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TMI Blog2018 (7) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited (hereinafter called as "ICEX") and their respective shareholders. 4. The Board of Directors of NMCE in its meeting held on 30th June, 2017 approved the proposed merger of NMCE with ICEX and gave authority to the Managing Director NMCE to file this application seeking directions for convening and holding meetings of Equity Shareholders and Unsecured Creditors. It is stated that there are no Secured Creditors of NMCE and, therefore, there is no need to convene and hold meeting of Secured Creditors. 5. The issued, subscribed and paid-up share capital of NMCE is Rs. 19,11,66,670/- divided into 1,91,16,667 Equity Shares of Rs. 10/- each fully paid-up. NMCE is a deemed recognized Stock Exchange under the Securities Contracts (Regulation) Act, 1996 providing online screen-based derivative exchanges for permitted commodities and is registered with the Securities Exchange Board of India (hereinafter will be mentioned as "SEBI"). 6. The proposed Scheme contemplates that NMCE together with all its assets, liabilities, rights and obligations as per the Scheme of Amalgamation, without any further act or deed, shall be transferred to and vested in ICEX (Amalgamating Company) after a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendency of the SLPs before the Honourable Supreme Court, was of the view that it is necessary to hear the objections of NOL, at this stage itself, and permitted NOL to file objections. Accordingly, NOL filed its objections. 11. It is stated by NOL that it is the founder core-promoter and the largest shareholder holding 57,68,464 (30.18%) number of equity shares and a controlling stake in NMCE. In the Extraordinary General Meeting of NMCE, dated 19.09.2011, certain resolutions were passed against the shareholding rights of NOL. One such resolutions is to cancel the allotment of 29,32,280 equity shares of Rs. 10/- each to NOL as per the order of Forward Markets Commission (FMC), dated 23rd July, 2011 and authority is given to the Board of Directors for referring the matter to appropriate authorities. The Honourable High Court of Gujarat in Letters Patent Appeal No. 1039 of 2011 in Special Civil Application No.8377 of 2011 passed the following order :- "5. We accordingly allow the General Body to hold its Extraordinary meeting and may pass a Resolution authorizing the Exchange to refer the matter to the appropriate authority under the Companies Act, 1956 for cancellation of irregu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L had attempted to divest their equity in NMCE by bringing a reputed corporation as strategic investor at an upward negotiable enterprise valuation of NMCE at Rs. 180 crores. But the same was illegally and evasively denied by the acting MD of NMCE. The then acting MD of NMCE with an intention to siphon the valuable properties of NMCE and to abridge the rights of NOL, prevented divesting of interest of NOL in NMCE. It is further stated that, if the proposed merger is allowed, it will pre-emptively foreclose the legitimate claims of NOL against lost opportunity to dilute its stake at a proper offer. In view of the serious conflict of interest of the functionaries of NMCE, the admission and sanction of the proposed Scheme would be detrimental to public interest and public policy. NOL approached NMCE seeking copies of all documents relevant to the merger, but the said documents were never furnished to NOL. NOL approached SEBI vide its representation, dated 6.5.2017 bringing to their knowledge that if the proposed merger is approved, NOL would suffer gross and irreparable prejudice since its rights have been restrained by the erstwhile FMC and the matters have been sub judice before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director of NMCE and right to control premium at the time of divestment, which cannot be reversed. It is also stated that the track record of ICEX shows that it has accumulated losses of over Rs. 114 crores and is burdened with huge tax liabilities and penalties up to 300% of the tax amount evaded. According to NOL, ICEX is also facing litigation filed by a PSU, viz. MMTC. It is stated that prior to the purported capital infusion by rights issue, ICEX had a negative net worth as on 31.03.2016 whereas NMCE is a zero debt company with financial assets of Rs. 75 crore and 5 to 8 times higher market value by peer comparison. It is stated that the profit and loss account of ICEX shows that the company has been incurring expenditure of Rs. 5 crores per annum towards Information Technology support and rent of premises even during the years when the company was operative whereas NMCE has got its own premises and has its own state-of-the-art technology platform which is well integrated with distribution channels and back office software of its trading members. It is stated that the poor financial background of ICEX and the non-transparent conduct of NMCE raise strong apprehension on the bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by NOL before the Honourable Appellate Tribunal under PMLA and is pending for hearing. According to NMCE, Enforcement Directorate has already transferred 12,96,900 shares in its name and the remaining 33,45,729 shares are in the process of being transferred in the name of the Enforcement Directorate. The remaining 11,25,835 equity shares, which are in the name of NOL, constitute less than 6% of the paid-up capital. In view of the directions issued on 06.05.2014 by the Forward Markets Commission, being the Regulator, the voting rights even on these 11,25,835 shares held by NOL stand extinguished. It is stated that in view of Section 230(4) of Companies Act, 2013, the Objector Company would have no locus to maintain any objections to the Scheme of Arrangement. Previously FMC was the Regulator of NMCE, but now, SEBI is the Regulator. In view of the stay granted by the Honourable Supreme Court of India in SLP (C) No.10225-10227 of 2012, order of the FMC has been fully implemented. The Enforcement Directorate initiated proceedings under the provisions of the Prevention of Money Laundering Act, 2002. It has attached 46,42,629 shares. NOL challenged the provisional attachment unsuccessfu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is stated that NMCE could not achieve net worth criteria on its own despite making concerted efforts to raise fresh capital as no investor came forward to invest in NMCE due to irregularities committed by Shri Kailash R. Gupta. NMCE was advised by SEBI to meet with net worth requirements. NMCE received a letter, dated 05.05.2017 from SEBI directing that NMCE has to increase the number of members to 50 in terms of SEBI circular, dated 13.12.2012 and for not complying with the net worth criteria, NMCE is liable to be penalized. According to NMCE, it is compelled to go for the Scheme of Amalgamation to meet with the net worth requirement. It is further stated that the Honourable Supreme Court has been pleased to dismiss the Interlocutory Application filed by NOL while granting liberty to NOL to raise all issues before this Tribunal subject all the objections by NMCE. It is stated that NOL, which holds only less than 6% shares, that too without voting rights, cannot raise any objections. The order of the Honourable Supreme Court dated 22nd March, 2012 in SLP No. 10225-10227 and 6246 of 2012 made the order of FMC operative and the order made by the FMC has also been almost implemente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings of equity shareholders and unsecured creditors in the matter of amalgamation of NMCE with ICEX as per the proposed Scheme is sustainable or not? 22. There is no dispute about the fact that equity shareholding of NOL in NMCE is 30.18%. It is a fact that the Honourable Supreme Court, on 22nd March, 2012, in SLP (C) No. 10225-227 & 6246 of 2012 filed against NOL and Others, passed the following order :- "...........Till further orders, the operation of the High Court order, dated 9.2.2012 shall remain stayed. As a result of the interim order passed now the order, dated 23.7.2011 passed by the petitioner - Forward Markets Commission gets restored but any proceedings, decision or action taken in pursuance of that order shall abide by the final result of the special leave petitions." 23. In view of the above said order passed by the Honourable Supreme Court, all actions taken pursuant to the order of the FMC, dated 23.07.2011 are subject to the result of the SLPs. The material placed on record clearly goes to show that all actions proposed, initiated and pending against NOL are based on the order of the FMC, dated 23.07.2011. In this context, it is necessary to reproduce here ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary, with the help of the police authorities. (g) The NMCE is directed to recover from Shri Kailash Gupta all the monies reimbursed to his family members for their personal expenses including travel expenses. (h) The NMCE is directed to immediately file criminal cases against Shri Kailash Gupta for his various criminal acts of omission and commission elaborated in this order involving embezzlement of NCME funds, unauthorised and illegal payments of ATSPL to the tune of Rs. 28.80 crores for non-existent software development and software services, misappropriation of NMCE assets, frauds, fabrication of records and ten false agreements and tampering with records. (i) The NMCE is directed to immediately file a FIR against Mr. Kailsh Gupta who has all along been in effective control of ATSPL for perpetrating a fraud on NMCE and claiming payments for non-existent software development and software services, thereby causing it a wrongful loss of at least Rs. 28.80 crores. The four transferee benami shareholders of ATSPL may be the co-accused. (j) The Enforcement Division of the Commission is directed to initiate legal action under the relevant sections of the IPC against Shri Kaila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and illegal trespassing in to the Exchange premises late night on 21st- 22nd February, 2011 and making a systematic attempt at sabotaging the IT and software of the Exchange. (o) Shri Kailash Gupta is hereby held guilty of grossly abusing his executive fiduciary position as the Managing Director, and later as the Executive Vice-Chairman of the NMCE for causing wrongful and illegal monetary benefit to the firms/companies controlled by him or his close relatives at the expense of the Exchange and is, therefore, declared as a person not "fit and proper" to hold any position in the management and the Board of any Exchange recognized or registered by the Government of India, Forward Markets Commission or any other financial market regulator. It is further ordered that no company controlled by him either directly or indirectly, including the NOL. Shall hold shares in any association/exchange recognised by the Government or registered by the FMC in excess of 2% of the total issued capital of the Association/exchange. The NOL shall bring down its holding in the NMCE to 2% or less within a period of three months, which can be extended by a maximum period of further three months by the FMC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the FMC, which is in operation by virtue of the aforesaid order passed by the Honourable Supreme Court in SLP (C) No. 10225-10227 of 2012. Therefore, 30.18% shareholder, i.e. NOL, cannot participate in the shareholders' meeting. That means the shareholders' meeting will take place only with the remaining 69.84% shareholders. In case NOL participates in the shareholders' meeting, then there is no scope of the Scheme being approved in the shareholders' meeting. 27. The contention of NMCE that shareholding of NOL is only less than 6%, as on today, may be correct, but it is subject to the result of the aforesaid SLPs before the Honourable Supreme Court. If the Scheme is approved in the shareholders' meeting and in the unsecured creditors' meeting, even then there is opportunity and scope for NOL to raise all objections in respect of the Scheme in the petition seeking sanction of the Scheme. 28. It is contended by the learned counsel for NMCE that this is not the stage for NOL to raise objection. In support of the said contention, learned counsel for NMCE relied upon the decision of the Honourable Supreme Court in Rainbow Denim Ltd. v. Rama Petrochemicals Ltd. [2002] 10 SCC 498. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. 31. Although the above said proviso is in Section 230, it also applies to Section 232 of the Act in view of Section 232(1) of the Companies Act, 2013, wherein it is stated that the provisions of sub-sections (3) and (6) of Section 230 shall also apply mutatis mutandis in case of merger and amalgamation of companies. But in the case at hand, the Honourable Supreme Court vide its orders dated 18.09.2017 and 03.10.2017 made in I.A. No. 53586 of 2017 in SLP(C) No.7497 of 2012 granted liberty to NOL to raise all issues before this Tribunal subject to all objections. It is contended by the learned counsel for NOL that the Honourable Supreme Court, after considering the provisions of the Companies Act, passed the said order. It is also stated by NOL in the affidavit that the stage of amalgamation proceedings was also brought to the notice of the Honourable Supreme Court and the Honourable Supreme Court, after considering the stage of the amalgamation proceedings and the provisions of the Companies Act, gave liberty to NOL to raise all issues before this Tribunal. No doubt, the Honourable Supreme Court gave liberty to NOL to raise all issues before this Tribunal, but it is subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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