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2017 (5) TMI 1764
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....ation where all the shareholders have given consent, 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 ....
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....n before this Tribunal by virtue of notification no.S.O.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. 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 ....
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....embers or class of members and the debenture-holders of the company, individually at the address registered with the company which shall be accompanied by a statement disclosing the details 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 concer....
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....ersion of preference shares into equity shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable; (b) the protection of any class of creditors; (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 compr....
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....ivided among and transferred to two or more companies, the Tribunal may on such application, order a meeting of the creditors or class of creditors or the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal may direct and the provisions of sub-sections (3) to (6) of section 230 shall apply mutatis mutandis. (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 v....
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.... purposes of approval of the scheme. 4. Disclosures in application made to the Tribunal for compromise or arrangement.- Creditors Responsibility Statement. - For the purposes of sub-clause (i) Of clause (c) of sub-section (2) of section 230 of the Act, the creditor's responsibility statement in Form No. CAA. 1 shall be included in the scheme of corporate debt restructuring. Explanation For the purpose of this rule, it is clarified that a scheme of corporate debt restructuring as 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 meet....
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.... meeting of equity shareholders on similar set of facts, viz. the equity shareholders had recorded their consent to the scheme. Since there are conflicting decisions from the Coordinate Benches in this regard, so legal position is to be adjudged in the present scenario. Here it is important to consider the law laid down by the Hon'ble Supreme Court in case of Sub Inspector Roop Lal - vs- Lt. Governor [2000] 1 SCC 644 at page 654. In the above-mentioned case, Hon'ble Supreme Court has showed serious dissatisfaction in regard to the manner 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 anothe....
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....ase of CIT- vs- Pawan Kumar Laddha [2010] 13 SCC page 294 at page 297, the Hon'ble Supreme Court has laid down the law that "the Courts have to be careful in reading into the Act such disenabling provisions as that would tantamount to judicial legislation which the Courts must eschew. It is for Parliament to specifically say that no appeal shall be filed or admitted or maintainable without the assessee's paying the admitted tax due.....In such a case the question would also arise as to why the Appellate Tribunal should not be given the power to dispense 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 ....
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.... the Scheme, statement required under Section 230 of the Companies Act, 2013 read with Rule 6 of The Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 and the prescribed Form of Proxy, shall be sent individually by Registered Post or by Speed Post or by Courier or by Email of by Hand Delivery to each of the Equity Shareholders of both the Applicant Companies at their respective registered or last known addresses as per the records of the respective Applicant Companies. 4. The quorum for the aforesaid meetings shall be as prescribed under Section 103 of the Companies 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 ....
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....ilar to Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. If no response is received by the Tribunal from such creditors within 30 days of date of receipt of the notice it will be presumed that such creditors have no objection to the proposed Scheme. 12. Both the Applicant Companies to serve the notice upon the Regional Director, Eastern Region, Ministry of Corporate Affairs, the Registrar of Companies and the Official Liquidator, pursuant to Section 230(5) of the Companies Act, 2013 and as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. If no response is received 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....
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....ny) under Sections 391 to 394 of the Companies Act, 1956. The corresponding new provisions are contained in Companies Act, 2013 read with the Companies and Amalgamations) Rules, 2016 in relation to the scheme of Amalgamation proposed between Jupiter Alloys & Steel (India) Limited (Amalgamating Company) and Jupiter Wagons Limited (Amalgamated Company). The aforesaid Scheme has been also annexed with the application. The applicant submitted that this instant application was earlier filed with Hon'ble High court at Calcutta being C.A. no. 896 of 2016 earlier for sanction of a Scheme of Amalgamation before the Hon'ble High Court at Calcutta on 14.12.2016, which has now come for consideration before this Tribunal by virtue of notification no. 3677(E) dated 7^th December, 2016 in which relevant sections came into force with effect from 15^th 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 the....
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....uch orders as may be necessary for meeting the ends of justice or to prevent abuse of the process of the Tribunal" There is no express bar of the exercise of such inherent powers either under the Act or under the Rules. However, it will be desirable to incorporate in the Rules a specific provision so as to avoid divergence of opinion based upon the facts of the individual cases by various benches which may be based upon considerations such as, number of shareholders, voting power, paid-up capital, net worth, etc. The judgment of the various Hon'ble High Courts, apart from Tribunal's decisions mentioned above by the Ld. Judicial Member, are also mentioned herein. Obviously, the NCLT Rules are not applicable before any proceedings in the Hon'ble High 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 2^nd November, 2015 The Hon'ble Delhi High Court in the above case has held that convening the meeting ....
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....Company) and Jupiter Wagons Limited (Applicant No.2 / Amalgamated Company) under Sections 391-394 of the Companies Act, 1956 in relation to the Scheme of Amalgamation proposed between the said applicant companies has been received before the Tribunal on transfer from Hon'ble High Court at Calcutta (where it was initially filed being Company Application No.896 / 2016) pursuant to MCA Notification no. S.O. 3676(E) dated 7th December, 2016 which provides that the pending proceedings under the Companies Act, 1956 prior to 1 5th December, 2016 before any High Court shall transferred to the NCLT. The matter has to be dealt in accordance with Section 434(1)(c) of the Companies Act, 2013 i.e. from the stage before their transfer. Simaltaneously, pursuant to MCA notification no. S.O. 3677 (E) dated 7th December, 2016, 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 th....
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.... (j) The valuation report dated 18.11.2016 has been issued by Singhi & Co., Chartered Accountants and it annexed as 'Annexure - L' the application which provides that each equity shareholder of Amalgamating company shall be issued 661 fully paid up shares of Rs. 10/- each of the Amalgamated Company for every 100 fully paid up equity shares of Rs. 100/- each held by such equity member in the Amalgamating Company. (k) The details relating to authorized share capital, paid up share capital, main objects, present business and latest audited annual accounts of the applicant no. 1 company and applicant no.2 company are submitted in paragraphs no. 5 to 8 and paragraphs no. 11 to 14 of the application, respectively along with the relevant annexures. None of the applicant companies has any debentures. (l) An affidavit in support of the joint application is sworn by Mr.Asim Ranjan Dasgupta, 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 applicabl....
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.... their consents for the scheme which are annexed at 'Annexure I-1 to 1-15' and 'Annexure K-1 to K-2' of the petition respectively. The shareholders being Indians have filed their consents by way of affidavits. The only one shareholder (body corporate) being foreign resident has filed Board Resolutions & consent letters for both the companies. The affidavits are duly identified and notarized. There are 8 common shareholders in both the applicant companies. (c) Section 230(9) of the Act itself provides the method of affidavits when it deals with creditors. Hence there may not be different footings for members and creditors and tough directions be given to ensure the authenticity of the affidavits. (d) Since all the shareholders have already given consent in writing prior to the meeting, hence the meeting cannot serve any further purpose than completing a mere formality. Substantial compliance rather than formal compliance be considered, if it 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 effectivenes....
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.... of the Companies (Compromises, Arrangements and Amalgamations Rules, 2016 all start with the word "Where" and this read with the word "may" gives ample opportunity to read the provisions that there are two situations, one where a meeting is held and the other where a meeting is not held, in both situations permitted by the Court. (n) Meetings should be dispensed with in cases where the companies are closely held with small number of shareholders or creditors or when the financial position of the companies are such that they would not be able to bear the expenses in this regard in going strictly by the Act and the Rules made thereunder if the Bench is convinced that there is no malafide and if the applicants are ready to give further undertakings as the Bench may direct. (r) The recent orders of the various Benches of NCLT have been differing from each other but the Bengaluru Bench vide Order dated 14.03.2017 in the matter of Puma India Corporate Services Private Limited has considered the issue of dispensation of meetings in the favour of the applicants. It was submitted that dispensation was allowed by the Bengaluru Bench even in the case of Coffee Day Overseas ....
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....f the Tribunal can use the word "may" to dismiss the application, it will not be fair to apply this discretion only for dismissal and not for other reliefs, where the facts & circumstances so require. However, discretion does not confer any authority to be exercised in arbitrary and wanton manner and should be exercised after considering entire facts and circumstances. It cannot be ignored that almost all the High Courts have exercised this discretion since long and dispensed with the calling of the meetings in appropriate situations. The precedents created by the High Courts to dispense with the requirement of convening the meetings are worth and continuation of such precedents are virtue in the era of ease of doing businesses as well as future course of corporate actions. A settled issue should not be unsettled without proper reasons. Thus the notion that calling of meetings is mandatory does not stand. 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 covening the meetings of the shareholders and credito....
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.... Eastern Region (Ministry of Corporate Affairs), Registrar of Companies - West Bengal, Income Tax Authority within whose jurisdiction the assessments of the Applicant Companies are made and the Official Liquidator, pursuant to 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. If no response is received by the Tribunal from the above authorities within 30 days of date of receipt of the notice it will be presumed that such authorities have no objection to the proposed Scheme as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. (iv) Both the Applicant Companies to serve the notices upon their current creditors i.e. creditors as on the date of passing of this Order having outstanding debt amounting to not less than five percent of total outstanding debt of the Company as per the list of creditors as on the date of passing of this Order in the same manner as the notices shall be served to various authorities as per Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companie....