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TMI Blog2021 (6) TMI 599X X X X Extracts X X X X X X X X Extracts X X X X ..... proposal given by the company. Because of this, the Regulating Authorities will not get a chance to raise their objections before a decision is taken by the company (shareholders) to pass a resolution to the scheme proposed by the Board of Directors - If the shareholder's meeting is not held as stated under Section 230(3) whole process envisaged under Section 230(3)(4)(5)(6) will become redundant, the proposal of dispensation of shareholders meeting is in violation of the procedure laid under Section 230 of the Companies Act, 2013. Whether the concept of two judges and three judges is applicable to NCLT? - HELD THAT:- NCLT is only a fact finding Tribunal constituted under Companies Act 2013, wherein it is categorically mentioned that NCLT shall be constituted with one judicial member and one technical member. When such is the case, is there any scope to constitute three member bench by NCLT on its own? It has to act according to the jurisdiction given to it. It is not a constitutional court and not even a court having jurisdiction under section 9 of CPC to temper its powers beyond the scope and ambit of the Companies Act. The Act 2013 even envisages how to go about when di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng errors. Further, Hon'ble Supreme Court in the case of CIT v. Pawan Kumar Laddha, (2010) 13 SCC page 294 has laid down that The Courts have to be careful in reading into the Act such dis-enabling provisions as that would tantamount to judicial legislation which the Courts must eschew... It is specifically mentioned in Section 230(9) of the Act that meetings can be dispensed in case of Creditors. Section 230(1) of the Act refers to meetings of Shareholders and Creditors. In view of this, there is no option but to hold that meetings of Shareholders should be convened. The principle about the legislative intent by Apex Court has also been held by this bench in the case of G Trans Logistics (India) Private Limited V/s. Emtex Engineering Pvt. Ltd., (IB)-1093(ND)/2018. 2. Against this order, the judicial member Shri Abni Ranjan Kumar Sinha wrote the dissent order stating that in the past, for three judge Bench of Calcutta NCLT in CA 11/2017 having held that the Tribunal has power to grant dispensation of the shareholders meeting if all the shareholders have given their consent for the scheme, it shall be binding on other NCLT Benches. And he has also referred to N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one is called first motion seeking a direction u/s. 230(1) of the The Companies Act 2013 (the Act) to hold meetings of the stakeholders as stated in the Act, upon such order, once the meeting ordered is held, on the report of the Chairman/Chairmen of the meeting/meetings, second motion will be initiated for admission, after admission, at the final hearing, Tribunal will adjudicate on the scheme petition finally heard. Why all these checkmates arranged at first motion is, if anybody has any objection to seek for approval of the shareholders, the objectors can raise their objection at the time of conducting shareholders meeting itself. 7. As per Sub Section 230(1), the relief that is presumed to be sought is for an order to hold stakeholders meetings, the applicant cannot ask any other relief other than the relief for holding meetings, because section is couched in such a way that the Court upon consideration what all it has to do is either to order for meetings, or to reject the relief seeking for meetings, except this nothing is mentioned in the subsection. I will discuss Section 230(9) context later. 8. It is a known fact that it is a Tribunal limited to deal with powers co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. Pawan Kumar Laddha, (2010) 13 SCC page 294, NCLT has attempted to legislate the section of law by incorporation of something by implication that is not present in the subsection, As to subsection 230(9) (dispensation of holding creditors meeting provided 90 percent consent is given by way of filing affidavits) is a standalone provision, it cannot be understood that this stand alone provision can even permit dispensation of shareholders meeting. If such is the discretion contemplated in Subsection 230(1), the legislature would not have carved out a standalone provision for dispensation of creditors meeting under sub section 230(9) of the Act. 10. In the present section, the word may employed in sub section 1 of section 230 gives discretion either to order or not to order holding meetings. Since in Subsection 230(2) it has been stated that the application filed under Subsection 230(1) shall be in compliance of the mandate given under subsection 230(2), it is an obligation upon the Tribunal to verify as to whether or not the application filed is in compliance of subsection 230(2) and to verify other aspects whether or not the applicant company is burdened with other infirmit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be called, held and conducted in such manner as Tribunal directs. The direction mentioned at the end of the section speaks about the manner in which meeting is to be called, to be held and conducted. The Tribunal has discretion to decide the mode of calling meeting, the Tribunal has discretion how to hold the meeting, the Tribunal has discretion how to conduct the meeting, but not to dispense with shareholders meetings. By seeing this discretion in relation to the manner of calling, holding and conducting meeting, one cannot misconstrue that since the word may is used somewhere in the section, meeting itself need not be called and held owing to the discretion conferred upon NCLT by usage of the word may . 15. The difficulties likely to emerge out of not calling, holding and conducting meeting is, the problem is notice will not go to the stakeholders, who are the persons ultimately to decide the direction and destiny of the applicant company. By which, the statement of compromise or arrangement, copy of the valuation report, explanation in respect to effect of this scheme upon creditors, and other stakeholders and the effect of the material interest, if any, of the directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Companies Act by giving a tweak to the provision of law by saying previously dispensation was provided. After repeal of the old enactment, the old regime cannot be seen as still in force, while reading the provisions, wholesome idea and spirit behind the legislation is to be seen. 20. If the chronology of Section 230 is read, it is evident that NCLT at the outset shall look into compromise or arrangement proposal on the application filed by the company. On filing such application, if at all it is of the view that proposal shall be examined and allow the company to call and hold meeting as per subsection 230(6), it shall issue notices to the creditors as well as members of the company individually at the address registered with the company, along with those notices, the applicant companies are under obligation to send statement disclosing the details of the compromise or arrangement, copy of the valuation report and the effect of such proposal upon the creditors and members and other stakeholders and such notices shall be disclosed even on the website of the company, apart from that, same notice shall be sent to other Regulating Authorities as mentioned in subsection 230(5) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is proposed to be called in pursuance of an order of the Tribunal under sub-section (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to all the members or class of members and the debenture-holders of the company individually at the address registered with the company which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining them effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed: Provided that such notice and other documents shall also be 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 mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 1-6 of section 230 shall apply mutatis mutandis and there being additional disclosures under sub-section (2) of section 232, NCLT could sanction post compliance as mentioned in Section 232. Therefore, the applicant cannot invoke a procedure that is not present in subsections (1) (2) of Section 230 for sanction of the scheme falling under Section 232 as well. As to rest of subsections of this section (section 232), they only talk of actions of post sanction of the scheme; hence we believe that the applicant is not permitted to import something other than the procedure given for grant of approval for holding meetings u/s. 230 as well as u/s. 232 of the Act. 24. As to dispensation, it has been mentioned in subsection 9 of Section 230, the Tribunal is given discretion to dispense with calling of a creditors meeting or class of creditors meetings, where such creditors or class of creditors having at least 90% value agree and confirm by way of affidavit to the scheme of compromise or arrangement. But this grant of dispensation has not been extended to the shareholders either in subsection 9 or any other subsection of Section 230 of the Companies Act, 2013. The discretion given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitute such Benches. Moreover if any aberration of applicability of law comes anywhere from the orders of NCLT, it does not mean other NCLT Benches also to follow it. NCLT cases are dependent on multiple facts with different different logical ends, for NCLT - one guiding principle is the statute under which it is working. 28. This concept of ratio decidendi is a common law doctrine to be applied to the cases where statutory guidance is absent, but not in the cases where section is so telltale leaving no scope to doubt its mandate. Here we cannot simply proceed blindfolded shirking the duty of implementing the law given by the people through legislative bodies just by looking at orders passed by some other Bench of NCLT. 29. Of course in Service Tribunal cases, there is a ratio that orders should not be variant on one circular or memorandum given by any Government. Normally Service Tribunals pass orders saying covered case if facts are on the same circular or memorandum. It cannot be so with NCLT because facts in each case are different. It is understandable if any Bench passes an order dealing with an aspect that is not present in the statute, then it could be said that N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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