Devkaran And Co Pvt Ltd vs Shashi Tanna

(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