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Dispute as to Inheritance of Shares is a Civil dispute, can’t be decided in proceedings under Section 241/ 242 of Companies Act, 2013: SC [Read Judgment]

supreme court - Inheritance Shares - civil dispute - Taxscan

The Supreme Court held that dispute as to the inheritance of shares is a civil dispute, cannot be decided in proceedings under Section 241/ 242 of Companies Act, 2013.

The case is the outcome of a family tussle. Late Mr. Abhey Kumar Oswal, during his lifetime, held as many as 5,35,3,960 shares in M/s. Oswal Agro Mills Ltd., a listed company. He breathed his last in Russia.

Mr. Pankaj Oswal filed a partition suit claiming entitlement to one-fourth of the estate of Mr. Abhey Kumar Oswal. He claimed one-fourth of the deceased’s shareholdings who were holding shares to the extent of 39.88% in Oswal Agro Mills. Ltd. The deceased also held 11.11% shares in M/s. Oswal Greentech Ltd., respondent No.16. The partition suit was filed on 3.2.2017 by the respondent for one fourth each of 39.88% shareholding in the respondent company and 11.11% shareholding in another respondent company. Prayer was made for an interim injunction in the civil suit.

These appeals have been preferred against the judgment and order passed by the NCLAT in Company Appeal, thereby affirming the order passed by the NCLT concerning maintainability of the applications filed under sections 241 and 242 of the Companies Act, 2013.

The division bench of Justice Arun Mishra and Justice S. Abdul Nazeer held that dispute as to the inheritance of shares is a civil dispute, cannot be decided in proceedings under Section 241/ 242 of Companies Act, 2013.

“We are of the opinion that 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 a 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,” the bench said.

“The respondent should have waited for the decision of the right, title and interest, in the civil suit concerning shares in question,” the bench said.

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