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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 COURT OF INDIA), this is not the stage for NOL to raise objections. In case the Scheme is approved by the shareholders and unsecured creditors and in case NMCE comes up before this Tribunal with a petition to sanction the Scheme, then, at that stage, NOL is at liberty to raise all objections and all such objections raised by NOL have to be considered by this Tribunal before approving of the Scheme. This Tribunal is of the considered view that necessary directions can be given to NMCE and ICEX to conduct meetings for approval of the proposed Scheme. The order dispensing meetings or order to conduct meetings in respect of proposed merger of NMCE with ICEX is subject to final result in the SLPs pending before the Honourable Supreme Court of India, the proceedings before the Appellate Authority under PMLA and T.P. on the file of this Tribunal relating to shareholding rights of NOL. The Objector NOL is also given liberty to raise all the objections in respect of the Scheme of merger of NMCE with ICEX in the petition seeking sanction of the Scheme, if any, is filed, subject to order of the Honourable Supreme Court in the pending SLPs - C.A. (CAA) NO. 97/NCLT/AHM/2017 - - - Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme. 7. ICEX is also a deemed recognized Stock Exchange under the Securities Contracts (Regulation) Act, 1956 doing the same activities that are being undertaken by NMCE. 8. According to the Applicant-NMCE, the amalgamation of NMCE with ICEX would consolidate the business operations of ICEX and NMCE and have the following benefits :- * Greater integration of operations, greater financial strength and flexibility resulting in operational synergy of the combined entity; * Greater efficiency in management of resources of NMCE and access to resources of NMCE and access to resources of NMCE may be deployed more efficiently in the combined entity; * Providing a common platform for the trading and several permitted commodities, being traded by NMCE and proposed to be traded by ICEX; and * Reducing administrative, operative and marketing costs. The amalgamation of NMCE with ICEX would thus help in attaining operational efficiencies, cost competitiveness, creating synergies for businesses; and would assist in capitalizing on the growth opportunities to the fullest extent as NMCE and ICEX are engaged in similar line of business, being online screen derivative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h law after hearing the parties. 6. CA stands disposed of with the aforesaid observations. It is needless to say that if any decision is taken by third respondent or its governing body or any other authority during the pendency of the appeal, it shall be subject to the result of this case. List main matter for hearing on 26th September, 2011. The Honourable High Court, in the above said proceeding, quashed and set aside the order dated 23rd July, 2011 and directed the Commission to take a decision in accordance with law after issuing show-cause notice and after hearing necessary parties. 12. The Honourable High Court of Gujarat in Misc. Civil Application - For Review - No.525 of 2012 in Letters Patent Appeal No. 1039 of 2011 passed the following order :- 10 ..The resolution passed at the Extraordinary General Meeting of the opponent No.3 - National Multi-Commodity Exchange of India held on 19.09.2011 are hereby quashed and set aside. The opponent No. 3 - National Multi-Commodity Exchange of India shall take such consequential steps as may be necessary pursuant to the quashment of the aforesaid resolution passed in Extraordinary General Meeting held on 19.09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court vide its interim order, dated 28.07.2017 directed SEBI to respond to NOL s representation. Meanwhile, NMCE filed the present petition before this Tribunal. NOL represented before the Honourable Supreme Court that compliance and sanctions under the relevant provisions of the Companies Act solely depend upon the consent of the shareholders of the merging entities with a 75% majority and that voting rights of NOL have been retrospectively extinguished without sufficient cause pursuant to the sub judice order of FMC. It is further stated that Honourable Supreme Court vide its order dated 18.09.2017 and 03.10.2017 granted explicit liberty to NOL and empowered this Tribunal to consider all issues relating to the proposed merger raised by NOL before the Supreme Court. It is stated that the Honourable Supreme Court opened the rights of NOL before this Tribunal as a competent forum under the Companies Act, in view of the decision taken by SEBI on 09.08.2017 which, inter alia, stated that the final approval for the entire merger process of both the companies including their shareholders comes under the jurisdiction of NCLT under the relevant provisions of the Companies Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2% holding. As per the share exchange ratio under the proposed Scheme, NOL, presently holding the controlling stake of 30.18%, will be reduced to a minority under 11% whereas the anchor investor of ICEX would accrue the controlling interest of the merged entity by increase of its present 8.72% holding in NMCE to over 20% holding in the merged entity. It is stated that the proposed scheme is devised to take over the controlling interest of NMCE in a hostile manner by depriving its largest shareholder. It is also stated that there is no provision in the Memorandum of Association of NMCE for merging the company with any other company. It is further stated that the merger is in violation of the provisions of PMLA, inasmuch as, it will result in effective transfer of the shares of NOL which are under attachment along with the underlying assets of NMCE. 17. In the reply to the objections, it is stated by NMCE that Shri Kailash R. Gupta and his family members are controlling NOL, which is having 30.18% paid-up capital in NMCE. Shri Kailash R. Gupta, during his term as Managing Director of NMCE and later as its Executive Vice-Chairman, committed serious fraud by siphoning about ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated that consequent to the transfer of shares in the name of Enforcement Directorate, NOL will hold only 11,25,835 equity shares that constitute 5.90% of the total paid-up capital of NMCE. It is stated that in view of the provisions of Section 230(4) of the Companies Act, 2013, NOL would have no locus to raise any objections to the Scheme. 18. It is further stated that NMCE is National Multi-Commodity Exchange, which is providing a public platform for dealing in commodities derivatives. ICEX is also a National Multi-Commodity Exchange doing similar activity. As per Regulation 14(1) of the Securities Contract (Regulation) (Stock Exchange and Clearing Corporations) Regulations, 2012 read with revised norms applicable to Commodity Exchange, dated 06.05.2014 issued by the Forward Markets Commission, it is obligatory for a recognized commodity exchange to have a minimum net worth of ₹ 100 crores. Clause (2) of the Revised Norms issued by FMC, dated 06.05.2014, which is relevant, reads as follows :- 2. Net work requirements: (1) Every recognized commodity exchange shall have a minimum net worth of one hundred crore rupees at all times: Provided that a recognize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is without any substance and basis. It is stated that SEBI, as per the directions of the Honourable Supreme Court, in its response through letter, dated 09.08.2017 denied all the allegations made against it by NOL. 20. In the rejoinder NOL stated that the applicant NMCE has got several options to raise its net worth to required level by issuing bonus shares followed by scouting/syndication of private equity, revamping the top management or an IPO instead of offering NMCE to be merged with ICEX. In the rejoinder filed by NOL, it is also stated that the Honourable Supreme Court in its order, dated 22.03.2012 passed in SLPs clearly observed that any proceedings, decision or action taken in pursuance of the order, dated 23.07.2011 passed by the FMC shall abide by the final result of the Special Leave Petitions. It is further stated that NMCE cannot treat the FMC order, dated 23.07.2011 as a final order despite the fact that its legality is pending before the Honourable Supreme Court. It is also stated that taking possession of the attached shares by Enforcement Directorate does not strip NOL of its ownership of the said shares. It is further stated that NOL can still exercise all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, the Commission passes the following orders:- (a) The NMCE is directed to place before the Board of Directors the evidence regarding the irregularities in the allotment of shares of NMCE to NOL for convening an extraordinary meeting of the General Body of the NMCE to consider passing a resolution to authorize the Exchange to refer the matter to the appropriate authorities under the Companies Act, 1956 for cancellation of the irregular allotment of 29,32,280 shares to the NOL and any other action as provided under the Companies Act, 1956; Needless to say, the impugned 29,32,280 shares presently held by NOL will not have voting rights. (b) The NMCE is directed to take appropriate legal action against Shri Kailash Ramkishan Gupta and Arrow Total Solution Pvt. Ltd. Ahmedabad to recover the wrongful and illegal over-payment of ₹ 28.80 crores to Arrow Total Solution Pvt Ltd. out of the total payment of ₹ 29.47 crores made to it. (c) The NMCE is directed to take appropriate legal action to recover the wrongful and illegal payment of ₹ 2.47 crores made to Kushal Enterprises, Ahmedabad. (d) The NMCE is directed to initiate legal proceedings to reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery of ten false agreements between the NMCE with Arrow Total Solutions LLC/Arrow Total Solution Pvt. Ltd, and compelling Exchange Executives to sign them, under duress, and for failing to furnish records requisitioned by the Commission in violation of Section 20 (a) (i) and Section 20 (a) (ii) of the F.C. (R) Act, 1952. (k) The NMCE is directed to initiate an enquiry whether there is evidence of violation of the provisions of the FEMA in making payment to Kushal Enterprises, Ahmedabad against the claim of ATSLLC, USA in the books of the NMCE, and if there is such evidence refer the matter to the Enforcement Directorate for appropriate action under the FEMA. (l) The NMCE is directed to refer the Board of Directors of the Exchange a copy of this order and the statement of Shri Bharat Shah, Partner of M/s. Shah and Dalai, Chartered Accountants, who were the Statutory Auditors for NMCE since the financial years 2004-05 till 2009-10 and also Statutory Auditors for Neptune Overseas, Neptune World Trade and ATSPL, made during the enquiry conducted by the FMC. The Board of the NMCE may consider referring the case to the Institute of Chartered Accountants, the self-regulatory bod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NOL supported by evidence of sufficient reasons for not being able to divest the excess shareholding within a period of three months. Not being able to get a price deemed to be reasonable by NOL shall not be accepted as the sufficient reason for seeking extension of three months. The said order of the FMC was impugned before the Honourable High Court of Gujarat in Letters Patent Appeal No. 1039 of 2011 and the Honourable High Court was pleased to quash and set aside the said order of the FMC. Aggrieved by that order, FMC, NMCE and others filed the above said SLPs, being SLP (C) No.10225-10227 of 2012 and 6246 of 2012, before the Honourable Supreme Court. 24. In this context, it is necessary to mention that the shareholding of NOL in NMCE and the voting rights of NOL in respect of its shareholding in NMCE have been interfered with because of the order of the FMC, dated 23.07.2011. The said order is under challenge before the Honourable Supreme Court in the aforesaid SLPs. The interim order passed in the said SLPs by the Honourable Supreme Court clearly indicates that all proceedings and actions taken pursuant to the order of the FMC, dated 23.07.2011 are subject to the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourable Supreme Court held that the appropriate time for the Company Judge to consider the Scheme is subsequent to approval thereof by the shareholders and creditors of the company. The aforesaid decision was rendered under Section 394 of the Companies Act, 1956. Moreover, in that case, it appears that the Company Judge considered the nature of the scheme at the first stage, i.e. before conducting the meetings of the shareholders and creditors. In the case on hand, what is in issue is without participation of 30.18% shareholders, i.e. the Objector NOL, whether a meeting of shareholders can be called for the purpose of approving a Scheme that proposes amalgamation of NMCE with ICEX. 29. As already said, the shareholding of NOL is in legal battle before more than one forum, i.e. Enforcement Directorate, Appellate Tribunal under PMLA, Honourable Supreme Court and this Tribunal in T.P. No.56 of 2016. It is pertinent to add here that NMCE which is going for amalgamation sought for cancellation of the shares of NOL to the extent of 29,32,680, that means still NOL is having 29,32,680 equity shares in NMCE, may be they are under attachment or confiscation and they are subject to result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, even as per the order of the Honourable Supreme Court. Therefore, in view of Section 230(4) and the judgment of the Honourable Supreme Court in Rainbow Denim Ltd. (supra), this is not the stage for NOL to raise objections. 32. In case the Scheme is approved by the shareholders and unsecured creditors and in case NMCE comes up before this Tribunal with a petition to sanction the Scheme, then, at that stage, NOL is at liberty to raise all objections and all such objections raised by NOL have to be considered by this Tribunal before approving of the Scheme. 33. This Tribunal is of the considered view that necessary directions can be given to NMCE and ICEX to conduct meetings for approval of the proposed Scheme. The order dispensing meetings or order to conduct meetings in respect of proposed merger of NMCE with ICEX is subject to final result in the SLPs pending before the Honourable Supreme Court of India, the proceedings before the Appellate Authority under PMLA and T.P. No.56 of 2016 on the file of this Tribunal relating to shareholding rights of NOL. 34. The Objector NOL is also given liberty to raise all the objections in respect of the Scheme of merger of NMCE with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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