Tribunal approves company conversion from public to private, resolves issues, and dismisses costs

The tribunal approved the special resolution for the conversion of the appellant company from a public company to a private company, setting aside the impugned order. The petition was deemed to be within the limitation period, the shorter notice for the EOGM was found valid, concerns regarding the new auditor were resolved, the resignation of independent directors did not affect the petition, objections by creditors were settled, and compliance with conversion conditions was confirmed. No costs were ordered.

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Issues Involved:
1. Limitation period for filing the petition.
2. Validity of the shorter notice for the Extraordinary General Meeting (EOGM).
3. Appointment and actions of the new auditor.
4. Resignation of independent directors.
5. Objections raised by creditors and objectors.
6. Compliance with conditions for conversion from a public company to a private company.

Issue-wise Detailed Analysis:

1. Limitation Period for Filing the Petition:
The primary issue was whether the petition was filed within the prescribed limitation period. Rule 68(1) of NCLT Rules 2016 stipulates that a petition for conversion of a public company into a private company must be filed not less than three months from the date of passing the special resolution. The appellant company passed the resolution on 14.08.2017 and filed the first petition on 30.10.2017, which was premature and subsequently withdrawn. The second petition was filed on 19.12.2017, which was within the required timeframe. Thus, the petition was deemed to be within the limitation period.

2. Validity of the Shorter Notice for the EOGM:
The appellant company convened an EOGM on 14.08.2017 with a shorter notice, which was consented to in writing by all shareholders. Section 101 of the Companies Act 2013 allows for a general meeting to be called with shorter notice if consent is given by at least 95% of the members entitled to vote. The holding company, VPS Healthcare Pvt Ltd, authorized representatives to attend and vote at the meeting. The tribunal found no illegality or irregularity in the passing of the resolution dated 14.08.2017.

3. Appointment and Actions of the New Auditor:
Concerns were raised about the appointment and actions of the new auditor, M/s Dayanand Yadav & Co. The appellant company explained that the new auditor was appointed as a tax auditor on 02.09.2016 and as a statutory auditor on 17.10.2016. The new auditor had reviewed and signed the financial statements for FY 2015-16. The Institute of Chartered Accountants of India (ICAI) exonerated the auditor from any professional misconduct, thus resolving the issue satisfactorily.

4. Resignation of Independent Directors:
Two independent directors resigned after the EOGM, and this fact was not initially disclosed in the petition. However, the appellant company, being a wholly-owned subsidiary and an unlisted public company, was not required to appoint independent directors as per sub-rule (2) of Rule 4 of the Companies (Appointment & Qualification of Directors) Rules 2014. Therefore, the non-disclosure of their resignation did not affect the merit of the petition.

5. Objections Raised by Creditors and Objectors:
Objections were raised by creditors holding only 0.05% of the total debt and contingent debt of 1.39%. The appellant company settled claims with all objectors and filed no dues certificates. The dispute with Ernst & Young was pending before the Arbitral Tribunal, and the conversion would not affect the appellant company’s responsibilities and liabilities.

6. Compliance with Conditions for Conversion:
The tribunal reviewed the compliance with the conditions for conversion from a public company to a private company and found that the appellant company had fulfilled the necessary conditions. The shortcomings pointed out by the NCLT were deemed inconsequential.

Conclusion:
The tribunal set aside the impugned order and approved the special resolution dated 14.08.2017 for the conversion of the appellant company from a public company to a private company. No order as to costs was made.

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