii) Assets and properties of the Sole Proprietary Concern of M/s Nenshi Monji in the Consent Terms dated February 2016 and 26th April 2017;10
That this Hon'ble Court be pleased to hold and declare void any transactions effected by the Defendants in respect of the 2 properti4es viz. (i) Flat No.63/64, 6 th Floor, Umang Building, Kashibal Navrange Marg, New Gamdevi, Mumbai 400007 and (ii) Assets and properties of the Sole Proprietary Concern of M/s Nenshi Monji.
22. Thus admittedly in none of the litigations viz Civil Suit No.1075/2019 and in Testamentary Petition No.2683/2023 the Respondent No.3 had got any relief/stay of the operation of the Consent Terms and neither those have been declared as void/non-est till date qua those 667 shares. Thus, in the light of the above, we now need to examine the impugned order as under:-.
5. This petition has been filed by Mr. Shashi Tanna and Mr. Nikhil Satya who claims to be administrator of the state of deceased Tarla Tanna, the holder of 667 shares of Respondent No.1 Company.
7. Admittedly the petitioner herein are not members on the register of the shareholder of the Respondent No.1 Company however they derive their authority from the consent terms executed before Hon'ble High Court of Bombay which inter alia records at clause 6 that "agreed and declared that in partial modifications of Clause No.10 of the said Consent Terms, the said 667 shares of Devkaran & Co. Pvt. Ltd., shall be distributed and divided amongst the Plaintiffs and Defendant Nos.3 to 12 in the ratio as set out in Annexure A hereto. Agreed and declared that the Plaintiffs and Defendant Nos.3 to 12 shall be the owners of the shares allotted and distributed to them and till such time Plaintiff No.2 shall hold the said 667 Shares for and on behalf of the Plaintiffs and Defendants Nos.3 to 12. The Plaintiff No.2 is authorized to get the said 667 Shares effectively transferred in favour of the Plaintiffs and Defendant Nos.3 to 12". The Plaintiffs No.2 is the Petitioner No.1 herein.
8. The said consent terms further records at Clause No.10 that "agreed and declared that in all the matters of administration and/or distribution as above, Plaintiff No.2 Shashi Tanna with Mr. Nikhil Satya Son of Defendant No.3 shall act as the representatives of the Plaintiffs and Defendant No.3 to 12 in consultation and guidance of Shri Suresh Kotak and Defendant No.17 i.e. Shri. Mahendra Ghelani."
9. The Hon'ble Supreme Court in the case of M/s Worldwide Agencies Pvt. Ltd. and Anr. Vs. M/s Margaret T. Desor has 11 clearly held that the succession is not kept in abeyance accordingly, it would not be just and proper to deny the legal representatives of the deceased member of the right to maintain a petition under Section 397 and 398. To hold that the legal representatives of the decease shareholder could not be given at the same time of a member under Section 397 and 398 of the Act would be taking a hyper-technical view which does not advance the case of equity and justice. In that case the maintainability issue was decided on the basis of letter of administration obtained from the competent authority under Section 290 of the Indian Succession Act.
10. The Ld. Counsel for the Respondents submitted that the consent terms from which the authority is sought to be drawn by the petitioner to maintain the present petition are in challenge before the Hon'ble Bombay High Court and Petitioner No.1 is one of the party in that matter. However, on perusal of the plaint pending before Hon'ble High Court, we find that the consent terms dated February 2016 and 26 April 2017 passed in Suit No.10 of 2009, testamentary suit no. 127 of 2014 and testamentary petition no. 883 of 2014 are sought to be declared illegal in so far as they purport to deal with two properties. Accordingly, the issue of succession of shares of Tarla Tanna in terms of said consent terms is not subjudice before Hon'ble High Court in that petition. Accordingly, we do not find any merit in the contention of the Respondent in this regard.
11. Since the Petitioners have filed the present petition in terms of the authority vested in them under the consent terms, we are of considered view that present petition is maintainable in view of decision of Hon'ble Supreme Court in the case of M/s Worldwide Agencies Pvt. Ltd. and Anr. Vs. M/s Margaret T. Desor
23. A bare perusal of the impugned order, in the facts of this case pleaded before us depicts of no infirmity. Admittedly the shareholding of the deceased Smt Tanna have been brought from 66% to 6% after her death and the reason given is she could not invest more money after her death. Looking at the conduct of Respondent No.3 who was in control of appellant company after the death of Smt Tarla Tanna, it gives all the more reason that her Estate be represented by someone who could protect the interest of legal heirs either per Consent Terms and/or under a Will, if Respondent No.3 succeeds in any 12 of the cases, but till such time her Estate and her shareholding needs to be protected and for this reason there must be someone to represent her estate/shareholding in the company. In the circumstances we find no reason to allow this appeal as the reduction of her shareholding after her death speaks volumes of allegations set out in the company petition and needs to be examined by the Ld. Tribunal. Thus we find no infirmity in the impugned order as her estate needs to be represented by someone, viz, Respondents No.1 and 2 at least till orders in earlier suits viz. No.1210/2019 and TP 887/2014 are varied/modified etc. Thus we are not inclined to interfere in a reasoned order passed by the Ld. NCLT. Accordingly, the appeal is dismissed.
24. Pending applications are also disposed of.
(Justice Yogesh Khanna) Member (Judicial) (Mr. Ajai Das Mehrotra) Member (Technical) Bm/md