JAI MAHAL HOTELS PVT. LTD. Vs. RAJKUMAR DEVRAJ & ORS.

Tags Interpretation

Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 7914 of 2015, Judgment Date: Sep 23, 2015

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.7914 OF 2015
(ARISING OUT OF SLP (CIVIL) NO.4384 OF 2013)

JAI MAHAL HOTELS PVT. LTD. … APPELLANT

VERSUS

RAJKUMAR DEVRAJ & ORS. … RESPONDENTS

WITH

CIVIL APPEAL NO.7915 OF 2015
(ARISING OUT OF SLP (CIVIL) NO.4903 OF 2013)

WITH

CIVIL APPEAL NO.7919 OF 2015
(ARISING OUT OF SLP (CIVIL) NO.13752 OF 2013)

WITH

CIVIL APPEAL NO.7916 OF 2015
(ARISING OUT OF SLP (CIVIL) NO.13756 OF 2013)

WITH

CIVIL APPEAL NO.7917 OF 2015
(ARISING OUT OF SLP (CIVIL) NO.14309 OF 2013)

WITH

CIVIL APPEAL NO.7918 OF 2015
(ARISING OUT OF SLP (CIVIL) NO.14322 OF 2013)

J U D G M E N T

ADARSH KUMAR GOEL, J.

1. Leave granted. The question raised in these appeals relates to the
scope of power under Section 111 of the Companies Act, 1956, to direct
rectification in the share register of a company. The question has to be
examined in the context of correctness of the view taken in the impugned
order passed by the High Court directing rectification at the instance of
Respondent No.1-Rajkumar Devraj and Respondent No.2-Rajkumari Lalitya
Kumari (the “DR Group”), who are the son and daughter respectively of late
Maharaja Jagat Singh (“LMJS”) .

2. LMJS held shares in M/s. Jai Mahal Hotels Pvt. Ltd., M/s. Ram Bagh
Palace Hotels Pvt. Ltd., M/s Sawai Madhopur Lodge Pvt. Ltd. and M/s. S.M.S.
Investment Corporation Pvt. Ltd. He died on 05th February, 1997 leaving
behind a Will dated 23rd June, 1996 in favour of his mother Gayatri Devi
(“GD”). Succession certificate dated 19th February, 2009 was issued by the
District Judge, Jaipur jointly in favour of GD and DR Group. GD executed
transfer deed dated 27th April, 2009 in favour of DR Group. She also
executed Will dated 10th May, 2009 in favour of DR Group. She died on 29th
September, 2009. Vide letter dated 15th July, 2009, DR Group claimed
transmission and transfer of shares in their favour on the basis of
succession certificate dated 19th February, 2009 issued by the District and
Sessions Judge, Jaipur (Civil), transfer deed dated 27th April, 2009
executed by their grand mother Gayitri Devi (“GD”) along with revalidation
of the letter issued by the Registrar of Companies.

3. The application having not been accepted by the Company, the DR Group
filed appeals before the Company Law Board (“CLB”), New Delhi. Urvashi
Devi, grand daughter of husband of GD from another wife (“UD Group”) filed
application for impleadment stating that the succession certificate was a
nullity. She accepted validity of Will dated 23rd June, 1996 executed in
favour of GD by LMJS but contested the succession certificate. It was her
further case that DR Group had no right of succession in view of Will dated
23rd June, 1996 and they were also not heirs of GD as LMJS was adopted in
another family. Further stand was that since at the instance of GD,
proceedings were stayed, succession certificate could not be granted even
at her instance. Stay granted by the High Court was in a petition seeking
consolidation of a probate case and succession certificate. Section 370 of
Succession Act was also invoked. It was also submitted that the settlement
which was the basis of succession certificate was not genuine. Her Will
dated 10th May, 2009 was also contested. Urvashi Devi, Prithvi Raj and Jai
Singh also sought transfer of shares in their favour claiming as heirs of
GD. It was submitted that GD could not enter into any settlement contrary
to the Will dated 23rd June, 1996. Further contention was that she died
intestate on 29th September, 2009 and that DG has been disinherited by LMJS
in his Will dated 23rd June, 1996.
4. Suit No.32 of 2010 was also filed by the UD Group before the District
Judge, Jaipur, raising the dispute of succession to the estate of GD. In
the said suit, CMA No.20 of 2010 was filed under Order XXXIX Rules 1 and 2
CPC, for temporary injunction. The application was dismissed by detailed
order dated 28th July, 2011. In the said application, all the issues
raised by the UD Group were examined prima facie, including validity of
succession certificate dated 19th February, 2009. The Court on
considering the rival submissions held :
“In such condition seeing the said entire facts and circumstances and the
documents submitted no prima facie case is made out by the applicants for
stopping the implementation of the order dated 19.02.2009 passed in S.A.
No.134 of 1998 by the Learned District Judge, Jaipur till the disposal of
the suit.”

5. The CLB dismissed the appeals filed by the DR Group vide order dated
16th March, 2011. The Board framed following questions for consideration :

“(i) Whether order dated 19.02.2009 in Succession Case No.134/98 is a
nullity?

(ii) Whether a Will exists?

(iii) Whether the alleged Will dated 23.06.1996 is required to be proved or
disprove?

(iv) Whether the probate proceedings in Case No.32/2006 could be
dismissed/disposed of on the basis of a settlement between the private
parties?

(v) Whether probate proceedings exist as on date?

(vi) Whether construction of the Will is required?

(vii) Whether bar of Section 370 of the Indian Succession Act operates in
the facts and circumstances of this case?

(viii) Whether Sections 373, 381, 383 and other provisions of the
Indian Succession Act are applicable in the facts and circumstances of this
case?

(ix) Whether Late Maharaj Jagat Singh was adopted?

(x) Who really are the legal representatives for the shares held in the
sole name of the deceased?”

6. To decide the above questions, following issues were framed :

(i) Whether these petitions involve disputed and complicated questions of
law and facts regarding entitlement to the estate of late Maharaj Jagat
Singh?

(ii) If these petitions involve complicated questions of law and facts,
whether these are maintainable before the CLB? To be precise, whether the
CLB has jurisdiction in this matter or it is ousted on account of the
competent court i.e. Civil Court having jurisdiction in this matter.

(iii) In case, the CLB exercising its discretion proceeds to decide the
entitlement to shareholding attracting the provisions of sub-section (7) of
Section 111, is the CLB competent to decide whether the alleged Will is
proved or disproved? And as well as other questins enumerated in para 51
above.

(iv) Further, can be CLB ignore that in view of the stay order of the High
Court the order dated 19.02.2009 in Case No.134/98 on which issuing of
Succession Certificate is based and Succession Certificate is the basis for
the petitioners in C.P. Nos.13 to 16 to claim transmission of shares, is a
nullity, is it ab initio void in law, is it without jurisdiction, is it a
merely nullity, it is not necessary for anybody who objects to that order,
to apply to set it aside, he can only rely on its invalidity when it is set
up against him, although he has not taken steps to set it aside, such order
cannot give rise to any right whatever not even to a right to appeal, it
can give rise to no rights and impose no obligations, the same can be
ignored as nullity, that is, non-existent in the eye of law and it is not
necessary to set it aside?

(v) Whether the order dated 19.02.2009 is unenforceable due to the bar of
Section 370 of the Indian Succession Act, 1925 for granting Succession
Certificate in the presence of the Will?

(vi) Can in view of Section 381 of the Succession Act, the Succession
Certificate granted jointly in the name of the Rajmata and two grand
children be operative after the demise of the Rajmata?

(vii) Can the probate proceedings in case No.327/06 be dismissed on the
basis of a settlement between private parties?

(viii) Can probate proceedings decide entitlement?

(ix) Whether the CLB shall proceed to decide whether in the face of the
alleged Will disinheriting Devraj & Lalitya, Late Rajmata can directly or
indirectly still make them entitle to the estate of Late Maharaj Jagat
Singh?

(x) Whether in the presence of the alleged Will disinheriting Devraj &
Lalitya, the estate of Late Maharaj Jagat Singh devolve upon Rajkumari
Urvashi, Maharaj Prithviraj Singh, Maharaj Jai Singh and Maharaja Bhawani
Singh whose case is based on adoption of Late Maharaj Jagat Singh?

(xi) Whether the CLB can decide these questions in a summary jurisdiction
is the main issue to be considered in this matter?

7. It was held that the Board could not decide the complexity of facts
and law which had arisen and such questions could be decided before the
Civil Court and not before the CLB. In this view of the matter, the matter
was not gone into on merits. The concluding part of the order is as
follows :
“67. Having carefully considered the facts of the present case and the
nature of the allegations made by the parties as mentioned above and
applying the ratio of the decisions mentioned above, I am of the view that
such disputed and complicated questions of law and facts cannot be decided
by the CLB in the summary jurisdiction under Section 111 of the Act. Such
questions which are involved in the present case can be decided before the
Civil Court on the basis of the oral and documentary evidence adduced by
the parties in support of their respective cases. The CLB is not the forum
to adjudicate on these complicated questions of law and facts. The issue
“whether the application is not maintainable on account of its involving
complicated questions of title” it is not necessary to decide the other
issues raised in the case. ………”

8. DR Group moved the High Court of Delhi under Section 10F of the
Companies Act. UD Group also filed appeals before the High Court. The
High Court allowed the appeals of DR Group and dismissed the appeal filed
by the UD Group. The operative part of the order passed by the High Court
is as follows :
“38. Having considered carefully, the facts of the present case and the
nature of the allegations made by the respondents, it is clear that the
alleged disputes raised by the respondent group in so far as the
rectification issue is concerned are all illusory. Admittedly these shares
were in the name of Jagat Singh who had bequeathed them to his mother
Maharani Gayatri Devi and she in terms of a settlement arrived at between
her grandchildren followed by her Will had bequeathed the said share
holding thereafter in favour of her grandchildren i.e. the petitioner
group. The respondents who were the cousins of Jagat Singh are not even
claiming as legal heirs of Jagat Singh but only in their capacity of his
legal representatives; these allegations do not in any manner affect the
title of the shareholding of Jagat Singh. There is no involvement of any
fraud or forgery. Petition under Section 111 of the Companies Act was well
maintainable.

39. The CLB returning a finding opposite has committed an illegality which
is liable to be set aside. It is accordingly set aside. The order dated
16.3.2011 is set aside; the member register of the companies be rectified
in the name of the petitioner group and the petitioners i.e. Dev Raj and
Lalitya Kumari be substituted in lieu of Jagat Singh.

40. As noted Supra, the appeals filed by the respondent group are
infructuous; they have supported the order of the CLB, their prayer in the
appeal that the shares register be rectified in their favour as necessarily
to be dismissed as even as per their own statement, they do not have any
document to support their submission that they are entitled to the
rectification of the member register qua these shares of Jagat Singh in
their favour.”

9. Thus, the High Court held that the succession certificate dated 19th
February, 2009 issued by the competent court had to be taken as conclusive
evidence under Section 381 of the Indian Succession Act. The plea that the
succession certificate dated 19th February, 2009 was in violation of stay
order dated 20th August, 2008 was rejected. It was observed that stay
order was passed at the instance of GD herself whose statement itself was
the basis of the order dated 19th February, 2009. Writ Petition No.7524 of
2008 wherein order dated 20th August, 2008 was passed itself was got
disposed of as infructuous on 18th January, 2011 in view of order dated
19th February, 2009. UD Group was in no manner connected with those
proceedings. As regards Suit filed by UD Group challenging order dated
19th February, 2009, interim application for stay of order dated 19th
February, 2009 was dismissed on 28th July, 2011. The Court had refused to
grant any interim injunction in favour of UD Group and other plaintiffs.
As regards disinheritance of DR Group in Will dated 23rd June, 1996, it was
observed that the reason for disinheriting as mentioned therein was not
against the DR Group but only against the estranged wife of the testator.
The GD who was the legatee herself bequeathed her rights in favour of the
DR Group by duly signing the transfer deeds and communicating the same to
the Board of Directors. She also executed Will dated 10th May, 2009. Mere
fact that the same had been challenged was no bar to the claim of the DR
Group.

10. We have heard S/Shri H.P. Rawal, Sanjiv Sen, learned senior counsel
for the Companies, Shri Vikas Singh, learned senior counsel for the UD
Group and Shri C.A. Sundaram, learned senior counsel for the DR Group and
perused the records.

11. Contention raised on behalf of the appellants mainly is that
jurisdiction under Section 111 of the Companies Act is summary in nature
and complicated questions of title cannot be adjudicated upon in the said
jurisdiction. Reliance has also been placed on Ammonia Supplies Corpn. (P)
Ltd. vs. Modern Plastic Containers (P) Ltd.[1], Standard Chartered Bank vs.
Andhra Bank Financial Services Ltd.[2], Luxmi Tea Company Limited vs.
Pradip Kumar Sarkar[3] and Bajaj Auto Ltd. vs. N.K. Firodia[4]. Further
submission is that succession certificate was void on account of interim
order passed by the High Court dated 20th August, 2008. Reliance has been
placed on Mulraj vs. Murti Raghonathji Maharaj[5], Manohar Lal vs.
Ugrasen[6], Ajudh Raj vs. Moti[7] and Chiranjila Shrilal Goenka vs. Jasjit
Singh[8].

12. It was also submitted that DR Group could not inherit the rights of
LMJS in view of the language of the Will dated 23rd June, 1996 and also on
the ground that the Will executed by GD was under challenge. In absence of
the said Will, DR Group could not acquire any rights as UD Group was
entitled to inherit the estate of GD.

13. Per contra, Shri Sundaram supported the view taken by the High Court.
His submission is that there is no real dispute. The succession
certificate in favour of DR Group has to be acted upon especially when in
the suit filed by the UD Group, interim order has been declined and it has
been found that there was no prima facie case in challenge to the said
certificate. Pendency of suit without there being any interim order in
favour of the UD Group in respect of succession to the estate of the GD was
of no consequence. The scope of power under Section 111(7) of the Companies
Act included jurisdiction to decide a question of title. Apart from
succession certificate and the Will, GD had executed transfer deed and
communicated the same to the Board of Directors. In the face of her
statement in proceedings for succession certificate followed by transfer
deed, no dispute whatsoever, remained as to the rights of DR Group to have
the shares transferred in their favour. The Board of Directors was
dominated by the UD Group who abused its position to deprive DR Group of
their rights. The CLB failed to appreciate the scope of its jurisdiction
as well as the scope of controversy between the parties. The High Court
rightly allowed their appeal. Apart from relying upon the judgment in
Ammonia (supra), reliance was also placed on judgment of Calcutta High
Court by Ruma Pal, J. (as she then was) in Nupur Mitra vs. Basubani Pvt.
Ltd.[9].

14. We have given due consideration to the rival submissions. The main
question for consideration is whether there is any real dispute between the
parties about the entitlement of DR Group to have the shares transferred in
their favour and whether the exercise of jurisdiction by the High Court is
beyond the scope of Section 111 of the Companies Act.

15. We are of the opinion that there is no real dispute between the
parties as held by the High Court. DR Group has furnished the succession
certificate as well as the transfer deed executed by GD in their favour.
The same had to be acted upon. Moreover, the civil court in interim
application moved by the UD Group held that the UD Group had no prima facie
case. The said order was required to be acted upon subject to any further
order that may be passed in any pending proceedings between the parties.
There is no conflicting order of any court or authority. There is thus, no
complicated question of title. Moreover, there is no bar to adjudication
for purposes of transfer of shares unless the court finds otherwise. The
stay order obtained by GD herself could not debar her from making a
statement to settle the matter. The judgments relied upon by the
appellants have no application to such a fact situation.

16. In Ammonia (supra), the scope of jurisdiction of the Company Court to
deal with an issue of rectification in the Register of Members maintained
by the Company was considered. Following Public Passenger Service Ltd. vs.
M.A. Khadar[10], it was held that jurisdiction under Section 155 was
summary in nature. If for reasons of complexity or otherwise, the matter
could be more conveniently decided in a suit, the Court may relegate the
parties to such remedy. Subject to the said limitation, jurisdiction to
deal with such matter is exclusively with the Company Court. It was
observed :

“31. ……..It cannot be doubted that in spite of exclusiveness to decide all
matters pertaining to the rectification it has to act within the said four
corners and adjudication of such matters cannot be doubted to be summary in
nature. So, whenever a question is raised the court has to adjudicate on
the facts and circumstances of each case. If it truly is rectification, all
matters raised in that connection should be decided by the court under
Section 155 and if it finds adjudication of any matter not falling under
it, it may direct a party to get his right adjudicated by a civil court.
Unless jurisdiction is expressly or implicitly barred under a statute, for
violation or redress of any such right the civil court would have
jurisdiction. ……..”

17. Thus, there is a thin line in appreciating the scope of jurisdiction
of the Company Court/Company Law Board. The jurisdiction is exclusive if
the matter truly relates to rectification but if the issue is alien to
rectification, such matter may not be within the exclusive jurisdiction of
the Company Court/Company Law Board.

18. In Standard Chartered Bank (supra), scope of Section 111(7) was
considered. It was observed that jurisdiction being summary in nature, a
seriously disputed question of title could be left to be decided by the
civil court. It was observed :

“29 ……The nature of proceedings under Section 111 are slightly different
from a title suit, although, sub-section (7) of Section 111 gives to the
Tribunal the jurisdiction to decide any question relating to the title of
any person who is a party to the application, to have his name entered in
or omitted from the register and also the general jurisdiction to decide
any question which it is necessary or expedient to decide in connection
with such an application. It has been held in Ammonia Supplies Corpn. (P)
Ltd. v. Modern Plastic Containers (P) Ltd. that the jurisdiction exercised
by the Company Court under Section 155 of the Companies Act, 1956
(corresponding to Section 111 of the present Act, before its amendment by
Act 31 of 1988) was somewhat summary in nature and that if a seriously
disputed question of title arose, the Company Court should relegate the
parties to a suit, which was the more appropriate remedy for investigation
and adjudication of such seriously disputed question of title.”

19. In Luxmi Tea Company Limited and Bajaj Auto Ltd. (supra), it was
observed that a company did not have any discretion in rectifying its
register except to require the procedure being followed.

20. In the present case, as already observed, there is no real dispute
between the parties. The DR Group followed the due procedure. It had the
succession certificate in its favour apart from the transfer deed from GD,
who admittedly inherited rights from LMJS. Will in favour of GD is beyond
any dispute. Thus, the DR Group derived rights from the GD by documents
executed by her in her lifetime and conveyed to the Company. Even if the
Will of GD is not taken into account, for purposes of issue of
rectification, the documents executed by GD clearly entitled the DR Group
to have the rectification made.

21. The decisions in Mulraj, Manohar Lal, Ajudh Raj and Chiranjilal
Shrilal Goenka (supra) are of no relevance to a situation where the
beneficiary of the interim order itself opts to proceed with the matter in
respect of which stay is granted by higher Court. In the present case, GD
having settled the matter and having herself sought rectification, the
interim order granted at her instance could be no bar against the DR Group.
The decisions sought are thus, of no relevance to such a situation.

22. We sum up our conclusions as follows :

(i) LMJS executed will in favour of his mother – GD which is not in
dispute;

(ii) GD and DR jointly obtained succession certificate;

(iii) GD signed the transfer deeds and communicated the same to the Board
of Directors; and

(iv) The civil court vide order dated 28th July, 1991 declined to grant
temporary injunction finding no prima facie case against the succession
certificate.

23. In above circumstances, even in summary jurisdiction, the CLB had no
justification to reject the claim of the DR Group. The High Court rightly
reversed the said order.

24. In view of the above, we find no merit in these appeals. The same
are dismissed with costs quantified at Rs.5 lakhs in each of the appeals.

…………..……..…………………………….J.
[ANIL R. DAVE]

…………..….………………………………..J.
[ADARSH KUMAR GOEL]
NEW DELHI
SEPTEMBER 23, 2015
-----------------------
[1] 1998 (7) SCC 105
[2] 2006 (6) SCC 94
[3] 1989 Supp. (2) SCC 656
[4] 1970 (2) SCC 550, 557
[5] (1967) 3 SCR 84
[6] 2010 (11) SCC 557
[7] 1991 (3) SCC 136
[8] 1993 (2) SCC 507
[9] 1999 (2) Calcutta Law Times 264
[10] AIR 1966 SC 489

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