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TMI Blog2005 (2) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... mani, learned advocate appearing for the applicant-Company has prayed for time to work out the modality of place and time of convening the meetings. The Court, however, insisted that the applicant should first satisfy the Court with regard to the issuance of directions for convening the meetings. At this stage, Mr. Sandeep Singhi, learned advocate appearing for UTI Bank in a winding up petition filed against applicant-Company, who was present in the Court, has submitted that before passing any order in this application, a copy of the application should be furnished to him and he may be heard in the matter. Accordingly, the applicant was directed to serve the copy of this application to Mr. Sandeep Singhi, the learned advocate for UTI Bank as well as for Bank of Karnataka, another petitioning creditor and matter was adjourned to 22-2-2005. 3. On receipt of the copy of the application, Mr. Singhi has filed his appearance in this application on behalf of UTI Bank and also placed on record the affidavit-in-reply raising objections against issuance of any direction for convening the meetings. 4. On the basis of this affidavit-in-reply, Mr. Singhi has submitted that the objector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the present scheme. Exim Bank was agreeable provided its unsecured loans are considered for restructuring in the same lines as provided for the secured lenders. UTI has communicated that the scheme would be acceptable provided there is 100 per cent repayment of principal debt. Mr. Singhi has further submitted that in the category of unsecured lenders more than 25 per cent in value of the unsecured lenders have objected to the present scheme as being proposed by way of the present company application. He has further submitted that as the scheme has already been deliberated and discussed by the lenders and the same being objected by more than 25 per cent value of the unsecured lenders, the scheme is already rejected by the unsecured lenders and that the applicant has no requisite majority in the said category. To provide strength to his submission, Mr. Singhi has pointed out that in number of matters, the Court permits the applicants for dispensation with the meetings either of creditors or shareholders on production of their consent letters. Similarly, when the Company failed to procure the requisite majority of unsecured creditors at the meeting called for by ARCIL, the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... want of requisite majority, there will be no question of sanctioning the scheme by this Court. If the resolution is passed by the requisite majority, the Company in the present case or the sponsor of the scheme in general will have to file substantive Company Petition for getting sanction to the scheme. The Court applies its mind at that stage and after admission of the petition, issues notices to the interested parties, including Central Government, Official Liquidator etc. depending upon the nature of the Scheme and also passes an order for public advertisement. At the time of final hearing of the petition, the Court considers the objections to the scheme raised by the objectors and goes into the merits of the scheme. Since this stage has not yet come, the Court should reject or overrule all these objections and issue the directions for convening the meetings. In support of his submissions, Mr. Soparkar has relied on the decision of this Court in the case of Gujarat Kamdar Sahakari Mandal v. Ramkrishna Mills Ltd. [1998] 92 Comp. Cas. 692 (Guj.) and the decision of the Hon ble Supreme Court in the case of Rainbow Denim Ltd. v. Rama Petrochemicals Ltd. [2003] 116 Comp. Cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as prayed for, due to the following reasons or on the following grounds. 13. The first issue which arose before the Court for its consideration is as to whether the proceedings for seeking directions to convene the meeting are ex parte proceedings and whether other parties may have any right of audience in the said proceedings. For this purpose, provisions contained in rules 67, 68 and 71 are required to be looked into. Rule 67 deals with Summons for directions to convene a meeting. It reads as under : "67. Summons for directions to convene a meeting - An application under section 391(1) for an order convening a meeting of creditors and/or members or any class of them shall be by a Judge s Summons supported by an affidavit. A copy of the proposed compromise or arrangement shall be annexed to the affidavit as an exhibit thereto. Save as provided in rule 68 hereunder, the summons shall be moved ex parte. The summons shall be in Form No. 33, and the affidavit in support thereof in Form No. 34." Rule 68 carves out an exception. It deals with Service on Company. It reads as under : "68. Service on Company - Where the company is not the applicant, a copy of the summ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not specifically provide for such notice to them, rule 9 of Rules enables the Company Court in the exercise of its inherent powers to issue directions for service of notice upon the persons concerned or interested. The Court, therefore, held that the nature of function exercised in the matter before the Court under section 391(1) is undoubtedly a judicial function and both the Central Government and the shareholders are entitled to notice. 15. A reference is also invited to the decision of the Bombay High Court in the case of Vasant Investment Corpn. Ltd. (supra) wherein it is held that merely because a rule makes the provision for ex parte application, it cannot debar the party interested in the action from placing its view point that the proposed order should or should not be made. The interest of justice requires that if a party desires to make any submission, even at the ex parte stage, the Court should hear him. 16. Precisely for this reason and keeping these judicial pronouncements in mind, the Court has directed the applicant vide its order dated 4-2-2005 to supply a copy of the application to the learned counsel appearing for the petitioning creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the stage of issuance of direction to convene the meeting, whether the said observations are confining to the facts of that case only or it lays down any precedent. 19. Mr. Sandeep Singhi, however, has submitted that the detailed facts are found in the judgment of Punjab Haryana High Court wherein, while deciding the application, the learned Judge has observed that it is patently a device adopted to transfer certain assets including immovable property without due process of law. No consideration was being passed nor any transfer deed executed. This must be taken to be a device thus adopted to defeat the normal provisions of law. Secondly, despite the limited jurisdiction of the Court, when on the face of it the scheme did not appear to be in public interest and was defeating the provisions of law, no useful purpose would be served by giving permission for calling of the meetings of the shareholders and the creditors. 20. Since the learned Company Judge has gone into the merits of the scheme at the stage of issuance of directions, the Hon ble Supreme Court has observed that at this stage, the Court is not supposed to go into the merits of the matter. 21. Even while c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before this Court and at this stage, the Court would certainly consider these aspects of the scheme and would also go into the merits of the scheme. The Court, therefore, inclines to issue directions to convene the meeting and accordingly, the Court hereby issues the following directions : (1)That Four separate meetings of the secured creditors with first charge or class A creditors, secured creditors with second charge or class B creditors, other creditors or class C creditors of the applicant-company shall be convened and held at Hotel Fortune Landmark , Usmanpura, Ashram Road, Ahmedabad, on Tuesday, 22nd March of 2005 at 11.00 a.m., 12.30 p.m., 2.00 p.m. and that of the shareholders of the applicant-company shall be convened and held at Rajpath Club Limited, Sarkhej-Gandhinagar Road, Ahmedabad on Monday, the 28th March, 2005 at 11.00 a.m. respectively for the purpose of considering, and if thought fit, approving with or without-modifications, the scheme of arrangement and compromise of the applicant-company with its secured creditors with first charge, secured creditors with second charge, other creditors and shareholders. (2)That at least 21 clear days before the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge, other creditors and shareholders shall be 3 (three), each creditor and shareholders present in person. (7)That voting by proxy is permitted provided that the proxy in the prescribed form and duly signed by the person entitled to attend and vote at the aforesaid meeting or by his authorised representative, is filed with the applicant-company at its registered office at Ram Nivas-1, Khanpur, Ahmedabad-380 001, not later than 48 hours before the said meeting. (8)That the value of the vote of each secured creditors with first charge, secured creditors with Second charge, other creditors and Shareholders of the Company shall be equal to the amount of debt advanced by such creditor to the Company or amount of the capital subscribed by such shareholders to the Company as the case may be, and this shall be in accordance with the records or registers of the applicant-Company (subject to reconciliation of accounts) as on the cut-off date as per the scheme and where the entries in the records or registers are disputed, the Chairman of the meeting shall determine the value or number for the purposes of the meeting and his decision in that behalf is subject to final determination b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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