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2019 (7) TMI 1616 - AT - Companies LawApproval of amalgamation scheme - conduct of the meetings of the equity shareholders and unsecured creditors of NMCE with ICS - Money Laundering - HELD THAT - There is no dispute that the FMC Order dated 23.07.2011 referred in para 6(B) (supra) was in force on the date of meeting of the shareholders and when Impugned Orders were passed and even when final hearing of the present Appeals took place. FMC found the Appellant and Shri Kailash Gupta and others guilty of various misconducts and illegal activities which led to various actions getting initiated, and litigations arising therefrom, which appear to be at different stages. The FMC Order found 29,32,280 shares to be irregular allotment to the Appellant and directed taking of steps to cancel the same. The operative Orders of FMC which we have referred in para 6 above, also found Shri Kailash Gupta to be a person not fit and proper to hold any position in the management and the Board of any Exchange recognized or registered by the Government of India, FMC or any other financial market Regulatory. Thus, on 23.07.2011 itself, the FMC had found Kailash Gupta as not fit and proper person and the shares held by NOL were eclipsed - even if for any technicality or reason the FMC Order dated 23.07.2011 and all consequential actions against Appellant and Kailash Gupta were to get quashed still, Mr. Kailash Gupta may not be able to claim that he has a general reputation and record of fairness and integrity, and should be deemed to be a fit and proper person. Mr. Kailash Gupta who attended the shareholders Meeting and who claims himself to be authorized signatory of the Appellant being not fit and proper person, could not have voted and was rightly not allowed to vote. We have gone through the Reports of Chairman (Annexure I Page 113) and Scrutinizer (Page 127) and part of the Report we have reproduced at para 11 (supra). We are aware of the general rule of such meetings where adjournment can be there for want of quorum and at adjourned meeting, quorum figure would stand relaxed. As such, Chairman had no reason to fudge Report. We have no reasons to doubt the Reports. Considering Para 25(2) of Report of Chairman, the scheme had sufficient support to sail through. Coming to the objections raised by the Appellant with regard to the scheme, some of them were already answered by SEBI itself. It may be recalled that the Appellant claimed that the Appellant claimed to have sent representation to SEBI against the proposed merger and when SEBI did not respond, the Appellant moved the Hon ble Supreme Court and sought directions - In spite of such communication by SEBI which is a Regulatory, the Appellant has kept harping that ICE is a company which was bleeding and had no net worth and that NMCE could have raised its own cash net worth. Nothing is shown that the Appellant raised any questions to this communication of SEBI. The letter of SEBI itself shows how the shares of the Appellant got affected and the submissions made that ICE was bleeding in finance and had no net worth, etc., need to be discarded. The argument that the scheme does not mention that it was proposed to meet the net worth requirement and so the scheme should be doubted, also needs to be discarded. We have gone through the First, Second and Third Impugned Orders. We do not find any reason to interfere with the same. The shares held by the Appellant in Respondent No.1 Company have been under eclipse since the Order passed by FMC on 23.07.2011 and the same were under eclipse when the shareholders meeting took place and the Impugned Orders were passed and the position remained the same when final hearing of this Appeal took place. In the period after we reserved this matter for Judgement, the parties have not moved us to say that any Orders in favour of the Appellant have been passed in the litigations pending - The Third Impugned Order dated 27.08.2018 shows that when in NCLT, Judgement was reserved by Order dated 02.07.2018 (see para 32) and some Order came to be passed by the Appellate Tribunal PMLA, the Appellant had moved NCLT and sought and received rehearing. No such Motion has been brought before us and as such, we presume that the position regarding eclipse to the rights of Appellant and Kailash Gupta is still there - there are no reason to interfere with the Impugned Order and for reasons recorded above, Appeals against the three Impugned Orders deserve to be rejected. Appeal dismissed.
Issues Involved:
1. Validity of the three impugned orders passed by NCLT regarding the amalgamation of NMCE with ICE. 2. Objections raised by the appellant regarding the amalgamation scheme. 3. Voting rights and participation of the appellant in the shareholders' meeting. 4. Compliance with statutory and regulatory requirements, including net worth criteria. 5. Public interest and commercial wisdom of the amalgamation scheme. Issue-wise Detailed Analysis: 1. Validity of the Three Impugned Orders: The appeals arise from three impugned orders passed by the NCLT, Ahmedabad Bench, concerning the amalgamation of NMCE with ICE. The first order dated 31st January 2018 addressed the appellant's objections and noted that the appellant's voting rights were suspended. The second order dated 21st February 2018 directed the holding of meetings of equity shareholders and unsecured creditors. The third order dated 27th August 2018 approved the amalgamation scheme, rejecting the appellant's objections. 2. Objections Raised by the Appellant: The appellant, Neptune Overseas Limited (NOL), objected to the amalgamation scheme on several grounds, including the alleged financial instability of ICE, the potential pre-emptive foreclosure of the appellant's rights, and the claim that NMCE had other options to raise capital. The NCLT considered these objections but found them unsubstantiated. The tribunal noted that the scheme was proposed to comply with SEBI regulations and was in the interest of both companies and their stakeholders. 3. Voting Rights and Participation of the Appellant: The appellant's voting rights were a significant issue due to the FMC order dated 23rd July 2011, which found irregularities in the allotment of shares to NOL and declared Kailash Gupta, associated with NOL, as not "fit and proper." Consequently, the appellant's voting rights were suspended. The NCLT upheld this suspension, noting that the appellant could attend the meetings but could not vote. The tribunal also dismissed objections regarding the quorum and authority of participants in the shareholders' meeting. 4. Compliance with Statutory and Regulatory Requirements: The amalgamation scheme aimed to meet the net worth criteria stipulated by SEBI regulations. NMCE needed to achieve a minimum net worth of ?100 crores, which it struggled to meet independently. SEBI's letter dated 9th August 2017 confirmed that NMCE's net worth was insufficient and that the merger with ICE was a viable solution to comply with regulatory requirements. The NCLT found that the scheme was necessary to avoid penal actions against NMCE and to ensure its continued operation as a recognized commodity exchange. 5. Public Interest and Commercial Wisdom: The NCLT emphasized the commercial wisdom of the shareholders and creditors in approving the amalgamation scheme. The tribunal noted that the scheme had the support of the majority of shareholders and creditors and that SEBI, as the regulator, had approved the scheme. The NCLT found that the objections raised by the appellant did not suggest that the scheme was illegal or prohibited by law. The tribunal concluded that the scheme was in the interest of the companies and their stakeholders and was necessary to comply with regulatory requirements. Conclusion: The NCLT rejected the appellant's objections and approved the amalgamation scheme, finding it in the interest of both companies and their stakeholders. The tribunal upheld the suspension of the appellant's voting rights due to the FMC order and found that the scheme was necessary to comply with SEBI regulations. The appeals against the three impugned orders were dismissed, and the amalgamation was sanctioned, subject to decisions by higher forums.
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