HIGH COURT OF BOMBAY
Prabodh Jamnadas Kothari
versus
Vikram Jamnadas Kothari
Notice of Motion No. 775 of 2012
SUIT NO. 694 OF 2012
Date of Pronouncement – 30.10.2012
JUDGMENT
1. The plaintiff has sued for declaration of the estate of his deceased father and for his 1/2 share, right, title and interest therein in respect of the properties set out in Exhibit-C to the plaint.
2. Properties at item Nos. 1 and 2 are the main properties with which the parties are at dispute. Item No. 1 relates to 49,010 shares of KNK Trading (P.) Ltd., stated to have been owned by the plaintiff’s father.
3. The plaintiff’s father has executed a Will in 2003 bequeathing the shares equally to his two sons the plaintiff and defendant No. 1. The defendants claim that the shares are transferred to defendant No.2, the wife of defendant No. 1 in 1999 itself. The plaintiff has challenged the transfer as fraudulent. The plaintiff has shown the annual returns of defendant No.5-company which shows the transfer effected in the first year of the incorporation of the company itself. The very first annual returns filed under section 169 of the Companies Act, 1956 (‘the Act’) shows the transfer executed in the name of defendant No. 2 of 49,000 shares (whereas 49,010 shares were actually transferred). The date of the transfer is not shown in the returns. It is contended that transfer has not taken place between the date of the first annual general meeting (‘AGM’) and the date of filing of the returns. The date of the filing of the returns is not shown in the returns. All later documents follow therefrom. The plaintiff has challenged all the documents emanating from the initial transfer. The defendants have sought to show that the father of the plaintiff and defendant No. 1 who was the director of the company signed such returns from year-to-year as also his personal tax returns.
4. The plaintiff claimed his share in that property, it being admittedly the biggest asset of the father.
5. There have been certain e-mail exchanges between the plaintiff and defendant No.3 as late as on 1st June, 2008 defendant No.3 son of defendant No. 1 has e-mailed the plaintiff not only the details about the property, but about the negotiations that he had for himself as also on behalf of the plaintiff. That interesting e-mail runs, thus :
“As of now I met with 3 developers, they are offering me very less value as the reason given was too much density of tenants on the property, and kindly note that the property is not 1,47,000 sq. feet but little over 1,18,000 sq. feet which I had told you as the front portion of the property was acquired by the Government for road widening purpose, its just that the BMC records are not updated of the same, people are ready to give us decent money for the property if we settle with the tenants and give them vacant plot with all required permissions to build, and kindly note too that I have been fair to you too till date and will continue to do so and never pressurised you to give me your share of the taxes and outgoings on the godown, though it is constantly burning a hole in my pocket, will update you of any new developments.”
6. Had the shares of the father been transferred as shown in the annual returns in 1999 itself such an e-mail would never have been written by the defendant No.3. The admissions contained in the e-mail is the circumstantial evidence prima facie showing that the transfer is not bona fide.
7. The very Will of the father which has been accepted by both the brothers, the plaintiff as well as defendant No. 1, bequeathing to both of them the shares in defendant No.5-company equally also shows that the father, until the date of the Will in 2003, held those shares.
8. The plaintiff’s share in that property, therefore, would require to be protected pending the notice of motion.
9. The property at item No.2 in Exhibit-C to the plaint is a flat at Marine drive which defendants 1, 2 and 3 claim to have purchased in 2006 out of their own separate funds. The plaintiff claims that that flat has been purchased from the amount received by the defendants upon the sale of the property at item No. 1 fraudulently and behind the back of the plaintiff. Defendants 1, 2 and 3 have produced their bank statements showing the amounts paid for the purchase of the flat being Rs. 1.90 crore. The defendants have also shown how the amounts came into their bank accounts. Defendant No. 1 claims to have the initial investment made in 2005 from the sale of one janta Godown which is another property of plaintiff, defendant No. 1 and defendant No.3 in which the plaintiff’s share has been paid and the share of defendant No. 1 has been utilised by him for the purchase of the flat. The initial receipt is shown to be invested in HDFC Mutual Funds on 28th February, 2005 which is redeemed on 11th April, 2006. His investment is out of the cheque amount received from the sale of Janta Godown. The other amounts are contributed by defendants 2 and 3. These are also shown from their bank accounts. They were also initially invested in HDFC Mutual Funds on 22nd March, 2005 which was redeemed on 11th April, 2006 and 10th October, 2005 which was redeemed on 11th April, 2006. The total amount has been invested in the flat on 13th April, 2006.
10. The property at item No. 3 is admitted to be the estate of the deceased. It was tenanted by the deceased. The defendants have offered that the plaintiff may reside in that property whilst he is in Mumbai.
11. The property at item No.4 which is an agricultural land which is stated to have been sold in 1968 to a Trust. The house property which is in Kutch, Gujarat is admitted by the defendants to be the estate of the father. The defendants agree to give the plaintiff his 1/2 share therein.
12. The defendants do not claim item No.5.
13. The defendants also offer item No.6 to the plaintiff which are shown to be the shares of a defunct company.
14. The property at item No.7 was tenanted by the private limited company in which the deceased as well as the plaintiff and defendant No. 1 are members. The landlord of this property is stated to be United Insurance Co. and the fact that the deceased had owned the property is admitted.
15. Half share of the plaintiff in item No.8 is stated to have been transferred to the plaintiff.
16. The bank account at serial No.9 shows the balance of Rs. 5,880.
17. There is not much dispute with regard to the movables in item No. 10.
18. The shares and securities of the deceased in item No.11 are shown to be transferred to the plaintiff towards his 1/2 share.
19. The main property forming a part of the estate of the deceased father of the parties is item No. 1. The plaintiff was desirous of acquiring his 1/2 share therein. There have been e-mails between the plaintiff and defendant No.3. After the aforesaid e-mail showing negotiations which were in progress even in 2008 sent by defendant No. 3 to the plaintiff, the plaintiff sent his e-mail dated 2nd June, 2008 alleging that for 5 years the defendant No. 3 had not done anything and calling upon him to take a decision. Under those circumstances, the plaintiff has alleged that a family arrangement-cum-compromise was agreed upon between the parties. The plaintiff and the two executors under the Will of the father are shown to have signed the family arrangement. That arrangement dated 12th July, 2008 records that items of the Will were discussed and agreed upon for a total value of Rs. 5 crore payable in two instalments by the end of the year to the plaintiff. That has not been paid. The plaintiff has accordingly sued to recover his above share from the defendants.
20. The plaintiff’s own case shows a crystallisation of the plaintiff’s share at Rs.5 crore in 2008.
21. Upon the transfer of item No. 1, defendants 1, 2 and 3 are stated to have received Rs. 48 crore in 2010. The plaintiff’s share shown in the family arrangement at Rs. 5 crore in 2008 would have augmented commensurately. The entire amount payable was payable by the end of the year 2008. Had that amount being paid it would have been invested by the plaintiff. The plaintiff’s share which is required to be protected pending the suit upon the prima facie case made out by the plaintiff, which is upon the admission of the execution of the Will by his father and the admitted relationship of the parties, would, therefore, require to be protected pending the notice of motion. Hence, the properties in Exhibit-C to the plaint must remain protected towards the plaintiff’s share. It may be clarified that though defendants 1, 2 and 3 have shown their independent right in the property at item No.2, since these defendants are prima facie seen to have transferred the property at item No. 1 to the other defendants under the transaction without bona fide full title, their property at item No.2 must remain injuncted against further transfer or creation of any further rights pending the notice of motion.
22. Hence, the following ad interim order is passed.
23. Defendants 1, 2 and 3 shall deposit Rs. 7.5 crore in this court towards plaintiff’s share in the estate of his deceased father within 4 weeks from today. If the amount is not deposited defendants shall not dispose of, alienate, encumber, part with possession, transfer or create any 3rd party rights in the properties at item Nos. 2, 3, 4, 6, 7 and 8 in Schedule Exhibit-C to the plaint pending the notice of motion.
24. Issue Regarding the Bar of Jurisdiction raised by defendant No.5 :
“Defendant No. 5 has sought to raise the issue of bar of this court’s inherent jurisdiction under section 10E(4C) read with section 111(4) and (7) of the Indian Companies Act (1 of 1956).”
25. Hence, the issue is framed and answered as follows :
“Whether the inherent jurisdiction of this court is barred – No.”
26. Since Item No. 1 relates to the claim of the plaintiff in the shares of private limited company held by the deceased as an estate of the deceased, it is contended by the defendants that this court’s jurisdiction in determination of whether item No. l forms an estate of the deceased is barred under section 10E(4C) read with section 111(4) and (7) of the Act as amended in 1988 and 2003. The relevant part of the sections which may bar or oust the civil courts jurisdiction runs, thus :
“PART. IA
BOARD OF COMPANY LAW ADMINISTRATION
10E. Constitution of Board of Company Law Administration…. – (4C) Every Bench referred to in sub-section (4B) shall have powers which are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely :
(a) discovery and inspection of documents or other material objects producible as evidence ;
(b) enforcing the attendance of witnesses and requiring the deposit of their expenses ;
(c) compelling the production of documents or other material objects producible as evidence and impounding the same ;
(d) examining witnesses on oath ;
(e) granting adjournments ;
(f) reception of evidence on affidavits.”
“111. Power to refuse registration and appeal against refusal -…….(4) If –
(a) the name of any person –
(i) is, without sufficient cause, entered in the register of members of a company ; or
(ii) after having been entered in the register, is, without sufficient cause, omitted therefrom ; or
(b) default is made, or unnecessary delay takes place, in entering in the register the fact of any person having become, or ceased to be a [member including a refusal under sub-section (1)],
the person aggrieved, or any member of the company, or the company, may apply to the Tribunal for rectification of the register….
(7) On any application under this section, the Tribunal –
