Above: Jai Mahal Palace
Palace intrigue ends as the National Company Law Tribunal rules that the offspring of the late Prince Jagat Singh are entitled to inherit the royal estate denied by their step uncle and his son
By Prakash Bhandari in Jaipur
It’s been a long-drawn royal battle involving the estate of a deceased prince, the only son of one of the most glamorous royals of the country—the late Rajmata Gayatri Devi of Jaipur. Jagat Singh had two children—a son and daughter—from his marriage with a Thai princess whom he divorced. In a landmark decision, his son, Devraj Singh, and daughter, Lalitya Kumari, the grandchildren of Gayatri Devi, have won control of the iconic property, the Jai Mahal Palace. The National Company Law Tribunal (NCLT) has restored their majority holding in the company that owns the majestic palace, which is now run as a hotel.
The Delhi bench of the NCLT allowed the two offspring of the late Prince Jagat Singh their dues, denied by their step-uncle, Prithviraj, and his son, Vijit Singh. They had 99 percent of the paid-up capital of the Jai Mahal Palace, owned by their father. The Tribunal through its order delivered by R Vardharajan, member (Judicial), has restored “the position ante” immediately upon the death of Jagat Singh in terms of strength and directors of the board of Jai Mahal Hotel Ltd. The 82-page order has also observed that the majority shareholding of the children was converted into a minority by their step-uncle, Prithviraj, and his son, Vijit Singh.
The prelude to the latest order by the NCLT was typical of the feudal family feuds and palace intrigues of bygone years. The ruling details how, after the death of Jagat Singh, Prithviraj, who had just one percent shareholding, virtually ousted Devraj and Lalitya, denying them rightful ownership of the shares as well as an opportunity to participate in the affairs of the company by insisting on a succession certificate with a view to delay the succession to the property of their father. They were denied representation in the management of the company although their father had 99 percent shareholding. Instead, Prithviraj, who had just one percent holding, took control of the company that owned Jai Mahal Palace. Prithviraj inducted Meenaxi Kumari, the wife of his son, as the director without any notice to Devraj and Lalitya and their grandmother, Gayatri Devi.
The NCLT also observed that Prithviraj conspired to convert the shareholding of Devraj and Lalitya (99 percent) into a minority. He increased the paid-up capital of Vijit and Meenaxi from 5,100 shares of Rs 100 each to 60,982 equity shares. Out of the in-crease of 60,982 equity shares, 50,794 equity shares had been allotted to Vijit in 2001, and on the same day, 10,088 equity shares were allotted to Meenaxi at the face value of Rs 100 each, even though the intrinsic value of the shares was much higher because of the accumulated reserves and assets held by the company. Prithviraj did these manipulations with the ulterior motive of diluting the share of Devraj and Lalitya.
The Tribunal also pointed out that Prithviraj siphoned off approximately Rs 8 crore under the guise of two agreements. It held that the petitioners were denied legitimate rights to become members despite being legal heirs of Jagat Singh and their majority shareholding had been converted into a minority by overt and covert acts. It also noted that the company’s affairs had been conducted in an oppressive manner by Prithviraj, Vijit and Meenaxi. This was unfair and prejudiced under the provisions of Section 397 and Section 398 of the Companies Act, 1956, the Tribunal ruled.
The Tribunal ordered that all resolutions passed in the meetings of the board of directors with regard to the appointment of Meenaxi held on March 31, 1999, and March 27, 2001, and their subsequent confirmation be set aside. It restored the position ante immediately after the death of Jagat Singh. All resolutions in relation to the increase in the authorised capital were also set aside.
The NCLT also ordered that no major policy decision should be taken to manage the affairs of the company and the board should be constituted with Devraj and Lalitya. It also ruled that Delhi-based chartered accountant Amarjit Chopra be appointed as the independent auditor to audit the accounts from February 1997 until March 2018. The purpose of appointing an independent auditor is to examine the siphoning off of funds and their leakage and the amount would be recoverable from Prithviraj and Vijit.
The Tribunal also imposed a penalty of Rs 10 lakh each on Prithviraj, Vijit and Meenaxi. It also ordered the company to rectify its register of members reflecting the status quo ante prior to the allotment of 60,982 equity shares as its paid-up equity capital.
“All the resolutions passed either in the board meeting held on April 4, 2001, in relation to the resolution allotting additional capital of Hotel Jai Mahal to Prithviraj and his son Vijit Singh aggregating to 60,982 equity shares of Rs 100 each are set aside,” the Tribunal said.
The NCLT has also directed that the board of the company “shall be reconstituted with Prithviraj and Vijit Singh along with three nominees to the board to be appointed by the petitioners (Devraj and Lalitya) within a period of four weeks from the day of this order.”
Devraj and Lalitya had filed the petition in 2006 (in the then CLB) against the company and its directors, challenging the wrongful dilution of their shareholding from 99 percent to 6 percent by allotment of shares to Prithviraj and Vijit.
The grandchildren had earlier won the battle for transfer of their father’s shares in their names from the Supreme Court in 2015. The Court had held that Gayatri Devi’s grandchildren were the rightful heirs of the multi-crore assets of her son, Jagat Singh, who died in 1997. Gayatri Devi’s stepsons, Prithviraj and Jai Singh, and step-grandson, Vijit Singh, had challenged the will of Jagat Singh that bequeathed shares to Devraj Singh and Lalitya Kumari and his estranged wife, Priyanandana Rangsit.
The NCLT order was guided by the Supreme Court’s decision which held that Gayatri Devi’s step-sons and step-grandchildren cannot claim their rights over shares held by her.
The Court directed rectification of the company records to show Devraj and Lalitya as holders of stakes that Gayatri Devi held, allowing them rights to their father’s company—Jai Mahal Hotel, and also to Rambagh Palace Hotels, Sawai Madhopur Lodge and SMS Investment Corporation. The late Gayatri Devi’s share of property was estimated at around Rs 1,000 crore in 2010.
“It has taken a long time for my sister and me to get justice. We have always had faith in the Indian judicial system. I tried to do all that was necessary to avoid the litigation, but my plea fell on deaf ears and I had no remedy left but to seek justice in the court of law,” Devraj said.
Jagat Singh had willed his shares to his mother on June 23, 1996, eight months before he died. Later, Gayatri Devi executed a transfer deed and a will in the name of her grandchildren before she died on September 29, 2009. When Devraj and Lalitya sought rectification of the shares, their step-cousins and uncles objected, saying their father’s 1996 will had disinherited the duo from the property.
Jai Mahal Palace, as well as Rambagh Palace, is currently run by the Tata-owned Indian Hotels Company Ltd (IHCL) under a management contract. Rambagh was originally the residence of the Maharaja of Jaipur, late Maharaja Sawai Man Singh, while Jai Mahal was the residence of the prime minister of Jaipur. Both are prized hotel properties.
The latest order, however, concerns mainly Jai Mahal Palace which was bequeathed by way of a gift deed to Sawai Man Singh’s fourth son, Jagat Singh, on May 5, 1956 and it remained his exclusive property. In 1981, Jagat Singh decided to sign a management contract with IHCL to be used as a hotel with a minimum guarantee payment.
Jagat Singh, the exclusive owner of Jai Mahal, constituted a firm and held 5,050 equity shares or 99 percent of the share capital as his individual shareholding strength. Out of the remaining 50 equity shares, only 45 equity shares were held by Prithviraj and the remaining by his son, Vijit.
Jagat Singh divorced his wife, Priyanandana, and their minor children, Devraj and Lalitya, stayed with their mother in Thailand, while the father lived in London.
The affairs of the company were looked after by Prithviraj as Jagat Singh was living in London and after the latter’s demise in 1997 Prithviraj took full control of the company that owned the Jai Mahal Palace.
As both Devraj and Lalitya were living in Thailand and were minors, Prithviraj was in an ideal position to oust them from the estate, though they were the legal heirs along with Gayatri Devi.
Despite the fierce royal battle raging in the Supreme Court and the NCLT, the Jai Mahal Palace has remained an oasis of luxurious harmony with a distinctive royal atmosphere and artifacts and traditions belonging to another era. None of its pampered guests has been given any indication of the bloodless royal battle swirling around the iconic property in the heart of the Pink City.