Judgment of the day- Aruna Oswal v. Pankaj Oswal & Ors.

By Yash Gupta

Late Mr. Abhey Kumar Oswal who owned 39.88% shares in OswalAgro Mills. Ltd. (respondent No.2) and 11.11% shares in M/s. Oswal Greentech Ltd. (Respondent no.16) made his wife (appellant) nominee for the shares. After his death, she was registered as a holder. Respondent no.1, son of deceased, filed a partition suit on 3.2.2017 claiming entitlement to 1/4th shares held by his deceased father. In the said suit, the High Court directed the status quo. Respondent no.1, then filed Company Petition alleging oppression and mismanagement in the affairs of respondent no.2-company and Respondent no. 16-company. Whether respondent no.1 was eligible. Held, no. Admittedly he was not holding 10% shares as required under Section 244. His claim of inheritance of 9.97% shares was pending adjudication in the civil suit filed for partition. Even the question relating to the effect of nomination in favor of his mother (appellant) and resultant vesting of right, title, and interest in her was to be finally determined in the suit. The appellant continued to be the registered holder of shares by virtue of the status quo directed by the High Court in the action. Therefore, allowing respondent No.1 to continue the proceedings under Sections 241 and 242 by giving waiver of the obligation to hold 10 percent shares, as stated under Section 244, was not acceptable. Respondent No.1 had to first determine his right of inheritance before a civil court, more so in the light of his mother's nomination. In fact, Respondent No.1 himself, having chosen the civil suit solution, submitted applications pursuant to Sections 241 and 242 was an afterthought.

Admittedly, respondent No.1 is not holding the shares to the extent of eligibility threshold of 10% as stipulated under section 244 in order to maintain an application under sections 241 and 242. He has purchased the holding of 0.03% in M/s. Oswal Agro Mills Ltd. in June 2017 after filing a civil suit and remaining 9.97% is in dispute, he is claiming on the strength of his being a legal representative. In M/s. Oswal Greentech Ltd., 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 one­fourth. 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 favor of his mother Mrs. Aruna Oswal, whether the 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.

It is also not contested that the High Court passed an order retaining the status quo with respect to shareholding and other assets in the pending civil suit. Regardless of the status quo order shares will be kept in Mrs. ArunaOswal 's name before eventually the claim is decided. Considering the order passed by the civil court, it would not be fair to treat NCLT 's shareholding in the name of respondent No.1 before ownership rights are eventually determined in the civil suit, and propriety also demands that. The question of rule, title, and interest is simply a grant of civil rights between the parties as to the consequence of the appointment decision in a civil suit. It would not be appropriate to entertain these parallel proceedings and give waivers as claimed under section 244 before the civil suit's decision. Respondent No.1 had himself chosen to avail the remedy of a civil suit, as such filing of an application under sections 241 and 242 after that is nothing but an afterthought.

It is sufficient to guide the dropping of the proceedings before the NCLT concerning oppression and mismanagement pursuant to sections 241 and 242 of the Act with the right to file again on all the issues if any of the proceedings are decreed in favor of respondent No.1 and the shareholding of respondent No.1 rises to the extent needed by section 244 by 10 percent. We affirm that, in the pending civil suit, we left all the issues to be resolved. Impugned orders passed by both the NCLT and NCLAT are set aside, and the appeals are permitted to the extent mentioned above.

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