Family Settlement Excluding Legal Heirs, Coparceners Cannot Defeat Oppression Petition: NCLT Kolkata:

The National Company Law Tribunal (NCLT) in Kolkata has held that family settlement agreements entered into by only some members of a family cannot be recognised as binding settlements where other legal heirs and coparceners continue to assert rights in the disputed estate and shareholding.

The tribunal ruled that two such agreements relied upon in a dispute concerning Anil Plantations Private Limited were void and illegal. It further held that the agreements could not render the company petition non-maintainable.

The ruling was delivered by Judicial Member Bidisha Banerjee and Technical Member Siddharth Mishra.

On the requirements of a valid family settlement, the tribunal held,

“The essence of a valid family settlement is that all the parties in a family must have given their consent to the settlement agreement and that it is not a partial settlement between any members of the family.”

The Tribunal further observed, “A bilateral or multilateral arrangement confined to some members of the family, which leaves out other members cannot constitute a comprehensive and binding family settlement.”

The dispute stems from a petition alleging oppression and mismanagement in Anil Plantations Private Limited.

During the proceedings, family members who had entered into settlement agreements in August and November 2024 asked the Tribunal to dismiss the petition.

They argued that the settlements had resolved the family dispute and that no cause of action remained. They also maintained that the arrangements had already been acted upon, leaving no basis for the petition to continue.

The settlements were opposed by two daughters of late Ram Niranjan Kajaria, who continued to claim succession and coparcenary rights in the estate and shareholding. They contended that the agreements were executed despite subsisting status quo orders governing the disputed shareholding.

They also pointed out that family members claiming rights in the estate had been left out of the settlements.

While examining the record, the tribunal noted that the daughters challenging the settlements had consistently asserted rights in the estate and the shareholding. It also recorded that partition proceedings concerning the estate remain pending and that status quo directions continue to operate.

One settlement was entered into between Indira Kejriwal and Amit Sanganeria. Another was entered into between Vineeta Singhania and Amit Sanganeria. The tribunal noted that both agreements purported to deal with rights in shares held by the late Ram Niranjan Kajaria and the family Hindu Undivided Family but did not include the daughters who continued to claim rights as co-heirs and coparceners.

Referring to the Supreme Court's decision in Kale and Others v. Deputy Director of Consolidation, the Tribunal noted that family settlements are recognised in law when they are entered into bona fide to resolve family disputes.

In the present case, however, the tribunal found that the settlements were not comprehensive arrangements involving all persons claiming rights in the subject matter. It also noted that the agreements were executed while status quo orders concerning the disputed shareholding were in force before both the Tribunal and the civil court.

Holding that the settlements excluded legal heirs and coparceners who continued to claim rights in the estate and shareholding, the Tribunal declined to recognise them. It consequently concluded that the agreements dated August 3, 2024 and November 5, 2024 were void and illegal.

Having found the agreements invalid, the tribunal held that they did not bring the underlying disputes to an end. The company petition, therefore, could not be dismissed on the strength of those settlements.