2021 (6) TMI 599 - Tri - Companies Law

Dispensation with shareholder' meeting - section 230 of the Companies Act, 2013 - whether or not shareholders' meetings could be dispensed with in the first motion of the Scheme Application? - HELD THAT - It has been mentioned in subsection 9 of Section 230, the Tribunal is given discretion to dispense with calling of a creditors meeting or class of creditors meetings, where such creditors or class of creditors having at least 90% value agree and confirm by way of affidavit to the scheme of compromise or arrangement. But this grant of dispensation has not been extended to the shareholders either in subsection 9 or any other subsection of Section 230 of the Companies Act, 2013. The discretion given to NCLT to dispense with meetings is only limited to creditors meetings but not to shareholders meetings when mandate is such, I don't know how NCLT will get discretion to dispense with holding shareholders meetings. If at all shareholder's meeting is not held, it is quite obvious notice will not go to various regulating authorities to the proposal given by the company. Because of this, the Regulating Authorities will not get a chance to raise their objections before a decision is taken by the company (shareholders) to pass a resolution to the scheme proposed by the Board of Directors - If the shareholder's meeting is not held as stated under Section 230(3) whole process envisaged under Section 230(3)(4)(5)(6) will become redundant, the proposal of dispensation of shareholders meeting is in violation of the procedure laid under Section 230 of the Companies Act, 2013. Whether the concept of two judges and three judges is applicable to NCLT? - HELD THAT - NCLT is only a fact finding Tribunal constituted under Companies Act 2013, wherein it is categorically mentioned that NCLT shall be constituted with one judicial member and one technical member. When such is the case, is there any scope to constitute three member bench by NCLT on its own? It has to act according to the jurisdiction given to it. It is not a constitutional court and not even a court having jurisdiction under section 9 of CPC to temper its powers beyond the scope and ambit of the Companies Act. The Act 2013 even envisages how to go about when difference of opinion comes in between judicial member and technical member. Of course in Service Tribunal cases, there is a ratio that orders should not be variant on one circular or memorandum given by any Government. Normally Service Tribunals pass orders saying covered case if facts are on the same circular or memorandum. It cannot be so with NCLT because facts in each case are different. It is understandable if any Bench passes an order dealing with an aspect that is not present in the statute, then it could be said that NCLT coordinate Bench order will have persuading effect. Thus, NCLT cannot dispense with holding meetings under section 230(1) of the Companies Act 2013 - application disposed off.

Issues Involved:
1. Whether shareholders' meetings can be dispensed with under Section 230 of the Companies Act, 2013.
2. The binding nature of larger bench decisions on coordinate benches within the NCLT.
3. The jurisdiction and authority of NCLT in constituting benches with more than two members.

Issue-wise Detailed Analysis:

1. Dispensation of Shareholders' Meetings under Section 230 of the Companies Act, 2013:

The primary contention was whether shareholders' meetings could be dispensed with under Section 230 of the Companies Act, 2013. The technical member opined that shareholders' meetings are mandatory as per the statute, whereas the judicial member believed that the tribunal has the discretion to dispense with such meetings if all shareholders consent to the scheme.

The technical member emphasized that Section 230(1) mandates the holding of shareholders' meetings and does not provide any discretion to dispense with them. He cited the Supreme Court's principle that legislative intent must be given effect, and redundancy should be avoided. The technical member referred to Section 230(9), which explicitly allows dispensation of creditors' meetings but does not extend this provision to shareholders' meetings. He argued that the legislative intent was clear in differentiating between creditors and shareholders, and the absence of a similar provision for shareholders indicates that their meetings cannot be dispensed with.

The judicial member, however, relied on precedents from the NCLT Calcutta and NCLAT, which had allowed the dispensation of shareholders' meetings if all shareholders consented. He argued that these precedents should be binding on other NCLT benches. The judicial member cited the principle of ratio decidendi, emphasizing that binding decisions of larger benches should be followed by coordinate benches.

Ultimately, the bench concluded that the language of Section 230(1) does not permit the dispensation of shareholders' meetings. The tribunal's discretion is limited to ordering or not ordering the holding of meetings, but not to dispense with them entirely. The bench highlighted that the legislative intent was to ensure transparency and participation of shareholders in corporate decisions, and any deviation from this mandate would undermine the purpose of the statute.

2. Binding Nature of Larger Bench Decisions on Coordinate Benches within NCLT:

The judicial member argued that the decision of a three-judge bench of the NCLT Calcutta, which allowed the dispensation of shareholders' meetings, should be binding on other NCLT benches. He cited the principle that decisions of larger benches should be followed by coordinate benches to maintain consistency and avoid conflicting judgments.

However, the bench clarified that the NCLT is a fact-finding tribunal with limited jurisdiction and must adhere to the statutory provisions of the Companies Act. The tribunal cannot overreach its jurisdiction or re-legislate the statute based on precedents that deviate from the clear mandate of the law. The bench emphasized that the statutory guidance provided in Section 230 is unambiguous, and the tribunal must implement the law as enacted by the legislature.

3. Jurisdiction and Authority of NCLT in Constituting Benches with More than Two Members:

The bench addressed the issue of whether the NCLT has the authority to constitute benches with more than two members. It was noted that the NCLT is constituted with one judicial member and one technical member as per the Companies Act, 2013. The act does not provide for the constitution of three-member benches by the NCLT itself.

The bench concluded that the NCLT must act within the jurisdiction and authority conferred upon it by the Companies Act. It cannot constitute benches with more than two members on its own, as this would be beyond its statutory mandate. The tribunal must adhere to the provisions of the Companies Act and cannot overreach its jurisdiction.

Conclusion:

The bench agreed with the technical member's view that shareholders' meetings cannot be dispensed with under Section 230(1) of the Companies Act, 2013. The tribunal emphasized the importance of adhering to the statutory provisions and the legislative intent behind the enactment. The decision highlighted the limited jurisdiction and authority of the NCLT and the need to maintain consistency with the statutory mandate. The issue was decided in favor of holding shareholders' meetings, with the applicant company directed to seek directions from the respective bench for holding such meetings.

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