2011 (3) TMI 1462 - HC - Companies Law

Demerger - unsecured creditor - application for recalling the order - by which directions were issued to convene the meetings of the shareholders and the creditors of the company for considering the scheme of demerger - conditions of section 391, were complied with - application were rightly rejected.

Summary

Issues:
Challenge to order rejecting application for recalling order convening meetings for demerger scheme under Companies Act, 1956.

Analysis:
The judgment dealt with a special appeal filed against an order rejecting the petitioner's application for recalling the order under section 391 of the Companies Act, 1956, related to a demerger scheme. The respondent raised objections on the maintainability of the special appeal, arguing that the order in question was not a judgment as it did not decide any case or rights of the parties and was not a final order. The respondent also highlighted the deletion of the right of appeal under section 391(7) by the Companies (Second Amendment) Act, 2002, making the appeal not maintainable under the said section.

The court noted that the Companies (Second Amendment) Act, 2002, had provisions regarding Tribunals that were stayed, and a recent Supreme Court order was passed to reconsider these provisions. The judgment discussed the observations made by the learned single judge, who held that the appellant did not have a caveatable interest at the stage of chamber's summons under rule 67 of the Companies (Court) Rules, 1959. The judge referred to a Supreme Court case emphasizing the importance of giving a hearing to contributors, creditors, and shareholders in such applications to avoid making the scheme unworkable.

The appellant argued that a person with an interest in the company's affairs could make objections if a caveat was filed during chamber's summons, asserting that the appellant had a caveatable interest and a right to be heard at the stage of issuing orders for convening meetings. The impugned order confirmed that the conditions of section 391 were met before convening the meeting for the demerger scheme, with proper advertisement of the summons in newspapers. The court observed that the appellant's rights were protected by hearing objections during the confirmation of the demerger scheme, and no prejudice was caused at that stage.

The judgment concluded that the learned single judge did not err in rejecting the application for recalling the order, as the appellant's rights were safeguarded during the proceedings for confirming the demerger scheme, and no prejudice was caused. The special appeal was ultimately dismissed by the court.