Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2020 Supreme(SC) 440

SUPREME COURT OF INDIA
Arun Mishra, S. Abdul Nazeer, JJ.
ARUNA OSWAL – APPELLANT
VS.
PANKAJ OSWAL & ORS. – RESPONDENTS
CIVIL APPEAL NO.9340 OF 2019 WITH CIVIL APPEAL NO.9399 OF 2019 AND CIVIL APPEAL NO.9401 OF 2019
Decided On : 06-07-2020

Advocates Appeared:
For the Appellant(s) :Bhakti Vardhan Singh, Aman Jha, R. C. Kohli, Swarupama Chaturvedi, Advocates
For the Respondent(s):Sidharth Sethi, Advocate

IMPORTANT POINTS
(1) Merely disowning a son by late father or by family, is not going to deprive him of any right in property to which he may be otherwise entitled in accordance with law.
(2) Question of right, title, and interest is essentially adjudication of civil rights between parties, as to effect of nomination decision in a civil suit is going to govern parties' rights.

Headnote:
Companies Act, 2013 – Sections 241, 242 and 244 read with Section 72 – Companies (Share Capital and Debentures) Rules, 2014 – Rule 19 – Company Petition – Maintainability – Dispute raised as to inheritance of estate of deceased main share-holder – Every holder of securities has a right to nominate any person to whom his securities shall vest in event of his death – In case of joint-holders also, they have a right to nominate any person to whom all rights in securities shall vest in event of death of all joint holders – Vesting is absolute and provisions supersede by virtue of a non-obstante clause any other law for time being in force – Prima facie shares vest in a nominee and he becomes absolute owner of securities on strength of nomination – In absence of nomination, a legal representative cannot be denied right to maintain petition regarding oppression and mismanagement – In instant case, nomination had been made – Respondent No.1 is not holding shares to extent of eligibility threshold of 10% as stipulated under Section 244 in order to maintain an application under Sections 241 and 242 – Filing of petition under Sections 241 and 242 seeking waiver is a misconceived exercise – Firstly, respondent no.1 has to firmly establish his right of inheritance before a civil court to the extent of shares he is claiming – Respondent no.1 had nothing to do with affairs of company and he is not a registered owner – Rights in estate/shares, of respondent no.1, are protected in civil suit – Respondent no.1 does not represent body of shareholders holding requisite percentage of shares in company, necessary in order to maintain such a petition – Question of right, title, and interest is essentially adjudication of civil rights between parties, as to effect of nomination decision in a civil suit is going to govern parties' rights – It would not be appropriate to entertain these parallel proceedings and give waiver as claimed under Section 244 before civil suit's decision – Respondent No.1 had himself chosen to avail remedy of civil suit, as such filing of application under Sections 241 and 242 after that is nothing but an afterthought – Merely disowning a son by late father or by family, is not going to deprive him of any right in property to which he may be otherwise entitled in accordance with law – Pertinent question needs to be tried in a civil suit and adjudicated finally – It cannot be decided by NCLT in proceedings in question – Impugned orders passed by NCLT as well as NCLAT set aside. (Paras 15, 16, 20, 22, 24, 25, 26 and 29)
Facts of the case:
Case is outcome of a family tussle. Present appeals have been preferred against the judgment and order dated 14.11.2019 passed by National Company Law Appellate Tribunal, New Delhi, (NCLAT) in Company Appeal (AT) No.411 of 2018, thereby affirming order passed by National Company Law Tribunal (NCLT) concerning maintainability of applications filed under sections 241 and 242 of Companies Act, 2013.
Findings of Court:
Merely disowning a son by late father or by the family, is not going to deprive him of any right in the property to which he may be otherwise entitled in accordance with the law. The pertinent question needs to be tried in a civil suit and adjudicated finally, it cannot be decided by NCLT in proceedings in question. Hence, we refrain from deciding the question raised on behalf of the appellants in the present proceedings.
Result : Appeals allowed.

JUDGMENT

ARUN MISHRA, J.

1. These appeals have been preferred against the judgment and order dated 14.11.2019 passed by the National Company Law Appellate Tribunal, New Delhi, (for short ‘the NCLAT’) in Company Appeal (AT) No.411 of 2018, thereby affirming the order passed by the National Company Law Tribunal (for short ‘the NCLT’) concerning maintainability of the applications filed under sections 241 and 242 of the Companies Act, 2013 (hereinafter referred to as ‘the Act’).

2. The case is the outcome of a family tussle. Late Mr. Abhey Kumar Oswal, during his lifetime, held as many as 5,35,3,960 shares in M/s. Oswal Agro Mills Ltd., a listed company. He breathed his last on 29.3.2016 in Russia. On or about 18.6.2015, Mr. Abhey Kumar Oswal filed a nomination according to section 72 of the Act in favour of Mrs. Aruna Oswal, his wife. Two witnesses duly attested the nomination in the prescribed manner. As per the appellant, it was explicitly provided therein that: "This nomination shall supersede any prior nomination made by me/us and any testamentary document executed by me/us." The name of Mrs. Aruna Oswal, the appellant, was registered as a holder on 16.4.2016 as against the shares held by her deceased husband.

3. Mr. Pankaj Oswal, respondent No.1, filed a partition suit being C.S. No.53/2017 claiming entitlement to onefourth of the estate of Mr. Abhey Kumar Oswal. He claimed onefourth of the deceased's shareholdings who was holding shares to the extent of 39.88% in Oswal Agro Mills. Ltd., respondent No.2. The deceased also held 11.11% shares in M/s. Oswal Greentech Ltd., respondent No.16. The partition suit was filed on 3.2.2017 by respondent No.1 for 1/4th each of 39.88% shareholding in respondent No.2 company and 11.11% shareholding in respondent No.16 company. Prayer was made for an interim injunction in the civil suit. The High Court vide order dated 8.2.2017 directed the parties to maintain the status quo concerning shares and other immoveable property. As on 8.2.2017, the shares stood registered in the ownership of Mrs. Aruna Oswal, who continues to be the owner of the shares.

4. After the demise of Mr. Abhey Kumar Oswal, respondent No.1 entered into the corporate offices of respondent Nos.2 and 16 along with his wife for which a criminal complaint was lodged. FIR No.54/2016 was registered at Police Station Barakhamba Road, New Delhi. As a counterblast, respondent No.1 also filed a criminal complaint against the appellant as well as the officials of respondent No.2 and respondent No.16 companies, alleging illegal transmission of shares. The application filed by respondent No.1 for registration of the FIR was dismissed vide order dated 13.8.2018, and the revision petition filed against the said dismissal is pending.

5. Mr. Pankaj Oswal, respondent No.1 filed Company Petition No.56/CHD/PB/2018 Pankaj Oswal v. Oswal Agro Mills Ltd. & Ors., alleging oppression and mismanagement in the affairs of respondent No.2 company. A prayer was also made against M/s. Oswal Greentech. Ltd. Respondent No.1 claimed eligibility to maintain the petition on the ground of being a holder of 0.03% shareholding and claiming entitlement and legitimate expectation to 9.97% shareholding of M/s. Oswal Agro Mills Ltd. by virtue of his being the son of deceased Abhey Kumar Oswal.

6. An application was filed before NCLT in May 2018 by the appellant challenging maintainability of the petition, inter alia, on the following grounds:

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2020 Supreme(SC) 440

SUPREME COURT OF INDIAArun Mishra, S. Abdul Nazeer, JJ.ARUNA OSWAL – APPELLANTVS.PANKAJ OSWAL & ORS. – RESPONDENTSCIVIL APPEAL NO.9340 OF 2019 WITH CIVIL APPEAL NO.9399 OF 2019 AND CIVIL APPEAL NO.9401 OF 2019Decided On : 06-07-2020

Cases Referred (7)

SUPREME COURT OF INDIA
Arun Mishra, S. Abdul Nazeer, JJ.
ARUNA OSWAL – APPELLANT
VS.
PANKAJ OSWAL & ORS. – RESPONDENTS
CIVIL APPEAL NO.9340 OF 2019 WITH CIVIL APPEAL NO.9399 OF 2019 AND CIVIL APPEAL NO.9401 OF 2019
Decided On : 06-07-2020