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TMI Blog2002 (9) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... eguard the interests of debenture-holders. He pointed out that Sub-section (1) of Section 117C stipulates the following:-- (i) Create a debenture redemption reserve for the redemption of debentures issued by the Company after the commencement of the provisions of Section 117C. (ii) Redemption reserve should be created from out of the Company's profits of every year. (iii) The reserve so created should be credited with adequate amount. (iv) The reserve so created should remain until such debentures are redeemed. Where a company fails to redeem debentures issued on or after the commencement of the Companies (Amendment) Act, 2000 against which debenture redemption reserve is created, the provisions of Sub-section (4) are attracted. The term debentures used in Sub-section (4) effectively means those debentures referred to under Sub-section (1). Shri Srinivasan referred to a Press release dated 26-4-2001 issued by the Press Information Bureau and a Circular No. 9/2002 dated 18-4-2002 issued by Department of Companies Affairs in the matter of creation of debenture redemption reserve as contemplated under Section 117C. According to the Press release publishing the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure or of evidence they may have retrospective effect. It is a fundamental rule of law that no Statute should be construed to apply retrospectively unless it is expressly or by necessary implication made to have retrospective operation, in support of which he relied on State of Madhya Pradesh v. Rameshwar Rathod AIR 1990 SC 1849. He further referred to Garikapati Veeraya v. N. Subbiah Choudhary AIR 1957 SC 540 to show that the golden rule of construction is that, in the absence of anything in the enactment to show that it is to have retrospective operation, it cannot be so construed as to have the effect of altering the law applicable to a claim in litigation at the time when the Act was passed . For these reasons, Shri Srinivasan sought for dismissal of the applications. 3. According to Shri B. Ravi, Practising Company Secretary and Authorised Representative of the applicants (CA Nos. VLL1 and 2/2002), Section 117C is intended to protect the interests of debenture holders and applicable in respect of all debentures, whether issued prior or after the introduction of the Amendment Act, 2000. In this connection, he referred to the Notes on Clauses, viz. Clause 161 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing of an enactment before coming to conclusion whether any Statute is retrospective in operation. In this connection, he relied on Sanghvi Jeevraj Ghewar Chand v. Secretary, Madras Chillies, Grains and Kirana Merchants Workers Union AIR 1969 SC 530, Shri Ravi, therefore, emphasised that Section 117C operates retrospectively, that the application is maintainable in respect of the subject debentures which remain unpaid and that the Company may be directed to redeem the same forthwith. 4. I have considered the pleadings and submissions, both oral and written, made on behalf of the Companies as well as the applicants. The issue that arises for my consideration is whether Sub-section (4) of Section 117C empowers the CLB to entertain applications from debenture holders in the event of a company fails on the date of maturity to redeem debentures issued prior to the Companies (Amendment) Act, 2000. 5. The facts not in dispute are that the debentures covered by the application in CA No. VLL 1/2002 were allotted on 21 -2-2000, debentures covered by the applications in CA No. VLL 2/2002 on 28-9-1998, debentures covered by the applications in CA Nos. 3 4/2002 were issued on 30-6- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure-holders can now approach the CLB in case of default by the company in payment of interest or principal amount. Section 117C(4) does not make any distinction in regard to relief against non-payment of principal amount of debenture or interest due after due date by the company, whether issued prior or after insertion of Section 117C. In my view, there cannot be two classes of debenture-holders, one class claiming relief before the CLB and the other before the civil courts. It will not be out of context to refer to Clause (d) of the Circular No. 9/2002 dated 18-4-2002 of Department of Company Affairs relied by both sides, which reads as under:-- d. Section 117C will apply to debentures issued and pending to be redeemed and as such DRR is required to be created for debentures issued prior to 13-12-2000 and pending redemption subject to clarifications issued herein. It is, therefore, clear that debenture redemption reserve is required to be created for debentures issued prior to 13-12-2000 and pending redemption, in which case, the CLB will have jurisdiction in respect of such debentures also. The plea of Shri Srinivasan that the circular dated 18-4-2002 of Department of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deposits. The CLB in exercise of its powers under Section 45QA(2) has directed the companies in a large number of cases for repayment of deposits accepted prior to the amendment but matured before or after 9-1-1997. The CLB has further exercised its suo motu powers in such cases. Moreover, the provisions of Section 117C(4) being analogous to Sections 58A(9) and 45QA(2), are beneficial provisions intended to protect the interests of debenture holders. Such a provision, in my view, should be exercised in favour of such aggrieved investors. Therefore, the plea of the Companies must fail. 7. Taking into account the facts and circumstances of the case, submissions of the authorized representatives of both sides and the legal position stated supra, I am of the considered view that the provisions of Section 117C(4) are applicable to all debentures whether issued prior or after the introduction of the Amendment Act, 2000, i.e., 13-12-2000 and pending redemption. In view of this, the Companies are directed to redeem the debentures covered by these applications by payment of the principal amount and interest due thereon not later than 30-9-2002. 8. No order as to costs. - - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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