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TMI Blog2013 (5) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... have right to file his objection to the scheme which is not just and fair to him or to the class of creditors to whom he belongs. In our view, we respectfully disagree with the view taken by learned Single Judge since the provision of Section 391 of the Companies Act cannot be extended to such extent that even third parties namely those persons who are not shareholders or creditors of the Company can be allowed to intervene in such petitions filed under Section 391 of the Companies Act. It is an admitted position that the appellants who are the creditors of transferee Company namely VAL, the demerged Company were duly heard in the petition filed by the said Company in the Madras High Court for getting their scheme sanctioned and the judgment of the Madras High Court is awaited. If the objection raised by the appellants in the said Court is accepted and the scheme is not approved by the Madras High Court, then, the entire scheme will fail and as such, it cannot be said that there is violation of principles of natural justice. We are, therefore, unable to accept the view taken by learned Single Judge in the said two decisions and overrule the said judgments. In our view, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s taken by the appellants, were reserved for orders on 29/10/2012 and the judgment is not yet pronounced. The appellants are now seeking to intervene in the Company Petition filed by SGL Company which is pending in this Court and have prayed that they may be heard. It is an admitted position that the appellants are neither the members nor they are the creditors of SGL Company. But it is alleged that since they are the creditors of VAL, the demerged Company, if the scheme is accepted by the Goa High Court, their interest will also be adversely affected and, therefore, they have locus to file their objections and intervene in this Company Petition. Learned Single Judge by his judgment and order dated 22/11/2012 was pleased to reject the Company Applications filed by the applicants for the reasons recorded. In another petition, similar objections were raised namely Company Application No.74/2012 in Company Petition No.12/2012 and Company Application No.75/2012 in Company Petition No.12/2012. 5. Shri Shyam Mehta, learned Senior Counsel appearing on behalf of the appellants submitted that the appellants being the creditors of transferee Company, have locus to intervene in the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Code of Civil Procedure, Order I, Rule 10, it was provided that the party whose rights are adversely affected, has right to intervene. In support, he relied on the judgment in the case of Ramesh Hirachand Kundanmal v. Municipal Corporation of Greater Bombay [1992] 2 SCC 524. He then submitted that the ratio of the judgments on which learned Single Judge had relied upon was not applicable to the facts in the present case. He invited our attention to the case of (i) Hindalco Industries Ltd. In re [2009] 94 SCL 1 (Bom.) (ii) Sequent Scientific Ltd. In re [2009] 94 SCL 55 (Bom.) and (iii) SEBI v. Sterlite Industries (India) Ltd. [2003] 45 SCL 475 (Bom.). 6. On the other hand, Mr. Chagla, learned Senior Counsel appearing on behalf of the respondent submitted that it is well settled position in law that a stranger to Company had no right to be heard in the scheme for amalgamation at the stage where the petition was filed under Section 391 of the Companies Act. He submitted that it was admitted position that the appellants were neither shareholders nor creditors of SGL Company. They were the creditors of the transferee Company namely VAL, the demerged Company and that they were hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly held that the said judgment on the provisions of Sections 391 and 392 operate in separate fields and that in a petition filed under Section 391, only the creditor or the member of the Company was entitled to move an application opposing the compromise or arrangement. 7. In rejoinder, learned Counsel appearing on behalf of the appellants submitted that there was no golden thread between all the judgments on which reliance has been placed by learned Senior Counsel for the respondent and the ratio of the judgments were not applicable to the facts of this case. He submitted that the financial position of the respondent was precarious and it had negative worth to the extent of minus 5,903 Crores. He submitted that the judgment in the case of S.K. Gupta (supra) was not applicable to the facts of the present case. 8. The short question which falls for consideration in this appeal is whether the appellants who are the creditors of the transferee Company are entitled to be heard in the petition filed under Section 391 of the Companies Act, by the transferor Company. 9. Before taking into consideration the rival submissions, it would be appropriate if the relevant provisions are ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (5) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made. (6) The Tribunal may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of." Perusal of the said section reveals that the said provision nowhere contemplates that notice and hearing can be given to the creditors of the transferee company in the petition filed by the transferor Company since Section 391(1)(a) and (b) clearly refer to a compromise or arrangement which is proposed between the Company and its creditors or any class of them and between the Company and its members or any class of them. 10. Similarly Section 392 of the Companies Act reads as under : "392. Power of Tribunal to enforce compromises and arrangement- (1) Where a Tribunal makes an order under section 391 sanctioning a compromise or an arrangement in respect of a company, it- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 972] 42 Comp. Cas. 211 and in the said case it has been held that sanction would operate only after the necessary orders under Section 394 of Companies Act are obtained by both transferor and transferee Company. In view of this, the final order passed in both the Courts would be dependent on both the transferor and transferee Company obtaining necessary sanction from the Court of competent jurisdiction. Even if one Court refuses to sanction the scheme, the entire scheme resultantly would fail. 13. The Apex Court in the case of Miheer H. Mafatlal (supra), after referring to the provisions of Sections 391 and 393 of the Companies Act has observed that the Company Court has to consider granting sanction of the scheme not merely on the decision of the majority of the shareholders or creditors or their respective classes who might have voted in favour of the scheme by the requisite majority, but it has observed that the Court has also to consider the pros and cons of the scheme with a view to finding out whether the scheme is fair, just and reasonable and is not contrary to any provisions of law and it does not violate any public policy. The Apex Court, therefore, has not held in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlying the scheme and can judiciously X-ray the same. 7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent. 8. That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9. Once the aforesaid broad parameters about the requirements of a scheme for getting 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 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then, such person has to be given hearing. It was submitted that this concept was accepted by the Apex Court in the cases of Miheer H. Mafatlal and National Textiles Workmen Union (supra) and therefore, on the basis of the extended meaning, which was given by the Apex Court in the said case to the principles of natural justice, the appellants had right to intervene and be heard in the said Company Petition filed by the respondent. It is not possible to accept the said submission. As we have pointed out hereinabove, the judgment in the case of Miheer H. Mafatlal (supra) does not in any way apply to the creditors of the transferee Company and it does not lay down the ratio that the creditor of transferee Company would also have right to intervene in the petition filed by the transferor Company. Secondly, in the case of National Textiles Workmen Union (supra), the issue involved was regarding the workmen of the Company who had filed winding up petition and in that context, therefore, the Supreme Court held that the workers of the said Company would be adversely affected and, therefore, they had right and locus to intervene in the said winding up petition. 16. This Court in a serie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench had observed that the said intervenor neither being the member or creditor of the Company, had no locus to intervene in the said petition. Learned Counsel for the appellants had vehemently urged that the facts of the said case were different since it was a petition filed under Section 100 of the Companies Act for financial restructuring and, therefore, the ratio of the said judgment does not apply to the facts of the present case. We are unable to accept the said contention of learned Counsel. The issue involved in the said case was identical and the question was whether any exercise which has to be carried out by the Company for restructuring as contemplated under Section 100 whether the intervenor, who was neither shareholder or creditor, can intervene and in such context, therefore, the Court had held that the said person had no locus. The ratio of the said case squarely applies to the present case. 17. The Division Bench of this Court in the case of Sterlite Industries (India) Ltd. (supra) also held that SEBI who had filed an application for intervention had no locus in the petition under Section 391 of the Companies Act not being shareholder or creditor of the Company. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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