Rajendra Singh Lodha Judgement Calcutta High Court

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<p>IN THE HIGH COURT AT CALCUTTA CIVIL APPELLATE JURISDICTION ORIGINAL SIDE APO No. 153/2006 PLA 204/2004 TS No. 6/2004 GA No. 1605/2006</p> <p>Rajendra Singh Lodhav e r s u s</p> <p>Ajay Kumar Newar &amp; Ors.APO No. 197/2006 PLA No. 204/2004 TS No. 6/2004 GA No. 1727/2006</p> <p>Rajendra Singh Lodhav e r s u s</p> <p>Ajay Kumar Newar &amp; Ors.P R E S E N T: The Hon'ble Mr. Justice PINAKI CHANDRA GHOSE an d The Hon'ble Mr. Justice TAPAN KUMAR DUTT. Heard on : 29.06.06, 10.07.06, 11.07.06, 13.07.06, 2.08.06, 3.08.06, 8.08.06, 9.08.06, 22.08.06, 23.08.06, 30.08.06, 5.09.06, 6.09.06, 12.09.06, 14.09.06, 19.09.06, 1.11.06, 15.11.06, 16.11.06, 22.11.06, 29.11.06, 13.12.06, 3.01.07, 17.01.07, 18.01.07, 25.01.07, 31.01.07, 7.02.07, 14.02.07, 15.02.07, 28.02.07, 1.03.07 and 19.04.07.Delivered on :</p> <p>11.10.2007</p> <p>For the appellant: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Anindya Kumar Mitra , Sr. Adv. Shaktinath Mukherjee, Sr. Adv. Pratap Chatterje, Sr. Adv. Bikash Ranjan Bhattacharya, Sr. Adv. Malay Kumar Ghosh, Adv. Abhrajit Mitra, Adv. Sanjit Kumar Trivedi, Adv. Debanjan Mandal, Adv. Joseph Banerjee, Adv.</p> <p>For Smt. Radha Devi Mohatta: Mr. Mr. Mr. Mr. S. B. Mookherjee, Sr. Adv. P. K. Das, Sr. Adv. S. N. Mookherjee, Sr. Adv. Ratnanko Banerjee, Adv.</p> <p>For Shri Ajay Kumar Newar &amp; Ors.:Mr. S. Pal, Sr. Adv. Mr. B. Sen, Sr. Adv. Mr. N. G. Khaitan, Adv. Mr. Debdatta Sen, Adv. Ms. Vineeta Meharia, Adv. For Shri G. P. Birla: Mr. Balai Ch. Ray, Sr. Adv. Mr. D. N. Sharma, Adv. Mrs. Rupa Bandopadhyay, Adv. Mr. T. K. Chaudhuri, Adv. For Shri K. K. Birla &amp; Ors.: Mr. S. P. Sarkar, Sr. Adv. Mr. Pramit Kr. Ray, Adv. Mr. Saumik Mukherjee, Adv.</p> <p>Pinaki Chandra Ghose, J. : Two appeals have been filed by theappellants challenging a common judgment and order dated 19th May, 2006 passed by the Hon'ble First Court on the applications filed by Radha Devi Mohatta (hereinafter referred to as RDM) and Laxmi Devi Newar (hereinafter referred to as LDN). following order: His Lordship was pleased to pass the</p> <p>Hence I appoint Joint Administrator, pendente lite, consisting of following persons (i) Mr. Hiranmoy Dutta, Barat-law of Bar Library Club; (ii) Promotha Nath Chatterjee, Learned Advocate of Bar Association, Room No. 1; (iii) Mr. Prabir Kumar Roy, ex-Sheriff of this Court of 10, S. N. Roy Road, Behala, Kolkata 700 019; (iv) Mr. Sujit Bhattacharjee of 52-C, Ballygunge Circular Road, Kolkata 700 019, who shall take charge and control of all the shareholding of the deceased Lady in all the companies and they should function as could be functioned by under law by virtue of the controlling shareholding of all the Companies left behind by the said Lady. They shall take step for rectification of all the share registers of the Companies recording their names. They shall immediately make an enquiry as to the dealings of Lodha vis--vis dividends and investment of the dividends and submit a report to the Court and they shall place themselves in the Board of Directors wherever it is possible by virtue of the shareholding. They shall, in consultation with each other, decide to dissolve the Board if necessary under law for the benefit of the Companies, wherever possible. Of course they must consult and take the views of Lodha in each and every step while taking decision. If his views and advice are accepted by the Administrators then the views of the contesting defendants shall be taken and if there is a difference in the two views the matter should be placed before the Court for obtaining direction. They shall remain in the office of the Administrator, pendente lite, for a</p> <p>period of two years or till the disposal of the probate proceedings whichever is earlier. Therefore, Lodha shall hand over all the charges to the aforesaid appointed Administrators, pendente lite. Interim order passed earlier will continue till possession is taken by the Administrator... The Memorandum of cross-objections in respect of the said order were also filed by the respondents in the instant appeals.</p> <p>Being aggrieved by the said order, these appeals and cross-objections were filed by the parties.</p> <p>Both the appeals and the cross-objections are taken up for hearing and are disposed of by this common judgment and order.</p> <p>The facts of the case briefly are as follows:-</p> <p>Priyamvada Debi Birla (hereinafter referred to as PDB), wife of M. P. Birla (hereinafter referred to as MPB) died on 3rd July, 2004 and left a registered Will dated 18th April, 1999 and a codicil dated 15th April, 2003 respectively. MPB died on 30th July, 1990. PDB, during her lifetime, was in</p> <p>control and management of MPB Group of Companies.</p> <p>By the said registered Will dated 18th April, 1999, PDB appointed Rajendra Singh Lodha (hereinafter referred to as RSL) as sole Executor to the Will. This Will has been challenged by the sisters of MPB, namely LDN and RDM. It is</p> <p>also to be noted that MPB and PDB had no issue. It further appears that the caveats were filed on behalf of LDN and RDM and the said caveats have not been opposed by RSL.</p> <p>K. K. Birla (hereinafter referred to as KKB), B. K. Birla (hereinafter referred to as BKB), G. P. Birla (hereinafter referred to as GPB) and Yasovardhan Birla (hereinafter referred to as YB) have also filed caveats challenging the said Will. The caveats filed by KKB, BKB and YB have been</p> <p>discharged by the High Court and the caveat filed by GPB has been retained.</p> <p>It is also to be noted that LDN, since deceased, her heirs and the Executors have been substituted in the probate proceedings. Admittedly, after the death of PDB, RSL, on 12th July, 2004 read out the said registered Will at Birla Park before the members of Birla family. On 19th July, 2004, RSL filed the probate application before this Hon'ble Court being P.L.A. No. 204 of 2004.</p> <p>It further appears that a suit being C. S. No. 221 of 2004 was filed on 17th August, 2004 by KKB, GPB and others claiming that MPB and PDB had left earlier Wills dated 13th July, 1982 and the said two Wills are Mutual Wills. The claim in the plaint is that there is an irrevocable agreement between MPB and PDB that they would not revoke the said Wills.</p> <p>On 18th August, 2004, KKB and others filed a petition for probate of the alleged Will of MPB dated 13th July, 1982 which has been marked as P.L.A. No. 241 of 2004. It is pointed out that the said petition was filed for probate 14 years after the death of MPB (i.e. in the year 1990). Another petition for probate was filed by GPB and others for probate of the alleged Will of PDB dated 13th July, 1982 being P.L.A. No. 242 of 2004.</p> <p>After the death of PDB, RSL, as Executor, took the charge of the Estate of PDB. The said fact is also admitted by the caveators. RSL was allowed to</p> <p>manage and control the Estate of the deceased testatrix (PDB) as Executor. After six months, applications were filed for appointment of Administrators pendete lite in respect of the said Estate.</p> <p>Mr. Anindya Mitra, Learned Senior Advocate alongwith</p> <p>Mr.</p> <p>Shaktinath Mukherjee, Learned Senior Advocate and others appearing in support of this Appeal contended that the application for appointment of the Administrator Pendente Lite was filed by the respondents after the delay of six months which would show that even the caveators do not have really any apprehension that the Estate in the hands of RSL as Executor was under any risk of dilution or waste or mismanagement. In fact, the caveators have not been able to establish any act of dilution of value of shares of the Estate in MPB Group of Companies or any or mismanagement on the part of the RSL during the said period of six months.</p> <p>The said application for appointment of Administrators Pendente Lite was filed on 16th December, 2004 being G.A. No. 4374 of 2004, G.A. No. 4375 of 2004 and G.A. No. 4376 of 2004 respectively.</p> <p>Mr. Mitra further submitted that at the ad-interim stage the matter was heard by the Hon'ble First Court for several days and the following ad-interim order and he drew our attention to the judgment delivered by the Hon'ble First Court reported in (2005) 2 WBLR Cal 311 (Priyamvada Devi Birla vs. Laxmi Devi Newar &amp; Ors.). He further drew our attention to paragraphs 35 and 36 which is reproduced as hereunder:</p> <p>35. Mr. A. K. Mitra and S. N. Mukherjee have agreed upon instruction from their client that the shareholding of all these companies shall not be transferred and/or disposed of till the disposal of the present application. I, therefore, direct Lodha to maintain the status quo with regard to the transfer of shares received and/or got hold of already in respect of the companies from the said deceased Lady. This order of status quo will also cover any other shareholding in respect of other companies, which might be coming to his hands. This order shall cover other immovable property also. The decision cited by both the learned Counsel are mostly related to the appointment of Administrator Pendente Lite, therefore, those decisions are not germane of the matter at this stage. 36. However, it is made clear in the event any step is taken for removal of any of the Directors only prior seven days notice shall be served upon the defendants. I direct the propounder by his controlling share holding shall not move any resolution nor support any resolution aiming to sell, encumber any assets of the MPB Group of Companies nor closure thereof, without express leave of the Court. The propounder shall also, maintain status quo in relation to the other properties.</p> <p>At the ad-interim stage the Hon'ble First Court held prima facie that:</p> <p> I do not find any allegation of mismanagement, destruction and devastation of the Estate only an allegation has been made that a jute mill is sought to be closed and the same is sought to be shifted. Explanation has been given by Lodha in his separate application stating that for economic viability of the above jute mill the said decision was taken to shift the jute mill at a different place as the existing site does not have any scope for expansion. So, I think, keeping in view the interest of the group of companies on the one hand and to safeguard the interest of the Estate of the deceased lady on the other hand slightly regulatory measure is to be taken After hearing the parties the Hon'ble Court was pleased to pass an adinterim order and further directed the parties to file their affidavits.</p> <p>Mr. Mitra and Mr. Mukherjee alongwith others appearing on behalf of the appellant further pointed out that the Hon'ble First Court on 19th May, 2006 finally disposed of the matter but did not pass any order for appointment of Administrators over the valuable jewellery, ornaments, portfolio shares and mutual funds held by PDB personally and allowed the Executor to remain in control and management of the same though the submissions were made before the Hon'ble First Court that RSL had suppressed jewellery, ornaments, valuable gold coins etc. Incidentally, all of which were however, found intact during the inventory from the residence of PDB itself. Mr. Mitra further submitted that the Hon'ble First Court had no lack of confidence in RSL and the Hon'ble First Court,</p> <p>after, having come to the conclusion that there was no mismanagement under RSL singled out the controlling block of shares held by PDB in MPB Group of Companies for appointment of four Administrators over the same with drastic powers, (a) to get the shares transferred in their own names and rectify shares register of the companies for recording their names, (b) to get themselves nominated on the Board of Directors and (c) to dissolve the existing Boards.</p> <p>Mr. Mitra further submitted that there was any material disclosed subsequent to the ad-interim order justifying necessity for appointment of Administrator Pendente Lite over the controlling block of shares of MPB Group of Companies? Other Birlas would like disintegration of MPB Group because other Birlas are business rivals. This question falls for consideration in this appeal and has been discussed hereinafter. An Officer of Court appointed over shares would not have any voting right and he relied upon a decision reported in AIR 1985 SC 520 (Balkrishnan vs. Swadeshi Polytex Ltd.) [serial no. 14 of Judges Brief page 101 at 112] property in shares does not vest in Receiver. But the Hon'ble First Court has conferred unusual power to Administrators to get shares recorded in their names by rectification of share register to vote and to become Directors. It is also submitted that after a period of 2 years 9 months, since the death of PDB, no ground of mismanagement has been established, even prima facie.</p> <p>He further submitted that under Section 247 of the Indian Succession Act, the Court has power to appoint Administrators Pendente Litem. No specific</p> <p>guidelines are mentioned in the said Section. Therefore, Courts have laid down the guideline through judgments. Mr. Mitra submitted that the principles for</p> <p>appointment of Administrators emerge from decided cases and the principles laid down therein are still undisputed.</p> <p>Appointment of Administrator is analogous to that of appointment of Receiver and he pointed out that the said position has also been accepted by the Hon'ble First Court and he drew our attention to page 45 line 7 of the said judgment in this regard. Under Order 40 Rule 1 of the Code of Civil Procedure, the appointment of Receiver should not only be just but must also be convenient.</p> <p>He further pointed out that the respondents before the Hon'ble First Court relied upon the following judgments:</p> <p>AIR 1933 Bom 342</p> <p>(Pandurang Shamrao Laud &amp; Ors. vs. Dwarkadas Kalliandas &amp; Ors.) (Adapala Subba Reddy &amp; Anr. vs. Adapala Andemma &amp; Ors.)</p> <p>AIR 1951 Madras 393</p> <p>AIR 1952 Cal 418</p> <p>(Goods of Borendranath Mitter &amp; Sudhindranath Mitter vs. Arunendranath Mitter) (Mahamaya Dassi vs. Commissioner of Income</p> <p>126 ITR 748</p> <p>Tax, W. B. III) Williams on Executors &amp; Administrators, 14th Edn. Page 206, and 13 CLJ 47 (Bhuban Mohini Debi vs. Kiran Bala Debi).</p> <p>In AIR 1933 Bom 342 (supra) the Court held as follows:</p> <p>In other words the position of an Administrator Pendente Lite is similar to that of a Receiver. (see page 343 column 2). In my opinion, the Court has to be satisfied as to the necessity of such an administration and as to the fitness of the proposed administration, and it must also be satisfied that it is just and proper under the circumstances of the case to appoint an Administrator before subjecting the Estate to the cost of such administration. (see page 344 column 1). He further submitted that in the decision reported in AIR 1951 Madras 393 (Adapala Subba Reddy &amp; Anr. vs. Adapala Andemma &amp; Ors.) the Court has held that the position of an Administrator would be analogous to that of a Receiver appointed under Order 40 Rule 1 of Civil Procedure Code. In another</p> <p>decision reported in AIR 1952 Cal 418 (In Goods of Borendranath Mitter &amp; Sudhindranath Mitter vs. Arunendranath Mitter), the Cour...</p>