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TMI Blog2020 (9) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions, and this is certainly not what the lawmakers intended. In the light of settled position in law on the import of the term arrangement , which is of wide ambit and import, there is no basis to hold that the scheme as filed by the petitioner does not constitute as an arrangement between the petitioner-company and its members within the meaning of sections 391-394 of the Companies Act, 1956 or section 230-232 of the Companies Act, 2013. There are no restrictive covenants built into the language of sections 391-394 of the Companies Act, 1956 or sections 230-232 of the Companies Act, 2013 that would inhibit our considering the present scheme to satisfy the requirements of an arrangement within the meaning of those sections. Even if the scheme purports to rectify and regularise the allotments already made by the petitioner, there is no reason why the scheme should not be treated as an arrangement between the company and its shareholders. Objections of the RD and of the shareholder holding 0.00012 per cent. of the paid-up share capital of the petitioner-company - HELD THAT:- The RD's objection is more on the procedural aspects than anything else. Procedural nicetie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Heard Mr. Hemant Sethi, learned counsel for the petitioner, Ms. Rupa Sutar, Deputy Director for the Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, and Mr. Ashish Lalpuria, the objecting shareholder of the petitioner. 3. This petition was originally filed before the hon'ble Bombay High Court. By virtue of notification issued by the Ministry of Corporate Affairs (MCA) on December 7, 2016 notifying the Companies (Transfer of Pending Proceedings) Rules, 2016, the above proceedings were transferred to this Bench. 4. The sanction of this Tribunal is sought under sections 230 to 232 of the Companies Act, 2013, to a scheme of arrangement between the petitioner-company and its equity shareholders. Learned counsel for the petitioner states that the scheme of arrangement has been filed by the petitioner-company pursuant to the advice of the Bombay Stock Exchange to the petitioner by its letter dated August 22, 2013. The scheme has been unanimously approved by the shareholders and creditors of the petitioner-company. 5. Learned counsel for the petitioner submits the rationale for the scheme is as follows : (a) The petitioner was incorporated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etired Chief Justice of India, who had opined that such an action did not amount to a reduction of share capital and compliance with the provisions of section 100 of the Companies Act, 1956 was not necessary. (e) On November 23, 1998 the board of directors of the company, implemented the proposal, whereby the 24,13,000 partly paid-up shares were converted to 6,03,250 fully paid-up shares. During the time of allotment, 406 shareholders had subscribed to 10,375 shares by paying the full subscription amounts of ₹ 160 per share. However, they had applied for less than 100 shares, which was the minimum threshold. (f) It is further stated that by a letter dated May 6, 1999 the Bombay Stock Exchange (BSE) declined the request of the petitioner to list the 6,03,250 proportionately reduced shares and the 10,375 shares that were issued. The said letter of the BSE was not received by the petitioner due to a change in its address. (g) The petitioner states that being unaware of the decision of BSE of non-listing of the aforesaid 6,03,250 proportionately reduced shares and the 10,375 shares that were issued, the company's recognised share capital in its audited financial stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and unsecured creditors were convened and held on February 8, 2016 and the scheme was unanimously approved by the shareholders and creditors present at the meetings. The chairman's report of the meetings of the equity shareholders and creditors is annexed to the company petition as exhibits H1 and H2. The report of scrutinisers, viz., M/s. Jayesh Vyas and Associates, practising company secretaries, forms part of the chairman's report. 8. The material provisions of the proposed scheme of arrangement were : (a) Ratification of reduction of 18,09,750 shares by conversion of 24,13,000 partly paid-up shares to 6,03,250 fully paid-up shares. (b) Reduction of share capital by cancellation and extinguishment of 10,375 fully paid-up shares allotted to 406 shareholders and transfer of fully paid-up 10,375 by the promoters at the rate of 0.005 paise per share to restore the rights of the said 406 shareholders. (c) Rearranging and numbering the distinctive numbers of shares to reconcile the same with the paid-up share capital. (d) Issue and allotment of 21,04,865 fully paid-up shares as bonus shares to the public shareholders of the company other than promoters. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter after considering the above observations. 10. In response to the report filed by the RD, the petitioner-company has filed affidavit in reply dated October 22, 2018 broadly reiterating the contents of the petition. It was averred that the objection raised by the RD is too technical. 11. Mr. Ashish Lalpuria, one of the shareholders of the petitioner appears in person. He has filed his objection to the proposed scheme. The only objection is that the if the present scheme is rejected, the petitioner may come out with scheme to buy-back the shares from the public shareholders. He also contends that the scheme in its present form is not a scheme that can fit into sections 230-232 of the Companies Act, 2013. 12. The core contention raised is whether the scheme as presented can be construed as a scheme of arrangement under section 391 of the Companies Act, 1956 or under section 230 of the Companies Act, 2013. 13. Mr. Hemant Sethi, learned counsel for the petitioner, submits that the term arrangement is not defined in the Companies Act, but as per judicial interpretation, it is of wide amplitude. The arrangement contemplated by way of the present scheme would certainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in recent years would not require authority and its validity is by no means diminished by what was said by Brightman J. in NFU Development Trust Ltd., In re [1972] 1 WLR 1548 (Ch D) ; [1973] 1 All ER 135 (Ch D). All that that case shows is that there must be some element of give and take. Beyond that it is neither necessary nor desirable to attempt a definition of 'arrangement'. (at page 652) (c) T. C. S. P. No. 151 of 2017 (Hindustan Unilever Ltd., In re) in the National Company Law Tribunal, Mumbai Bench, dated August 30, 2018 : In this scheme of arrangement an amount of ₹ 2,187.33 crores standing to the credit of the general reserves of the company was re-classified as and credited to the profit and loss of the company and subsequent thereto, such amounts credited to profit and loss account of the company was reclassified as and constitute accumulated profits of the company for the previous financial years. Further, on the scheme becoming effective, and subsequent to re-classification of the amounts standing to the credit of the general reserves and credit thereof to the profit and loss account, the amount so credited shall be paid out to the members of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to requisite approvals of all concerned authorities. 17. Learned counsel for the petitioner further submits that in any case, Mr. Ashish Lalpuria, the objecting shareholder, has no locus standi to file any objection as admittedly he does not have the required qualification. Mr. Hemant Sethi also invited our attention to the proviso to section 230(4) of the Companies Act, 2013 which, inter alia, reads as : 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 financial statement. 18. Per contra, Mr. Ashish Lalpuria submitted that the issue of locus should be decided only if this Tribunal holds that the scheme as filed by the petitioner in its present form is an arrangement within the meaning of the Companies Act, 1956/2013. 19. We have carefully considered the rival contentions of learned counsel for the petitioner and the objecting shareholder. We have also perused the report of the RD objecting to the present scheme on the ground that it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld inhibit our considering the present scheme to satisfy the requirements of an arrangement within the meaning of those sections. Even if the scheme purports to rectify and regularise the allotments already made by the petitioner, there is no reason why the scheme should not be treated as an arrangement between the company and its shareholders. Objection by the Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai 23. Having held that the scheme propounded does indeed answer the description of being an arrangement , we now proceed to examine the objections of the RD and of the shareholder holding 0.00012 per cent. of the paid-up share capital of the petitioner-company. To recapitulate, the RD had submitted that- (a) The company has acted only on the legal opinion dated November 3, 1997 and not acted on the basis of the letter and spirit of provisions of section 100 of the Companies Act, 1956. (b) Subscription made by each of the shareholders less than 100 each which is not acceptable. (c) Letter of Bombay Stock Exchange dated May 6, 1999 not received by the company and only came to know in the year 2012 is also not accept able since the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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