TaxTMI 
TaxTMI 
2012 (8) TMI 1123
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....ommon management and it was believed that the Scheme would result in the following advantages: (i) Consolidation of Facility Service Business into a single entity and thereby streamlining business verticals; (ii) Pooling of resources and focussed management attention into separate business verticals. 3. According to the Applicants, the Facility Service Business of the Demerged Entity was to be taken over by the Resulting Company as per the scheme framed. All future tenders and extension of contracts were to be taken in the Resulting Company. The balance of the business will remain with the Demerged Company. 4. After the Scheme was framed and filed in this Court for sanctioning of the same, the said Scheme was sanctioned by this Court on 25th June, 2010. Thereafter the Applicants intimated the said fact to the Registrar of Companies by filing form No. 21 under the Companies Act giving notice about the said order dated 25th June, 2010 to the Registrar of Companies. One of the Applicant Companies viz. Unique Delta Force Security Pvt. Ltd. also filed Form 23 with the Registrar of Companies for changing its name to Sumeet Delta Force Pvt. Ltd. and a Certificate dated 31st August 2....
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....ged as well as the Resulting Companies have passed a unanimous resolution in their meetings dated 22nd July, 2011 to approach this Court for recalling and/or setting aside the order dated 25th June, 2010 sanctioning the Scheme of Arrangement. It is submitted that the shareholders have also granted their consent to approach this Court for recalling and/or setting aside the order dated 25th June, 2010 sanctioning the scheme of arrangement. It is submitted that the meeting of the secured and unsecured creditors were dispensed with as rights of the creditors are not affected. If the sanction granted to the scheme is rejected/set aside, the rights of the creditors, whether secured or unsecured will remain intact. It is therefore submitted that it is in the interest of justice to recall and/or set aside the order allowing the Scheme Petitions dated 25th June, 2010. In support of his submission that this Court under Section 392 of the Companies Act has the power to revoke/recall the order dated 25th June, 2010, the learned Advocate appearing for the Applicants has relied on the decision of the Hon'ble Supreme Court in S.K. Gupta v. K.P. Jain [1979] 3 SCC 54 and decisions of this Court....
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.... inherent power to recall an order sanctioning a scheme under Section 391 and/or 394 of the Companies Act. 9. Mr. Mehta next submitted that on principles analogous to Order 23 of the Code of Civil Procedure, the order sanctioning the scheme cannot be recalled after the scheme has become effective inasmuch as rights are vested under the Scheme. In support of his contention he has relied upon the decision of the Hon'ble Apex Court in R. Rathinavel Chettiar v. V. Sivaraman [1999] 4 SCC 89. 10. Mr. Mehta submitted that even on facts no case is made out by the applicants for recalling of the order of the sanctioned scheme. The Applicants have sought cancellation of the scheme on the ground that it is not workable and is adversely affecting the interest of the Companies. It can hardly be a ground for seeking cancellation of the scheme at this stage when averments exactly contrary to the submissions now made were made in the Petition while seeking sanctioning of the scheme. Mr. Mehta submitted that if the scheme is not workable then the Company can certainly seek directions/modifications from this Court in order to make it workable. It cannot cancel the scheme on this ground. 11. I....
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....th or without modifications. Section 392 is clearly a complete code as far as the power of the Court to deal with a Scheme post sanction is concerned. It is thus clear that the Companies Act specifically prescribes the power vested in the Court once the scheme is sanctioned by the Court. It has clearly empowered the Court to give directions and allow modifications in the compromise or arrangement but has not given any powers to the Court to recall/rescind/cancel the order sanctioning the compromise or arrangement. If at all the Court is satisfied that the compromise or arrangement sanctioned under Section 391 cannot be worked satisfactorily with or without modifications, the Court can suo motu or on the Application of any person interested in the affairs of the Company make an order winding up the Petition. In fact, in view of the decision of the Hon'ble Supreme Court in Meghal Homes (P.) Ltd. (supra), it is now well settled that if a Company desires to modify a sanctioned scheme despite the same not being necessary for the proper working thereof, the Company cannot do so under any other provisions except by following the required procedure prescribed under Section 391 of the C....
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....s, the stakeholders and the 256 courts that sanctioned the scheme would have understood the provisions of the scheme to mean. 319.. It is true that in paragraph 26 of the said decision in S.K. Gupta case it was stated that " if something can be omitted or something can be added to a scheme of compromise by the Court, on its own motion or on the application of a person interested in the affairs of the company" then there ought not to be any justification for restricting the meaning of the word of modification and whittle down the powers of the court. However, the next paragraph holds the key to the judgment that the "basic fabric" of the scheme ought not to be changed. The limit on the powers of the Court to modify by way of even additions or omissions as contemplated is that the "basic fabric" of the Scheme cannot be changed; and according to the said decision, even before a court could embark upon a mission of suggesting modifications it has to first determine what "modifications are necessary to make the compromise or arrangement workable" Any such determination first has to arrive at a conclusion that the Scheme has become unworkable in its entirety or in a portion thereof. Ar....
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....ra) relied upon by the learned Advocate for the applicants is of no assistance to the Applicants and in fact as set out hereinabove supports the submissions made on behalf of the Regional Director. The decisions relied on by the learned Advocate for the Applicants in the case of Bedrock Ltd. (supra) and in the case of L.A. Chougule (supra) are also of no assistance to the Applicants. 15. As stated above the Applicant Companies duly filed Form No.21 with the Registrar of Companies thereby making the Scheme effective. Thereupon the Scheme became binding not only on the Applicant Companies but on the world at large. One of the Applicant Companies viz. Unique Delta Force Security Pvt. Ltd. also filed Form No.23 and changed its name. In these circumstances the contention of the Applicants that they did not act on the Order of this Court sanctioning the Scheme is not sustainable. 16. The submission advanced on behalf of the Regional Director that the order sanctioning the scheme cannot be recalled on principles analogous to order 23 of the Code of Civil Procedure since the scheme has already become effective and certain rights are vested under the scheme, in my view is also correct. In....
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....ehalf of the Regional Director that once the scheme has become effective, it is not permissible for the Company to rescind/abrogate/cancel the same without following the prescribed procedure is correct. 17. The Learned Advocate on behalf of the Applicants has also relied on the unreported decision of another Learned Single Judge of this Court viz. Dharmadhikari J. in the case of Topworth Steel and Power Pvt. Ltd. referred to above. In that case this Court had recalled the order approving and sanctioning the Scheme of amalgamation of the two companies. I find that the facts of the said case are materially different from those in the present case. From the aforesaid order of Dharmadhikari J. it is apparent that in that case the companies concerned had not filed Form 21 with the Registrar of Companies. It is also apparent that nothing had been done in pursuance of the order sanctioning the Scheme. As such the Scheme had not come into effect. It was in the light of these facts and as observed by the Learned Judge in paragraph 7 of the decision "in facts peculiar to this case" that this Court allowed the application for recall of the order sanctioning the Scheme. As observed by me, the....