AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 1764
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....ent, whereas the Companies Act, 2013 has authorized only for the dispensation of the meeting of creditors where creditors having at least 90% value agreed and confirmed by way of an affidavit scheme of compromise or arrangement?" Hon'ble President, NCLT referred the matter to the matter to the 3rd Member, Ms. Manorama Kumari, Member (Judicial) who has given a separate judgement and has passed order, which is annexed herewith as Annexure C. It appears that Member (Judicial), Ms. Manorama Kumari has taken a view which is in consonance with the view of the Member (Technical) Mr. S. Vijayaraghavan and decided the matter and passed the following order along with the main judgement. "Regard being had to the precedents set forth by the Hon'ble High Courts, I am of the view that I have no reason to depart from the precedents created by the Hon'ble High Courts to dispense with the requirements of convening the meetings of the shareholders and creditors of the Company, if Bench is satisfied in all respects. In the instant case both the applicant companies have few shareholders and all of them have given their written consents/affidavits and post merger there shall be positive....
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....n which relevant sections came into force with effect from 15th December, 2016 and by the Companies (Transfer of Pending Proceedings) Rules, 2016, which became effective on 15.12.2016. The objects of this application is to ultimately seek and obtain the sanction of this Tribunal to a Scheme of Amalgamation proposed to be made between the Jupiter Alloys & Steel (India) Ltd. and Jupiter Wagons Limited and their respective shareholders (hereinafter referred to as the Scheme) under the Scheme of Amalgamation. Heard the Ld. Pr.C.S representing both the Applicant Companies for dispensation of their respective members meeting. In relation to the above, it is necessary to go into the provisions of Companies Act, 2013 and the rules framed thereunder. For ready reference Section 230 and 232 of the Companies Act, 2013 and relevant part of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 are given below. Sec 230 Companies Act 2013 [(1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them, the Tribunal may, on the application of the company or of an....
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.... of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed: Provided that such notice and other documents shall also be placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the Securities and Exchange Board and stock exchange where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner as may be prescribed: Provided further that where the notice for the meeting is also issued by way of an advertisement, it shall indicate the time within which copies of the compromise or arrangement shall be made available to the concerned persons free of charge from the registered office of the company. (4) A notice under sub-section (3) shall provide that the persons to whom the notice is sent may vote in the meeting either themselves or throu....
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....tors; (c) if the compromise or arrangement results in the variation of the shareholders' rights, it shall be given effect to under the provisions of section 48; (d) if the compromise or arrangement is agreed to by the creditors under sub-section (6), any proceedings pending before the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (I of 1986) shall abate; (e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the terms of the compromise or arrangement: Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate by the company's auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under section 133. (8) The order of the Tribunal shall be filed with the Registrar by the company within a period of thirty days of the receipt of the order. (9) The Tribunal may dispense with calling of a mee....
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....ndis. (2) Where an order has been made by the Tribunal under sub-section (I), merging companies or the companies in respect of which a division is proposed, shall also be required to circulate the following for the meeting so ordered by the Tribunal, namely:- (a) the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company; (b) confirmation that a copy of the draft scheme has been filed with the Registrar; (c) a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promotors and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties; (d) the report of the expert with regard to valuation, if any; (e) a supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for the purposes of approving the scheme. (3) The Tribunal, after satisfying itself that the procedure specified in subsections (1) and (2) has been complied with, may, by or....
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....s referred to in clause (c) of sub-section (2) of section 230 of the Act shall mean a scheme that restructures or varies the debt obligations of a company towards its creditors. 5. Directions at hearing of the application.- Upon hearing the application under sub-section (1) of section 230 of the Act, the Tribunal shall, unless it thinks fit for any reason to dismiss the application, give such directions as it may think necessary in respect of the following matters:- (a) determining the class or classes of creditors or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement; or dispensing with the meeting for meetings for any class or classes of creditors in terms of sub-section (9) of section 230: (b) fixing the time and place of the meeting or meetings; (c) appointing a Chairperson and scrutinizer for the meeting or meetings to be held, as the case may be and fixing the terms of his appointment including remuneration; (d) fixing the quorum and the procedure to be followed at the meeting or meetings, including voting in person or by proxy or by postal ballot or by voting through electronic means; On perusal of the abov....
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....in which a Coordinate Bench of the Tribunal has overruled, in effect an earlier judgment of another Coordinate Bench of same Tribunal. Hon'ble Supreme Court has further held that this is opposed to all principles of judicial discipline and the Hon'ble Supreme Court has further laid down the guideline that if at all, the subsequent bench of the Tribunal was of the opinion that the earlier view taken by the Coordinate Bench of the same Tribunal was incorrect, it ought to have referred the matter to a larger bench so that difference of opinion between the two Coordinate Benches on the same point could have been avoided. In another case, Hon'ble Supreme Court in Union of India - vs- Paras Laminates Pvt. Ltd. [1990] 4 SCC page 453 has held that Bench of two Members must not likely disregard the decision of another bench of same Tribunal on an identical question. The rationale of this rule is the need of continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in the earlier cases on i....
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....nse with or waive such a condition? All these would come in the realm of legislation which can be done only by legislature. Hence, we find no merit in these appeals filed by the Department." In this case also, Companies Act, 2013 sub-clause (9) authorises the Tribunal to dispense with calling of the meeting of creditor or class of creditors but no such power is given for dispensing with the meeting of members/shareholders. Section 232 of the Companies Act which deal with the merger and amalgamation of the companies do not provide any such power to the Tribunal to dispense with the meeting of shareholder/members. When the Act does not empower then giving such dispensation will amount to interfere in the realm of legislation which is not permissible in law. In the light of the above discussion and the principle laid down by the Hon'ble Supreme Court in the case of Sub Inspector Roop Lal (supra) and Union of India -vs- Paras Laminates (supra), I do not think it proper to take a contrary view than earlier taken by the Coordinate Benches of NCLT Principal Bench Delhi and further reiterated by NCLT Mumbai and dispense with the meeting of members/shareholders. Therefore, in the circ....
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.... Act, 2013. 5. The notices of the aforesaid meetings shall be advertised in Form No. CAA.2, in one English newspaper being 'Business Standard' and in one Bengali newspaper being 'Aajkal' not less than 30 days before the date fixed for the meetings in accordance with Rule 7 of The Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 Image01 7. The value and number of the shares of each member shall be in accordance with the list attached in the instant application and the Chairperson of the meetings shall consider the same for the purpose of the meetings of the members as aforesaid. 8. The Chairperson appointed for the aforesaid meetings shall issue the notices of the aforesaid meetings. The said Chairperson shall have all powers under The Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 in relating to conduct of the meeting(s) including for deciding procedural questions that may arise or at any adjournment thereof or any other matter including an amendment to the Scheme or resolution, if any, proposed at the meeting by any person(s). 9. The voting by proxy or authorized representative in case of body corporate be permitted, p....
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....ed by the Tribunal from the Regional Director within 30 days of date of receipt of the notice it will be presumed that the Regional Director and / or Central Government has no objection to the proposed Scheme as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. In addition to the above order, applicant companies are also directed to send notice through e-mail on the Regional Director and RoC alongwith the affidavit annexing the copy of mail sent to ROC and the Regional Director within seven days from the date of order. 13. Both the Applicant Companies to serve the notice on the concerned Income Tax Authority within whose jurisdiction the Applicant Companies assessment are made, pursuant to Section 230(5) of the Companies Act, 2013 as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. If no response is received by the Tribunal from the Income Tax Authority within 30 days of the receipt of the notice it will be presumed that Income Tax Authority has no objection to the proposed Scheme as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. 14. Both the Applicant Companies sh....
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....l by virtue of notification no. 3677(E) dated 7th December, 2016 in which relevant sections came into force with effect from 15th December, 2016 and by the Companies (Transfer of pending Proceedings) Rules, 2016, which became effective on 15.12.2016. The objects of this application is to ultimately seek and obtain the sanction of this Tribunal to a Scheme of Amalgamation proposed to be made between the Jupiter Alloys & Steel (India) Ltd. and Jupiter Wagons Limited and their respective shareholders (hereinafter referred to as the Scheme) under the Scheme of Amalgamation. Heard the Ld. Pr.C.S representing both the Applicant Companies for dispensation of their respective members' meeting. Definition of "member" in relation to a company under sub-section 55 of Section 2 of the Companies Act, 2013 is as follows: i) ..... ii) ..... iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository, Section 230 of the Companies Act, 2013 relating to Compromises and Arrangements in sub-section (d) relates to members or class of members apart from creditors which clearly includes equity and preferential shareholders ....
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....Courts, who are governed by their own procedures. Some of them are mentioned below: i) Hon'ble Delhi High Court in the case of Basera Realtech Private Ltd. and other 10 Transferor Companies with SRK Tradelinks Private Ltd., the Transferee Company, in Company Application (Main) No. 150/2015 dated 2nd November, 2015 The Hon'ble Delhi High Court in the above case has held that convening the meeting of the equity shareholders of the transferor and transferee companies to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. The Hon'ble Calcutta High Court vide order dated 25th July, 2016 in the case of Traita Properties Private Limited has dispensed with the meetings of the shareholders of the transferor companies and transferee company by holding as under. "The application is under sections 391(1) and 393 of the Companies Act, 1956. The applicants seek dispensation of the meetings of the shareholders of the companies on the ground that written consent from all the shareholders has been obtained and the original letters to such effect have been appended to the application. In view of the consent ....
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....Section 230 [except sub section (11) and (12)] of Companies Act, 2013 (hereinafter referred to as 'the Act') and also Sections 231 - 233 of the said Act came into force w.e.f. 15th December, 2016 and also the Companies (Transfer of Pending Proceedings) Rules, 2016 came into force w.e.f. 15th December, 2016 and the erstwhile provisions of Sections 391 - 394 of the Companies Act, 1956 ceased to exist. Subsequently, the matter was transferred to this Bench vide File No.10/03/2017 NCLT dated 20th March, 2017 issued by NCLT, New Delhi. 1. The Ld.Practising Company Secretary has outlined the details of the proposed joint application which are as follows (a) It is a joint application in accordance with Rule 3(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. (b) Registered office of both the applicant companies are in the State of West Bengal and hence within the jurisdiction of this Bench. (c) The benefits of the Scheme have been submitted in paragraph numbers 15 and 16 of the application. The Scheme has been annexed as 'Annexure - A' to the application. The salient features of the Scheme have been elaborated in paragraph number 19 of ....
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....gupta, being the Director of both the Companies and has been filed along with the application. (m) It has been mentioned at paragraph no.25 of the application that no proceedings are pending under the provisions of Section 235 and 250A of the Companies Act, 1956 or applicable new provisions under the Companies Act, 2013 against both the applicant companies. (n) Ld.PCS also submitted that certain corporate actions are under process and both the companies have filed letters dated 28th March, 2017 with this Hon'ble Bench with respect to Share Subscription and Shareholders' Agreement executed between Tatravagonka A.S. ("Tatra"), Mr.Vivek Lohia and Mr.Vikash Lohia ("Promoters"), Jupiter Metal Spring Private Limited and Karisma Goods Private Limited ("Confirming Parties") and Jupiter Wagons Limited. Jupiter Wagons Limited is now considering to proceed with the second tranche of allotment and accordingly the following corporate actions are under process, which may be completed within April, 2017:- (i) Alteration of the Memorandum of Association of Jupiter Wagons Limited by increasing the present authorized share capital of the Company from Rs. 20,00,00,000/- (Rupees Two Cror....
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.... meets, the object and intent of the statute. (e) As mentioned in paragraph 24 of the application, the financial position of applicant/ amalgamated company shall have positive net worth post effectiveness of the Scheme and there has been no compromise with the creditors and that the respective creditors would, in no way, be affected by the scheme and that all the liabilities of the Amalgamating Company shall stand transferred to the Amalgamated Company and hence the creditors meeting is not relevant at all. (f) Creditors are fluctuating body on day to day basis and their interests are not adversely affected in any manner by the proposed Scheme. Scheme does not contemplate any corporate debt restructuring exercise as contemplated under Section 230(2) of the Act. (g) If the applicants are to comply with the proviso to sub-section (4) of Section 230 of the Act, then the data base of last audited financial statement has to be used but it is not practically possible that those who were creditors as on 31st March, 2016 may still be the creditors today i.e. March 2017. Hence the interest of current creditors cannot be protected in any manner by giving notice to such old credit....
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....avour of the applicants. It was submitted that dispensation was allowed by the Bengaluru Bench even in the case of Coffee Day Overseas Private Limited vide order dated 02.02.2017 which was in between the Order of Principal Bench dated 13.01.2017 and the Order of Mumbai Bench dated 13.02.2017. (s) The Hon'ble Bench is empowered to do so in the interest of justice under Rule 11 of National Company Law Tribunal Rules, 2016 read with Rule 24(2) of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. 3. In my view, there is imperative need to examine Section 230 and Section 232 of the Companies Act, 2013 and Rules made thereunder including the NCLT Rules, 2016 in the context of the objectives of the new Act and the legislative history behind this subject. Upon reading of Section 391 (1) of the Companies Act, 1956 vis-a-vis Section 230(1) of the Companies Act, 2013 it manifests that the language used under the old Act and the new Act being para materia to each other and both the Acts use the words "may" before "...order meeting". Section 232(1) of the Companies Act, 2013 also uses the word "may" in similar manner as Section 230(1) of the Companies Act, 2013. Sect....
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....the Hon'ble High Courts to dispense with the requirements of covening the meetings of the shareholders and creditors of the Company, if the Bench is satisfied in all respects. In the instant case both the applicant companies have few shareholders and all of them have given their written consents/ affidavits and post merger there shall be positive net worth and the creditors are not compromised. That apart, as we are in the era of ease of doing business, sometimes the advantage / effectiveness of corporate actions like mergers and amalgamations will be reduced to nullity if there is delay in time and unless the discretion can be used to plug the gaps, such delays may fade away the purpose of mergers and amalgamations. In this case, number shareholders of both the applicant companies are very small (including majority common shareholders) and all of them have given their consents for the scheme in writing and the financial position of applicant/ amalgamated company shall have positive net worth post effectiveness of the Scheme and there has been no compromise with the creditors and that the respective creditors would, in no way, be affected by the scheme and that all the liabil....
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....per Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 with suitable changes in the notice relating to waiver of the meetings and with a direction that they may submit their representations, if any, to the Tribunal and a copy of the same shall be simultaneously served on the concerned applicant company. If no response is received by from such creditors within 30 days of date of receipt of the notice it shall be presumed that such creditors have no objection to the proposed Scheme. (v) The relevant provisions of the Scheme, including Part II, shall stand modified/ adjusted to take into account the effect of proposed Corporate actions of increase in the authorized share capital and paid up capital of the Applicant No.2/ Amalgamated Company, if implemented before the date of circulation of notice under Section 230(5) of the Companies Act, 2013 and hence the modified/adjusted Scheme be circulated and in case it is not implemented by that time, then also necessary disclosures shall be made by way of appropriate note in the notice maintain complete transparency. It is directed that in any circumstances, ....