ARUNA OSWAL versus PANKAJ OSWAL & ORS.

Citation: [2020] 7 S.C.R. 476 · Decided: 06-07-2020 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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476
SUPREME COURT REPORTS
[2020] 7 S.C.R.
ARUNA OSWAL
v.
PANKAJ OSWAL & ORS.
(Civil Appeal No. 9340 of 2019)
JULY 06, 2020
[ARUN MISHRA AND S. ABDUL NAZEER, JJ.]
Companies Act, 2013 – ss. 241 and 242 – Respondent no. 1
filed a partition suit claiming entitlement to one-fourth of the estate/
shares of his father – The High Court directed status quo between
the parties and the said suit is pending – Thereafter, respondent no.
1 filed Company petition alleging oppression and mismanagement
in the affairs of respondent no. 2 company and claimed eligibility
to maintain the petition on the ground of being holder of 0.03%
shareholding and legitimate expectation to 9.97% shareholding of
respondent no. 2 company – The NCLT held the petition maintainable
and respondent no. 1 as legal heir was entitled to one-fourth share
of the property/shares – NCLAT affirmed the order passed by the
NCLT – On appeal, held: The basis of petition is the claim by way
of inheritance of one-fourth shareholding so as to constitute 10%
of the holding, which right cannot be decided in proceedings u/s.
241/242 of the Act – Respondent no. 1 has to firmly establish his
right of inheritance before a civil Court to the extent of the shares
he is claiming – The respondent no. 1 had nothing to do with the
affairs of the company and he is not a registered owner – The rights
in estate/shares, if any, of respondent no. 1 are protected in the civil
suit – Respondent no. 1 does not represent the body of shareholders
holding a requisite percentage of shares in the company, necessary
in order to maintain such a petition – It would not be appropriate
given the order passed by the civil Court to treat the shareholding
in the name of respondent no. 1 by NCLT before ownership rights
are finally decided in the civil suit – Therefore, the proceedings
filed before the NCLT regarding oppression and mismanagement
u/ss. 241/242 of the Act are directed to be dropped – The impugned
orders passed by the NCLT and NCLAT are set aside.
[2020] 7 S.C.R. 476
476
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Allowing the appeals, the Court
HELD:  1. Admittedly, respondent No.1 is not holding the
shares to the extent of eligibility threshold of 10% as stipulated
under section 244 of the Companies Act, 2013 in order to maintain
an application under sections 241 and 242. He has purchased the
holding of 0.03% in respondent no. 2 company in June 2017 after
filing civil suit and remaining 9.97% is in dispute, he is claiming
on the strength of his being a legal representative. In respondent
no. 16 company, the shareholding of the deceased was 11.11%,
out of which one-fourth share is claimed by respondent No.1.
Admittedly, in a civil suit for partition, he is also claiming a right
in the shares held by the deceased to the extent of one-fourth.
The question as to the right of respondent no.1 is required to be
adjudicated finally in the civil suit, including what is the effect of
nomination in favour of his mother whether absolute right, title,
and interest vested in the nominee or not, is to be finally
determined in the said suit. The decision in a civil suit would be
binding between the parties on the question of right, title, or
interest. It is the domain of a civil court to determine the right,
title, and interest in an estate in a suit for partition. [Para 20]
[491-H][492-A-C]
2. It is admitted by respondent no.1 that he was not involved
in day to day affairs of the company and had shifted to Australia to
set up his independent business w.e.f. 2001. [Para 21][492-G]
3. The basis of the petition is the claim by way of inheritance
of 1/4th shareholding so as to constitute 10% of the holding, which
right cannot be decided in proceedings under section 241/242 of
the Act. Thus, filing of the petition under sections 241 and 242
seeking waiver is a misconceived exercise, firstly, respondent
no.1 has to firmly establish his right of inheritance before a civil
court to the extent of the shares he is claiming; more so, in view
of the nomination made as per the provisions contained in Section
71 of the Companies Act, 2013. [Para 22][493-F-G]
4. In the instant case, this Court is satisfied that respondent
no.1, as pleaded by him, had nothing to do with the affairs of the
ARUNA OSWAL v. PANKAJ OSWAL & ORS.
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SUPREME COURT REPORTS
[2020] 7 S.C.R.
company and he is not a registered owner. The rights in estate/
shares, if any, of respondent no.1 are protected in the civil suit.
Thus, we are satisf

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