Jai Mahal Hotels Pvt. Ltd. v. Rajkumar Devraj & Ors.
The Supreme Court decided on the scope of power under Section 111 of the Companies Act, 1956, to direct rectification in the share register of a company. Late Maharaja Jagat Singh 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 in 1997 leaving behind a Will (1996 made) in favour of his mother Gayatri Devi. Rajkumar Devraj and Rajkumari Lalitya Kumari (DR Group), are the son and daughter of Late Maharaja Jagat Singh. In 2009, succession certificate was issued jointly in favour of Gayatri Devi and DR Group. Also Gayatri Devi executed transfer deed in favour of DR Group in April 2009. She also executed Will dated 10th May, 2009 in favour of DR Group. After Gayatri Devi died in September, 2009, DR Group claimed transmission and transfer of shares in their favour.
The application having not been accepted by the Company, the DR Group filed appeals before the Company Law Board but they were dismissed. The Company Law Board held that such disputed and complicated questions of law and facts cannot be decided by it in the summary jurisdiction under Section 111 of the Act. Such questions 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 High Court allowing the appeals of DR Group held that the 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. There is no involvement of any fraud or forgery. Petition under Section 111 of the Companies Act was well maintainable. It was directed that the member register of the companies be rectified in the name of the petitioner group and the petitioners be substituted in lieu of Jagat Singh. The High Court held that the succession certificate had to be taken as conclusive evidence under Section 381 of the Indian Succession Act. As regards disinheritance of DR Group in the 1996 Will, 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. Gayatri Devi 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.
The main question for consideration before the Supreme Court was 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.
The Supreme Court opined that there is no real dispute between the parties. DR Group has furnished the succession certificate as well as the transfer deed executed by Gayatri Devi in their favour. The same had to be acted upon. Moreover, the civil court in interim application moved by the Urvashi Devi Group held that it had no prima facie case. There is no conflicting order of any court or authority. Hence there was no complicated question of title. Moreover, there is no bar to adjudication for purposes of transfer of shares unless the court finds otherwise. The Court further held that 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.
It was held that 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 Gayatri Devi, who admittedly inherited rights from Late Maharaja Jagat Singh. Will in favour of Gayatri Devi is beyond any dispute. Thus, the DR Group derived rights from the Gayatri Devi by documents executed by her in her lifetime and conveyed to the Company. Even if the Will of Gayatri Devi is not taken into account, for purposes of issue of rectification, the documents executed by Gayatri Devi clearly entitled the DR Group to have the rectification made.
The Supreme Court finally concluded that LMJS executed will in favour of his mother Gayatri Devi which is not in dispute. Gayatri Devi and DR jointly obtained succession certificate. Gayatri Devi signed the transfer deeds and communicated the same to the Board of Directors. The civil court also declined to grant temporary injunction finding no prima facie case against the succession certificate. It was held that 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. Hence the appeals were dismissed.