Mrs. Suman Singh & Ors vs M/s. Sir Sobha Singh & Sons (P) Limited

Atul Chaturvedi, Member (Technical)

This Appeal has been filed by Mrs. Suman Singh & Ors., the Appellants on 06.02.2020, before this Adjudicating Authority, under Section 58 of the Companies Act, 2013 against M/s. Sir Sobha Singh & Sons (P) Limited, the Respondent, for seeking the following reliefs:

i. “Direct transmission of the 40 fully paid up equity shares of Rs. 1,000/- each bearing distinctive numbers 3465 to 3504 owned by the Late Mr. Shivinder Singh in favour of the Appellants.

ii. Direct production of the minutes of all past Board of Director Meeting/Annual General Meeting wherein the Board of Directors/Respondent Company had sanctioned the transmission of shares of a deceased Member in favour of his/her legal heirs.

iii. Pass any other order, as may be necessary in the interest of justice.

iv. Direct the Respondent Company to pay the Appellants the costs incurred by them for the present Appeal.”

Submissions of the Appellants:

i. The present Appeal prays for the transmission of 40 (forty) equity shares ("the subject shares") owned by the late Mr. Shivinder Singh in M/s. Sir Sobha Singh & Sons (P) Limited (“Respondent Company”) in favour of his legal heirs namely, Mrs. Anisa Singh (daughter/Appellant), Mrs. Suman Singh (wife) and Mr. Jaiveer Singh (son) (“Appellants”).

ii. The Appellants are aggrieved by the Respondent Company's refusal to transmit the subject shares. The Respondent Company is insisting on probate of the late Mr. Shivinder Singh's last will and testament dated 24th June, 2016 as a pre-condition for transmitting the said shares. It is stated that the said pre-condition is untenable in law and not mandated by the Company's Articles of Association.

iii. Mrs. Anisa Singh/Appellant No. 2 & Mr. Jaiveer Singh/Appellant No. 3 have consented, nominated and authorized their mother, Mrs. Suman Singh/Appellant No. 1 to institute the present Appeal on their behalf vide the General Power of Attorneys dated 01st January, 2020.

A copy of the GPAs in favour of Mrs. Suman Singh is filed along with the appeal.

A copy of the Respondent Company's Articles of Association is filed along with the appeal.

A copy of the last will and testament of the late Mr. Shivinder Singh dated 24th June, 2016 is filed along with the appeal.

iv. The Appellant declares that the present appeal is within the limitation laid down under the Companies Act, 2013 as the Respondent Company had recently on 06th January, 2020 vide its letter to the Appellant No.1 expressed its refusal to transmit the subject shares. Even otherwise, the company's refusal to transmit the shares is an act of oppression and has a continuing effect.

v. The late Sir Sobha Singh had five (5) children, namely, (4) sons being late Bhagwant Singh, late Khushwant Singh, late Daljit Singh and late Brig. Gurbux Singh and (1) daughter being late Mrs. Mohindar Jaspal Singh. The late Mr. Shivinder Singh was the son of the late Mrs. Mohindar Jaspal Singh. The late Mr. Shivinder Singh was initially married to Ruksana Sultana and out of the wedlock, his first daughter, Mrs. Amrita Singh was born. However, the marriage between Mr. Shivinder Singh & Ruksana Sultana ended. Thereafter, the late Mr. Shivinder Singh married Mrs. Suman Singh in 1974 and out of the wedlock two children, namely, the Appellant No. 2/ Mrs. Anisa Singh & the Appellant No. 3/Mr. Jaiveer Singh were born. The late Mr. Shivinder Singh became a shareholder in the Respondent Company on 13th August, 1985 when 10 (ten) equity shares of Rs. 1,000/- (Rupees One Thousand each) bearing distinctive numbers 3105 to 3114 were transferred to him by his mother - Mrs. Mohindar Jaspal Singh ("First Tranche"). On 13th August, 1985, Mrs. Anisa Singh/Appellant No. 2 transferred 5 (five) equity shares bearing distinctive Nos. 3115 to 3119 in the Respondent Company by her grandmother - Mrs. Mohindar Jaspal Singh. Similarly, on the said date, Mr. Jaiveer Singh/Appellant No. 3 also transferred 5 (five) equity shares bearing distinctive Nos. 3120 to 3124 by Mrs. Mohindar Jaspal Singh.

A copy of the Register of Members (up to the Year 2014) showing the shareholding of the Appellant No. 2 / Mrs. Anisa Singh & the Appellant No. 3/Mr. Jai Veer Singh is filed along with the appeal.

vi. Upon Mrs. Mohindar Jaspal Singh's demise, the 40 (forty) fully paid up equity shares/subject shares bearing distinctive numbers 3465 to 3504 owned by her were transmitted to Mr. Shivinder Singh on 18th August, 2005.

A copy of the Register of Members (up to the Year 2014) showing the shareholding of the late Mrs. Mohindar Jaspal Singh & Mr. Shivinder Singh is filed along with the appeal.

A copy of the Share Certificate bearing No. 40 issued to the late Mr. Shivinder Singh is filed along with the appeal.

vii. On 16th April, 2010, the late Mr. Shivinder Singh transferred the aforesaid first tranche of 10 (ten) equity shares held by him to his daughter (from his first marriage) - Mrs. Amrita Singh. A copy of the Register of Members (up to the Year 2014) showing the shareholding of Mrs. Amrita Singh is filed along with the appeal.

viii. Till his demise on 09th June, 2018, the late Mr. Shivinder Singh held the aforesaid 40 (forty) equity shares in the Respondent Company. On 15th February, 2019, a request was made by the Appellant No.1/Mrs. Suman Singh to the Respondent Company for transmission of the subject shares to herself and her children. A copy of the letter dated 15th February, 2019 is filed along with the appeal.

ix. On 2nd April, 2019, a similar request was made by the Appellant No.3/Mr. Jaiveer Singh to the Respondent Company for transmission of the subject shares. Mr. Jaiveer Singh's request email and letter dated 02nd April, 2019 is filed along with the appeal.

x. The Respondent Company in its communication dated 25th April, 2019 replied to the aforesaid request letters. The said communication stated that the Board of Directors at its Board Meeting dated 16th April, 2019 had decided that before transmission of the subject shares could be effected, a probate in respect of the aforesaid will of late Mr. Shivinder Singh ought to be obtained from the competent court so as to keep the Respondent Company immune from any apprehended claim by Mrs. Amrita Singh as she wasn’t mentioned in the said will. The communication concluded by stating that the

Board would "re-examine the matter as per law and on receipt of the probated will as per the Articles of Association of the Company". A copy of the Respondent Company's Communication dated 25th April, 2019 is filed along with the appeal.

xi. On 14th May, 2019, Mrs. Amrita Singh in her letter to the Board of Directors gave her categorical no-objection towards the transmission of the aforesaid subject shares in favour of the Appellants. However, in the said no-objection, Mrs. Amrita Singh did dispute the aforesaid will as she was not shown as a legal heir in the said instrument.

xii. On 17th May, 2019, the Appellant No.3/Mr. Jaiveer Singh in his email to the Board of Directors had annexed a copy of the aforesaid letter/no-objection of Mrs. Amrita Singh and once again requested for transmission of the subject shares. Mr. Jaiveer Singh's email dated 17th May, 2019 along with the letter/no-objection of Mrs. Amrita Singh dated 14th May, 2019 is filed along with the appeal.

xiii. On 19th July, 2019, the Respondent Company in its communication to Mrs. Suman Singh once again insisted on a probated will as a pre-condition for the transmission of the subject shares. Reliance was placed in the said communication on Article 8(d) of the Company's AoA to justify the said pre-condition of probate. Reliance was further placed in a selective fashion on the portion of the aforesaid letter/no-objection of Mrs. Amrita Sing'h wherein she had disputed the will of late Mr. Shivinder Singh. Clearly, the Respondent Company deliberately overlooked the clear and unequivocal no-objection of Mrs. Amrita Singh towards the transmission of the subject shares in favour of the Appellant and her family members. A copy of the Respondent Company's communication dated 19th July, 2019 is filed along with the appeal.

xiv. On 30th July, 2019, Mr. Jagvinder in his email to the Respondent Company demanded the probates of past deceased members whose shares were transmitted without any difficulty to their legal heirs. He emphasized the fact that probate for transmission of shares was never a requirement in the past. Email dated 30th July, 2019 of Mr. Jagvinder Singh is filed along with the appeal.

xv. To further allay the unfounded fears of the Board of Directors, Mrs. Amrita Singh sent an email dated 19th August, 2019 to the Board of Directors wherein she enclosed a notarised no-objection certificate which without any ambiguity contained her categorical no-objection towards the transmission of the subject shares. The email dated 19th August, 2019 of Mrs. Amrita Singh along with her notarised no-objection certificate 19th August, 2019 is filed along with the appeal.

xvi. Despite the aforesaid unequivocal no-objection from Mrs. Amrita Singh, the Respondent Company vide its recent communication dated 06th January, 2020 to the Appellant No.1/Mrs. Suman Singh in a perfunctory manner expressed its refusal to transmit the subject shares and reiterated its earlier obstinate stand. A copy of the Respondent Company's communication dated 06th January, 2020 to the Appellant No.1/Mrs. Suman Singh is filed along with the appeal.

Submissions of the Respondent:

i. It is pertinent to note that the present Appeal, which has admittedly been filed under Section 58 of the Companies Act, 2013, and not under Section 241-242 of the Companies Act, 2013, contains certain completely baseless allegations with respect to oppression and mismanagement of the Appellants. Notwithstanding the fact that a petition under Section 241-242 of the Companies Act, 2013, would not be maintainable in view of the threshold prescribed under the Companies Act, 2013, it is submitted that these allegations cannot form part of a petition under Section 58 of the Companies Act, 2013.

ii. It is submitted that the present Appeal has been filed by three of the legal heirs of the late Mr. Shivinder Singh. It is an admitted fact that the late Mr. Shivinder Singh had four legal heirs, including Ms. Amrita Singh (his daughter), who has, curiously, not been impleaded as a party to the present appeal.

iii. It is not in dispute that the transmission sought by the Appellants is based on the Will of Mr. Shivinder Singh dated 14.06.2016 propounded by the Appellants. It is further not in dispute that in her communication dated 14.05.2019 to the Respondent Company, Ms. Amrita Singh stated that/she does not "accept the contents of [the] will dated 24.06.2016 allegedly executed by Mr. Shivinder Singh".

iv. It was further stated by Ms. Amrita Singh in this communication that the Will propounded by the Appellants herein is not a "valid and legal document.” Additionally, this communication alleged that Mr. Shivinder Singh was not in a "fit state of mind" or in the "physical capacity" to execute the Will propounded by the Appellants.

v. The Articles of Association of the Respondent Company, in terms of Article 8(d), mandate that "in the case of the death of the member, the survivor, or survivors, where he was a sole or only surviving holder shall be the only person or persons recognised by the Company as having any title to his shares."

vi. The Articles of Association of the Respondent Company mandate that the "only" persons entitled to the transmission of late Mr. Shivinder Singh's shares would be his legal heirs. Consequently, the logical conclusion to Ms. Amrita Singh's objections to the Will propounded by the Appellants, entitles her to 1/4th of the shares held by late Mr. Shivinder Singh.

vii. The Appellants claim that Ms. Amrita Singh, despite disputing the validity of the Will propounded by the Appellants, has stated that she has no objection to the transmission of shares in favour of the Appellants. However, as set out below, in the light of the fact that the Will being relied upon is disputed inter se the legal heirs of the Late Mr. Shivinder Singh, the Appellants cannot claim transmission of the shares in their favour, to the exclusion of the fourth legal heir of the Late Mr. Shivinder Singh, i.e., Ms. Amrita Singh.

viii. In view of this position, the Appellants claim that there is no impediment for the Respondent Company to transmit shares in favour of the Appellants. Therefore, in effect, the Appellants are seeking any further transfer of the Late Mr. Shivinder Singh's shares so as to enable the Appellants to hold the 40 shares of the Late Mr. Shivinder Singh.

ix. The above-referenced contention of the Appellant fails to consider the fact that the Respondent Company is a private company, the shares of which are not freely transferrable and all share transfers are subject to the discretion of the Company's Board of Directors. In fact, any share transfer to a person who is not already a member of the Respondent Company (like Appellant No. 1), is specifically prohibited by the Articles of Association of the Respondent Company.

x. It is provided by the Respondent that Article 8 of the Articles of Association of the Company provides details about the current issue, which is as follows:

“8(a) No transfer of any share in the Capital of the Company shall be made or registered without the previous sanction of the Directors who may without assigning any reason decline to give such sanction....

(b) Any share may be transferred at any time by a member to his son or to any lined decendant of his son...

(c) Save as here by otherwise provided, no share shall be transferred to any person who is not a member of the Company so long as any member is willing to Purchase the same at a fair price which shall be fixed at the Ordinary General Meeting each year by the shareholders by an ordinary resolution. ...”

(emphasis supplied)

xi. Therefore, it is evident from the above clause of the Articles of the Association that:

Previous Sanction of Board of Directors Required: All share transfers required "previous sanction of the Directors, who may without assigning any reason decline to give such sanction".

No Transfer to Non-Member, Subject to Option to Member to Purchase: No shares can be transferred to any person, who is not a member of the Respondent Company (much like Appellant No. 1), so long as another member is willing to purchase the said shares at a fair price.

xii. If it is assumed (in view of Ms. Amrita Singh's objections, the Will and the Appellants' failure to get the Will probated) that the shares of Late Mr. Shivinder Singh are to pass onto his legal heirs in terms of intestate succession, the Appellants and Mrs. Amrita Singh would be entitled to 10 shares each. However, thereafter, in order to distribute the shares in terms of the prayer made by the Appellants, there would be a requirement for a further transfer of 31/3 shares by Mrs. Amrita Singh to each of the Appellants. Such a transfer would, inter alia, be subject to prior approval of the Board of Directors of the Respondent Company, who may deny the approval of such a transfer in terms of the Articles of Association of the Company.

Analysis and Findings

i. We have heard the Ld. Counsels appearing for both parties. Records as well as pleadings and written submissions have been perused.

ii. Based on the pleadings of both the parties and the rival contentions, the following point emerge for determination in this petition:-

(1) Whether this petition is within the jurisdiction of this Tribunal or not.

iii. At this stage, it is pertinent to refer to Section 58 of the Companies Act, 2013.

Section 58- Refusal of registration and appeal against refusal.

“(1) If a private company limited by shares refuses, whether in pursuance of any power of the company under its articles or otherwise, to register the transfer of, or the transmission by operation of law of the right to, any securities or interest of a member in the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of the refusal to the transferor and the transferee or to the person giving intimation of such transmission, as the case may be, giving reasons for such refusal.

(3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days from the date of receipt of the notice or in case no notice has been sent by the company, within a period of sixty days from the date on which the instrument of transfer or the intimation of transmission, as the case may be, was delivered to the company.”

It is pertinent to note here that Section 58 of the Companies Act, 2013 deals with the Refusal of Registration and appeal against the Refusal, it is evident from Section 58 that, the period of limitation for appeal is thirty and sixty days respectively.

iv. While determining Issue (1), we are of the considered view that the issue/dispute involved in this petition (the Appellants are seeking that this Tribunal declares that the Will propounded by them is valid) is a question involving the civil rights of the parties and that cannot be decided by this Tribunal in a similar manner. Therefore, this petition filed on 06.02.2020 is not within the jurisdiction of this Tribunal as the relief sought in the present appeal is beyond the scope and power of this Tribunal under Section 58 of the Companies Act, 2013.

Order

In view of the above facts and circumstances and the foregoing discussion, we are satisfied that the present petition fails to fulfill the criteria laid down under Section 58 of the Companies Act, 2013 and therefore, is inadmissible. It is accordingly, hereby ordered as follows: -

i. The Appeal bearing 184/58/ND/2020 filed by the Appellant under Section 58 of the Companies Act, 2013 against the Respondent is hereby dismissed.

ii. A certified copy of this order may be issued, if applied for, upon compliance with all requisite formalities.

No order as to costs.