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TMI Blog2004 (3) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... the case may be, and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company." 3. Company Petition No. 138 of 2003 is a petition under sections 391(2) and 394 of the Act for sanctioning the scheme of amalgamation of companies, namely, Swift Formulations (P.) Ltd. and Mukur Pharmaceuticals Co. (P.) Ltd., with another company, namely, Ind-Swift Ltd. 4. As per the provisions of sub-section (2) of section 391 of the Act, a majority in number representing three-fourth in value of the creditors/shareholders present and voting at the meeting, has to agree to this arrangement. In this case, the meetings of unsecured creditors/share-holders of the transferee-company were held on 22nd April, 2003. The meeting of unsecured creditors was attended by 17 creditors representing credit of the value of Rs. 15,48,77,556. The total value of unsecured creditors of this company is Rs. 27,19,01,000. The arrangement was unanimously approved. Similarly, in the meeting of the shareholders, 38 shareholders representing shares of the value of Rs. 1,25,17,560 were present at the meeting. 37 shareholders voted for approval of the arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany proposes to enter into a compromise or arrangement which is likely to affect the interest of all the creditors/shareholders, their interest needs to be safe-guarded. It is for this purpose that a larger majority is required to approve such a compromise as arrangement as per sub-section (2) of section 391 of the Act. ( ii )A plain reading of this provision clearly shows that an arrangement requires approval of the majority in the following manner : ( a ) It must be approved by majority in number of the persons present and voting either in person or, where the proxies are allowed, by proxy. ( b )The above majority in number must also represent three-fourth in the value of creditors/shareholders present and voting. The above provision nowhere provides that the majority, in number should represent three-fourth of the total value of creditors/shareholders. If such an interpretation was to be made, the words present and voting would become redundant. ( iii )Under the Indian Companies Act, 1913 the provision corresponding to sub-section (2) of section 391 of the Act was sub-section (2) of section 153, which reads as under : "(2) If a majority in number representing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the English law and, thus, the base for determining the three-fourth value has to be the value of shares/credits held by the members who are present and voting at the meeting and not the total value of the shares/credits of the company. ( v )The Companies Act, 1948, was superseded by the Companies Act, 1985, wherein an identical provision was made in sub-section (2) of section 425, which reads as under : "(2) If a majority in number representating three-fourths in value of the creditors or class of creditors or members or class of members (as the case may be), present and voting either in person or by proxy at the meeting, agree to any compromise or arrangement, the compromise or arrangement, if sanctioned by the court, is binding on all creditors or the class of creditors or on the members or class of members (as the case may be), and also on the company or, in the case of a company in the course of being wound up, on the liquidator and contributories of the company." In this provision again, the three-fourth value is required to be calculated in respect of the value of shares/credits represented by the persons who are present and voting at the meeting. ( vi )In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remaining 50 because there would not be a majority in number. The same principle applies to creditors. It will be seen that the majorities are of those who vote, not of those entitled to vote nor of those who are present. Thus, shareholders who are not present in person or by proxy, or who, although present, do not vote, may be ignored. However, this is not the whole requirement, because in addition the court requires to be satisfied that the class is fairly represented. If, for instance, there were altogether 10,000 shareholders holding 10,000 shares in all, the court would be unlikely to be satisfied by the statutory majorities at a meeting at which 10 members holding 100 shares in all were present and voted. " [Emphasis supplied] ( viii )In Gower s Principles of Modern Company Law, 6th edn., at p. 585, the scope and meaning of the concept of "majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present and voting", has been explained by giving an illustration as under : "An ordinary resolution is one passed by a simple majority of those voting, and is used for all matters not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved by the proper number of creditors required by the Act. The 2nd section of the Act provided that the meeting of the company s creditors may approve and sanction the agreement : "If a majority in number representing three-fourths in value of such creditors, or class of creditors, present either in person or by proxy at such meeting, shall agree to the arrangement or compromise, and the agreement or compromise shall, if sanctioned by an order of the court, be binding on all such creditors or class of creditors (as the case might be), and also on the liquidators and contributories of the company." The question, therefore, is whether "the majority representing three-fourths in value is to be the majority of all the creditors, in which case the 120,002, 12s, does not constitute three-fourths of 1,70,000 or the majority representing that value of the creditors present at the meeting "? In the later case, all the creditors but one, for a very small amount, approved the agreement. We say that the clause in the Act is satisfied by the sanction of three-fourths in value of the persons present at the meeting, and this was decided by Your Lordship in Tunis Railway Co., In re ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority present and voting necessarily mean the value of the valid votes and out of the same whether the resolution has been passed with three-fourth the majority". The learned counsel pointed out that the value of the votes in favour of the arrangement was Rs. 1,83,39,59,275, which was not three-fourth of Rs. 2,53,36,43,491, i.e., the value represented by the 18 creditors who were present in the meeting. This clearly shows that the base value for computation was only in respect of the creditors who were not only present but who had cast a valid vote. ( xi )Before the Bombay High Court in Vasant Investment Corpn. Ltd. v. Official Liquidator, Colaba Land Mill Co. Ltd. [1981] 51 Comp. Cas. 20, the scheme was unanimously approved at a meeting of shareholders where 95 shareholders holding a total number of 30,675 shares out of a total of 49,000 shares, were present. Thus, these 95 shareholders represented approximately 62 per cent of the shares of the company. The contention of the Official Liquidator that since the shareholders, who were present at the meeting represented only 62 per cent share, it was necessary and in the interest of justice that the views of rest of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned scheme is to supply by recourse to the procedure thereby prescribed the absence of that individual agreement by every member of the class to be bound by the scheme which would otherwise be necessary to give it validity [ see J K (Bombay) (P.) Ltd. v. New Kaiser-I-Hind Spg. Wvg. Co. Ltd. [1970] 40 Comp. Cas. 689 (SC).] "(p. 29) ( xii )From the facts of this case, it is evident that three-fourth majority envisaged under section 391(2) of the Act has to be of the value of the creditors present and voting and not of the total value of the creditors. The Madras High Court in Nods Worldwide Ltd., In re [2002] 109 Comp. Cas. 891 where also, the arrangement was approved in a meeting which was attended by 66 out of total of 300 shareholders, who represented 46.21 per cent of the paid-up capital of the transferee-company, it was held that the requirement of section 391 of the Act stood complied with. It has been observed as under : "...Those who attended the meeting, controlled 46.21 per cent of the paid-up capital of the transferee-company and were almost unanimous in according approval of the scheme. The requirement of section 391 of the Companies Act, 1956 regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion "present and voting" in this context had come up for consideration before the Madras High Court in D. Jayaraman v. Govt. of Tamil Nadu AIR 1987 Mad. 215. On 13th May, 1986, a Government Resolution was moved in the Legislative Assembly for absolution of the Legislative Council which came up for discussion on the very next day, i.e., 14th May, 1986. The members present in the House on that date were 222. However, before the voting took place, 60 members belonging to Congress-I and lone GKNC member withdrew from the House. The resolution was passed with 136 votes in favour and 25 votes against it. The question for consideration was as to whether 136 votes constituted "two-thirds of the members of the Assembly present and voting". The Madras High Court held that "by a plain reading of the article, the words "present and voting" occurring in article 169(1) would mean only those who were physically present and voting. It will not include those who withdrew from the House at the time of voting". He, therefore, contended that the three-fourth majority for the purposes of section 391(2) of the Act has also to be construed in the same manner from out of the value of the creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guard has been provided. In other words, the resolution has to be passed not only by a majority in number of the persons present and voting but additionally such majority must represent three-fourth of the value of shares/credits held by the persons-present and voting. He pointed out that in the corresponding provision of sub-section (2) of section 153 of the Indian Companies Act, 1913 (which has already been reproduced in the earlier part of this judgment), the requirement of three-fourth majority in value had to be seen in relation to the value of the shareholder s creditors who were present either in person or by proxy. It was not necessary that such person should also have participated in the voting. He submitted that as per the Company Law Committee Report, 1952, it was recommended that the words "and voting" between the words present and either be added. The object of this amendment was explained so as "to ensure that decisions in regard to compromises and arrangements are taken by a majority of three-fourths of the members present and voting in class meetings". It was in this background that the provisions of section 391(2) of the Act were enacted. If this provision were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settled rules of construction. If the intention was to have three-fourth majority of the total value, the provisions would have been worded accordingly. In our view, the language of section 391(2) of the Act is totally unambiguous and a plain reading of this provision clearly shows that the majority in number by which a compromise or arrangement is approved should represent three-fourth in value of the creditors/shareholders who are present and voting and not of the total value of the shareholders or creditors of the company. 14. We may usefully refer to the following observations of the Supreme Court in Sajjan Singh v. State of Rajasthan AIR 1965 SC 845, in the context of article 169(1) of the Constitution : "169. Abolition or creation of Legislative Councils in States. (1) Notwithstanding anything in article 168, Parliament may by law provide for the abolition of the Legislative Council of a State having such a Council or for the creation of such a Council in a State having no such Council, if the Legislative Assembly of the State passes a resolution, to that effect by a majority of the total membership of the Assembly and by a majority of not less than two-third of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and unambiguous. A statute is an edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent. Words and phrases are symbols that stimulate mental references to referents. The object of interpreting a statute is to ascertain the intention of the Legislature enacting it ( See Institute of Chartered Accountants of India v. Price Waterhouse [1997] 6 SCC 312). The intention of the Legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been said. As a consequence, a construction which requires for its support, addition or substitution of words or which results in rejection of words as meaningless has to be avoided. As observed in Crawford v. Spooner [1846] 6 MOO PCC 1 Courts cannot aid the Legislatures defective phrasing of an Act, we cannot add or mend, and by construction make up deficiencies which are left there ( See State of Gujarat v. Dilipbhai Nathjibhai Patel [1998] 3 SCC 234. It is contrary to all rules of construction to read words into an Act unless it is absolutely necessary to do so ( See Stock v. Frank Jones (Tipton ..... X X X X Extracts X X X X X X X X Extracts X X X X
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