2002 (1) TMI 1223 - HC - Companies Law

Issues Involved:
1. Sanction of the Scheme of Compromise and Arrangement.
2. Compliance with statutory provisions.
3. Validity of the resolution and notice for the meeting.
4. Payment to unsecured depositors versus debenture holders.
5. Participation of debenture holders in the meeting.
6. Justness and reasonableness of the scheme.
7. Objections by the consortium of banks.
8. Locus standi of the banks.
9. Central Government's stand.

Detailed Analysis:

1. Sanction of the Scheme of Compromise and Arrangement:
The petitioner, Gujarat Lease Financing Ltd. (GLFL), sought the Court's sanction for a scheme of compromise and arrangement to be binding on all categories of 'E' and 'F' series debenture holders and the company. The scheme proposed reduced maturity amounts due to adverse financial conditions.

2. Compliance with Statutory Provisions:
The objections raised included non-compliance with section 393(1)(a) of the Companies Act, non-disclosure of debenture trustees' powers, and non-compliance with sections 117B and 119 of the Act. The Court found no breach of statutory provisions for convening and holding meetings of debenture holders.

3. Validity of the Resolution and Notice for the Meeting:
The explanatory statement sent with the notice did not mention the powers of debenture trustees or pending proceedings against the company. However, the Court found that the company had no obligation to disclose such information and that the meeting's approval was not vitiated by non-disclosure.

4. Payment to Unsecured Depositors versus Debenture Holders:
The company paid unsecured depositors Rs. 157 crores with interest as per the Reserve Bank of India's directive. The Court noted that the debenture holders, aware of this payment, accepted the scheme offering 70% of the maturity amount.

5. Participation of Debenture Holders in the Meeting:
Only 8 to 10 percent of debenture holders attended the meeting. The Court found that the quorum was fixed by the Act and the company's articles of association, and the approval by the present debenture holders was valid.

6. Justness and Reasonableness of the Scheme:
The Court applied the principles from Miheer H. Mafatlal v. Mafatlal Industries Ltd., finding the scheme just, fair, and reasonable. The scheme offered 70% of the maturity amount, which was deemed reasonable given the company's financial condition and market performance.

7. Objections by the Consortium of Banks:
The banks objected to the scheme, arguing it was illegal, unworkable, and that they should have been included as secured creditors. The Court found that the banks and debenture holders constituted different classes, with the banks having a higher claim over the company's assets.

8. Locus Standi of the Banks:
The Court determined that the banks had no locus standi to object to the scheme as it did not affect their rights. The scheme was between the company and its debenture holders, and the banks' rights remained unaffected.

9. Central Government's Stand:
The Central Government did not object to the scheme and left the matter to the Court's discretion. The Court noted that the scheme did not cover 'G' series debentures and that the objections from secured creditors like banks were already addressed.

Conclusion:
The Court sanctioned the scheme of compromise between GLFL and its 'E' and 'F' series debenture holders, directing the company to pay the reduced maturity amounts by 28-2-2002 along with accrued interest. The Court also clarified that the borrowing from Torrent (P.) Ltd. for this purpose did not violate the Reserve Bank's directive. The petition was allowed, and the scheme was approved.

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