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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

In ARUNA OSWAL vs PANKAJ OSWAL & ORS., an appeal was filed before the Supreme Court against  the judgment and order passed by the NCLAT in Company Appeal (AT) No.411 of 2018, thereby affirming the order passed by the National Company Law Tribunal (for short ‘the NCLT’) concerning maintainability of the applications filed under sections 241 and 242 of the 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 on 29.3.2016 in Russia. On or about 18.6.2015, Mr. Abhey Kumar Oswal filed a nomination according to section 72 of the Act in favour of Mrs. Aruna Oswal, his wife.

Mr. Pankaj Oswal, respondent No.1, filed a partition suit being C.S. No.53/2017 claiming entitlement to one­ fourth of the estate of Mr. Abhey Kumar Oswal including shares and a Company Petition No.56/CHD/PB/2018 ­ Pankaj Oswal v. Oswal Agro Mills Ltd. & Ors., alleging oppression and mismanagement in the affairs of respondent No.2 company.

The appellant filed an application before the NCLT challenging the maintainability of the petition, wherein the main dispute raised as to the inheritance of the estate of the deceased is a civil dispute and could not be said to be an act of oppression and mismanagement. Such a dispute could not be adjudicated in a company petition filed during the civil suit's pendency. Thus, the company petition deserves to be dismissed. NCLT as well as NCLAT dismissed the applications.

The division bench of the Supreme Court agreeing with the appellant 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 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 respondent should have waited for the decision of the right, title and interest, in the civil suit concerning shares in question.3676/




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