2017 (4) TMI 131 - Tri - Companies Law

Dismissal of Petition for Non-Compliance with Companies Act 2013

The Tribunal dismissed the petition due to non-compliance with the mandatory provisions of the Companies Act, 2013, specifically Section 68 governing ... Sanction and approval of a Scheme of Arrangement - Held that:- In the instant case, as already pointed out, the Scheme which contemplates the action of buy back of shares exceeding the statutory prescribed maximum under Section 68 of 2013 Act by the Petitioner is inconsistent with the provisions of 2013 Act as compared to the repealed enactment, namely 1956 Act and hence the said action on the part of the Petitioner cannot be saved by this Tribunal by upholding the Scheme and sanctioning it. In effect it also makes the decision cited by Learned Counsel for the Petitioner inapplicable to the facts of the case in hand. Hence looking from any angle this Tribunal is perforce to apply the provisions of 2013 Act in considering the sanction of the Scheme and not as espoused by the Petitioner for the applicability of the 1956 Act A vested right has accrued to the petitioner which is sought to be taken away by repeal and subsequent enactment. The Petitioner, by virtue of Clause 20 of the Scheme as reproduced in the initial paragraphs of the instant order itself has made the Scheme conditional upon certain contingencies and compliances one being the sanction of the High Court, presently by this Tribunal, being fully aware of the contingencies and that the scheme hinges upon the statute and cannot exist independent of it. Taking into consideration the position of law presently in force, we are unable to sanction the Scheme in its present form annexed as Annexure 10 to the petition and for the reasons aforesaid the petition fails and the same is dismissed. Issues Involved:1. Compliance with Section 230(10) of the Companies Act, 2013.2. Applicability of the Companies Act, 1956 vs. Companies Act, 2013 to transferred cases.Issue-wise Detailed Analysis:1. Compliance with Section 230(10) of the Companies Act, 2013:The petitioner sought approval for a Scheme of Arrangement under Section 391 of the Companies Act, 1956, which involved the buy-back and cancellation of 60,00,000 equity shares. The Tribunal examined whether the Scheme complied with Section 230(10) of the Companies Act, 2013, which mandates that any buy-back of securities must be in accordance with Section 68 of the 2013 Act. The petitioner admitted non-compliance with Section 68 but argued that the Scheme should be governed by the 1956 Act, as the petition was initially filed under that Act. The Tribunal disagreed, stating that the 2013 Act now governs the field of sanctioning Schemes of Compromise or Arrangement, and compliance with Section 68 is mandatory.2. Applicability of the Companies Act, 1956 vs. Companies Act, 2013 to transferred cases:The Tribunal addressed whether the 1956 Act or the 2013 Act should apply to cases transferred from the High Courts. The Tribunal noted that the Companies Act, 2013, and relevant notifications by the Central Government, particularly Section 434(1)(c), mandate that transferred cases should be dealt with under the 2013 Act unless orders have been reserved. The Tribunal emphasized that it is a creature of the 2013 Act and cannot apply the repealed 1956 Act to transferred cases. The Tribunal concluded that the 2013 Act's provisions, including Section 68, must be applied, and the Scheme's non-compliance with these provisions necessitated its dismissal.Conclusion:The Tribunal dismissed the petition, citing non-compliance with the mandatory provisions of the Companies Act, 2013, specifically Section 68, which governs the buy-back of shares. The Tribunal clarified that transferred cases must be dealt with under the 2013 Act, rejecting the petitioner's argument for the applicability of the 1956 Act. The Tribunal also addressed the concept of vested rights, concluding that no vested right had accrued to the petitioner under the 1956 Act that could override the provisions of the 2013 Act.