2013 (7) TMI 1135 - HC - Companies Law

Summary

Issues Involved:
1. Maintainability of the application for recalling the order sanctioning the scheme of arrangement.
2. Jurisdiction of the court to recall an order sanctioning a scheme of arrangement.
3. Applicability of the doctrine of in pari delicto in the context of the scheme of arrangement.
4. Compliance with statutory provisions and public policy in sanctioning the scheme of arrangement.

Summary:

1. Maintainability of the application for recalling the order sanctioning the scheme of arrangement:
The court held that the application for recalling the order sanctioning the scheme of arrangement filed by Castron Technologies Ltd. (C.T.L.) alone was not maintainable. The application should have been filed by both parties involved in the scheme, i.e., C.T.L. and Castron Mining Ltd. (C.M.L.). The court emphasized that a consent decree, such as the one sanctioning the scheme, cannot be recalled at the instance of one party alone.

2. Jurisdiction of the court to recall an order sanctioning a scheme of arrangement:
The court observed that once an order sanctioning a scheme of arrangement is drawn up and acted upon, it becomes final and the court does not have jurisdiction to recall such an order. The inherent power of the court to recall an order can only be exercised in specific circumstances, such as lack of jurisdiction, fraud, collusion, or mistake by the court prejudicing a party. In this case, none of these conditions were met, and the application was not maintainable u/s 391 and 392 of the Companies Act.

3. Applicability of the doctrine of in pari delicto in the context of the scheme of arrangement:
The court discussed the principle of in pari delicto, which means that a party cannot seek relief if they were equally at fault in the transaction. The court held that C.T.L. could not take advantage of the alleged illegality of the scheme as it was a party to the purportedly illegal transaction. The court cited various judgments to support this view, concluding that the doctrine of in pari delicto applied, and C.T.L. could not seek to recall the scheme on this ground.

4. Compliance with statutory provisions and public policy in sanctioning the scheme of arrangement:
The court addressed the argument that the scheme of arrangement violated rule 37 of the Mineral Concession Rules, 1960, which requires prior government approval for the transfer of a mining lease. The court held that the scheme did not involve the transfer of the mining lease itself but rather the application for the mining lease, which did not require prior approval. The court also noted that the scheme was sanctioned by the court and acted upon by both the Central and State Governments, making it final and binding.

Conclusion:
The court dismissed the appeal, upholding the single judge's order rejecting the application for recalling the scheme of arrangement and granting the application for its implementation. The court emphasized that the proper procedure for modifying or replacing a scheme of arrangement is through compliance with section 392 of the Companies Act, and not by filing an application for recalling the order.