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2019 (5) TMI 483
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....terprises having customers in various countries like United States, United Kingdom, Australia etc. The petitioner company was granted status of an approved "Special Economic Zone" unit. It is pleaded that the revenues demonstrated a phenomenal growth in 2013-14 and 2014-15 with revenues being Rs. 520 crores and Rs. 500 crores respectively. However, a financial crunch was posed in the year 2014-15 when IBM, the company's largest partner transferred the Master Services Agreement (MSA) to some other company. It is pleaded that in order to improve its net worth the company made a partnership agreement with a large telecom company in UAE which is projected to generate revenues of Rs. 163.10 crores in the next 12 months. It is pleaded that the scheme proposed would enable the petitioner company to generate business of Rs. 150 crores in 2017-18. Alongwith the application the audited balance sheet for the year 2014-15 was filed and unaudited financial sheet statement for the year 2015-16 was filed. The Scheme creates four Classes of creditors namely Class A for Creditors of statutory dues, Class B secured creditors, unsecured creditors are part of Class C and Class D creditors are the dues....
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....authorisation letters were received from the secured creditors though two of the creditors were present but they did not carry any authorisation letter. (iii) In the meeting of statutory creditors the resolution was passed by the majority. (iv) In the meeting of unsecured creditors there was a lot of confusion. A number of unsecured creditors who were present have questioned the scheme which provided that unsecured creditors will be paid only 50% of their debts whereas all other creditors were being paid 100% of the dues. Representative of the company intervened and stated that they will try to pay 100% of the dues even to the unsecured creditors. 24 unsecured creditors voted at the meeting. As per the report, 11 creditors voted for the resolution being a value of Rs. 1,35,03,221.36/-. 12 creditors voted against being a value of Rs. 5,42,08,965/-. The Chairman hence submitted that the resolution had failed. I may only note that some of the unsecured creditors being four had voted stating that they accept the scheme if 100% of the outstanding dues of the unsecured creditors are being paid by the petitioner company. The Chairman of the meeting had, however, taken these votes as....
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....he Specified Undertaking of the Unit Trust of India and Anr vs. Garware Polyster Ltd. (2005) 10 SCC 682; and Chembra Orchard Produce Limited and Others vs. Regional Director of Company Affairs and Another, 2009 (2) SCC 547 to contend that it is the duty of this court to examine the genuineness and bona fide of the scheme for dues. 10. Learned senior counsel appearing for the petitioner has refuted the contentions of the learned counsel for the objector. Regarding the passing of the scheme in the meeting of secured and unsecured creditors he submits that these resolutions were duly passed. Regarding the secured creditors, he submits that there are only two secured creditors of the respondent company and both were present in the meeting. Representatives of the bidder were present in court. However, the bidding could not take place for technical reasons as they were not carrying the letters of authority. He submits that these secured creditors have not chosen to file any objections in this court meaning thereby that they are agreeing to the scheme. He further submits that in the course of meeting the petitioner had offered to pay 100% of the outstanding principal debt to the uns....
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.... with the request to entertain the application preferred by the petitioner. On 11.7.2017 this Court recalled the order dated 6.1.2017 by which order the petitioner had sought leave to withdraw the said applications. 12. I may note that in the main petition the petitioner has made both the prayers, namely, for permission to convene the meetings of the concerned creditors and to also approve and implement the proposed scheme of arrangement to pay the creditors. The Punjab and Haryana High Court in Alpha Corp. Development Private Limited vs. Euthoria Developers Private Limited (supra)had noted as follows:- "10. The learned Judge held that upon pronouncement of the order dated 25.10.2016, no order was reserved by this Court and, as a result thereof, this matter cannot be retained by the High court. The learned Judge observed that under the aforesaid notification this Court has jurisdiction for passing an order only in a case which has been reserved by it. There are certain important aspects of this issue regarding the aforesaid notification which were probably not brought to the notice of the learned Judge. Firstly, it must be noted that this was a composite petition for direction....
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....o the company, such as the latest financial position of the company, the latest auditor' s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like.] (3) An order made by the Court under sub- section (2) shall have no effect until a certified copy of the order has been filed with the Registrar. (4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company. (5) If default is made in complying with sub- section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten rupees for each copy in respect of which default is made. (6) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the applicatio....
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....ioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held. 2. 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 and fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4. That all 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 proviso of Sub-section (2) of Section 391 of 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 i....
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....d to the judgment of the Supreme Court in Administrator of the Specified Undertaking of the Unit Trust of India and Another vs. Garware Polyster Ltd., (supra) wherein the Supreme Court held as follows:- "32. Section 391 read with Section 393 of the Act postulate that where a compromise or arrangement is proposed between a company and its creditors or any class of them; or between a company and its members or any class of them, the court is required to direct holding of meetings of creditors or class of creditors or members or class of members who are concerned with such a scheme. In the event majority of the creditors representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting accord their approval thereto thus put to vote, whereupon, the court may consider the question of grant of sanction thereto. Section 391(1)(a) enjoins that requisite information therefore should be placed 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 gra....
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.... votes for the original scheme. The unsecured creditor Mahadev Travels has voted for the scheme and has a debt of Rs. 1,05,77,364/-. This is clear from the ballot paper attached. Some of the creditors who had not voted had filed objections in court against the scheme. However three of the creditors have withdrawn their objections on learning that the petitioner is ready and willing to pay 100% of the debt. CA No. 979/2018 was filed by one objector-My Kind of Vacations Pvt. Ltd. who has claimed a sum of Rs. 23,16,838. The other creditor is Global Logic Indi Pvt. Ltd. who has claimed Rs. 2,22,69,366/-. The third creditor is Inficare Software Technologies Pvt. Ltd. who had filed Co. Pet. No. 889/2016 who has claimed an outstanding of Rs. 70,97,044/-. All three creditors on coming to know that the petitioner is ready to pay 100% payment have withdrawn their objections in court and stated that they have no objection in case the petitioner are ready and willing to pay 100% of the principal amount. However, would it be possible to this court to take into account all these subsequent developments which have taken place after the meeting. 25. Reference in this context may be had to th....
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....l doctrine. Firstly, the consent of all or virtually all the shareholders given even outside a meeting is sufficient to comply with the requirements of a meeting. Secondly, written resolutions instead of those passed in meetings are now capable of being registered, e.g., section 192 of the Companies Act. Thirdly, the doctrine of lifting the veil of incorporation and looking at the reality of the action of the members enables the court to hold that consent of the overwhelming majority of the shareholders outside the meeting is sufficient to show that the resolution was supported by virtually all the members of the company. In these three ways substantial compliance rather than formal compliance meets the requirements of the statute." In the said decision, it is further observed as follows: "A third exception to the rule that all the shareholders of a company must cast their votes in a formally called meeting is made by the doctrine of acquiescence. If all the shareholders acquiesce in a certain arrangement, the question of a meeting having been called does not arise at all." In the backdrop of this decision as well as on proper interpretation of section 391(2) which is not ....
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....ccount the error in the report, the votes cast in the meeting for the modified scheme i.e. payment of 100% debt and no objections given by some of the creditors in court, the new scheme appears to have got the support of more than 70% of the value of unsecured creditors but still falls short of three-fourth of the value of the creditors. 27. As far as secured creditors are concerned, it is stated by the learned senior counsel for the petitioner that there are only two secured creditors. Both were present in the meeting but could not vote as their representatives were not duly authorized. The net result is that the Chairman had no option but to invalidate the proceedings and hold that the meeting could not reach at a conclusion. Essentially the meeting lacked quorum. However, as rightly pointed by the learned senior counsel for the petitioner, none of the two secured creditors has filed any objections in court against the scheme. 28. In the light of these facts would it be appropriate for this court to completely outrightly reject the scheme and to scuttle the initiative sought to be taken by the petitioner company to try and revive itself. Reference may be had to the judgment o....
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.... because there is one objector to the approval of the scheme, who is none other than the sole dissenter, the court should not refuse to sanction the scheme. What the court could do in such circumstances is to give protection to the dissenter, by amending the scheme. The above views of mine receive support from Palmer's Company Law, volume 1, twenty-third edition, para 79-13, which reads : "... The court will not, however, upset a scheme for minor irregularities, as where consent of a class has been subsequently obtained, and where the necessary majority of one class was absent when the petition was presented, the court allowed a fresh petition to be presented subsequently when the necessary majority was later obtained, without requiring the other class meetings to be held again." 30. Keeping in view the above, it would be appropriate to give another opportunity to the company to put to vote the new scheme proposed by the petitioner, namely, repayment of 100% dues to unsecured creditors. The original scheme was modified orally in the course of the proceedings. This created confusion. In this context reference may be had to the observations of the learned Author in Palmer....