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TMI Blog2019 (11) TMI 1654X X X X Extracts X X X X X X X X Extracts X X X X ..... Gupta, Advocate ORDER Ajay Kumar Vatsavayi, J. CA (CAA) No.39/Chd/Hry/2018 has been filed by five Companies, as referred in the above cause title, under Sections 230-232 of the Companies Act, 2013 (for brevity, the Act ) read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (for brevity, the Rules ) seeking dispensation of convening of the meetings of the shareholders, creditors and unsecured creditors of all classes of all the 5 applicant companies, among other reliefs. 2. This Tribunal, after hearing the learned counsel for the applicant-companies and also after perusing the pleadings on record while allowing certain prayers, rejected the prayer relating to dispense with the convening of the meetings of unsecured creditors of Applicant Company No. 4 and equity shareholders, secured and unsecured creditors of Applicant Company No. 5 vide its order dated 07.06.2019. 3. The applicant-companies, aggrieved with the order dated 07.06.2019, to the limited extent of declining their prayer seeking dispensation of meetings of unsecured creditors of Applicant Company No.4 and equity shareholders, secured and unsecured creditors of Applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lined to dispense with the meetings of Shareholders, Secured and Unsecured Creditors by holding that the consent affidavits of Unsecured Creditors in respect of Appellant No. 4 and Equity Shareholders and Secured and Unsecured Creditors have not been obtained. The relevant portion of the impugned order reads as under:- xx xx xx 6. Learned counsel for the Appellants, while relying on the judgments of larger Benches and Coordinate Benches of the Tribunal stated to have been brought to the notice of the Tribunal vide additional affidavit dated 15th February, 2019 vide Diary No. 787/19 as also the law propounded by various Hon ble High Courts, submitted that in similar circumstances meetings of Shareholders and Creditors were dispensed with. We have referred to some of these judgments and the legal position enunciated therein would warrant the conclusion that the impugned order is per incuriam. It is noticed elsewhere in this judgment that following of the judicial precedent and observing the judicial view propounded by a Coordinate Bench in compliance is a matter of judicial discipline and the only course open to a Coordinate Bench of equal strength taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird Member and the case was decided as per majority view which, inter alia dispensed with the requirement of convening of meeting of members and creditors taking into account the considerations that there shall be positive net worth and creditors will not be compromised. 8. Keeping in view the foregoing and all relevant considerations as also the settled law on the subject, the impugned order falling within the purview of per incuriam cannot be supported. The Tribunal should have applied its mind in the light of judicial precedents brought to its notice by way of an affidavit, and in the event of the views expressed by the Coordinate or Larger Benches being squarely applicable, followed the same. Such application of mind being abysmally absent, the impugned order is unsustainable and has to be set aside to the extent it relates to directions for convening of the meetings of Unsecured Creditors of Appellant No. 4 and the meetings of the Equity Shareholders, Secured and Unsecured Creditors of Appellant No.5. 9. The appeal is allowed and the impugned order is set aside to the extent indicated hereinabove and directions passed thereunder. The matter is remanded to the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Therefore, it is hereby held that even the scheme is in respect of subsidiaries but merely on this ground, dispensation of meetings of shareholders, secured and unsecured creditors cannot be dispensed with. Also, it is stated in the prayer clause of the application that in the alternate, the Tribunal may issue directions to convene the meetings of unsecured creditors of Applicant No. 4 and equity shareholders, secured and unsecured creditors of Applicant No. 5 and issue directions with regard to appointment of Chairperson, Alternate Chairperson and Scrutinizer as well as issue directions for publication. 8. The learned senior counsel Dr. U.K. Chaudhary appearing for the applicant-companies, while drawing our attention to the orders of the Hon ble NCLAT, submitted that in view of the majority decision in Jupiter Alloys Steel (India) Limited And Jupiter Wagons Limited in T.A. No. 11/2017 connected with C.A. No. 896/2016 of the NCLT, Kolkata Bench, the prayer of the applicant companies is required to be allowed. 9. In Jupiter Alloys Steel (India) Limited, the issue considered was whether the Tribunal has power to grant dispensation of the shareholders meeting regardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r each individual case based on facts and circumstances and discretion can be predictable in identical situation. If the word may is directory / mandatory and not discretionary then the meaning of such a rigid interpretation could also be that the Tribunal does not have the power to reject or dismiss the application; but that is not the case. If the Tribunal can use the word may to dismiss the application, it will not be fair to apply this discretion only for dismissal and not for other reliefs, where the facts circumstances so require. However, discretion does not confer any authority to be exercised in arbitrary and wanton manner and should be exercised after considering entire facts and circumstances. It cannot be ignored that almost all the High Courts 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 reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of this Tribunal to dispense with the convening of the meetings of shareholders/members is concerned, which is binding on this two Member Bench, we are proceeding further to examine the other issue. 11. The other issue in the instant CA is that there was no consent for the scheme by the unsecured creditors of the applicant company No. 4 and equity shareholders, secured and unsecured creditors of applicant company No. 5 and in such circumstance whether the meetings of the said categories can be dispensed with. The learned senior counsel submits that the transferee company, directly and indirectly has 100% holding in the applicant companies 1 to 4 and it is a scheme between wholly owned subsidiary companies and their holding company, and hence consent is not required for dispensing with their meetings. The learned counsel further submits that the net worth of the transferee company is highly positive and the assets of the demerger company and the transferee company are more than sufficient to discharge their respective liabilities. It is also stated that the unsecured creditors of the demerger undertaking will become the unsecured creditors of the transferee company which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be unsettled without proper reasons. Thus, the notion that calling of meetings is mandatory does not stand , and when with the conditions mentioned in clauses (a) and (b) of sub-section (1) of Section 232 of the Act are satisfied, the Tribunal is empowered to take appropriate steps 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. 13. In any event, invoking such power is an exception to the Rule and can be done only in a particular case, depending on the facts and circumstances of the case. In the present case it is stated that the transferee company, directly and indirectly has 100% holding in the transferor company No. 4 and the scheme is between the wholly owned subsidiary companies and their holding company and the net worth of the demerged company, post sanction of the scheme will be ₹1.14 crores whereas the net worth of transferee company will be ₹22,777.17 crores and the unsecured creditors of demerged company will become the unsecured creditors of the transferee company 14. We have carefully perused the proposed sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30 days of date of receipt of the notice it shall be presumed that such creditors have no objection to the proposed Scheme. Similar action shall also be taken by the Applicant Company No. 5 in respect of current equity shareholders i.e. shareholders as on the date of passing of this order having shares of not less than five percent of the subscribed share capital of the Applicant Company No. 5. (iii) The notices to be served under Section 230(5) of the Companies Act, 2013 as aforesaid shall contain all disclosures as mentioned in Rule 6(3) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 irrespective of the fact that meetings have been dispensed with. (iv) Advertisement of dispatch of notices to the creditors and equity shareholders as above shall be published in accordance with Rule 7 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 with suitable changes as may be practicable. (v) Both the applicant Companies No. 4 and 5 shall furnish copy of the Scheme free of charge within 1 day of any requisition for the same made by every creditor as mentioned above or member of the concerned Applicant Companies. (vi) Both the appl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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