AI Drafter 
TaxTMI 
TaxTMI 
2017 (3) TMI 50
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....ares (OCCRPS) of Rs. 10/- each. Similarly, the petitioner in Company Petition No.201 of 2016, SHARE Microfin Limited (SHARE) was registered on 20.04.1999 as a public limited company and it is having its registered office in Hyderabad, Telangana. Its authorized share capital as on 01.04.2015 is Rs. 830.00 crores divided into 10,00,00,000 equity shares of Rs. 10/- each and 73,00,00,000 preference shares of Rs. 10/- each. The issued, subscribed and paid-up share capital as on 01.04.2015 is Rs. 697,35,20,420/- divided into 5,32,17,042 fully paid up equity shares of Rs. 10/- each and 64,41,35,000 OCCRPS of Rs. 10/- each. Both the companies are engaged in the business of providing financial and support services to marginalized sections of society particularly underserved rural and urban women across India. The erstwhile State of Andhra Pradesh passed Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2010 regulating the loan disbursement and recovery process for micro finance institutions in Andhra Pradesh and Telangana. The provisions of the said Act reduced the revenue generation of the companies. The reduced revenues of both the companies have caused bo....
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....irected to get the notices published in the Business Standard, English daily, Hyderabad edition and Andhra Bhoomi Telugu Daily, Hyderabad edition. Appropriate notices were issued to the Regional Director, South East Region, Ministry of Corporate Affairs, Ranga Reddy District. Pursuant to the said notices, the Regional Director filed his report on 04.08.2016. After publication of notices in the Newspapers, the HDFC Bank Limited filed Company Application No.1277 of 2016 in Company Petition No.200 of 2016 submitting their objections to the said scheme. In support of their application it is stated that the Bank is one of the creditors of the petitioner company, who advanced a term loan of Rs. 85.00 Crores vide facility agreement dated 29.07.2010. The total principal loan amount outstanding as on 31.03.2015 is Rs. 26,85,70,850/- and out of the total 33 creditors of the petitioner company, the applicant is one of the major lenders to the company. In view of the environment created by the operation of the provisions of the Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2010, the petitioner company proposed a Corporate Debt Restructuring Package (CDR) to it....
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....se to enable the applicant to take a decision and in spite of the same the petitioner company vide its reply dated 18.07.2016 refused to cooperate. After receipt of the said reply the applicant informed by letter dated 10.08.2016 that it reserves its rights to raise appropriate objections before this Court. 2) Though the notice of meeting was received in the branch office of the applicant bank it took sometime to reach the higher authorities and by that time the meeting was already convened on 31.05.2016 and the bank could not attend such meeting due to inadvertent delay in internal correspondence among the departments of the applicant bank. The non-participation in the meeting is merely a procedural irregularity and hence the decision taken in the said meeting is not binding more particularly when it has a substantial loan exposure. 3) If the applicant bank had attended the creditors meeting it could not have got requisite majority for approval. 4) The mere change in legislative environment cannot be a ground for merger or demerger of the company. 5) The proposed scheme of arrangement is detrimental to the interests of the creditors and if the same is allowed it would ....
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.... the company is highly unreasonable as the principal outstanding will be paid in a span of 9 years from the effective date with a moratorium period of 3 years. In fact, the creditors are not going to realize any significant portion of their debt in the next 6 years and since the survival of the company itself is doubtful, it is not in the interest of creditors to sanction the scheme by this Court. 12) There is no road map outlined under the scheme in clear terms about the survival of the petitioner in Company Petition No.200 of 2016 post demerger under the proposed scheme. In fact, the CDR Cell has rejected the proposal of demerger vide its letter dated 30.07.2016. It is surprising that when no bank has given any mandate to the CDR Cell, 11 creditors consented to the scheme of demerger mechanically and without introspecting the adverse implications of such proposed scheme. 13) The petitioner would not be in a position to continue its business in the States of AP and Telangana due to legislative environment and hence the proposed scheme would cause undue financial damage to its creditors. 14) The petitioner did not enclose the list of pending litigations to the scheme nor d....
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....d to suit its vested interests. The application was filed to delay approval of the scheme by this Court after approval by the equity shareholders, preference shareholders and the creditors of the companies. The total exposure of the applicant Bank is Rs. 26,85,70,850/- and it represents the total outstanding debt of 6% of the petitioner as on 30.04.2016 and the applicant is a participant in the Joint Lenders Forum (JLF) formed in respect of the petitioner company in accordance with the Reserve Bank of India guidelines and CDR mechanism. When the applicant Bank filed a request to the CDREG to revoke the approved CDR package to the company on 03rd October 2015 the same was rejected by the CDREG. The applicant Bank also asked the larger creditors for one time settlement with the petitioner company in the meeting of JLF held on 14.10.2015 and the same was also negatived by the other lenders. In fact, the creditors consented to the present scheme of arrangement and referred it to the CDREG for approval. It was stated that consequent to the legislation, the RBI issued a notification recognizing that the challenges afflicting the MFI sector were not necessarily on account of any credit we....
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.... of proceedings for seeking sanction of this Court to the scheme of arrangement. The HDFC Bank, Secunderabad branch has been the point of regular communication between the petitioner companies for more than a decade. E-mails were sent to the senior officials on 05.05.2016 and 06.05.2016 also and the deponent of this application is one of such officers. It is also stated that if a lender abstains from attending the court ordered meeting of creditors, such a lender cannot raise contentions after the scheme of arrangement has been approved. The applicant, having not chosen to attend the meeting, is not entitled to raise the objections nor thwart the approval of the scheme of arrangement. The allegation that the petitioner did not cooperate for the information sought by the applicant on 12.07.2016 in spite of its reply dated 18.07.2016 is without any basis. The applicant intentionally not participated in the creditors meeting held on 31.05.2016 and the allegation that if it had attended the meeting, the scheme would not have got requisite majority of approval is totally unsustainable. The present application is filed only to harass and pressurize the petitioners to engage in discussion....
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....l of the application. A rejoinder and a surrejoinder were filed by the applicant Bank disputing the averments made in the counter affidavit. Similarly, Company Application No.1278 of 2016 was filed by the applicant HDFC Bank in Company Petition No.201 of 2016. M/s. Aditya Birla Finance Limited also filed Company Application No.1342 of 2016 in Company Petition No.201 of 2016 seeking to implead as respondent and adjudicate the objections raised by it. In support of the said application it is stated that the applicant sanctioned and disbursed an amount of Rs. 50.00 Crores to the petitioner company in Company Petition No.201 of 2016 in August 2010 and September 2010. The said company was unable to maintain the repayment schedule of the said term loan in view of the enactment. The applicant is a part of the lenders who approved the CDR package with effect from 01.04.2011. As per the said package the outstanding amount was fixed at Rs. 36.00 Crores as on 01.04.2011 and the said amount was restructured as Rs. 23.02 Crores towards term loan and Rs. 12.98 Crores towards OCCRPS. In spite of not maintaining the repayment schedule under the said CDR package the applicant sanctioned an....
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....as approved by the requisite majority of shareholders, preferential creditors and creditors? 3) Whether this Court has got jurisdiction to modify the scheme of arrangement proposed by the Board of Directors of the Companies involved in it and approved by the shareholders, creditors and others in the meeting held for the purpose of considering the scheme of arrangement and if so whether the proposed scheme of arrangement requires any modification in the light of the objections raised by the objectors? Both the companies are engaged in the business of providing financial and support services to marginalized sections of the society particularly underserved rural and urban women across India. Both the companies were incorporated in the year 2001 and 1999 respectively. The passing of Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Act, 2010 brought a drastic change on the operations of both the companies. It reduced the revenue generation of the companies. In view of the adverse impact caused by the legislation, both the companies had to service their repayment obligations to their creditors out of the recoveries made by them from their business in the Stat....
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....olders through proxy holding 86,73,084 equity shares of Asmitha, aggregating to 95 equity shareholders holding 2,36,39,286 equity shares of Asmitha. The said scheme of arrangement was opened for voting at the meeting by the Chairperson, Ms. K. Sumathi. No votes were cast against the proposed scheme of arrangement. The proposed scheme of arrangement was approved unanimously by the equity shareholders. 2. The meeting was attended by 20 preference shareholders in person holding 16,40,72,140 preference shares of Asmitha and 1 preference shareholder through proxy holding 30,10,000 preference shares of Asmitha, aggregating to 21 preference shareholders holding 16,70,82,140 preference shares of Asmitha. The said scheme of arrangement was opened for voting at the meeting by the Chairperson, Mr. J. Amrutha Rao. 11 preference shareholders (holding 8,72,12,940 preference shares of Asmitha) have voted in favour of the proposed resolution. 4 preference shareholders (holding 2,64,05,250 preference shares of Asmitha) have voted against/opposing the resolution. 6 preference shareholders holding 5,34,63,950 preference shares of Asmitha did not participate in the voting or cast valid votes. 3.....
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....preference shareholders and creditors of both the companies. The final position in the meetings convened by the Chairpersons emerged as under: CONSOLIDATED RESULTS OF VOTINGS IN THE HC CONVENED MEETINGS OF SHARE & ASMITHA Sl No Meeting for Meeting held on Name of the Court appointed Chairperson/Chair man for the meeting No.of Shareholders/Proxies/Cr editors participated No.of Shares held/Amount outstanding In favour of the Resolution Against the Resolution Votes No.of shares held/amount outstanding % of holding Votes No.of shares held/Amount outstanding % of holding 1 Shareholders of Asmitha Microfin Ltd 30th May2016 Mrs.K. Sumathi 9523,639,286 95 23,639,286 100% - - - 2 Preference shareholders of Asmitha Microfin Ltd 31st May 2016 Mr. J. Amruth Rao 15113,618,190 1187,212,940 77% 4 26,405,250 23% 3 Creditors of Asmitha Microfin Ltd 31st May 2016 Mr. JUMV Prasad 16 2,293,026,485 111,730,678,609 75.48% 5562,347,876 24.5 2% 4 Shareholders of SHARE Microfin Ltd 1st June 2016 Mrs. K. Vijaya Laxmi 3553,216,542 3553,216,542 100% - - - ....
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....ion (2) shall have no effect until a certified copy of the order has been filed with the Registrar. The above provision makes it clear that even in the case of a company which is being wound up one can ask for consideration of the proposal for a compromise or arrangement if majority number representing 3/4th in value of the creditors or members present and voting at the meeting agreed to such proposal, the compromise or arrangement can be considered by the Court. In Wearwell Cycle Company India Limited v. A.K. Misra and Brahm Arenja [(1998) 94 CampCas 723 Delhi = ILR 1994 Delhi 109] , the Delhi High Court was dealing with a company in liquidation which submitted a scheme for revival of the company and the same was sanctioned by the Court. The Company Court recalled the winding up order and cancelled the same in view of the said scheme. The Court appointed a committee of management for implementation of the scheme. It was held that whenever a choice is available to Court between the revival of the company and its winding up, the Court must as far as possible, lean in favour of revival of the company for that will have the prospectus of generating jobs and putting the assets of....
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....he Court it would bind even the dissenting minority shareholders or creditors. Therefore, the fairness of the scheme qua them also has to be kept in view by the Company Court its sanction. It is, of course, true that so far as the Company Court is concerned as per the statutory provisions of Sections 391 and 393 of the Act the question of voidability of the scheme will have to be judged subject to the rider that a scheme sanctioned by majority will remain binding to a dissenting minority of creditors or members as the case may be, even though they have not consented to such scheme and to that extent absence of their consent will have to effect the scheme. It can be postulated that even in case of such a Scheme of Compromise and Arrangement put up for sanction of a Company Court it will have to be seen whether the proposed scheme is lawful and just and fair to the whole class of creditors or members including the dissenting minority to whom it is offered for approval and which has been approved by such class of persons with requisite majority vote. 28-A. However further question remains whether the Court has jurisdiction like an appellate authority to minutely scrutinise the sche....
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....That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391, sub-section(2). 3. That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just fair to the class as whole so as to legitimately blind even the dissenting members of that class. 4. That all the necessary material indicated by Section 393(1)(a) is placed before the voters at the concerned meetings as contemplated by Section 391, sub-Section (1). 5. That all the requisite material contemplated by the provision of sub-Section (2) of Section 391of the Act is placed before the Court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same. 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 of to satisfied on this aspect, t....
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....habitually sanction reductions and exercise its discretion in favour of them unless the act is a pointless and hollow act. Provided those requirements are satisfied, the company may reduce its capital in any way that it thinks fit. Rafter Group plc, 1988 ChD 685; Re Ratners Group plc; In Re Hindalco Industries Ltd. The court does not exercise any appellate power over the decision of the Company or its management. The Court is required to satisfy itself and see that the procedure, by which the resolution is carried through, is legally correct and the shareholders and creditors are not prejudiced. It is also the duty of the Court to see that the scheme is fair and equitable between the different classes of shareholders, Hindalco Industries Ltd; Hyderabad Industries Ltd., 2004 55 SCL 1, the arrangement is such as a man of business would reasonably approve, Hindustan Lever Employees Union v Hindustan Lever Ltd., 1995 83 CompCas 30; Custina Re Haare, 1933 AER 105 and Butfe Press LIC, 1961 CD 270, and the proposed reduction is within the powers of the company, and for the purposes allowed by the statute. The courts have a 'discretion' to confirm or not to confirm, which it is the....
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....idence to the court and is something sufficiently solid and near in expectation to be a real prospect. Once those tests have been satisfied the court, which has a discretion whether or not to confirm a reduction, will normally exercise its discretion in favour of confirming the reduction. Thorn EMI plc, 1988 4 BCC 698. The discretion conferred by the section will, however, only be exercised in favour of confirmation of the reduction where the court is satisfied that the cause of the reduction (capital in excess of wants; capital lost; capital not represented by available assets, or as the case may be) was properly put to the shareholders so that they could exercise an informed choice; the cause is proved by the evidence before the court; Jupiter House Investments (Cambridge) Ltd, 1985 BCLC 222; In Re Grosvenor Press Plc., 1985 1 WLR 980; the proposal is one that ought to be sanctioned; and the proposal is fair and equitable to the shareholders as a whole. Ransomes Plc, 1999 2 BCLC 591. 12. Subject to confirmation by the court, which is required and which is the safeguard of the minority, the question of reducing capital is a domestic one for the decision of the majority, and the....
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....ectively to implement the sanctioned scheme. PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 (Bom) has declared that these provisions are in the nature of a single window clearance system to ensure that the parties are not put to avoidable or unnecessary cumbersome procedure for making a representation or application to the court for various other alterations or changes which may be essential or necessary or consequential to implement the sanctioned scheme. In view of this, on this ground also, scheme cannot be halted. With regard to counting of votes in the creditors meeting, the High Court of Delhi in Wearwell Cycle Company India Limiteds case (supra) relied on Palmers Company Law, 24th Edition, para 79.16 and quoted the following passage and opined that the following illustration is not based on any judgment of any Court or any authentic judicial pronouncement in interpreting the expression. I will deal with Objections Nos. (i) and (ii) together. The main objection which was most vehemently canvassed before me by Mr. J C. Seth, counsel for Mr. H. L. Seth related to the Scheme having not been approved by the requisite majority in terms of Section 391(2) of the Act an....
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....the votes of the creditors is counting the number of creditors represented by the persons voting including the number of creditors into whose shoes he has stepped. It was held "Number" to mean/convey number of shares/creditors represented by each person present and voting. A similar view was taken in Maharashtra Apex Corporation Limiteds case (2005) 124 Comp Cas 637 (Kar.) , which is as follows: 29In the 13th Edition of Buckley on the Companies Act, it has been observed that for the purpose of corresponding provision under the English law, sanction of majority in number representing 3/4th in value of the members of the class present and voting in person or by proxy is sufficient, although it may not represent 3/4th in value, nor semble, constitute a majority in number of the total class. The provisions of section 391(2) of the Act are in pari materia with the section 206(2) of the Companies Act, 1948 which was being interpreted in the aforesaid book. The English Company Law by Professor Robert R. Pennington (5th Edition), Page 590 use of the words "present and voting" has been explained as under: "...It appears that proxies may both speak and vote at meetings of creditors ....
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....hareholders who are not present in person or by proxy, or who, although present, do not vote, may be ignored. However, this is not the whole requirement, because in addition the Court requires to be satisfied that the class is fairly represented. If, for instance, there were altogether 1000 shareholders holding 10,000 shares in all, the Court would be unlikely to be satisfied by the statutory majorities at a meeting at which 10 members holding 100 shares in all were present and voted." In Gower's Principles of Modern Company Law (sixth edition) (at page 585) the scope and meaning of the concept of "majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present and voting" has been explained by giving an illustration as under: "An ordinary resolution is one passed by a simple majority of those voting, and is used for all matters not requiring another type of resolution under the Act or the articles. An extraordinary resolution is one passed by a three-fourths majority but no special period of notice is needed. Under the Act an extraordinary resolution is required only for certain ....
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.... such creditors, or class of creditors, present either in person or by proxy at such meeting, shall agree to the arrangement or compromise, and the agreement or compromise shall, if sanctioned by an order of the Court, be binding on all such creditors or class of creditors (as the case might be) and also on the liquidators and contributories of the company'. The question, therefore, is whether 'the majority representing three-fourths in value' is to be the majority of all the creditors in which case the Pounds 1,20,002,12s, 3d. does not constitute three-fourths of funds 1,70,000, or the majority representing that value of the creditors present at the meeting? In the latter case, all the creditors but one, for a very small amount, approved the agreement. We say that the clause in the Act is satisfied by the sanction of three- fourths in value of the persons present at the meeting, and this was decided by your Lordship in re Tunis Railway Company (May 22, 1874) affirmed on appeal (before the Lords Justices, July 11, 1874). Carson, for Dixon said he was desirous that the arrangement should be carried into effect. MALLINS, V.C. : I think the agreement should be car....
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....creditors, or members or class of members, present and voting either in person or where proxies are allowed, by proxy. There is no difficulty in understanding the word 'present' as the creditors or members should be physically present in person or through their proxy in the meeting. The problem arises in the context of the word 'voting'. Voting is formal expression of will or opinion by the person entitled to exercise the right on the subject or issue in question. Voting is explained as the expression of ones will, preference, or choice in regard to the decision to be made by the body as a whole upon any proposed measure or proceeding. Right to vote means right to exercise the right in favour of or against the motion or regulation. A member present and voting may remain neutral, indifferent, unbiased or impartial not engaged on either side. Voting has to be either in the affirmative or negative, i. e., 'yes' or 'no' on the ballot paper or voting paper. One is not supposed to write anything except putting 'yes' or 'no' either in favour of the proposition or against the proposition. In addition to the same, if any suggestion, condition,....
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....t, the requirement of majority of three-fourths has to be seen in relation to the value of shares/credit represented by the persons who are present and voting in the meeting, either in person or by proxy. This provision cannot be interpreted to mean that the three-fourths majority has to be of the total value of the creditors/shareholders of the company. It was also held that section 391(2) of the Act has also been enacted so as to ensure that, a compromise or arrangement should receive substantial support from the creditors/shareholders. It is for this purpose that a two fold requirement has been prescribed. Firstly, it must be approved by a majority in number of the members present and voting and in addition, such majority should also represent three-fourths value of the creditors/shareholders who are present and voting. This ensures that the persons representing nominal value of shares or credits though may be in majority, may not take a decision which adversely affects the rights of the persons who have substantial shareholding or credit, but are in minority in numbers. Conversely, it also protects the rights of the small creditors/shareholders against persons holding large sha....
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.... the correct approach for the sanctioning of a scheme for amalgamation, says that the scheme should not be scrutinized in the way a carping critic, a hair-splitting expert, a meticulous accountant or a fastidious counsel would do it. But, it must be tested from the point of view of an ordinary reasonable shareholder, acting in a businessman-like manner, taking within his comprehension and bearing in mind all the circumstances prevailing at the time when the meeting was called upon to consider the scheme in question. It is pointed out that, before the scheme is sanctioned, it would be the duty of the court to see that the proposed scheme is a fair and reasonable one, but the initial burden in this respect would be on the petitioner to show that, prima facie, the scheme is a fair and reasonable one, such as a prudent and reasonable shareholder would approve of and not object to. Followed in Navjivan Mills Ltd., Re [(1972) 42 Com Cases 265 at 320 (Guj)]. As stated above, the scheme of compromise and arrangement was approved by the requisite 3/4th majority of the members and creditors who attended the meeting. Now an objection is raised by the two creditors who did not attend the me....
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....spite of the said letter, now the scheme of arrangement was approved by the requisite majority of creditors who attended the meeting. The value of the HDFC Bank interest in SHARE Company is 4.27% aggregating to INR 418,646,368, whereas in Asmitha it is 5.12% aggregating to INR 296,301,250. The other objector, Aditya Birla Finance Limited is not having any interest in Asmitha, but its interest in SHARE company is 1.74% and of the value of INR 170,323,420. The objections of the HDFC Bank relate to its non-participation in the meeting due to improper communication of the notice of the meeting, the very nature of the scheme and repayment schedule provided to the creditors. The objections of the Aditya Birla Finance Limited who is also one of the creditors is with regard to majority secured in the meeting of the creditors by taking the vote of SIDBI and coming down of the equity of the SHARE company from 644,13,50,000 to 32,20,67,500. The composite scheme of arrangement affects the OCCRPS. As a part of the scheme, 57,45,71,293 OCCRPS issued by SHARE to its CDR lenders under the SHARE Master Restructuring Agreement representing 89.2004% of the total outstanding OCCRPS issued by SHA....
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.... * SHARE demerges its Andhra Pradesh/Telangana States business into a demerged undertaking which merges into Asmitha. * Asmitha demerges its rest of India business (except AP/TS business) into a demerged undertaking which merges with SHARE. * If this Honble Court were to accord sanction to the scheme the resultant companies will have the following present businesses of the two companies - Asmitha Andhra Pradesh and Telangana State business - SHARE Rest of India business II. SITUATION POST SANCTION (If accorded by this Honble Court) Equity Shareholders: * Shareholders of Asmitha would be allotted equity shares in SHARE in the ratio of 1:1.956 as consideration for transfer of Asmithas rest of India business to SHARE. * Shareholdersl of SHARE would be allotted equity shares in Asmitha in the ratio of 1:1.1541 as consideration for transfer of SHAREs AP/TS business to Asmitha. OCCRPS Shareholders: Note:- The Optionally Convertible Cumulative Redeemable Preference Shares are held by Banks/Financial Institutions for a total value of INR 644 Crores in SHARE and INR 309 Crores in Asmitha. * SHARE * 89.2004% of the total outstanding OCCRPS issued by SHARE ....
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....conducted. Learned counsel for the petitioners relied on the observations of the Honble Supreme Court in Mafatlal Industries Limiteds case (supra) and that of the High Courts of Karnataka and Bombay reported in Maharashtra Apex Corporation Limiteds case (supra), Alstom Power Boilers Limited v. State Bank of India (Company Petition Nos.337 and 338 of 2002 in Company Application Nos.116 and 117 of 2002 of Bombay High Court decided on 31.10.2002), and Larsen and Toubro Limiteds case (2004) 121 CompCas 523 (Bom) (supra). However, learned counsel, by relying on the observations made in the last two cases agreed that the applicant can raise objection before this Court and the only thing that has to be satisfied is with regard to unfairness of the scheme. In the light of the above, it has to be seen whether the case set up by the objector before this Court can be entertained in spite of its non- participation in the meeting convened for the purpose of approving the scheme of arrangement. The objector states that the main purpose of the scheme is transferring the healthy part to one entity and unhealthy part to other entity resulting in the unhealthy company to have its natural death. T....
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....oned that they have approached RBI for seeking forbearance and special dispensation for asset classification in the books of lenders. Thereafter, CDR EG gave the following decision. Decision: CDR EG noted the above matters for information and directed the MI to bring a review note after seeking high court approval. Learned counsel for the petitioners submitted that the matter was not pursued at the level of CDREG regarding merger - demerger as requisite majority of lenders had already approved the scheme in the board convened meeting and Sections 391 and 394 of the Act provide a complete mode and manner in which scheme of arrangement between a company, its shareholders and its creditors are to be proposed, considered, scrutinized, approved and sanctioned. It is further submitted that the proceeding before CDREG cannot have any effect on a scheme proposed. It is admitted that the CDR mechanism operates as follows. The RBI has issued detailed guidelines on the Corporate Debt Restructuring System on 23.08.2001 for implementation by the banks and financial institutions. The Corporate Debt Restructuring (DCR) Mechanism provides for a voluntary, non-statutory system bas....
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....eme of arrangement proposed cannot be approved without the approval of the CDR Cell, though the same is a voluntary body of lenders). The other objection raised by the objector in Company Application No.1342 of 2016 relates to the vote cast by SIDBI based on the letter dated 02.06.2016 issued to the Chairperson. The letter issued by SIDBI to the Managing Director of Share Microfin Limited dated 02.06.2016 reads as follows. With regard to the Scheme of Arrangement between Share Microfin Limited and Asmitha Microfin Limited, SIDBI has received notice from the Honble High Court, Hyderabad, for providing mandate at the meeting of the Creditors of Share Microfin Limited. In this connection, we would like to inform you that we are agreeable for proposed Scheme subject to increasing your offer of debt allocation in Company to SIDBI from existing offer to higher amount to our satisfaction. Please bring this to kind attention of Chairperson, Creditors Meeting of Share Microfin Ltd, and record the same in his report to Honble High Court. The apprehension with regard to recovery of an amount of Rs. 18.18 Crores by transferring the said amount to the petitioner in Company Petition ....
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.... member of Micro Finance Institutions Network, whereas SHARE is a member. There is reduction in the equity, conversion of OCCRPS into ordinary equity shares involved in the present scheme of arrangement. In the absence of any expertise, this Court cannot give any conclusive finding except placing before the CDR EG for a decision on the scheme of arrangement, though legal requirements are met substantially, as the CDR EG itself deferred its decision in view of the pendency of the present Company Petitions before this Court. The Corporate Debt Restructuring Mechanism was evolved by the Reserve Bank of India to ensure timely and transparent mechanism for restructuring of corporate debts of viable entities facing problems, for the benefit of all concerned. It is also intended to minimize the losses to the creditors and other stock holders through an orderly and coordinated restructuring programme. It is a voluntary non-statutory system based on Debtor-Creditor Agreement and Inter-Creditor Agreement and the principle of approvals by super majority of 75% creditors which makes it binding on the remaining 25% to fall in line with the majority decision. It consists of three tiers, namel....