TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 127
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....ng the Companies (Transfer of Pending Proceedings) Rules, 2016, the above proceedings were transferred to this Bench. 4. The sanction of this Tribunal is sought under sections 230 to 232 of the Companies Act, 2013, to a scheme of arrangement between the petitioner-company and its equity shareholders. Learned counsel for the petitioner states that the scheme of arrangement has been filed by the petitioner-company pursuant to the advice of the Bombay Stock Exchange to the petitioner by its letter dated August 22, 2013. The scheme has been unanimously approved by the shareholders and creditors of the petitioner-company. 5. Learned counsel for the petitioner submits the rationale for the scheme is as follows : (a) The petitioner was incorporated in the year 1973 as Ashok Organic Industries Ltd. It has changed its name to Kumaka Industries Ltd., on March 5, 2011 and is in the business of manufacturing, buying, selling, importing, exporting, distributing, processing, exchange, converting, altering or otherwise handling or dealing, in export of chemicals of any nature and kind whatsoever including organic and inorganic chemicals, synthetics, solvents, dyes and chemicals, drugs, pharma....
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....by paying the full subscription amounts of Rs. 160 per share. However, they had applied for less than 100 shares, which was the minimum threshold. (f) It is further stated that by a letter dated May 6, 1999 the Bombay Stock Exchange (BSE) declined the request of the petitioner to list the 6,03,250 proportionately reduced shares and the 10,375 shares that were issued. The said letter of the BSE was not received by the petitioner due to a change in its address. (g) The petitioner states that being unaware of the decision of BSE of non-listing of the aforesaid 6,03,250 proportionately reduced shares and the 10,375 shares that were issued, the company's recognised share capital in its audited financial statement, annual returns and other documents of the company and its submission of quarterly and half-yearly financial results made to the BSE, SEBI and other Governmental authorities since then and till date and in absence of any communication to the contrary or non-receipt of any objections from them the company presumed and believed that these authorities have confirmed and accepted the capital status of the company. The capital structure of the company was shown to be as unde....
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....share to restore the rights of the said 406 shareholders. (c) Rearranging and numbering the distinctive numbers of shares to reconcile the same with the paid-up share capital. (d) Issue and allotment of 21,04,865 fully paid-up shares as bonus shares to the public shareholders of the company other than promoters. 9. The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai (RD) has filed his report dated January 2, 2018 opposing scheme on the following grounds : (1) As per the scheme and information submitted by the company it is clearly mentioned that approval is sought for as under : (a) Ratification of reduction of 18,09,750 shares by conversion of 24,13,000 partly paid-up shares to 6,03,250 fully paid-up shares. (b) Reduction of share capital by cancellation and extinguishment of 10,375 fully paid-up shares allotted to 406 shareholders and transfer of fully paid-up 10,375 by the promoters at the rate of 0.005 paise per share. (c) To restore the rights of the said 406 shareholders, rearranging and numbering the distinctive numbers of shares to reconcile the same with the paid-up share capital. (d) Issue and allotment of 2....
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....on 391 of the Companies Act, 1956 or under section 230 of the Companies Act, 2013. 13. Mr. Hemant Sethi, learned counsel for the petitioner, submits that the term "arrangement" is not defined in the Companies Act, but as per judicial interpretation, it is of wide amplitude. The arrangement contemplated by way of the present scheme would certainly fall within the ambit of the term "arrangement" as envisaged under sections 391-394 of the Companies Act, 1956 or sections 230-232 of the Companies Act, 2013. 14. In support of his contention Mr. Hemant Sethi relies upon the following judgments : (a) Q. H. Talbros Ltd., In re [2016] 65 taxmann.com 159 (P&H), dated December 10, 2015. The Division Bench of the Punjab and Haryana High Court in paragraph 14, inter alia, observed : "A merger and a demerger are not the only components of a composite scheme of arrangement. The term arrangement in section 391 is of wide amplitude. It is not defined in the Act. Corporate affairs are often complex involving the interplay of innumerable factors including those relating to policy matters, management and financial aspects and legal issues. The schemes often require considerations of various enact....
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....s and constitute accumulated profits of the company for the previous financial years. Further, on the scheme becoming effective, and subsequent to re-classification of the amounts standing to the credit of the general reserves and credit thereof to the profit and loss account, the amount so credited shall be paid out to the members of the company, from time to time by the board of directors at their sole discretion. The Regional Director, Western Region, MCA, opposed the scheme on various grounds including that the scheme is not an arrangement hence cannot be filed under sections 391-394 or sections 230-232 of the 2013 Act. This Tribunal, after considering various judgments cited, sanctioned the scheme as scheme of arrangement." (d) Securities and Exchange Board of India v. Sterlite Industries (India) Ltd. [2003] 113 Comp Cas 273 (Bom), decided on July 15, 2002 : "The principal challenge to the scheme was by SEBI and Ministry of Corporate Affairs before the Division Bench of the Bombay High Court on the ground that the court has no power to sanction the scheme of this nature under section 391 of the Companies Act as the company is required to follow the procedure prescribed u....
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....oner in its present form is an "arrangement" within the meaning of the Companies Act, 1956/2013. 19. We have carefully considered the rival contentions of learned counsel for the petitioner and the objecting shareholder. We have also perused the report of the RD objecting to the present scheme on the ground that it is not a scheme at all but only a rectification of the errors on the part of the petitioner. 20. That the term "arrangement" envisaged by sections 391-394 of the Companies Act, 1956 as also sections 230-232 of the Companies Act, 2013, is a term capable of the widest import, is not res integra. The Legislature, in its infinite wisdom, deliberately did not get down to the task of marking delimiters to the term "arrangement", aware as it was that arrangements can take on multiple hues and a bewildering assortment of forms. It is limited only by human ingenuity in finding solutions to corporate problems. Therefore, to make it conform to set parameters would be to do injustice to the statutory provisions, and this is certainly not what the lawmakers intended. 21. Some of the evaluation parameters set out in the judgment of the hon'ble Supreme Court in Miheer H. Mafatla....
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....ovisions of section 100 of the Companies Act, 1956. (b) Subscription made by each of the shareholders less than 100 each which is not acceptable. (c) Letter of Bombay Stock Exchange dated May 6, 1999 not received by the company and only came to know in the year 2012 is also not accept able since the company was listed in touch with the Bombay Stock Exchange, the reason mentioned above is not justifiable. (d) The present scheme is made only as per the advice of the Bombay Stock Exchange in the year 2013 which is not acceptable since the company has to comply with the Companies Act, 1956 before the letter received from the Bombay Stock Exchange. The RD's objection is more on the procedural aspects than anything else. Procedural niceties would not be sufficient to deter us from considering the scheme. The RD has not raised any objection as regards any illegality in the scheme, or that it is against public policy, and therefore we overrule the said objections. Objection by Mr. Ashish Lalpuria, one of the shareholders holding fifteen shares 24. We next consider the objections of the shareholder holding fifteen shares in the petitioner-company. Having held that the scheme ....