2019 (8) TMI 829 - AT - Companies Law

Dispensation of meetings of Unsecured Creditors of Appellant No. 4 and Shareholders and Unsecured Creditors of Appellant No. 5 - Section 421 of the Companies Act, 2013 - HELD THAT - It is well settled that a Coordinate Bench is bound to follow the law enunciated by another Coordinate Bench and if it feels that the earlier view requires reconsideration, it may refer the matter to a larger bench for reconsideration. Following of the judicial precedent and observing the judicial view propounded by a Coordinate Bench in compliance is a matter of judicial discipline and the only course open to a Coordinate Bench of equal strength taking a different view is to refer the matter to a larger Bench. This is the law of the land declared by the Hon ble Apex Court and has to be observed and adhered to strictly. The impugned order falling within the purview of per incuriam cannot be supported. The Tribunal should have applied its mind in the light of judicial precedents brought to its notice by way of an affidavit, and in the event of the views expressed by the Coordinate or Larger Benches being squarely applicable, followed the same. Such application of mind being abysmally absent, the impugned order is unsustainable and has to be set aside to the extent it relates to directions for convening of the meetings of Unsecured Creditors of Appellant No. 4 and the meetings of the Equity Shareholders, Secured and Unsecured Creditors of Appellant No.5. The matter is remanded to the Tribunal for fresh consideration of the first joint motion application preferred by the Applicants/Appellants having regard to the settled position of law and the views and precedents of Coordinate or Larger Benches of the Tribunal - Appeal allowed by way of remand.

Summary

Issues:
Appeal under Section 421 of the Companies Act, 2013 regarding dispensation of meetings of Unsecured Creditors and Shareholders in a scheme of arrangement/amalgamation between wholly owned subsidiaries and their holding company.

Analysis:
1. The appeal arose due to the declining of the prayer seeking dispensation of meetings of Unsecured Creditors and Shareholders in a scheme of arrangement/amalgamation. Appellants argued that the Tribunal ignored settled legal precedents and judgments on the subject, including those from other benches of the National Company Law Tribunal.

2. The Appellants contended that judicial discipline required the Tribunal to follow judgments pronounced by other benches on the same subject. They cited various judgments, including a three-member bench judgment of the NCLT, Kolkata, praying for setting aside the impugned order and directing the Tribunal to pass an order in accordance with the law and previous judgments.

3. The Appellants highlighted judgments of Coordinate Benches that were ignored by the Tribunal. They referenced cases where meetings of shareholders and creditors were dispensed with based on specific criteria such as positive net worth and no compromise to creditors.

4. The principle of judicial discipline was emphasized, stating that a Coordinate Bench must follow the law enunciated by another Coordinate Bench. The Tribunal was expected to refer the matter to a larger bench if it felt the need for reconsideration, rather than overruling the earlier judgment without due process.

5. The Tribunal's decision was challenged based on the argument that the proposed scheme of amalgamation between the Holding Company and its Subsidiaries complied with the provisions of the Companies Act, 2013. The Appellants sought dispensation of meetings based on written consents obtained from relevant stakeholders.

6. The Appellants contended that the impugned order was per incuriam as it did not consider the legal precedents and views of Coordinate Benches, which were binding. They argued that the Tribunal should have followed established legal principles and precedents in dispensing with the meetings of shareholders and creditors.

7. The Tribunal's exercise of discretion in declining the first motion related to convening meetings of Unsecured Creditors and Equity Shareholders was deemed unsustainable. The Tribunal was expected to apply its mind in light of judicial precedents and views of Coordinate or Larger Benches, which were not adequately considered in the impugned order.

8. The appeal was allowed, setting aside the impugned order to the extent it related to convening meetings of Unsecured Creditors and Equity Shareholders. The matter was remanded to the Tribunal for fresh consideration in line with established legal principles and precedents.

This detailed analysis of the judgment highlights the legal arguments, principles of judicial discipline, and the application of law in the context of dispensation of meetings in a scheme of arrangement/amalgamation under the Companies Act, 2013.