TaxTMI 
TaxTMI 
2020 (10) TMI 919
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....panies Act, 1956 (Existing Sections 230-232 of Companies Act, 2013) for sanction of the Arrangement embodied in the scheme originally filed before Bombay High Court which by virtue of notification issued by Ministry of Corporate Affairs (MCA) on 7th December, 2016 got transferred to NCLT, Mumbai. The Appellant is a shareholder of Respondent No. 1 Company and he pointed out certain irregularities and non-compliances and raised the objections that the Scheme of Arrangements is a mere rectification of action already taken by the Respondent company without obtaining approval of the Tribunal and other Regulatory Authorities as required under the provisions of Companies Act. NCLT, Mumbai passed the order dated 6th July, 2020 stating that the scheme appears to be fair and reasonable and does not violate any provision of law and is not contrary to public policy or public interest. Hence, the Appellant on being aggrieved by the order of NCLT, Mumbai have preferred this appeal under section 421 of Companies Act, 2013. 3. It is sated by the Appellant that on 12th January, 1995, the Respondent No. 1 company entered into capital market by way of Public Issue of 37,47,400 equity shares of Rs. ....
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....hareholding pattern 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, the Company presumed and believed that these authorities have accepted the revised capital status of the Company. 6. It is also submitted by the Appellant that despite receiving the above mentioned communication regarding adherence to provisions of Section 100 of Companies Act, 1956 from BSE on 23rd January, 1999, the Company made application to BSE for the said capital reduction. Thereafter on 6th May 1999, BSE communicated to the Company that it has rejected the Application for listing of these shares and that the Exchange has taken a serious view of the same. 7. It is also submitted by the Appellant that after the Depositories Act, 1996 came into force, SEBI alongwith Stock Exchange made it mandatory for all companies to register themselves with the depositories in order to facilitate dematerialisation of shares and trading of securities on the stock exchange platform was made mandatory in demat form in a phased manner. The ....
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....the said SEBI order, the Company and its Director presented the scheme to save their skin from the clutches of SEBI rather than for well being of shareholders as mentioned in the petition for portraying it as an "investor friendly" proposition. 10. It is further stated by the Appellant that after learning about the said order the Respondent No. 1 Company filed an application with BSE on 22nd July, 2013 for revocation of suspension of trading. However, no such evidence was attached in the petition filed by the company. Upon receipt of the letter from the Company, BSE advised the Company to implement Reduction of Capital through Scheme/ Court or approach Registrar of Companies (RoC) for alternative remedy. 11. It is further stated by the Appellant that the Company filed the Scheme of Arrangement before the Bombay High Court. On 11th December, 2015, the Company was directed to convene meeting of shareholders and creditors. As per the Order and as per the directions, a meeting of Equity Shareholders and Creditors was held on 8th February, 2016. Finally, on 8th March, 2016, the Company filed the scheme petition before the Bombay High Court and thereafter, in December 2016 for confirma....
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.... shareholders seems to be fair, reasonable and no public policy is being prejudiced by the said scheme including overruling the objections raised by the Regional Director (Western Region) Ministry of Corporate Affairs, Mumbai stating that the objections are mere procedural lapses than anything else and there is no illegality pointed out by them. However, NCLT has grossly failed in appreciating the entire facts and circumstances of the case to the conclusion which is opposed to every principle laid down under section 230-232. Furthermore, the Company has time and again misled the courts in the name of Bonus Shares to believe that the proposal is a scheme for the benefit of all raising serious doubts about the existence of these 406 shareholders and whether the Company is a shell company or not. 14. The Appellant further contended that he has the locus to file the present appeal and the embargo under section 230(4) would not apply to the Appellant as he has challenged that the proposal made by the Respondent Company in the form of a Scheme or Arrangement cannot be termed as Scheme or Arrangement as contemplated under section 230-232 of the Companies Act, 2013. Section 230(4) was cre....
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....nt, one Shri Om Prakash Lalpuria died on 15.06.2004, and thereafter, on expiry of nearly twelve years, the appellant on 17.02.2016, for the first time applied for the transmission of shares of respondent no 1. The said 25 (twenty five) shares originally held by the appellant's father were transferred to the appellant without delay and in compliance of law, who is presently holding 15 (fifteen) shares out of the 1,20,85,625 (one crore twenty lakh eighty five thousand six hundred twenty five shares) shares of Respondent No. 1 Company. 18. It is further submitted by the learned counsel for respondent no 1 that the appeal filed is frivolous, vexatious and appears on the face of it to be malicious prosecution. It is averred that as per the said Scheme, the appellant shall be allotted 21 new bonus shares on its present 15 shares. Further, all rights of the shareholders including the appellants are duly protected. The Directors have no interest in the Scheme and it is a duly sanctioned investor friendly Scheme. The only purpose of the said appeal, according to learned counsel, is to harass and blackmail the respondent no 11, in order to avail some sort of ransom or monetary benefit. 19.....
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....as a matter of convenience and as an afterthought. The appellant had sufficiently raised his objections before the High Court of Bombay/ NCLT in the affidavit dated 22.08.2016. Learned counsel for the respondent averred that this is against the settled position of law that no new grounds can be raised in the appeal, if they were not originally pleaded before the original court of jurisdiction. 23. It is further submitted that all the arguments and contentions advanced by the appellant were sufficiently heard and considered by NCLT, only after which NCLT dismissed the said objections and approved the Scheme as being fair, reasonable, investor friendly and in the wider interest of the public shareholders. He has placed reliance on para 25 of the impugned order, dated 06.07.2020 which is reproduced below: 24. It is submitted by the learned counsel for Respondent No. 1 that the Appellant is trying to mislead and misguide this Tribunal by filing incomplete pleading and veiling the relevant documents which were originally filed before NCLT/ High Court of Bombay. Prima facie, it appears that the appellant has omitted to place on record crucial documents in the appeal including its own o....
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.... Company which represents only 0.00012% of the paid up capital of Respondent No. 1 Company. The said percentage of the shareholding of the appellant is not only negligible but drastically below the threshold of the percentage prescribed to object the scheme under Section 230(4) of the Companies Act, 2013. Even if the objection of the Respondent No. 1 Company that the Appellant has no locus standi under section 230 (4) to object the scheme is accepted but this will not affect the power of Regional Director as there is no such limitation prescribed for the Regional Director to file his objections as he is a public authority and has to look after the interest of the public/shareholders/investors at large. Thus the Objections raised by the Regional Director should be given due weightage/consideration. The Regional Director have made the following objections which are reproduced below: The company has acted only on the legal opinion dated 3.11.1997 and not acted on the basis of the letter and spirit of provisions of Section 100 of the Companies Act,1956. Subscription made by each of the shareholders less than 100 each which is not acceptable. Letter of Bombay Stock Exchange dated ....
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.... Company was compelled to take a decision and therefore it brought forth a proposal, as a scheme in order to safeguard their directors and the Company. 30. It is pertinent to note under section 230 (5) provides that a notice under sub-section (3) along with all the documents in such form as may be prescribed shall also be sent to the Central Government, the income-tax authorities, the Reserve Bank of India, the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition Commission of India established under sub-section (1) of section 7 of the Competition Act, 2002, if necessary, and such other sectorial regulators or authorities which are likely to be affected by the compromise or arrangement and shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that they have no representations to make on the proposals. The basic intent behind this provisions of law is that these authorities plays a vital role in the overall legal structure and should work harmoniously with the Tribunal in order to ensure ....