EXTENSION OF ANNUAL GENERAL MEETING UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016

[Mr. M. GOVINDARAJAN]

Section 96 of the Companies Act, 2013 (‘Act’ for short) provides that every company other than a One Person Company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it, and not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next: in case of the first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months, from the date of closing of the financial year.    The Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.  If the Registrar of Companies rejects the application for extension of time appeal may be filed before the National Company Law Tribunal (‘Tribunal’ for short).

Thus the power of giving extension  of time for conducting the Annual General Meeting of a company vests on the Registrar of Companies on filing application by the company concerned before the Registrar of Companies having jurisdiction.

The Insolvency and Bankruptcy Code, 2016 (‘Code’ for short) was enacted to the ease of doing insolvency resolution process.  The financial creditor or an operational creditor or the corporate applicant itself may file an application in the prescribed form for resolution process.  For the purpose of resolution process, interim resolution professional/resolution professional is appointed to take care of the resolution process coordinating with the company and committee of creditors in toto.

The issue to be discussed in this article whether the National Company Law Tribunal, in the shoes of Adjudicating Authority under the Code is having power to order for the extension of time for the conduct of Annual General Meeting of a company which is under insolvency resolution process.

In ‘Punjab National Bank V. James Hotels Limited’ – 2017 (4) TMI 1267 - NATIONAL COMPANY LAW TRIBUNAL, CHANDIGARH, the Punjab National Bank as financial creditor filed an application under section 7 of the Code against the corporate debtor.  The said application was admitted by the Adjudicating Authority.  The applicant to this petition, Navneet Gupta was appointed as the interim resolution professional.   He was later appointed as the resolution professional in the first meeting of the Committee of Creditors.

The due date for conducting Annual General Meeting for the company of the corporate debtor was 30^th September, 2017.  The interim resolution professional started collecting and collating information about the financial condition of the corporate debtor, the process of which took some time due to scattered nature of the transactions.  The resolution process has been made further complicated by the non cooperation of the suspended Board of directors as the complete information was not provided despite repeated reminders.  The suspended Board of Directors also filed cases against the applicant, which he had to defend.  One the shareholders also filed miscellaneous application before the Adjudicating Authority, which was also defended and thus consumed time of the resolution process.

The applicant brought the facts of the case as detailed before the Adjudicating Authority-

• Conducting of AGM is a tedious process there being 3500 shareholders of the company;
• Number of reports regarding the functioning of the company have to be prepared and to be served upon each of the shareholder;
• Keeping in view of the above the applicant applied to the Registrar of Companies for seeking further time to hold AGM;
• The Registrar of Companies rejected the request of the applicant;
• The order passed by the RoC is without application of mind or affording any opportunity of hearing;
• The matter regarding holding of the AGM was discussed in the meeting of the committee of creditors and the above difficulty was brought to the notice of the committee;
• In the committee it was resolved that an application should be filed before the Tribunal for seeking extension of time for holding AGM, which is enclosed as Annexure to the application;

The shareholder contended the following before the Adjudicating Authority-

• He has no problem with the extension of time, but the procedure adopted by the applicant for approaching the Adjudicating Authority instead of filing an appropriate application before the National Company Law Tribunal under the Companies Act, 2013 which should not be accepted.

The Registrar of Companies submitted the following before the Adjudicating Authority-

• No reasons were given by the resolution professional in the application for seeking extension of time for holding AGM;
• It was only a one line application;
• There is a huge amount of fee, which the company has defaulted in depositing in the office of RoC due to increase of the capital from ₹ 14 crore to ₹ 52 crore in the year 2011;
• If the amount of the above said fee is paid, the RoC may not have difficulty in extending the period of time for holding AGM if fresh application is filed on such deposit;
• The remedy to the applicant against the order passed by the RoC under section 96 of the Act is to approach the Adjudicating Authority, but elsewhere;
• The application has to mention the special reasons in the application for extension of time as required by third proviso to section 96 of the Companies Act, 2013;

The Adjudicating Authority did not accept the arguments made by both the parties, since the declaration of moratorium in terms of section 14 of the Code. 

The Adjudicating Authority held that section 97 of the Act the Tribunal can call or direct the calling of AGM of the company on application of any member of the company.  section 97 of the Act is not at all attracted because the present petition is a case of seeking of extension of time and not for calling AGM on any ground nor this an application by a member of the company, but by the resolution professional appointed under the Code.

The Adjudicating Authority was of the view that an application by the resolution professional, who is the creature of the Code and for any difficulty he has to apply to the Adjudicating Authority which admitted the petition and directed the initiation of resolution process.  The Code is a complete code in itself and the Adjudicating Authority undoubtedly can exercise the powers for extension of time for holding of AGM in view of the difficulties expressed by the Resolution Process.   The issue raised by the applicant-resolution professional clearly arises out of or in relation to the insolvency resolution of the corporate debtor under the Code.  In view of the above the Adjudicating Authority  found that the present petition is a fit case where the time for holding of the AGM should be extended in exercise of the powers of this Adjudicating Authority under section 60(5)(c) of the Code.  The applicant sought for extension of time up to 31^st December, 2017 and the Adjudicating Authority found it that it is a reasonable order.  The Adjudicating Authority allowed the application and allowed the time for holding AGM  up to 31^st December, 2017.