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TMI Blog2012 (12) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... . Mr Rajiv Bahl, for Official Liquidator Advocates who appeared in this case: For the Appellant Mr Neeraj Malhotra, Adv. with Mr Shourjya Mukherjee, Adv. For the Respondent Mr Sudhanshu Batra, Sr. Advocate with Mr Bhuvan Gugnani, Adv. for CRB Capital Markets Ltd. Mr Rajiv Bahl, for Official Liquidator Advocates who appeared in this case: For the Appellant Mr R.P. Bhatt, Sr. Adv. with Mr Ishaan Madaan and Mr Chirag M. Shroff, Adv. For the Respondent Mr Sudhanshu Batra, Sr. Advocate with Mr Bhuvan Gugnani, Adv. for CRB Capital Markets Ltd. Mr Rajiv Bahl, for Official Liquidator JUDGMENT BADAR DURREZ AHMED, J 1. In all these appeals the judgment dated 24.01.2006 delivered by the learned company Judge is under challenge. The appellants are aggrieved by the fact that the learned company Judge allowed the company petition No. 251/2002 filed on behalf of CRB Capital Markets Limited (the common respondent in all these appeals). CRB Capital Markets Limited (hereinafter referred to as 'CRB Capital') had filed the said company petition No. 251/2002 seeking sanction of a scheme under sections 391/392 of the Companies Act, 1956. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- "Provisions relating to Non-Banking Institutions receiving deposits and Financial Institutions." CRB Capital was provisionally classified as a loan company on 04.05.1993 and the classification status was changed to that of Equipment Leasing Company on 16.06.1993. 4. It is pointed out by the RBI that on 12.04.1993, based on the Shah Committee recommendations on the role of NBFCs a circular was issued to all the NBFCs advising them to get themselves registered with RBI if their net owned funds were more than Rs. 50 Lakhs. It is alleged that CRB Capital, although it had net owned funds of more than Rs. 50 Lakhs, did not apply for registration till the year 1996. CRB Capital made an application to RBI for registration only on 24.10.1996 and on receipt of the application RBI decided to inspect the company before registration. Inspections were carried out between November 13, 1996 and November 18, 1996 with reference to CRB Capital's financial position as on 31.03.1996. However, the inspection extended to the Mumbai office of CRB Capital and therefore the inspection was completed in its entirety only in January 1997. 5. During the inspection, according to RBI, several illegalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arging its obligations and liabilities. According to RBI, the reply submitted by CRB Capital made no mention of its assets and only spoke of its liability. 8. According to RBI, CRB Capital was also advised to prepare a plan indicating the month-wise maturity pattern of public deposits, month-wise cash flow as also sale of assets (if any) for the purpose of re-payment of deposits by virtue of a letter dated 15.05.1997. CRB Capital did not respond to the said letter. It is also alleged that the efforts of the RBI to contact the Managing Director / Directors and Officers of CRB Capital were in vain. And that, all the offices of CRB Capital remained closed since 1997. It is further alleged that the Chairman of CRB Capital (C.R. Bansali) was not traceable and no other official of the company was available. Two of the Directors had informed RBI that they had resigned from the board of directors of the company with effect from 06.03.1997. In the meanwhile, RBI had also allegedly received a complaint from the Government of Gujarat informing it that a number of co-operative banks in the State of Gujarat had placed funds aggregating Rs. 50 crores with CRB Capital and they had received a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion No. 191/1997) filed by RBI, were going on, CRB Capital filed an application being C.A. No. 1416/1998 in the said company petition seeking approval for the scheme of re-arrangement formulated by them. By an order dated 23.02.2002, the company court directed the consideration of the scheme propounded by CRB Capital by the creditors of the company. Pending consideration of the scheme, the company court had also directed that no further step including publication be taken pursuant to the admission of the company petition No. 191/1997. The company court also directed the scheme to be considered by the secured creditors, unsecured creditors and shareholders of CRB Capital and, accordingly, meetings were held. A modified scheme of compromise and an arrangement was filed by CRB Capital for approval of the company court. On 01.07.2002 a meeting of the secured creditors was held. It was attended by 28 secured creditors. On 02.07.2002 a meeting of unsecured creditors was held at Talkatora Stadium and out of the 1,34,000 depositors, 14,461 attended the meeting either personally or through proxy. 14. Thereafter, CRB Capital filed the modified scheme, approved in the meetings, before the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Delhi High Court. b) Payment of balance 75% of the principal amount shall be made in eight equal quarterly instalment commencing from the month following the expiry of six months from the date of sanctioning of the scheme of Arrangement/ Compromise by Hon'ble Delhi High Court. STATE BANK OF INDIA (Unsecured Creditor) Since the charge over the securities held by State Bank of India have not been registered with the Register of Companies, State Bank of India is considered as an unsecured creditor. All the assets whether moveable or immovable held by the State Bank of India except asset owned by CRB Corporation Ltd. shall be liquidated by the Bank in private negotiations in consultation with the propounder of the scheme for recovery of the principal amount. Any shortfall and/or deficiency in discharge of the dues of the Bank against recovery from the various assets held by SBI, the same shall be paid and/or discharged by the company at par in terms of the payment of schedule as applicable to other unsecured creditors. No interest, however, shall be payable to the Bank on the principal amount determined. OTHER UNSECURED CREDITORS i) Payment equivalent to 50% of the principal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor be directed to hand over the Books of Accounts, records documents, assets & properties of the Company as well as the other Group Companies including the Cash balance lying with him and / or deposited in any Bank to the Propounder of the Scheme. 3. SEBI & Stock Exchanges (a) The Registrations and Licences, granted by Securities and Exchange Board of India (SEBI) for carrying out different activities by the Company and other Group Companies, which were suspended as a consequence to the appointment of Provisional Liquidator by this Hon'ble Court be restored and SEBI and the Stock exchanges where the shares of the Company as well its Group Companies were listed be directed to revoke its various orders passed u/s 11B of Securities and Exchange Board of India Act (SEBI Act) and or any other provisions of SEBI Act and other Laws, Regulations, & bye-laws of SEBI and Stock Exchanges. The details of such Registrations and Licences given to the Company and its Group Companies are as under:- i) Category-I Merchant Banking Registration granted by SEBI to the Company. ii) Registration Certificate granted to the Company by SEBI for setting up Mutual Fund. iii) Registration Certificate g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, records etc of CRB Asset Management Company Ltd, CRB Trustee Limited and CRB Mutual Fund Ltd. be handed over to the Propounder of the Scheme. 6. INCOME TAX AUTHORITIES The Income-tax Department be directed to stay the demands and vacate the ex-parte orders and to allow the Company to file Appeal/s. Revision Applications and any other proceedings before the appropriate authorities and or Court and any delay in filing such proceedings be condoned and interest & penalties be waived. 7. CIVIL/CRIMINAL CASES All the cases, civil as well as criminal, filed against the Company, its ex-Directors & Officers, particularly the following cases filed against the Company and its Directors be vacated or stayed sine-die. Details of such cases, inter-alia, are as under: a) All the Complaint cases filed u/s 138 of Negotiable Instruments Act against the Company and its Directors and/or its Officers. b) Case No. 42/97 filed by CBI in Session Court at Mumbai on the Complaint of State Bank of India against the Directors and Officers of the Company. c) Case No. 1/98 filed by CBI in Session Court at Mumbai on complaint of Bank of Baroda against the Directors and Officers of the Company. d) Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecovery of dues from the debtors and other parties be decided and decrees passed. 11. The liabilities in respect of employees of the Company as well as its Group Companies be limited to their dues upto 21.5.97 and the services of the employees be treated as terminated on payment of their terminal benefits and arrears or dues if any upto the said date. 12. The following companies with whom the Company had entered into bought out deals be directed to pay the amounts due from them along with accrued interest till the date of payment- Rs. in crores 1. ELIN Electronics Limited 7.20 2. Garware Petrochem Ltd. 2.55 3. Stickwel Fashions Ltd. 2.94 4. RRB Aurolite Ltd. 0.62 5. Sakumbari Sugar Mills Ltd. 1.92 6. United MachineryWorks Ltd. 0.35 7. North India Cement Limited 0.30 ------ 15.88 ------- The Hon'ble Justice Dalbir Bhandari was pleased to appoint Official Liquidator on the Board of Directors of the above mentioned companies. 13. State Bank of India be directed to hand over various assets and properties in respect of which charge has not been created in ROC. 14. The Leased premises held by the Company prior to the Order dated 22/5/97 passed in CP No.191/97 be permitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged by RBI that the scheme was contrary to statutory provisions and as such approval ought not to be granted as that would be opposed to law as also public policy. A similar set of objections was made by the other objectors. 15. On behalf of CRB Capital it was submitted before the learned company Judge that the secured creditors, unsecured creditors and shareholders had accepted the modified scheme by an overwhelming 3/4ths majority in value as well as by simple majority. It was submitted that winding up of a company is a step which results in the civil death of the company and would be contrary to public interest as lakhs of depositors and shareholders all over the country would find that their funds and investments have dissipated. It was contended that RBI, while balancing the general public interest, has also to take into account the interest of the Bank and financial institutions as well as secured and unsecured creditors and that revival of a financial company ought not to be objected to merely because of certain alleged irregularities inasmuch as the implication of closure of a company not only has an impact on the financial institution and its customers but also on the fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 crore for such depositors was not in public interest. Consequently, he directed that the limit of Rs. 10 crore to the payment of deposits up to Rs. 5000/- be removed and the scheme was modified to that extent. It was also modified by directing that widows, disabled persons, retired government servants and persons above 55 years of age would get the entire deposit re-paid without any limit within one year after the sanction of the scheme. Insofar as the other unsecured creditors were concerned such as the deposit holders and bond holders above the value of Rs. 5000/-, they were to be paid an amount equivalent to 50% of the principal amount in five annual installments commencing from the date of sanctioning of the scheme and the balance 50% of the principal amount was to be discharged in the form of allotment of shares of CRB Capital of Rs. 10/- each at par as soon as the approvals from the competent authority (SEBI) were received. 18. Finally, the learned company Judge felt that there was inherent public interest in the scheme and sanctioned the same as under:- "49. I am, therefore, of the view that the following factors indicate the public interest inherent in the sanction of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India i.e. (i) to (v) from the Reserve Bank of India the petitioners have during the course of hearing given up the reliefs / concessions sought in clauses (ii) to (v) under the heading Reserve Bank of India and are not been pressed and accordingly the said clauses (ii) to (v) shall stand deleted from the Scheme. In so far as relief (i) is concerned directions have already been given in para 37 above. (IV) As regard para 5 of part IV of the scheme which related to the Trust Petition filed by SEBI before the Bombay High Court it is contended by the parties that Trust Petition No.3 filed by SEBI before the Hon'ble Mumbai High Court is presently pending before the Supreme Court of India for transferring the same and accordingly the said para 5 shall stand deleted from the scheme. xxxx xxxx xxxx xxx (VI) That the propounder of this scheme shall within 15 days from the date of sanction of the scheme file an affidavit in the Court accepting the modifications made to the scheme in this order and undertaking to be bound by the same. (VII) The propounder shall also file the projected balance sheet for five years from the cut-off date annexure-A and the projected fund for statement 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme under Section 391-392 of the Companies Act? iv) Depending upon the answers of questions 1 to 4 above whether the scheme formulated in the instant case is bonafide, feasible and fair? v) Whether grounds for winding up of the company under Section 45 MC (1) of the RBI as made out in the winding up petition exist. If so, to what effect?" 20. Being aggrieved by the said order dated 29.02.2008 passed by the said Division Bench in the said appeals, CRB Capital preferred Special Leave Petitions before the Supreme Court which got converted into Civil Appeal Nos. 2733-2736/2009 (CRB Capital Markets Limited v. Reserve Bank of India & Ors.). Those civil appeals were disposed of by the Supreme Court by an order dated 22.04.2009 in the following manner:- "23. We are, accordingly, of the view that since the Division Bench has not considered on merits the findings of the Company Judge, it would be in the fitness of things for the Division Bench itself to consider all the points, including those which had not been considered by the Company Judge, as raised at the time of hearing of the Appeals, and decide the same. 24. We, accordingly, allow the Appeals and set aside the order of the Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Miheer H Mafatlal v. Mafatlal Industries Limited: (1997) 1 SCC 579, wherein, according to the learned counsel, the Supreme Court held that a scheme could not be sanctioned if it violated any law. According to the learned counsel, the Supreme Court also held that the court sanctioning a scheme had to consider the pros and cons of the scheme with a view to finding out whether it was fair, just and reasonable and was not contrary to any provisions of law and did not violate any public policy. It was also contended that the concessions sought by CRB Capital were contrary to the statutory provisions and could not be granted in law. It was submitted that in the absence of such concessions the scheme was not workable. Importantly, the learned counsel for RBI drew our attention to the fact that the proposal to discharge part of the liability towards the depositors by issuance of shares of the very same company in liquidation was unacceptable. 22. The learned counsel also sought to distinguish the decision of the Karnataka High Court in the case of In Re: Maharashtra Apex Corporation Limited: (2005) 124 Company Cases 637 (Karnataka) by submitting that in that case no winding up p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up proceeding initiated on the application made by RBI under Section 45MC of the RBI Act. He then submitted that Part VII of the Companies Act dealt with winding up. Chapter I thereof contained preliminary provisions dealing with modes of winding up and contributories. Chapter II of Part VII dealt with the cases of winding up by the Court/Tribunal. Section 433 which stipulated the circumstances in which a company could be wound up fell within this chapter. And, so did Section 446, which provided for stay of suit on the passing of a winding up order. Section 446(2)(c), according to Mr Batra, empowered the Court/Tribunal, notwithstanding anything contained in any other law for the time being in force, to have jurisdiction to entertain or dispose of any application made under Section 391 by or in respect of the company. Therefore, according to Mr Batra, a scheme under Section 391 of the Companies Act can be entertained even in the case of a winding up proceeding under section 45MC of the RBI Act. He referred to the decision of the Supreme Court in the case of M/s Doypack Systems Pvt. Ltd. v. Union of India: (1988) 2 SCC 299, in order to explain the meaning of the expression "in relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1956 was maintainable even in a winding up petition filed by RBI under Section 45MC(1) of the RBI Act. It was also submitted that a scheme could be sanctioned even if it were contrary to the provisions of the RBI Act. 28. The learned counsel appearing on behalf of SEBI, adopted the arguments of Mr Parag Tripathi. He submitted that a scheme could not be contrary to statutory provisions and, in any event, could not contain any terms or conditions which trenched upon the power of SEBI under the Securities & Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act). The other submissions of the learned counsel for SEBI were essentially centred on the next question and we shall refer to them when we deal with that question. 29. The learned counsel appearing on behalf of the Official Liquidator submitted that a scheme under Section 391 of the Companies Act could be filed at any stage. He submitted that sanction for a scheme under Section 391 could be applied for even if there was no winding up petition against the company. It can be filed during the pendency of a winding up petition as well as after winding up orders have been made by the company court. It was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dissolved. 30. The learned counsel for the Official Liquidator then sought to draw a distinction between a secured and unsecured creditor. It was submitted that depositors are not secured creditors. It was contended that under the provisions of Section 529 of the Companies Act, after the passing of a winding-up order, the security of every secured creditor is deemed to be subject to a pari passu charge in favour of the workmen to the extent of the workmen's portion. Furthermore, under Section 421 of the Companies Act, 1956, notwithstanding anything contained in any other provision of the said Act or any other law for the time being in the winding up of a company, dues of workmen and debts due to secured creditors are to be paid in priority to all other debts. Section 530 of the Companies Act also speaks of payment of dues of preferential creditors which includes statutory dues like taxes etc. It was, therefore, submitted that a depositor cannot be treated as a secured creditor under the Companies Act, 1956 and particularly so after the passing of a winding-up order. It was, therefore, submitted that the provisions of Section 45Q and 45 MC of the RBI Act should be read with the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." This provision makes it abundantly clear that the provisions of Chapter III-B shall take effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. The argument of the learned counsel for the RBI was that because of Section 45Q, the provisions of Chapter III-B of the RBI Act had precedence over the provisions of the Companies Act and therefore during the pendency of a winding-up petition under Section 45MC no application for sanctioning of a scheme under Section 391/392 of the Companies Act, could be entertained by the company court. We are unable to read-in such a prohibition or restraint in the powers of the company court under Sections 391/392 of the Companies Act, 1956. All that Section 45Q says is that the provisions of Chapter III-B of the RBI Act shall have effect notwithstanding anything "inconsistent therewith" contained in any other law for the time being in force. There is nothing inconsistent in the provision of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner prejudicial to the members of the company and the company. Insofar as the power of the court to accord sanction, proviso to section 392 is concerned, once the conditions are fulfilled, there is no impediment for the court to accord sanction. Once these statutory requirements are complied with, though the provisions of the scheme contravene the legislative mandate, it is permissible to make provisions in the scheme contrary to the other statutory provisions. The order of the company court, according sanction, will have the affect of overriding those other statutory provisions." It was held by the learned single Judge of the Karnataka High Court that it was permissible to make provisions in the scheme contrary to statutory provisions other than those contained in Sections 391/392 of the Companies Act. Thus, according to the said decision, a scheme could contain provisions which were violative of, inter alia, the RBI Act, the SEBI Act, etc and such a scheme could still be validly sanctioned by the company court. This view is in direct conflict with what has been stated by the Supreme Court Miheer H Mafatlal (supra). In that case the Supreme Court observed as under:- " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a scheme of compromise and arrangement are not exhaustive but only broadly illustrative of the contours of the Court's jurisdiction." (underlining added) It is clear that the Supreme Court had categorically held that the proposed scheme of compromise/ arrangement should not be found to be violative of any provision of law nor should it be contrary to public policy. Therefore, the reliance placed by the learned company Judge as also by the learned counsel for CRB Capital on the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions before the appropriate Court and get any delay in filing the same condoned. It was contended that income tax proceedings could not be the subject matter of a scheme under Section 391 of the Companies Act. Reliance was placed on the Supreme Court decision in the case of S.V. Kandeakar v. V.M. Deshpande: (1972) 1 SCC 438. Insofar as the criminal cases were concerned, it was contended that the scheme envisaged that all civil and criminal cases be "vacated or stayed sine die". It was contended that the learned company Judge erred in law in sanctioning this part of the scheme. It was submitted that a Division Bench of this court in D.K. Kapur v. R.B.I.: 2001 (105) Company Cases 643 (Delhi), had clearly held that the expression "suit or other legal proceedings" used in Section 446(1) of the Companies Act and the expression "suit or proceeding" used in Section 446(2) of the Companies Act, 1956 did not include criminal proceedings and therefore the company Judge could not have sanctioned the scheme as it required the 'vacation or stay sine die' of the criminal cases against CRB Capital. This was clearly beyond the jurisdiction of the company court under Section 391/392 of the Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ode and a complete procedure is prescribed thereunder for challenging and assailing the orders passed by SEBI under the said Act. A reference was made to Section 15-T and Section 20 of the SEBI Act which read as under:- "15-T. Appeal to the Securities Appellate Tribunal.- (1) Save as provided in sub-section (2), any person aggrieved- (a) by an order of the Board made, on and after the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder; or (b) by an order made by an adjudicating officer under this Act, may prefer an appeal to a Securities Appellate Tribunal having jurisdiction in the matter. (2) No appeal shall lie to the Securities Appellate Tribunal from an order made- (a) by the Board on and after the commencement of the Securities Laws (Second Amendment) Act, 1999; (b) by an adjudicating officer, with the consent of the parties. (3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by 3 [the Board or the Adjudicating Officer, as the case may be,] is received by him and it shall be in such form and be accompan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der had also been passed by SEBI and other Stock Exchanges suspending the membership rights of the Ex-Directors of CRB Capital. It was, therefore, contended that the reliefs and concessions sought by CRB Capital against SEBI were totally inconsistent with the provisions of Section 15T and Section 20 of SEBI Act and thus the said provisions would override the scheme propounded by CRB Capital to the extent it sought the setting aside of the orders suspending and cancelling various registrations etc. granted to CRB Capital. The learned counsel for SEBI placed reliance on the Supreme Court decision in the case of Tata Motors v. Pharmaceutical Products of India Limited & Anr: (2008) 7 SCC 619, for the proposition that the SEBI Act being a complete code in itself, could not be interfered with under a scheme by the company court. Of course, the case in Tata Motors (supra) was under the Sick Industrial Companies (Special Provisions) Act, 1985, hereinafter referred to as the SICA Act. However, the principles enunciated therein would, according to the learned counsel, be applicable even insofar as the provisions under the SEBI Act are concerned. 37. The learned counsel appearing on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. (2) If a 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 either in person or, where proxies are allowed under the rules made under Section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Tribunal, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as 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: Provided that no order sanctioning any compromise or arrangement shall be made by the Tribunal unless the Tribunal is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Tribunal, by affidavit or otherwise, all material facts relating to the company, such as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up of the company, or before or after the commencement of the Companies (Amendment) Act, 1960. (3) xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx (4) Nothing in sub-section (1) or sub-section (3) shall apply to any proceeding pending in appeal before the Supreme Court or a High Court." 38. It is clear that under Section 391(1), the company court could, at any time after an application is made to it under Section 391, stay the commencement or continuation of any "suit or proceeding" against the company on such terms as it thinks fit until the application is finally disposed of. In this provision, two things are to be noted. First of all, the expression used is "suit or proceeding" and secondly, that the stay is only until the application is finally disposed of. Therefore, whatever the stay that may be granted under this provision, the same would apply only till the application under Section 391 is finally disposed of. Such an application gets finally disposed of when it is either rejected or when the scheme is sanctioned. While sanctioning the scheme, there is no power to stay proceedings any further, that is, after the application is disposed of. Insofar as Section 446 is concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Indian Companies Act, particularly the language of Section 446, read as a whole, it appears to us that the expression "other legal proceeding" in sub-section (1) and the expression "legal proceeding" in sub-section (2) convey the same sense and the proceedings in both the sub-sections must be such as can appropriately be dealt with by the winding up court. The Income Tax Act is, in our opinion, a complete code and it is particularly so with respect to the assessment and reassessment of income tax with which alone we are concerned in the present case. The fact that after the amount of tax payable by an assessee has been determined or quantified its realisation from a company in liquidation is governed by the Act because the income tax payable also being a debt has to rank pari passu with other debts due from the company does not mean that the assessment proceedings for computing the amount of tax must be held to be such other legal proceedings as can only be started or continued with the leave of the liquidation court under Section 446 of the Act. The liquidation court, in our opinion, cannot perform the functions of Income Tax Officers while assessing the amount of tax paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings were held to be controlled by the winding up court. On the view that we have taken, the decisions in the case of Seth Spinning Mills Ltd., (In Liquidation) and the Mysore Spun Silk Mills Ltd., (In Liquidation) do not seem to lay down the correct rule of law that the Income Tax Officers must obtain leave of the winding up court for commencing or continuing assessment or re-assessment proceedings. (underlining added) In a more recent decision of a Division Bench of this court in Krishna Texport Industries Ltd. v. DCM Limited: [2008] 114 Company Cases 113 (Delhi), the Division Bench observed as under:- "33. It can hardly be said that the object of Section 391(6) of the said Act is to prevent action against the officers of the company who may be involved in cheating, criminal breach of trust, misappropriation, forgery and for that matter dishonour of cheque. Again the provision cannot be used to bring to an end a prosecution arising from Income Tax Act or Foreign Exchange Control Act. The proceedings are clearly not of a pecuniary nature involving recovery of money. Interestingly, even the scheme stated to be approved at the behest of the respondent company does not env ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (supra) a Division Bench of this court has taken the unequivocal view 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. From the foregoing discussion it is clear that quasi-judicial orders passed by a statutory authority like SEBI or orders passed by RBI and the Income Tax Authorities under special enactments cannot be set aside while sanctioning a scheme under Section 391 of the Companies Act. It is also clear 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. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 20. The latter provisions have already been set out above. Therefore, there cannot be any interference with the provisions of SEBI Act while a scheme is sanctioned under Section 391 of the Companies Act. 43. The two questions have, therefore, to be answered in the negative. Q.4 Depending on to the answer to the questions above, whether the scheme formulated in the instant case is bona-fide, feasible and fair? 44. We have already noticed the submission made by the learned counsel for the parties. 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. The learned counsel for CRB Capital, in the course of arguments, submitted that he was willing to give up various parts of the reliefs and concessions but, we fail to understand as to how that would improve the position inasmuch as without the reliefs and concessions, the scheme in itself would become unworkable. For example, one of the reliefs sought is that a direction be given to SEBI to revoke its order passed under Section 11B of the SEBI Act which inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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? 45. Insofar as this question is concerned it would be pertinent to note that the impugned judgment itself notes that if the scheme cannot be successfully implemented, then the winding-up petition C.P. No. 191/1997 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. Since the scheme cannot be sustained in law, the winding-up petition would, automatically get revived. 46. Therefore, we set aside the impugned judgment as also the scheme and remit the matter to the company court for consideration of the winding-up petition (C.P. No. 191/1997) in accordance with law. We make it clear that there is 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. However, only such a scheme may be propounded, which does not contravene any of the statutory provisions contained in the Companies Act, the RBI Act, the SEBI Act or the Income Tax Act or any other statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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