Could the pendency of a multi-party succession dispute over a deceased depositor’s estate grant a company a perpetual “free pass” to retain matured deposits in violation of the Companies Act, 2013. The National Company Law Appellate Tribunal (NCLAT), Chennai Bench, recently addressed this critical tension in Dr. M.A.M. Ramaswamy Chettiar v. Chettinad Coal Washeries Pvt. Ltd. and Anr.1 The Appellate Tribunal clarified that while the question of who ultimately inherits an asset rests with a probate court, the regulatory mandate to protect that asset and ensure statutory compliance regarding corporate deposits falls squarely within the jurisdiction of the National Company Law Tribunal (NCLT). By invoking the principle that a beneficiary can act to protect an estate even before a will is probated, the NCLAT ensured that the estate of the late Dr. M.A.M. Ramaswamy would not be depleted by corporate non-compliance or potential mismanagement during the interim of a testamentary battle.
The Factual Matrix
The legal saga began in 2014 when the late Dr. M.A.M. Ramaswamy Chettiar approached the Company Law Board seeking the repayment of deposits from Chettinad Coal Washeries Pvt. Ltd. under the Companies Act, 2013. Following his demise in 2015, two rival claimants emerged: his adopted son, Mr. M.A.M.R. Muthiah, claiming via an adoption deed, and the Chettinad Charitable Trust, claiming under a 2015 will. This ignited a “dispute of succession” that led the NCLAT, in a prior 2022 ruling, to set aside substitution orders and remit the matter to the NCLT to be decided only after the conclusion of testamentary proceedings before the Madras High Court. Consequently, the NCLT adjourned the principal petition sine die. However, the Trust later moved an interlocutory application (IA No. 93/2024) highlighting that the deposits totaling approximately Rs. 66.32 crores had matured in March 2023 and were being retained by the company in violation of Sections 73 and 74 of the Act. The Trust expressed a sharp apprehension that because the rival claimant and his wife controlled 99% of the company, the funds might be “frittered away” before the probate was granted. When the NCLT again directed the parties to seek clarification from the NCLAT, the Trust appealed, seeking a direction for the company to deposit the matured sum into the credit of the pending probate proceedings for safekeeping.
Judicial Rationale and Legal Precedents
The NCLAT’s rationale rests on a clear jurisdictional bifurcation: the High Court decides who inherits, but the NCLT decides the fate of the deposit under company law. The Appellate Tribunal observed that its previous order to wait for the probate outcome only concerned the “substitution” of the legal heir in the records, not the underlying statutory obligation of the company to refund matured deposits. Relying on Sections 73(4) and 74(1) of the Companies Act, 2013, the Bench emphasized that the retention of deposits after maturity is a regulatory concern that the NCLT must address regardless of the identity of the eventual successor. To bridge the procedural gap caused by the deceased’s lack of a formal representative, the NCLAT applied the Supreme Court’s ruling in Binapani Kar Chowdhury v. Sri Satyabrata Basu & Anr.2 This precedent establishes that the bar under Section 213 of the Indian Succession Act which normally prevents a claimant from establishing a right under a will without probate does not prevent a beneficiary from instituting proceedings to protect or preserve the estate in the interim.
The Tribunal reasoned that directing the company to deposit the funds into the probate proceedings would be a neutral act; it would not favor either the Trust or the adopted son, but would instead ensure the asset is placed in “safe hands” until the final adjudication. Furthermore, the NCLAT noted that since both claimants were already parties to the company petition, they were entitled to pursue the matter to prevent the potential frittering away of the estate’s value.
Conclusion
The NCLAT’s decision represents a pragmatic triumph of substance over form. By remanding the matter for a fresh merit-based consideration of the deposit’s status, the Tribunal refused to allow a corporate entity to exploit a family succession battle as a shield against its statutory liabilities. The ruling reinforces the NCLT’s role as a guardian of corporate discipline, ensuring that matured deposits are treated as trust property of the estate rather than available liquidity for a company in limbo. Ultimately, the judgment underscores that while the wheels of testamentary law may turn slowly, the protections afforded by the Companies Act must remain immediate and robust to prevent the “irreparable loss” of a deceased’s assets.
Expositor(s): Adv. Jahnobi Paul
