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TMI Blog2003 (10) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the DCM Limited (transferor company) and DCM Precision Limited respectively for convening the meetings of shareholders and creditors of the companies for approving the Scheme of Restructuring and Arrangement. 2. As per the prayers made in C.A. Nos. 1742 and 1743 of 2000, on 14-2-2000, this Court directed the convening of meetings of secured creditors, unsecured creditors shareholders of both the companies on 17th, 18th and 19th May, 2000 respectively. Notice of the said meetings were duly published in the manner prescribed under the Act and on 17th, 18th and 19th May, 2000, the meetings were held. In all the meetings of shareholders/creditors, the scheme was approved by more than the requisite majority of the three-fourth in number and value of the shareholders and the creditors of the companies and were accordingly reported to this Court by the Chairpersons of the said meetings. In the meeting of shareholders of DCM, 99.97 per cent of present and voting supported the Scheme. In the meeting of unsecured creditors of DCM, 99.59 per cent present and voting supported the Scheme. 91.63 per cent of the secured creditors present and voting supported the Scheme. In the meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( g )The impact of the Scheme as per the repayment plan shows that the debt settlement is spread over 9 years and most of the small entities will be paid in first 2 years of the Scheme as opposed to the larger secured entities such as the banks and financial institutions who are to be the recipients of back ended payments. ( h )The appointed days are : ( i )for restructuring of debits: 1-1-1999; ( ii )for demerger of Engineering Business: 1-4-2000 as approved in the meeting but modified to 1-4-2001 as per the separate order passed in CA No. 1789 of 2001; ( iii )the scheme while seeking the restructuring of the company DCM Limited also envisages paying of debts of creditors. 5. Thus the applicant company has submitted that the Scheme deserves to be sanctioned and approved by this Court as the requisite statutory majority as per the norms prescribed by Section 391(2) of the Act of not only the creditors both secured and unsecured, but all the shareholders present at the time of the meetings have overwhelmingly voted upon and approved the present scheme. It is also submitted that all the statutory procedures prescribed under Sections 391 and 394(4) of the Act and the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed in favour of the scheme; and ( f )In Cetex Petro Chemicals Ltd., In re [1992] 73 Comp. Cas. 298 (Mad.) it was held that it is for the members of the company to judge the benefits of a scheme and not for the Company Court. 7. In Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp. Cas. 792, the Hon ble Supreme Court held as under: "The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by section 391(1)( a ) have been held; that the scheme put up for sanction of the court is backed up by the requisite majority vote as required by section 391, sub-section (2); that the concerned meetings of the creditors of members or any class of them had the relevant material to enable the voters to arrive at informed decision for approving the scheme in question; that the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class; that all necessary material indicated by section 393(1)( a ) is placed before the voters at the concerned meetings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itors in opposing the scheme. Nonetheless it is essential that the scheme must be a fair and equitable one, though it is none of the business of the court to judge upon the commercial merits which in fact is the function of the creditors and members. ( ii )The scheme has not got to be scrutinized by the court with that much care with which an expert will scrutinize it, nor will it approach it in a carping spirit with a view to pick holes in it. If the majority is acting in a bona fide and honest manner, and in the interests of the class that it purports to represent, then, if the scheme is such as fair-minded person, reasonably acquainted with the facts of the case as prevailing at the time when the scheme was sponsored and approved, can regard it as beneficial for those whom the majority seeks to represent, then, unless there are some strong and cogent grounds to show that the scheme was conceived, designed or calculated to cause injury to others, the court will ordinarily sanction it, rather than reject it. While examining the scheme the court should, keeping in view all the aspects of the matter, prefer a living scheme to compulsory liquidation bringing about an end to a com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they have conveyed all interest and their claims are capable of being ascertained by any common system of valuation. The group styled as a class should ordinarily be homogeneous and must have commonality of interest and the compromise offered to them must be identical. ( xxiii )Generally speaking, the creditors of the company should be divided into three different classes, viz., secured creditors, preferential creditors and unsecured creditors. The workers of the company, each to the extent of the first Rs. 1,000 of his claim in winding up, would be a preferential creditor and indisputably they would form a separate and distinct class. Unsecured creditors will normally form a single class except where some of them are to be treated in a manner different from the rest and have different interests which might conflict. ****** ( xxv )The essential requirement of section 393(1)( a ) is that the creditors and members who are to assemble in the meeting should have advance information of the proposed scheme of compromise and arrangement and its effect on their interest as members and creditors. If the whole of the proposed scheme was annexed to the notice, anyone having a bare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have approved the proposed scheme of Restructuring and Arrangement by the requisite statutory majority and since the Central Government as well as the Official Liquidator have no objection to the grant of sanction to the proposed Scheme nor has any objection been found existing to the proposed Scheme, I do not find any legal impediment to the grant of sanction to the proposed Scheme of Restructuring and Arrangement. 11. Considering the averments explaining the contents of the Scheme and the other facts disclosed in this petition, it is found that: ( a )The statutory procedure for holding the meeting and formulation of the Scheme was complied with as per the requirement of section 391(1)( a ). ( b )It was approved by the requisite majority stipulated by section 391(2). ( c )There was relevant and adequate material before creditors and members so as to arrive at an informed decision. ( d )Section 393(1)( a ) s requirement of placing relevant material before the voters at the statutory meeting under section 391(1) was complied with. ( e )Requisite material has been placed before the Court by the propounder of the Scheme under section 391(2). ( f )There are no objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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