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2012 (12) TMI 536 - HC - Companies LawWinding up petition - Whether scheme u/s 391-392 of the Companies Act is maintainable in a winding up petition filed by the Reserve Bank of India under Section 45MC(1) of RBI Act, 1934? - Held that - If the scheme contains any term or condition which is in derogation of any statutory provision, the same cannot be sanctioned. It is a part of public policy itself that statutory provisions are to be followed and are not to be disregarded or contravened. Therefore, a scheme which ignores or side-steps statutory provisions would clearly be opposed to public policy. Therefore, while a scheme under Sections 391/392 of the Companies Act could be considered by the company court even during the pendency of the winding up petition filed by RBI under Section 45MMC of the RBI Act, such a scheme cannot be sanctioned if it is in violation of any of the statutory provisions including the provisions of Chapter III-B of RBI Act. Whether criminal and income tax proceedings pending against the company and its directors & quasi-judicial orders passed by a statutory authority like SEBI could be stayed by the company court while sanctioning a scheme under Sections 391-392 of the Companies Act, 1956 - Held that - Suit or other legal proceeding as appearing in Section 446(1) as also the expression suit or proceeding under Section 446(2) of the Companies Act do not include criminal proceedings. The same would be the position with regard to the expression suit or proceeding as appearing in Section 391(6) of the Companies Act. The consequence of this would be that a company court while examining or sanctioning a scheme under Section 391/392 of the Companies Act cannot stay any criminal proceedings as that is beyond the scope of the powers and jurisdiction of the company court. In Krishna Texport Industries Ltd. Versus DCM Ltd. (2008 (5) TMI 425 - HIGH COURT OF DELHI) an unequivocal view was taken that Section 391(6) of the Companies Act does not envisage either quashing or stay of criminal cases against the company or its Directors. Such criminal proceedings include those under Section 138 of the Negotiable Instruments Act, 1881. Statutory authority like SEBI or orders passed by RBI and the ITA under special enactments cannot be set aside while sanctioning a scheme under Section 391 of the Companies Act. No stay of any criminal or income tax proceedings can be ordered by the company court while considering an application under Sections 391/392 of the Companies Act, 1956. Therefore, the scheme which entails a direction to SEBI to revoke the orders passed under Section 11B of the SEBI Act could not have been sanctioned in law. Similarly, directions regarding vacation or stay sine die of all criminal cases could not have been given by the company court. Directions could not be given to the CBI to release the passport of the propounders of the scheme as also of the Ex-Directors of CRB Capital nor a direction could be given to CBI to hand over all records and documents of CRB Capital including records of fixed deposits, particularly, in view of the fact that the criminal cases were pending against the said Directors/ Ex-Directors of CRB Capital - the provisions of SEBI Act and RBI Act being special and complete codes in themselves with regard to their respective subject matters would over-ride the provisions of Companies Act in case there is any inconsistency between the said provisions Whether the scheme formulated in the instant case is bona-fide, feasible and fair? - Held that - It is apparent that the reliefs and concessions as sought under the scheme form an integral part of the scheme. If a majority of reliefs and concessions sought in law cannot be granted, the scheme itself would be unworkable - Several directions including the direction in respect of criminal cases and stay of demands and vacation of ex-parte orders insofar as income tax authorities are concerned also the release of the passport of the propounders of the scheme would probably be contrary to the direction given by the criminal court inasmuch as that may have been a condition for grant of bail. Such a direction, once again, may be contrary to law, thus scheme as formulated in the present case is not bonafide, feasible or fair. Whether grounds for winding up of the Company under Section 45MC (1) of Reserve Bank of India Act, 1934 as made out in the winding up petition exist. If so, to what effect? - Held that - If the scheme cannot be successfully implemented, then the winding-up petition filed by the RBI in respect of CRB Capital would revive. It is obvious that the company court has not examined the winding-up petition of RBI on merits - set aside the impugned judgment as also the scheme and remit the matter to the company court for consideration of the winding-up petition in accordance with law - no bar on CRB Capital propounding another scheme during the pendency of the said winding-up petition or even thereafter, in case winding-up is ordered.
Issues Involved:
1. Maintainability of a scheme under Sections 391-392 of the Companies Act during a winding-up petition filed by the RBI under Section 45MC(1) of the Reserve Bank of India Act, 1934. 2. Whether a scheme under Sections 391-392 of the Companies Act can set aside quasi-judicial orders passed by a statutory authority like SEBI. 3. Whether criminal and income tax proceedings pending against the company and its directors could be stayed by the company court while sanctioning a scheme under Sections 391-392 of the Companies Act, 1956. 4. Whether the scheme formulated in the instant case is bona fide, feasible, and fair. 5. Whether grounds for winding up of the company under Section 45MC (1) of the Reserve Bank of India Act, 1934 as made out in the winding-up petition exist, and if so, to what effect. Detailed Analysis: Issue 1: Maintainability of a Scheme under Sections 391-392 of the Companies Act during a Winding-up Petition filed by the RBI under Section 45MC(1) of the RBI Act The court examined whether an application for sanctioning a scheme under Sections 391/392 of the Companies Act is maintainable during the pendency of a winding-up petition filed by the RBI under Section 45MC(1) of the RBI Act. The RBI contended that the provisions of Chapter III B of the RBI Act, which include Section 45MC, override all other laws, including the Companies Act, by virtue of Section 45Q. Therefore, the RBI argued that the company court should have considered the winding-up petition on merits before sanctioning any scheme. The court, however, concluded that while a scheme under Sections 391/392 of the Companies Act could be considered during the pendency of a winding-up petition filed by the RBI, such a scheme cannot be sanctioned if it is in violation of any statutory provisions, including the provisions of Chapter III-B of the RBI Act. Issue 2: Whether a Scheme under Sections 391-392 of the Companies Act can Set Aside Quasi-Judicial Orders Passed by a Statutory Authority like SEBI The court examined whether the scheme could set aside quasi-judicial orders passed by statutory authorities like SEBI. The court noted that the SEBI Act is a special and later Act compared to the Companies Act and that it is a complete code in itself. Therefore, orders passed under the SEBI Act by SEBI would have to be decided and determined in terms of that Act and cannot be interfered with by the company court while sanctioning a scheme under Section 391 of the Companies Act. The court concluded that quasi-judicial orders passed by statutory authorities like SEBI cannot be set aside while sanctioning a scheme under Section 391 of the Companies Act. Issue 3: Whether Criminal and Income Tax Proceedings Pending Against the Company and its Directors Could be Stayed by the Company Court while Sanctioning a Scheme under Sections 391-392 of the Companies Act, 1956 The court examined whether criminal and income tax proceedings could be stayed by the company court while sanctioning a scheme under Sections 391/392 of the Companies Act. The court referred to the Supreme Court's decision in S.V. Kandeakar v. V.M. Deshpande, which held that the Income Tax Act is a complete code and that assessment proceedings for computing the amount of tax cannot be stayed by the winding-up court. Similarly, the court held that criminal proceedings cannot be stayed by the company court as they are beyond the scope of the powers and jurisdiction of the company court. The court concluded that no stay of any criminal or income tax proceedings can be ordered by the company court while considering an application under Sections 391/392 of the Companies Act, 1956. Issue 4: Whether the Scheme Formulated in the Instant Case is Bona Fide, Feasible, and Fair The court examined whether the scheme formulated in the instant case was bona fide, feasible, and fair. The court noted that the reliefs and concessions sought under the scheme formed an integral part of the scheme. Since many of these reliefs and concessions could not be granted in law, the scheme itself would become unworkable. The court also noted that the scheme contravened the provisions of the RBI Act, particularly Section 45QA. Therefore, the court concluded that the scheme as formulated in the present case was not bona fide, feasible, or fair. Issue 5: Whether Grounds for Winding Up of the Company under Section 45MC (1) of the Reserve Bank of India Act, 1934 as Made Out in the Winding-Up Petition Exist, and if so, to What Effect The court noted that the impugned judgment itself stated that if the scheme could not be successfully implemented, then the winding-up petition filed by the RBI would revive. Since the scheme could not be sustained in law, the winding-up petition would automatically get revived. The court set aside the impugned judgment and the scheme and remitted the matter to the company court for consideration of the winding-up petition in accordance with law. The court also clarified that there was no bar on CRB Capital propounding another scheme during the pendency of the winding-up petition or even thereafter, provided the scheme did not contravene any statutory provisions and was in public interest. Conclusion: The appeals were allowed to the extent that the impugned judgment and the scheme were set aside, and the matter was remitted to the company court for consideration of the winding-up petition in accordance with law.
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