Vipin Sanghi, J.

With the consent of the parties, I have finally heard the appeal and I proceed to dispose of the same.

1. This company appeal under Section 10F of the Companies Act 1956 (for short, the `Act) is preferred by the Appellants, M/s. Dayagen Private Ltd. (for short, `the company) and one Mr. Vinod Pandita. According to respondent nos.1 and 2, Mr. Vinod Pandita was working in the capacity of an accountant in the company and was appointed as a Director of the company in the year 2002. The appeal is directed against the order dated 16th May 2007 passed by the Company Law Board (for short the Board) in Company Petition No. 5/2007. By the impugned order the Board declined to dismiss the Company Petition (being C.P.No. 5/2007) filed by Respondent Nos. 1 and 2 under Sections 397, 398 of the Act, upon hearing C.A. No. 59/2007 whereby the maintainability of the said petition was challenged by the Appellants. The Board has directed CA No. 59/2007 to be considered along with the company petition.

2. Late Sh. V.P. Punj was holding 980 equity shares out of the total 1000 Equity Shares issued by the Appellant Company. The remaining 20 equity shares were held by Respondent No. 2 herein, Sh. P.N. Suri. Shri V. P. Punj expired on 8th October 2006. According to Respondent No. 1 and 2, he left behind a Will dated 8th April 2005 bequeathing all his assets in favor of Respondent No. 1 herein. Respondent No. 1 approached the Company for transmission of 980 shares in his favour. He was informed that Late Sh. V.P. Punj had pledged the said 980 shares in favor of Sh. Nilender Prakash Punj who was Respondent No. 2 in the Company petition before the Board, and is Respondent No. 3 in the present appeal. It was the stand of the Company that as a pledgee Respondent No. 3 herein had already got the shares transferred in his name and as such the Respondent No. 1 was not entitled for transmission of these shares in his name. The appellants also relied upon, what is claimed to be, a nomination made by late Shri V.P. Punj in favor of respondent No. 3 herein. I may note that Respondent No. 3 herein Sh. Nilender Prakash Punj is the brother of Late Sh. V.P. Punj. The company, as is obvious, was a closely held company at that stage with only two shareholders. The company also took the stand that it had further allotted 3000 shares on 17th August 2006.

3. Faced with the aforesaid stand of the Company, Respondent No. 1 and 2 preferred the aforesaid Company petition No. 5/2007 under Section 397 and 398 of the Act before the Board, inter-alia, challenging the allotment of additional 3000 shares and declaring that Respondent No. 1 is the holder of 98% of the shareholding which came to him by virtue of the Will of Late Sh. V.P. Punj. Various other reliefs were also sought by Respondent No. 1 and 2 before the Board.

.4. The Company filed CA No. 59/2007 challenging the maintainability of the petition filed by Respondent No. 1 and 2 by placing reliance on Section 399 of the Companies Act 1956, and submitting that Respondent No. 1 and 2 did not fulfill the requirements of the said section and thereforee, they did not have the locus standi to maintain the said petition. It was contended that the shareholdings of Respondent No. 2 was only to the extent of 20 shares which, according to the Appellants herein, translated to less than 0.2% shares. Respondent No. 1 was not entitled to maintain the petition since he did not have any shareholding in the Company, and he was not entitled to succeed to the shareholding of Late Shri V.P. Punj, and he could not be considered to be a shareholder for the purpose of Sections 399 of the Act. It was further argued that there were 12 shareholders in the Company and thereforee Respondent No. 2 by himself did not constitute 1/10th of the membership of the Company. thereforee, neither in terms of the numbers/percentage of shares, nor in terms of number of shareholders, the Respondent No. 1 and 2 met the requirements of Secti