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2020 (9) TMI 127 - Tri - Companies LawSanction of scheme of arrangement between the petitioner-company and its equity shareholders - petitioner states that the scheme of arrangement has been filed by the petitioner-company pursuant to the advice of the Bombay Stock Exchange to the petitioner by its letter dated August 22, 2013 - whether the scheme as presented can be construed as a scheme of arrangement under section 391 of the Companies Act, 1956 or under section 230 of the Companies Act, 2013? HELD THAT - The term arrangement envisaged by sections 391-394 of the Companies Act, 1956 as also sections 230-232 of the Companies Act, 2013, is a term capable of the widest import, is not res integra. The Legislature, in its infinite wisdom, deliberately did not get down to the task of marking delimiters to the term arrangement , aware as it was that arrangements can take on multiple hues and a bewildering assortment of forms. It is limited only by human ingenuity in finding solutions to corporate problems. Therefore, to make it conform to set parameters would be to do injustice to the statutory provisions, and this is certainly not what the lawmakers intended. In the light of settled position in law on the import of the term arrangement , which is of wide ambit and import, there is no basis to hold that the scheme as filed by the petitioner does not constitute as an arrangement between the petitioner-company and its members within the meaning of sections 391-394 of the Companies Act, 1956 or section 230-232 of the Companies Act, 2013. There are no restrictive covenants built into the language of sections 391-394 of the Companies Act, 1956 or sections 230-232 of the Companies Act, 2013 that would inhibit our considering the present scheme to satisfy the requirements of an arrangement within the meaning of those sections. Even if the scheme purports to rectify and regularise the allotments already made by the petitioner, there is no reason why the scheme should not be treated as an arrangement between the company and its shareholders. Objections of the RD and of the shareholder holding 0.00012 per cent. of the paid-up share capital of the petitioner-company - HELD THAT - The RD's objection is more on the procedural aspects than anything else. Procedural niceties would not be sufficient to deter us from considering the scheme. The RD has not raised any objection as regards any illegality in the scheme, or that it is against public policy, and therefore we overrule the said objections. Objections of the shareholder holding fifteen shares in the petitioner-company - HELD THAT - Having held that the scheme envisaged is an arrangement for the purposes of sections 391-394 of the Companies Act, 1956 and sections 230-232 of the Companies Act, 2013, it is now necessary to determine whether the objector has the necessary locus to object to the scheme - The admitted position is that the objector holds fifteen shares, representing 0.00012 per cent. of the paid-up share capital of the petitioner-company. This is below the threshold of ten per cent. stipulated in section 230(4) of the Companies Act, 2013. However, even so, we have proceeded to consider the objections. On being questioned by the Bench as to how rejection of the scheme will benefit him, Mr. Ashish Lalpuria stated that if the present scheme is rejected, then it is possible the petitioner-company may come out with a proposal in the future to buy-back the shareholding from the public. This is purely speculative. We are not inclined to leave any loose ends. Therefore, the objection cannot be sustained even on merits. Having thus repelled the last vestiges of challenge, we notice from the material on record that the scheme appears to be fair and reasonable and does not violate any provisions of law and is not contrary to public policy or public interest. BSE Ltd., has stated in its letter dated September 15, 2015 that there are no adverse observations. In the absence of anything inherently abhorrent in the scheme, we see no reason why the scheme should not have the imprimatur of this Tribunal.
Issues Involved:
1. Validity of the scheme of arrangement under sections 230-232 of the Companies Act, 2013. 2. Objections raised by the Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai. 3. Objections raised by a shareholder regarding the scheme's compliance with sections 230-232 of the Companies Act, 2013. 4. Determination of the objecting shareholder's locus standi. Issue-wise Detailed Analysis: 1. Validity of the Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013: The petitioner sought the Tribunal's sanction for a scheme of arrangement under sections 230 to 232 of the Companies Act, 2013. The scheme was unanimously approved by the shareholders and creditors of the petitioner-company. The rationale behind the scheme included converting partly paid-up shares to fully paid-up shares and issuing bonus shares to public shareholders. The Tribunal noted that the term "arrangement" is of wide amplitude and capable of multiple interpretations. The scheme, even if it involves rectifying past actions, falls within the ambit of "arrangement" as envisaged under sections 230-232 of the Companies Act, 2013. 2. Objections Raised by the Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai: The Regional Director (RD) opposed the scheme on several grounds, including: - The company acted on a legal opinion rather than the provisions of section 100 of the Companies Act, 1956. - Subscription by shareholders was less than 100 shares each. - The company claimed it did not receive a letter from the Bombay Stock Exchange (BSE) in 1999 and only became aware in 2012. - The scheme was proposed as per BSE's advice in 2013, which was not acceptable. - The RD argued that the scheme was a rectification of past actions rather than a new proposal. The Tribunal overruled these objections, stating that procedural issues should not deter the consideration of the scheme. The RD did not raise any objections regarding the legality or public policy aspects of the scheme. 3. Objections Raised by a Shareholder Regarding the Scheme's Compliance with Sections 230-232 of the Companies Act, 2013: Mr. Ashish Lalpuria, a shareholder, objected to the scheme, arguing that it did not fit within sections 230-232 of the Companies Act, 2013. He suggested that if the scheme were rejected, the company might propose a buy-back of shares from public shareholders. The Tribunal noted that the scheme was fair, reasonable, and did not violate any provisions of law or public policy. The Tribunal emphasized that the commercial wisdom of the parties supporting the scheme by the requisite majority should be respected. 4. Determination of the Objecting Shareholder's Locus Standi: The Tribunal examined whether Mr. Ashish Lalpuria had the locus standi to object to the scheme. The objector held fifteen shares, representing 0.00012% of the paid-up share capital of the petitioner-company, which was below the 10% threshold stipulated in section 230(4) of the Companies Act, 2013. Despite this, the Tribunal considered his objections on merits but found them speculative and without substantial benefit to the objector. Conclusion: The Tribunal concluded that the scheme of arrangement was fair, reasonable, and in compliance with legal provisions. It overruled the objections raised by the RD and the shareholder, sanctioned the scheme, and directed the petitioner to comply with necessary formalities, including lodging certified copies of the order with relevant authorities. The scheme was pronounced in open court and the file was consigned to records.
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