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TMI Blog2017 (5) TMI 1764X X X X Extracts X X X X X X X X Extracts X X X X ..... mber (Judicial), There is imperative need to examine Section 230 and Section 232 of the Companies Act, 2013 and Rules made thereunder including the NCLT Rules, 2016 in the context of the objectives of the new Act and the legislative history behind this subject - Section 230(3) Companies Act, 2013 and Section 232(2) of the said Act and Rule 6 of the Companies (Compromises, Arrangements and Amalgamations Rules 2016, both start with the word Where and this has to be read with the word may as mentioned hereinabove. Now a question arises, that what was the legislative intent and the ratio decidendi behind using the word may and it is important to understand as to why the High Courts have exercised discretion under Section 391(1) of the Companies Act, 1956. It has to be accepted that the word may introduces an element or an essence of discretion and whenever the question of discretion comes in, authority follows and perhaps that is the reason why the authority and the inherent powers are granted so that in the interest of justice the same can be exercised in appropriate situations. It cannot be ignored that almost all the High Courts have exercised this discretion since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch for decisions on the following points on issue. Whether the Tribunal has power to grant dispensation of the shareholders' meeting regarding the proposed scheme of amalgamation where all the shareholders have given consent, whereas the Companies Act, 2013 has authorized only for the dispensation of the meeting of creditors where creditors having at least 90% value agreed and confirmed by way of an affidavit scheme of compromise or arrangement? Hon'ble President, NCLT referred the matter to the matter to the 3rd Member, Ms. Manorama Kumari, Member (Judicial) who has given a separate judgement and has passed order, which is annexed herewith as Annexure C. It appears that Member (Judicial), Ms. Manorama Kumari has taken a view which is in consonance with the view of the Member (Technical) Mr. S. Vijayaraghavan and decided the matter and passed the following order along with the main judgement. Regard being had to the precedents set forth by the Hon'ble High Courts, I am of the view that I have no reason to depart from the precedents created by the Hon'ble High Courts to dispense with the requirements of convening the meetings of the shareholders a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at Calcutta being C.A. no.896 of 2016 earlier for sanction of a Scheme of Amalgamation before the Hon'ble High Court at Calcutta on 14.12.2016, which has now come for consideration before this Tribunal by virtue of notification no.S.O.3677(E) dated 7th December, 2016 in which relevant sections came into force with effect from 15th December, 2016 and by the Companies (Transfer of Pending Proceedings) Rules, 2016, which became effective on 15.12.2016. The objects of this application is to ultimately seek and obtain the sanction of this Tribunal to a Scheme of Amalgamation proposed to be made between the Jupiter Alloys Steel (India) Ltd. and Jupiter Wagons Limited and their respective shareholders (hereinafter referred to as the Scheme) under the Scheme of Amalgamation. Heard the Ld. Pr.C.S representing both the Applicant Companies for dispensation of their respective members meeting. In relation to the above, it is necessary to go into the provisions of Companies Act, 2013 and the rules framed thereunder. For ready reference Section 230 and 232 of the Companies Act, 2013 and relevant part of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 are give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 their 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 meeting is also issued by way of an advertisement, it shall indicate the time within which co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romise or arrangement provides for conversion of preference shares into equity shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable; (b) the protection of any class of creditors; (c) if the compromise or arrangement results in the variation of the shareholders' rights, it shall be given effect to under the provisions of section 48; (d) if the compromise or arrangement is agreed to by the creditors under sub-section (6), any proceedings pending before the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (I of 1986) shall abate; (e) such other 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies, the Tribunal may on such application, order a meeting of the creditors or class of creditors or the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal may direct and the provisions of sub-sections (3) to (6) of section 230 shall apply mutatis mutandis. (2) Where an order has been made by the Tribunal under sub-section (I), merging companies or the companies in respect of which a division is proposed, shall also be required to circulate the following for the meeting so ordered by the Tribunal, namely:- (a) the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company; (b) confirmation that a copy of the draft scheme has been filed with the Registrar; (c) a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promotors and non-promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties; (d) the report of the expert with regard to valuation, if any; (e) a supplementary accounting statement if the last ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsibility Statement. - For the purposes of sub-clause (i) Of clause (c) of sub-section (2) of section 230 of the Act, the creditor's responsibility statement in Form No. CAA. 1 shall be included in the scheme of corporate debt restructuring. Explanation For the purpose of this rule, it is clarified that a scheme of corporate debt restructuring as referred to in clause (c) of sub-section (2) of section 230 of the Act shall mean a scheme that restructures or varies the debt obligations of a company towards its creditors. 5. Directions at hearing of the application.- Upon hearing the application under sub-section (1) of section 230 of the Act, the Tribunal shall, unless it thinks fit for any reason to dismiss the application, give such directions as it may think necessary in respect of the following matters:- (a) determining the class or classes of creditors or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement; or dispensing with the meeting for meetings for any class or classes of creditors in terms of sub-section (9) of section 230: (b) fixing the time and place of the meeting or meetings; (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Coordinate Benches in this regard, so legal position is to be adjudged in the present scenario. Here it is important to consider the law laid down by the Hon'ble Supreme Court in case of Sub Inspector Roop Lal - vs- Lt. Governor [2000] 1 SCC 644 at page 654. In the above-mentioned case, Hon'ble Supreme Court has showed serious dissatisfaction in regard to the manner in which a Coordinate Bench of the Tribunal has overruled, in effect an earlier judgment of another Coordinate Bench of same Tribunal. Hon'ble Supreme Court has further held that this is opposed to all principles of judicial discipline and the Hon'ble Supreme Court has further laid down the guideline that if at all, the subsequent bench of the Tribunal was of the opinion that the earlier view taken by the Coordinate Bench of the same Tribunal was incorrect, it ought to have referred the matter to a larger bench so that difference of opinion between the two Coordinate Benches on the same point could have been avoided. In another case, Hon'ble Supreme Court in Union of India - vs- Paras Laminates Pvt. Ltd. [1990] 4 SCC page 453 has held that Bench of two Members must not likely disregard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into the Act such disenabling provisions as that would tantamount to judicial legislation which the Courts must eschew. It is for Parliament to specifically say that no appeal shall be filed or admitted or maintainable without the assessee's paying the admitted tax due..... In such a case the question would also arise as to why the Appellate Tribunal should not be given the power to dispense with or waive such a condition? All these would come in the realm of legislation which can be done only by legislature. Hence, we find no merit in these appeals filed by the Department. In this case also, Companies Act, 2013 sub-clause (9) authorises the Tribunal to dispense with calling of the meeting of creditor or class of creditors but no such power is given for dispensing with the meeting of members/shareholders. Section 232 of the Companies Act which deal with the merger and amalgamation of the companies do not provide any such power to the Tribunal to dispense with the meeting of shareholder/members. When the Act does not empower then giving such dispensation will amount to interfere in the realm of legislation which is not permissible in law. In the light of the above dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed Form of Proxy, shall be sent individually by Registered Post or by Speed Post or by Courier or by Email of by Hand Delivery to each of the Equity Shareholders of both the Applicant Companies at their respective registered or last known addresses as per the records of the respective Applicant Companies. 4. The quorum for the aforesaid meetings shall be as prescribed under Section 103 of the Companies Act, 2013. 5. The notices of the aforesaid meetings shall be advertised in Form No. CAA.2, in one English newspaper being 'Business Standard' and in one Bengali newspaper being 'Aajkal' not less than 30 days before the date fixed for the meetings in accordance with Rule 7 of The Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 Image01 7. The value and number of the shares of each member shall be in accordance with the list attached in the instant application and the Chairperson of the meetings shall consider the same for the purpose of the meetings of the members as aforesaid. 8. The Chairperson appointed for the aforesaid meetings shall issue the notices of the aforesaid meetings. The said Chairperson shall have all powers under The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t such creditors have no objection to the proposed Scheme. 12. Both the Applicant Companies to serve the notice upon the Regional Director, Eastern Region, Ministry of Corporate Affairs, the Registrar of Companies and the Official Liquidator, pursuant to Section 230(5) of the Companies Act, 2013 and as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. If no response is received by the Tribunal from the Regional Director within 30 days of date of receipt of the notice it will be presumed that the Regional Director and / or Central Government has no objection to the proposed Scheme as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. In addition to the above order, applicant companies are also directed to send notice through e-mail on the Regional Director and RoC alongwith the affidavit annexing the copy of mail sent to ROC and the Regional Director within seven days from the date of order. 13. Both the Applicant Companies to serve the notice on the concerned Income Tax Authority within whose jurisdiction the Applicant Companies assessment are made, pursuant to Section 230(5) of the Companies Act, 2013 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited (Amalgamating Company) and Jupiter Wagons Limited (Amalgamated Company). The aforesaid Scheme has been also annexed with the application. The applicant submitted that this instant application was earlier filed with Hon ble High court at Calcutta being C.A. no. 896 of 2016 earlier for sanction of a Scheme of Amalgamation before the Hon ble High Court at Calcutta on 14.12.2016, which has now come for consideration before this Tribunal by virtue of notification no. 3677(E) dated 7 th December, 2016 in which relevant sections came into force with effect from 15 th December, 2016 and by the Companies (Transfer of pending Proceedings) Rules, 2016, which became effective on 15.12.2016. The objects of this application is to ultimately seek and obtain the sanction of this Tribunal to a Scheme of Amalgamation proposed to be made between the Jupiter Alloys Steel (India) Ltd. and Jupiter Wagons Limited and their respective shareholders (hereinafter referred to as the Scheme) under the Scheme of Amalgamation. Heard the Ld. Pr.C.S representing both the Applicant Companies for dispensation of their respective members' meeting. Definition of member in relation to a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so as to avoid divergence of opinion based upon the facts of the individual cases by various benches which may be based upon considerations such as, number of shareholders, voting power, paid-up capital, net worth, etc. The judgment of the various Hon'ble High Courts, apart from Tribunal's decisions mentioned above by the Ld. Judicial Member, are also mentioned herein. Obviously, the NCLT Rules are not applicable before any proceedings in the Hon'ble High Courts, who are governed by their own procedures. Some of them are mentioned below: i) Hon'ble Delhi High Court in the case of Basera Realtech Private Ltd. and other 10 Transferor Companies with SRK Tradelinks Private Ltd., the Transferee Company, in Company Application (Main) No. 150/2015 dated 2 nd November, 2015 The Hon'ble Delhi High Court in the above case has held that convening the meeting of the equity shareholders of the transferor and transferee companies to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. The Hon'ble Calcutta High Court vide order dated 25th July, 2016 in the case of Traita Properties Priv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tta (where it was initially filed being Company Application No.896 / 2016) pursuant to MCA Notification no. S.O. 3676(E) dated 7th December, 2016 which provides that the pending proceedings under the Companies Act, 1956 prior to 1 5th December, 2016 before any High Court shall transferred to the NCLT. The matter has to be dealt in accordance with Section 434(1)(c) of the Companies Act, 2013 i.e. from the stage before their transfer. Simaltaneously, pursuant to MCA notification no. S.O. 3677 (E) dated 7th December, 2016, Section 230 [except sub section (11) and (12)] of Companies Act, 2013 (hereinafter referred to as 'the Act') and also Sections 231 - 233 of the said Act came into force w.e.f. 15th December, 2016 and also the Companies (Transfer of Pending Proceedings) Rules, 2016 came into force w.e.f. 15th December, 2016 and the erstwhile provisions of Sections 391 - 394 of the Companies Act, 1956 ceased to exist. Subsequently, the matter was transferred to this Bench vide File No.10/03/2017 NCLT dated 20th March, 2017 issued by NCLT, New Delhi. 1. The Ld.Practising Company Secretary has outlined the details of the proposed joint application which are as follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any for every 100 fully paid up equity shares of ₹ 100/- each held by such equity member in the Amalgamating Company. (k) The details relating to authorized share capital, paid up share capital, main objects, present business and latest audited annual accounts of the applicant no. 1 company and applicant no.2 company are submitted in paragraphs no. 5 to 8 and paragraphs no. 11 to 14 of the application, respectively along with the relevant annexures. None of the applicant companies has any debentures. (l) An affidavit in support of the joint application is sworn by Mr.Asim Ranjan Dasgupta, being the Director of both the Companies and has been filed along with the application. (m) It has been mentioned at paragraph no.25 of the application that no proceedings are pending under the provisions of Section 235 and 250A of the Companies Act, 1956 or applicable new provisions under the Companies Act, 2013 against both the applicant companies. (n) Ld.PCS also submitted that certain corporate actions are under process and both the companies have filed letters dated 28th March, 2017 with this Hon'ble Bench with respect to Share Subscription and Shareholders' Agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r both the companies. The affidavits are duly identified and notarized. There are 8 common shareholders in both the applicant companies. (c) Section 230(9) of the Act itself provides the method of affidavits when it deals with creditors. Hence there may not be different footings for members and creditors and tough directions be given to ensure the authenticity of the affidavits. (d) Since all the shareholders have already given consent in writing prior to the meeting, hence the meeting cannot serve any further purpose than completing a mere formality. Substantial compliance rather than formal compliance be considered, if it meets, the object and intent of the statute. (e) As mentioned in paragraph 24 of the application, the financial position of applicant/ amalgamated company shall have positive net worth post effectiveness of the Scheme and there has been no compromise with the creditors and that the respective creditors would, in no way, be affected by the scheme and that all the liabilities of the Amalgamating Company shall stand transferred to the Amalgamated Company and hence the creditors meeting is not relevant at all. (f) Creditors are fluctuating body on day t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sely held with small number of shareholders or creditors or when the financial position of the companies are such that they would not be able to bear the expenses in this regard in going strictly by the Act and the Rules made thereunder if the Bench is convinced that there is no malafide and if the applicants are ready to give further undertakings as the Bench may direct. (r) The recent orders of the various Benches of NCLT have been differing from each other but the Bengaluru Bench vide Order dated 14.03.2017 in the matter of Puma India Corporate Services Private Limited has considered the issue of dispensation of meetings in the favour of the applicants. It was submitted that dispensation was allowed by the Bengaluru Bench even in the case of Coffee Day Overseas Private Limited vide order dated 02.02.2017 which was in between the Order of Principal Bench dated 13.01.2017 and the Order of Mumbai Bench dated 13.02.2017. (s) The Hon'ble Bench is empowered to do so in the interest of justice under Rule 11 of National Company Law Tribunal Rules, 2016 read with Rule 24(2) of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. 3. In my view, there is impera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have exercised this discretion since long and dispensed with the calling of the meetings in appropriate situations. The precedents created by the High Courts to dispense with the requirement of convening the meetings are worth and continuation of such precedents are virtue in the era of ease of doing businesses as well as future course of corporate actions. A settled issue should not be unsettled without proper reasons. Thus the notion that calling of meetings is mandatory does not stand. Regard being had to the precedents set forth by the Hon'ble High Courts, I am of the view that I have no reason to depart from the precedents created by the Hon'ble High Courts to dispense with the requirements of covening the meetings of the shareholders and creditors of the Company, if the Bench is satisfied in all respects. In the instant case both the applicant companies have few shareholders and all of them have given their written consents/ affidavits and post merger there shall be positive net worth and the creditors are not compromised. That apart, as we are in the era of ease of doing business, sometimes the advantage / effectiveness of corporate actions like mergers and ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is received by the Tribunal from the above authorities within 30 days of date of receipt of the notice it will be presumed that such authorities have no objection to the proposed Scheme as per Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. (iv) Both the Applicant Companies to serve the notices upon their current creditors i.e. creditors as on the date of passing of this Order having outstanding debt amounting to not less than five percent of total outstanding debt of the Company as per the list of creditors as on the date of passing of this Order in the same manner as the notices shall be served to various authorities as per Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 with suitable changes in the notice relating to waiver of the meetings and with a direction that they may submit their representations, if any, to the Tribunal and a copy of the same shall be simultaneously served on the concerned applicant company. If no response is received by from such creditors within 30 days of date of receipt of the notice it shall be presumed that such creditors hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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