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TMI Blog2019 (7) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... e agree to and confirm the scheme of compromise or arrangement - This is a sine quo non for proceeding further and any order of sanctioning or refusing to sanction such compromise or arrangement by the Tribunal would be without jurisdiction unless the Tribunal has dispensed with calling of such meeting of creditors/ members in terms of Sub-section (9). It is manifestly clear that at the stage of calling of meeting of creditors/members for consideration of the scheme of compromise or arrangement the Tribunal is not required to examine the merits of the scheme qua the proposed compromise/ arrangement. Any such indulgence on the part of Tribunal would fall foul of the provision engrafted in Section 230 (1) of the Act and would be without jurisdiction. The mandate of law engrafted under Section 230(1) of the Act requiring the Tribunal to order calling of meeting of the creditors/ members of the concerned companies not being complied with and the mandatory provisions being observed in breach, the impugned order cannot be supported. The Tribunal, at the very threshold stage, was not required to venture into the merits of the proposed scheme of demerger which had to be examined only af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Mineral Enterprises Ltd. were sought to be given to MEL Properties Pvt. Ltd. (Resulting Company No.2). Admittedly, the Demerged Company in para IV (h) of its application CA (CAA) No. 56 of 2018 disclosed the factum of pendency of certain proceedings in relation to the mining business of the Demerged Company which on clarification turned out to be investigations registered as Spl. CC No. 12/2016 and Spl. CC No. 471/2016 arising out of charge sheet lodged by Special Investigation Team, Karnataka Lokayukta Police before 23rd Additional City Civil Sessions Court, Bangalore Urban at Bangalore wherein proceedings are stated to have been stayed by Hon ble High Court of Karnataka. According to Appellants the said proceedings have no bearing and cannot be an impediment in considering approval of the scheme of demerger. 3. It is submitted by learned counsel for the Appellants that the Company Applications were filed by the Demerged Company and the Resulting Companies praying for dispensation of meetings of their creditors and shareholders by duly producing consent affidavits in support of the scheme from 100% of the Shareholders of each company and 100% of the Creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal (AT) No. 04 of 2019 and Company Appeal (AT) No. 05 of 2019 figure as Respondents No. 1 and 2 in Company Appeal (AT) No. 06 of 2019. They have supported proposal for scheme of demerger by 100 percent voting. 4. We have given our anxious consideration to the submissions made at the bar and also scanned through the record. The relevant provisions of the Companies Act, 2013 are reproduced hereinbelow:- 230. Power to compromise or make arrangements with creditors and members (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them, the Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, 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. Explanation.-For the purposes of this sub-section, arrangement includes a reorganisation of the company s share capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the Securities and Exchange Board and stock exchange where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner as may be prescribed: Provided further that where the notice for the meeting is also issued by way of an advertisement, it shall indicate the time within which copies of the compromise or arrangement shall be made available to the concerned persons free of charge from the registered office of the company. (4) A notice under sub-section (3) shall provide that the persons to whom the notice is sent may vote in the meeting either themselves or through proxies or by postal ballot to the adoption of the compromise or arrangement within one month from the date of receipt of such notice: Provided that any objection to the compromise or arrangement shall be made only by persons holding not less than ten per cent. of the shareholding or having outstanding debt amounting to not less than five per cent. of the total outstanding debt as per the latest audited fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the terms of the compromise or arrangement: Provided that no compromise or arrangement shall be sanctioned by the Tribunal unless a certificate by the company's auditor has been filed with the Tribunal to the effect that the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under section 133. (8) The order of the Tribunal shall be filed with the Registrar by the company within a period of thirty days of the receipt of the order. (9) The Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors or class of creditors, having at least ninety per cent. value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. (10) No compromise or arrangement in respect of any buy-back of securities under this section shall be sanctioned by the Tribunal unless such buy-back is in accordance with the provisions of section 68. (11) Any comprom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transferor company is required to be transferred to transferee company or divided among/ transferred to two or more companies is required to order meeting of the creditors or members, as the case may be, to be called. Sub-section (9) thereof empowers the Tribunal to dispense with calling of a meeting of creditors where such creditors, having at least 90% value agree to and confirm the scheme of compromise or arrangement. The creditors/ members are required to file an affidavit stating that they agree to and confirm the scheme of compromise or arrangement. It is abundantly clear that where the creditors/ members having at least 90% value signify their consent to the scheme of compromise or arrangement by filing affidavits, the Tribunal will have the discretion to dispense with calling of meeting of creditors/ members. This is to be done at the very threshold stage and precedes an order by the Tribunal under Sub-Section (6) sanctioning a compromise or arrangement which can be passed by the Tribunal only after majority of the persons representing three-fourths in value of the creditors or members as the case may be agree to any compromise or arrangement. Once the companies conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goes to the root of the impugned order which cannot be sustained. 7. Apart from what has been stated hereinabove, the pending issues could not be construed as an impediment in sanctioning the proposed scheme of demerger. It is so for more than one reason. First being the case of Appellants - Petitioners before the Tribunal, that the demerger scheme proposed by the Appellants was not with regard to business of Mining which would continue with the Demerged Company and the pending investigation would continue unhindered against the Director of the Demerged Company without having any impact on the proposed scheme of demerger. Second, because pendency of investigation would not stand as a legal impediment in sanctioning the proposed scheme of demerger for any civil action or criminal proceedings in respect of past events/ transactions. In identical circumstances, the Hon ble Gujarat High Court sanctioned the modified composite scheme of arrangement in terms of its judgment dated 1st March, 2007 rendered in Company Petition Nos. 9 and 10 of 2006 titled Core Health Care Limited Vs. Nirma Limited. reported in 2007 SCC Online Guj 235 . Relevant portion thereof reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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