TaxTMI 
TaxTMI 
2005 (5) TMI 328
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....ures by various financial institutions including the Appellant No. 2 herein. For various reasons, including imposition of European Union Levelled Anti Dumping Duties, the Respondent suffered a cumulative loss of Rs. 228.58 crores by March 2001. In the said circumstance, the Respondent approached the Industrial Development Bank of India with a request for a restructuring package to clear its liabilities. A restructuring proposal was mooted; wherefor two meetings were held in March 2001 and October 2001 wherein the Unit Trust of India (UTI) participated. All the debenture holders upon due deliberations agreed to the said proposal of restructuring package except the Appellants herein. It is not in dispute that pursuant to or in furtherance of the said restructuring package, the Respondent herein paid a sum of Rs. 64.44 crores to various financial institutions between the period 1-10-2001 and 15-1-2003 in the following : "Sr. No. Institution Principal in Deferred Total (Rs. Crores) Interest 1. IDBI 15.5% PPD 99.50 43.70 143.20 2. IDBI 16% NCD 2.18 0.87 3.05 3. ICICI ZCD 6.00 1.95 7.95 4. UT....
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....V:C:KAJ 1000 Dt. 21-4-1997 GIC INV./97 Dt. 23-5-1997 175 NIC INVT/UW/DEBS 105 Dt. 30-5-1997 NIA INV./PM/BUD /72/96 175 Dt. 10-6-1997 OIC Deptt. 105 Investment Dt. 30-5-1997 UTI HQ: Inv: 262:97 140 Dt. 30-5-1997 Total 2100 2.2 Debenture shall rank pari passu.-The Company shall ensure that the Debentures shall rank pari passu inter se to all intents and purposes without any preference or priority of one over the other. 3.3 Right to review the rate of interest.-The Company agrees and undertakes that the Debenture holder(s) shall have a right to review the rate of interest as mentioned herein. The Company shall pay interest on the Debentures at the rate that may be stipulated by the Debenture holder(s) as a result of such review. The company also agrees and undertakes to obtain all necessary consents from the concerned authorities in accordance with the then prevailing rules and regulations and to sign all deeds and documents that may be required in this regard and to end....
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....made provisions satisfactory to the debenture holders for making such payment. (b) Charges - Create or permit any charges or lien on any assets of the Company except as provided in Article-IV, hereof. For the purpose of this clause, the term 'Line' shall include mortgages, pledges, shares, privileges and priorities of any kind and the term 'assets' shall include revenues and property of any kind. (c )Amendment of memorandum and articles of association - Amend its Memorandum and Articles of Association or alter its capital structure except as specified herein. (d) Merger, consolidation etc. - Undertake or permit any merger, consolidation, re-organization, scheme of arrangements or compromise with its creditors or shareholders or effect any scheme of amalgamation or reconstruction. (e )Investment by the company - Make any investment by way of deposits, loans, share capital etc. in any manner. (f )Revaluation of assets - Revalue its assets. (g )Trading activity - Carry on any general trading activity other than the sale of its own product." 3. In terms of the Common Subscription Agreement on or about 17-9-1997, a Debenture Trust Deed was created, the relevant clau....
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....f not less than three-fourths of the persons voting thereat upon a show of hands or if a poll is demanded by a majority representing not less than three-fourths in value of the votes cast on such poll. Such a Resolution is hereinafter called "Special Resolution". 24. A Resolution, passed at a general meeting of the Debenture holder duly convened and held in accordance with these presents shall, be binding upon all the Debenture holders whether present or not, at such meeting and each of the Debenture holders shall be bound to give effect thereto accordingly, and the passing of any such resolutions shall be conclusive evidence that the circumstances justify the passing thereof, the intentions being that it shall rest with the meeting to determine without appeal whether or not the circumstances justify the passing of such resolution. 25. Notwithstanding anything herein contained, it shall be competent for all the Debenture holders to exercise the rights, powers and authorities of the Debenture holders under the said Trust Deed by a letter or letters signed by or on behalf of the holder or holders of at least three-fourths in value of the Debentures outstanding without convening....
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....ction 391 of the Companies Act which was marked as Company Petition No. 269 of 2003. In the said proceedings except UTI, all other debenture holders sanctioned the restructuring package. 7. Before the learned Company Judge, the Appellants herein, inter alia, contended: (1) having regard to clause 7.5 of the agreement, the Respondent is totally precluded from filing the said application before the court without its consent; (2) the Respondent had suppressed material facts in the sense that disclosure to the effect that the Respondent-company was granted relief under the Bombay Relief Undertakings Act, 1958 had not been made to the said court; (3) the proposed scheme of arrangement is unfair, unreasonable and unjust which no prudent businessman will accept; and (4) UTI being an investment company forms a separate class by itself and, thus, cannot be compared with other financial institutions, as they are only lenders whereas UTI is an investing agency. 8. The learned Company Judge rejected all the contentions raised on behalf of the Appellants herein in terms of its judgment and order dated 1-10-2003. Aggrieved by and dissatisfied therewith, an appeal was preferred by the Appel....
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....r foreclosed, the High Court committed a serious error in holding that clause 7.5 would be hit by section 28 of the Indian Contract Act. In support of the said contentions, strong reliance has been placed by Dr. Dhawan on M.G. Bros. Lorry Service v. Prasad Textiles [1983] 3 SCC 61; A.B.C. Laminart (P.) Ltd. v. A.P. Agencies, Salem [1989] 2 SCC 163; Food Corpn. of India v. New India Assurance Co. Ltd. [1994] 3 SCC 324; National Insurance Co. Ltd. v. Sujir Ganesh Nayak & Co. [1997] 4 SCC 366; Nutan Kumar v. IInd Additional District Judge [2002] 8 SCC 31; Lachoo Mal v. Radhey Shyam [1971] 1 SCC 619; Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1997] 1 SCC 579; Kempe, Joint Liquidators of Mentor Insurance Ltd. v. Ambassador Insurance Co., in Liquidation [1998] 1 BCLC 234; and Re Hawk Insurance Co. Ltd. [2001] 2 BCLC 480. 13. The learned counsel would contend that the Appellants herein stand absolutely on a different footing vis-a-vis the other creditors as they invest money on long-term basis whereas the Appellants make investment for the benefit of the members of the mutual fund. 14. Mr. Soli J. Sorabjee, the learned Senior Counsel appearing on behalf of the Respondent, on th....
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....ivately placed debentures of Rs. 100 each. Out of the total investment of Rs. 21,00,00,000 made by the debenture holders, the contribution of the Appellant is only Rs. 4,00,00,000. The Respondent in terms of the said agreement had undertaken to redeem the debenture in three equal instalments from the end of fourth year of the date of allotment and ending in the sixth year. 18. In terms of clause 2.2 all debenture holders are entitled to be treated pari passu inter se wherefor no preference or priority of one over the other can be given. 19. The Industrial Credit and Investment Corporation Limited became the trustee for the debenture holders. In the agreement wherever an individual right has been conferred upon the debenture holders, they have been described as debenture holder(s) or debenture-holder/s. Debenture certificates were issued to the debenture holders in terms of the Debentures Trust Deed pursuant whereto they became entitled to the benefits specified therein but they were bound by and were deemed to have notice of all the provisions of the Trust Deed. The rights and remedies of the debenture holders against the company were to be exercised only through the trustee.....
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....hat the common subscription agreement has to be interpreted on its own without any reference to the trust deed. The provisions of the trust deed, in our opinion, can be referred to for the purpose of giving a true meaning to the agreement, as there does not exist any conflict between the two. They are to be considered together for the purpose of finding out as to how the agreement can be worked out. 25. This Court in this case is not called upon to interpret the nature of a document or the covenants entered into by and between the parties. The agreement specifies the rights and privileges of the parties thereto and in particular the rights and privileges of the debenture holder either collectively or individually. 26. The underlying or basic thread of the agreement vis-a-vis the trust deed is that the majority principle was accepted by the authorities. They do not provide for an unanimity; or any veto power in favour of one debenture holder so as to scuttle the decision of the majority. 27. In Moti Ram v. State of Madhya Pradesh AIR 1978 SC 1594, this Court noticed the observation of Justice Frankfurter in Massachusetts B. & Insurance Co. v. U.S. [(1956) 352 US 128 at 138]....
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....laced for consideration before the voters, in terms whereof the creditors or class of creditors can take an informed decision in relation thereto. The court, however, would not grant sanction to such a scheme only because the same reflects the Will of the majority of the creditors or a class of them but it must consider all aspects of the matter so as to arrive at a finding that the scheme is fair, just and reasonable and does not contravene public policy or any statutory provision. Such a care or caution is required to be exercised by all courts including the Civil Court in terms of Order XXIII, Rule 1 of the Code of Civil Procedure. 32. The scope and jurisdiction of the Company Court has been examined at some length by a Division Bench of this Court in Miheer H. Mafatlal's case (supra) wherein the broad contours of such jurisdiction have been enumerated indicating : "6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corpor....
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....used in different clauses. Wherever a right has been conferred upon an individual debenture holder, the agreement used the expression 'any or all the debenture holders' as contrasted by all debenture holders. The debenture holders are required to exercise their right through the trustee save and except in the cases which confer specified power to them. The Appellants herein cannot claim any priority or preference in the matter of realization of their dues over the other debenture holders. Each debenture holder has a pari passu right with each other, as is evident from clause 2.2. 36. In J.K. (Bom.) (P.) Ltd. ( supra), it was held : ". . . The Court could not have completed, as contended by the appellants, their rights which were still incomplete or order the company to execute a debenture trust deed or the second mortgage, and thus set up the appellants and the other Sch. 'B' creditors as secured creditors against the rest of the unsecured creditors. Such an order could not be passed as it would be contrary to and in breach of the right of distribution pari passu of the joint body of unsecured creditors. . . ." 37. [See also Andhra Bank v. Official Liquidator 2005 (3) SCAL....
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....sides have relied upon certain passages in Odgers' Construction of Deeds and Statutes (5th Edn. 1967). There (at pp. 28-29), the First General Rule of Interpretation formulated is: "The meaning of the document or of a particular part of it is therefore to be sought for in the document itself". That is, undoubtedly, the primary rule of construction to which sections 90 to 94 of the Indian Evidence Act give statutory recognition and effect, with certain exceptions contained in sections 95 to 98 of the Act. Of course, "the document" means "the document" read as a whole and not piecemeal." [Emphasis supplied] (p. 832) There is no quarrel with the aforementioned position of law. 45. In Smt. Rajbir Kaur v. S. Chokesiri & Co. [1989] 1 SCC 19, the court was concerned with the interpretation as to whether a document in question was a lease or a licence. The said decision has been rendered on the fact of the said case and on the basis of the evidence brought on records as to whether the tailor and the ice-cream vendors had been put in exclusive possession in the tenanted premises. The said decision has no application to the fact of the present case. 46. Delta International Ltd. v. S....