Company Law Board
Arjun Kumar Israni vs Cipla Ltd. on 10 January, 1996
Equivalent citations: (2000)2COMPLJ136(CLB)
ORDER
1. Shri Arjun Kumar Israni (hereinafter referred to as "appellant") has filed an appeal under Section 111 of the Companies Act, 1956, for rectification of register of members maintained by Cipla Limited (hereinafter referred to as 'respondent company') by transmitting the shares held by Dr. Kewalram Baniram Israni who died sometime in pr about 5 March, 1972. It is noted that at the time of his death he was holding 50 equity shares of Rs. 100 each and 20 5% Income-tax free preference shares of Rs. 100 each of the respondent company. It appears that he left a will and in pursuance thereof, Mrs. Silvanti K. Israni, wife of deceased, addressed a letter, dated 24.8.72 to the respondent company for transmission of the shares held by her late husband to her name. The respondent company vide its letter, dated 29.9.72 asked her to obtain a succession certificate from a court of law determining the heirs of the deceased and the shares of each of them in his estate and on receipt of the same, the matter will be considered. It appears that Mrs. Silvanti K. Israni died without obtaining the succession certificate for the shares in question held by her deceased husband, and later on the appellant, son of the deceased made an application for succession certificate in the court of Dist. Judge, Agra, and the same was granted in favour of the appellant by the said court on 14.7.94. As the respondent company, has not transmitted the shares based on the said succession certificate, the appellant has approached this Board for necessary order for rectification of register of members.
2. The respondent company in its reply has taken a plea that at the time of death, Dr. Kewalram Baniram Israni was holding 50 equity shares and 20 preference shares, but when the application for succession certificate was made -- number of shares including the bonus shares accrued were 800 equity shares of Rs. 100 each, which later on became 8,000 shares of Rs. 10 each on account of sub-division. It is further submitted in the said reply that after application for succession certificate was made, but before the grant thereof, further 40,000 bonus shares of Rs. 10 were issued which was also informed to the appellant, but the appellant failed to bring the same to the notice of the court, nor was the application for succession certificate amended or further application for succession certificate for further 40,000 bonus shares was made to the court. The company's plea is that they have never refused to register the transmission of shares but they have asked for amendment in succession certificate so as to show the present market value of the shares and the value as indicated by them was Rs. 7,500 and further pointed out that it was therefore necessary to approach appropriate court showing the correct present market value and it was also pointed out that the company has sub-divided the shares into Rs. 10 each and also issued bonus shares in the ratio of five equity shares for every one equity share held and the appellant, therefore, required to obtain succession certificate for the 48,000 equity shares showing the correct market value which was then approximately Rs. 1,000 per share. It is further submitted that the company has no intention to decline any valid transmission application, but it was only questioning the defects in the said application arising from the fact that the succession certificate was obtained by declaring the total value of the shares at Rs. 7,000 whereas the then prevailing market value of the equity shares alone was Rs. 4,80,00,000.
3. The appellant in his reply has denied that the succession certificate was obtained by indicating the face value of the shares instead of market value as alleged therein or otherwise. It is further submitted that, in any event, that enquiry is not within the jurisdiction of the company at the time of the transmission of the said shares. It is further submitted that necessity to obtain a succession certificate is only to show that the person who is seeking the transmission of the shares is a rightful claimant, and that the transfer has not been effected in favour of any other person than who is entitled in law. It is further submitted that it is not at all open for the respondent company to scrutinise and/or determine whether in respect of the said succession certificate, the appellant has paid the appropriate court fees or not. It is further submitted that once the succession certificate has been issued by the court having competent jurisdiction, then it is not open for the company to challenge the validity of such succession certificate and to refuse to transmit the said shares. It is submitted that it is also not open for the company to question the validity of the said succession certificate as the company is not at all concerned. It is further submitted that even if the company desires to challenge the issuance of the succession certificate, the same has to be done by adopting appropriate proceedings in the court issuing the certificate and not by way of withholding the transmission of the said shares pursuant to the said succession certificate. The appellant has also submitted that there is no limitation prescribed for making an application for succession certificate and any person can make application for succession certificate, if he is legally entitled to do so at any time when issue arises for obtaining the succession certificate.
4. During the course of hearing, the advocate appearing for the appellant invited attention to the provision of Section 381 of the Indian Succession Act and submitted that once the succession certificate is issued in favour of any person, the right and title of the claimant is recognised and in the instant case, there is no negative claimant. He further argued that the procedure for revocation of the succession certificate laid down under Section 383 of the Indian Succession Act and the restriction/defects in issuing a succession certificate are indicated in Section 370 of the said Act. He further submitted that the company is not concerned with the defects like payment of insufficient court fee and urged that once the succession certificate has been granted by the competent authority in favour of the legal heir, the company has to recognise that he is the rightful claimant to the estate of the deceased. In this connection, he has placed reliance in the case of Kamla V. Pai v. Esso Standard Refining Co. of India Ltd. (1997) 3 Comp LJ 138 (CLB): Company Law Board decision, page 66. He also placed reliance in the case of Thenappa Chettiar v. Indian Overseas Bank Ltd. AIR 1943 Mad 743 : (1943) 13 Comp Cas 203 (Mad), wherein it was held, where succession certificate has been granted in respect of the shares, the company would not be justified in insisting upon the production of probate or a letter of administration. He also placed reliance on the matter of Sita Ram Tiwari v. Sukha Tea Co. Ltd. (Company Law Board Appeal No. 3 of 1980) wherein it was held that the appellant had produced the requisite succession certificate and was the rightful owner of the shares standing in the name of his father in the company's records and there was no order or decree of any court restraining the company from registering transmission of shares.
5. We have considered the various averments made at the time of hearing. The questions for consideration are (i) whether this is a case of refusal of transmission of shares and appeal lies in the matter ; (ii) whether the appellant is right in obtaining the succession certificate in respect of 40 equity shares and 20 preference shares ; and (iii) whether the company is right in questioning the succession certificate on the basis of insufficient court fees stamps. From the facts available, it is clear that the appellant has forwarded the succession certificate obtained from competent court vide his letter, dated 21.7.94 to the respondent company for transmission of the shares standing in the name of the deceased to the name of the appellant and death certificate of registered holder of the shares was submitted to the company and the respondent company vide its letter, dated 13.9.94 asked the appellant to obtain a fresh succession certificate in view of the fact that the market value of the shares is not properly shown in the said succession certificate, and also to obtain succession certificate for 48,000 shares. In the case of Narinder Kumar Sehgal v. Leader Valves Ltd. (1993) 2 Comp LJ 16 (CLB) : (1993) 77 Comp Cas 393 (CLB), it was held that though the board has not specifically refused or unduly delayed it had observed in its resolution that the application was defective in law and the managing director was authorised to give a suit able reply to the applicants. The managing director vide his letter has sealed the fate of the application of the petitioners for transmission with the following remark : 'In the circumstances stated above your application for transmission of shares cannot be considered.' This specific statement amounts to a refusal and the petitioners have rightfully resorted to the legal action available under law. Hence the present appeal/ petition is maintainable. 'In the instant case also, the succession certificate and death certificate have been duly lodged with the respondent company ; however, it is noted that the company has not produced any Board resolution wherein the Board has considered the matter of transmission of shares. The company in its letter, dated 13.9.94 has stated as under :
"You may approach us after obtaining the said succession certificate alongwith all the share certificates in your possession."
In our opinion, this statement amounts to refusal and the appellant has rightly filed the present appeal for remedy available under law. Hence, we hold that the appeal is maintainable. There is no merit in company's contention in this regard.
6. The second question for consideration is whether the appellant has rightly obtained the succession certificate in respect of 50 equity shares and 20 preference shares as against 48,000 shares which are presently standing in the name of the deceased. In this connection, we observe that the succession certificate was obtained for the estate left by the deceased and at the time of death, the deceased was holding 50 equity shares and owing to the issue of various bonus shares from time to time on the basis of the shareholding by the said deceased, there are 48,000 equity shares of Rs. 10 each. After the death of the registered shareholder, his wife had approached the respondent company in 1972, and the company had insisted for obtaining succession certificate, unfortunately, she died and now his son has obtained succession certificate in the year 1994. The succession certificate granted is in respect of estate left by the deceased at the time of his death and in the instant case, it was 50 equity shares of Rs. 100 each, and 20 preference shares of Rs. 100 each and the court while granting the succession certificate declared the appellant as rightful owner of these shares registered in the name of Dr. Kewal Ram Baniram Israni including all bonus, dividends, interests, and other benefits accrued thereon upto date. In our view, the said succession certificate duly covers all the 48,000 equity shares, presently standing in the name of the deceased, and we, therefore, hold that the appellant is not required to obtain fresh succession certificate on this count.
7. Third question for consideration is whether the respondent company is justified in not acting on the succession certificate issued by the competent court on account of insufficient court fees stamp. In this regard, we are of the view that it is for the court to satisfy about the payment of proper court fees, and if court fees paid is insufficient, the recovery of deficit court fees alongwith penalty is to be decided by the authority of the court or revenue authority and it is not open for the respondent company to withhold the transmission of shares in the name of the appellant on this ground, once the succession certificate has been produced from the competent court who has declared the appellant as legal heir for the shares in question, and there is no other claimant for the said shares ; the company ought to have effected the transmission of shares on the basis of the succession certificate produced.
8. Accordingly, in pursuance of Sub-section (5) of Section 111 of the Companies Act, 1956, the respondent company is hereby directed to effect the transmission of 50 equity shares standing in the name of Dr. Kewalram Baniram Israni at the time of his death and various bonus shares, dividends and rights accrued from time to time on the said shares in the name of the appellant on the basis of succession certificate produced within 10 days from the date of receipt of this order.