2017 (5) TMI 266 - Tri - Companies Law

Conversion of Private company into Public 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

Summary

Issues: Conversion of company from public to private under Companies Act, 2013

Issue 1: Interpretation of Section 14 of Companies Act, 2013
The judgment discusses the provisions of Section 14 of the Companies Act, 2013, which allows a company to alter its articles by a special resolution for conversion from public to private or vice versa. The Tribunal clarifies the impact of a Ministry of Corporate Affairs Notification dated 11.06.2014, which stated that corresponding provisions of the Companies Act, 1956 would remain in force until the provisions of the Companies Act, 2013 were notified. The Tribunal holds that the operation of Rule 33 of the Companies (Incorporation) Rule, 2014 became redundant due to the notification. It emphasizes that the Companies Act, 2013 supersedes old provisions, and the National Company Law Tribunal (NCLT) has the power to approve such conversions.

Issue 2: Compliance with NCLT Rules for conversion
The judgment further delves into the compliance with NCLT Rules, specifically Rule 68, for the conversion of a public company to a private company. It analyzes a company petition's details, including resolutions passed by the board and members for the conversion. The capital structure of the petitioner company is scrutinized, and reasons for the proposed conversion are cited, emphasizing the efficiency and economic benefits of being a private limited company. The Tribunal evaluates the company's compliance with Section 14 and Rule 68 of NCLT Rules, 2016, and concludes that the conversion is in the company's interest, causing no prejudice to stakeholders.

Conclusion
The judgment allows the conversion from public to private, directing the petitioner to alter its articles accordingly and communicate the changes to the Registrar within 15 days. It highlights that the conversion is in compliance with the Companies Act, 2013, and serves the company's interests without prejudicing stakeholders. No costs are awarded, and the case is consigned to record. Overall, the judgment provides a detailed analysis of the legal provisions governing the conversion of a company from public to private under the Companies Act, 2013, and ensures that the conversion process is conducted in accordance with the law.