2002 (9) TMI 895 - Board - Companies Law

Summary

Issues Involved:
1. Applicability of Section 117C of the Companies Act, 1956 to debentures issued prior to the Companies (Amendment) Act, 2000.
2. Jurisdiction of the Company Law Board (CLB) under Section 117C(4) to entertain applications from debenture holders for non-redemption of debentures issued before the Amendment Act, 2000.

Issue-wise Detailed Analysis:

1. Applicability of Section 117C of the Companies Act, 1956 to debentures issued prior to the Companies (Amendment) Act, 2000:

The debenture holders of Vijaya Leasing Limited (VLL) and Vijaya Commercial Credit Limited (VCCL) filed applications under Section 117C of the Companies Act, 1956, claiming non-repayment of debenture amounts. The Companies argued that Section 117C, introduced by the Companies (Amendment) Act, 2000, should apply prospectively, i.e., only to debentures issued after 13-12-2000. They cited the Press release dated 26-4-2001 and Circular No. 9/2002 dated 18-4-2002, asserting that the provision creates a new liability and should not operate retrospectively. They relied on various Supreme Court judgments to support their argument that statutes imposing new obligations or liabilities should not be construed retrospectively unless explicitly stated.

On the other hand, the applicants contended that Section 117C is intended to protect debenture holders and should apply to all debentures, irrespective of their issuance date. They referred to the Notes on Clauses of the Companies Bill, 1993, and 1997, and the Circular dated 18-4-2002, which indicated that the provision applies to debentures issued before 13-12-2000 and pending redemption. They argued that the provision should be construed retrospectively to remedy the existing default by the Companies.

2. Jurisdiction of the Company Law Board (CLB) under Section 117C(4) to entertain applications from debenture holders for non-redemption of debentures issued before the Amendment Act, 2000:

The CLB examined whether it had jurisdiction under Section 117C(4) to entertain applications from debenture holders for debentures issued before the Amendment Act, 2000. It noted that Section 117C contains five sub-sections, with Sub-section (1) requiring companies to create a debenture redemption reserve for debentures issued after the commencement of the Act. Sub-section (4) empowers the CLB to direct companies to redeem debentures in case of default on the maturity date, without distinguishing between debentures issued before or after the Amendment Act, 2000.

The CLB highlighted that the language of Section 117C is plain and unambiguous, indicating that Sub-section (4) applies to all unredeemed debentures. It referred to Clause (d) of Circular No. 9/2002, which clarified that the debenture redemption reserve is required for debentures issued prior to 13-12-2000 and pending redemption. The CLB emphasized that the provision is beneficial and intended to protect debenture holders, similar to Sections 58A(9) and 45QA(2) of the Reserve Bank of India Act, 1934, which also apply retrospectively to protect investors' interests.

Conclusion:

The CLB concluded that Section 117C(4) applies to all debentures, whether issued before or after the Amendment Act, 2000, and pending redemption. It directed the Companies to redeem the debentures by paying the principal amount and interest due by 30-09-2002. The applications were thus maintainable, and the Companies were ordered to comply with the redemption requirements. No order as to costs was made.