SUCCESSOR HAS NO RIGHTS IN SHARES TILL SHARES STANDS REGISTERED IN HIS/ HER NAME

        

Supreme Court, Delhi High Court, Advocate, Legal, Law,

Nominee's Right to Succession in Company's Shares 

Hon’ble Supreme Court in the matter of Aruna Oswal Vs. Pankaj Oswal and Ors. Civil Appeal Nos. 9340, 9399 and 9401 of 2019, decided on 06-07-2020 has held that the successor of deceased person will not acquire any right in the shares till the shares are registered in his name. It further held that such a successor CANNOT even maintain Oppression and Mismanagement Proceedings on the basis of his shares to which he will succeed. 

Apparently, the above proposition looks good. But it will have a far reaching consequences and this proposition supports the wrong doers than supporting the Right. 


A Nominee (who may be in the control of the Company because of his/ her nomination to the shares of the deceased) OR Persons in the management of the Company, may prevent the Successor from taking part in the management of the company, by simply using the above proposition.

 

A Nominee may refuse the transfer the shares in the name of successor resulting in Civil Case, which may take years to decide and by the time it stands decided Nominee may siphon off all the funds, leaving the Successor hard and dry. 


Similarly, person in management may refuse to register the transmission of Shares or may direct for seeking a Judicial Order to this effect, which again may result in the above consequences. 


Hon’ble Supreme Court failed to consider that debarring the successor in such commercial disputes may result in (1) Multiplicity of Litigation and (2) a situation that Successor if left only with a Judicial Order in his favor at the end of the day. 


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