2017 (5) TMI 220 - Tri - Companies Law

Conversion from public to private company - Held that - Petitioner has complied with provisions of Section 14 to be read with Rule 68 of NCLT Rules, 2016. Therefore, having regard to all the circumstances, the conversion from public to private is in the interest of the Company which is being made with a view to comply efficiently with the provisions of Companies Act, 2013 causing no prejudice either to the members or to the creditors of the Petitioner. Therefore, the conversion is hereby allowed. The Petitioner is hereby directed to give effect of the conversion by requisite alteration in its Articles which is hereby addressed and communicate the altered Articles within a period of 15 days to the Registrar.

Issues:
1. Interpretation of Section 14 of Companies Act, 2013 regarding alteration of articles for conversion of company.
2. Impact of Ministry of Corporate Affairs notification dated 11.06.2014 on provisions of Companies Act, 2013.
3. Relevance and applicability of Rule 33 of Companies (Incorporation) Rule, 2014 in light of Section 14 of Companies Act, 2013.
4. Authority of National Company Law Tribunal (NCLT) in approving conversion of public company into private company.
5. Compliance with Rule 68 of National Company Law Tribunal Rules, 2016 for conversion of public company to private company.

Analysis:

1. The judgment primarily deals with the interpretation of Section 14 of the Companies Act, 2013, which allows a company to alter its articles for conversion from a public company to a private company or vice versa. The second proviso to Section 14(c) mandates approval from the National Company Law Tribunal (NCLT) for such conversions, ensuring the Tribunal makes an appropriate order as deemed fit.

2. The impact of a Ministry of Corporate Affairs notification dated 11.06.2014 is discussed, clarifying that provisions of Companies Act, 1956 would remain in force until corresponding provisions of Companies Act, 2013 are notified. This notification suspended the applicability of old provisions and rules, affecting the process of conversion.

3. The relevance of Rule 33 of Companies (Incorporation) Rule, 2014 is questioned in light of Section 14(2) of the Act, which confers powers to NCLT for approving conversion orders. The judgment holds that the statutory provisions of the Act supersede rules, rendering Rule 33 redundant for effecting conversions.

4. The authority of NCLT in approving the conversion of a public company into a private company is emphasized, highlighting the importance of complying with the procedures laid down in Section 14 of the Act. The judgment underscores the necessity of filing alterations with the Registrar within fifteen days of NCLT approval.

5. Compliance with Rule 68 of the National Company Law Tribunal Rules, 2016 is crucial for the conversion process. The judgment evaluates the petitioner's adherence to the conditions specified in Rule 68 for converting a public company to a private company, ensuring that the conversion is in the best interest of the company without prejudicing stakeholders.

In conclusion, the judgment allows the conversion from a public to a private company, as the petitioner has complied with the provisions of Section 14 and Rule 68. The decision aims to facilitate efficient compliance with the Companies Act, 2013, ensuring no prejudice to company members or creditors. The petitioner is directed to effect the conversion by altering its articles and communicating the changes to the Registrar within the stipulated timeframe.

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