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TMI Blog2024 (2) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 07.08.2020 passed by the Respondent No. 2;" 2. Since Rule 37 of the Companies (Incorporation) Third Amendment Rules, 2016, notified by the Respondent No. 1 on 27.07.2016 is under challenge in the present Writ Petition, the matter was placed before the Division Bench of this Court. On 23.01.2023 Learned Counsel appearing for the Petitioner stated before the Division Bench of this Court that he is not pressing for the relief prayed for in the prayer Clause (a) of the Writ Petition. In view of the submission made by the learned Counsel for the Petitioner the matter was listed before a Single Judge. 3. This Court will, therefore, deal only with the Order dated 07.08.2020, which is under challenge in the present Writ Petition, by which the Registrar of Companies rejecting the conversion of the Petitioner's company from an "Unlimited Liability Company" to a "Limited Liability Company". 4. Facts of the case reveal that the Petitioner is a company incorporated under the Companies Act, 1956 and is engaged in the business of wholesale cash and carry trading of footwear, apparels and sports equipment under the "Reebok" brand name through franchise based stores across India. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of its Annual Returns of financial statements under the provisions of the Companies Act, 1956 or the Companies Act, 2013, or (d) a petition for winding up is pending against the company, or (e) the company has not received amount due on calls in arrears, from its directors, for a period of not less than six months from the due date; or (f) an inquiry, inspection or investigation is pending against the company." 7. It is stated that the application of the Petitioner was rejected vide communication dated 05.10.2016 without any reasons and justification. It is stated that the Petitioner wrote letters seeking reasons for the rejection and since no reason was forthcoming, the Petitioner approached this Court by filing W.P.(C) 952/2017 challenging the communication dated 05.10.2016. It is stated that this Court vide Order dated 03.03.2020 directed the Respondent No. 2 to decide the application of the Petitioner afresh, in accordance with law, after giving adequate opportunity of being heard to the Petitioner. It is stated that pursuant to the Order passed by this Court, the Petitioner was invited by Respondent No. 2 for in-person hearing on 30.06.2020. Material on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pectively due to cash losses incurred by the company during the past financial years and the net worth of the company is negative and if company goes into winding up or is unable to pay its debts/liabilities then only the 3 shareholders of company have to bring money to pay the debts of the company and the company will not be able to pay its creditors in full. 10. Since the validity of Rule 37 of the 2016 Rules is not under challenge anymore, the only question which remains for consideration is as to whether the Order rejecting the application of the Petitioner can be sustained or not. 11. It is contended by the learned Senior Counsel appearing for the Petitioner that Section 18(3) of the Companies Act provides for conversion of companies which are already registered and it provides that the registration of a company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations and contracts may be enforced in the manner as if such registration had not been done. He, therefore, states that any debts, liabilities, obligations or contracts incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.00 Focus Energy Ltd. 156750 0.07 February 21, 2022 Shareholder name No. of shares held % of shareholding Reebok International Ltd. LLC. 233008420 99.03 Reebok (Mauritius) Company Limited 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 adidas America, Inc. 156750 0.07 February 24-2022 Shareholder name No. of shares held % of shareholding adidas Holding LLC 233008420 99.03 adidas (Mauritius) Limited (formerly known as Reebok (Mauritius) Company Limited) 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 adidas America, Inc. 156750 0.07 As of the date of this affidavit, the Petitioner Company's shareholding structure is as below: Shareholder name No. of shares held % of shareholding adidas Holdings LLC. 233008420 99.03 adidas (Mauritius) Limited (formerly known as Reebok (Mauritius) Company Limited 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 adidas America Inc. 156750 0.07 3. The present members of the Board of Directors, and Key Managerial Personnel of the Petitioner Company are: Name of Director DIN Designation Neelendra Singh 08491872 Managing Director Sunali Ahluwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he substance rather than to the form. If a new Act is "to explain" an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to supply an obvious omission or to clear up doubts as to the meaning of the previous Act. It is well settled that if a statute is curative or merely declaratory of the previous law retrospective operation is generally intended.... An amending Act may be purely declaratory to clear a meaning of a provision of the principal Act which was already implicit. A clarificatory amendment of this nature will have retrospective effect (ibid., pp. 468-69). 15. Though retrospectivity is not to be presumed and rather there is presumption against retrospectivity, according to Craies (Statute Law, 7th Edn.), it is open for the legislature to enact laws having retrospective operation. This can be achieved by express enactment or by necessary implication from the language employed. If it is a necessary implication from the language employed that the legislature intended a particular section to have a retrospective operation, the courts will give it such an operation. In the absence of a retrospective operation havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier regime. Under Section 18(2) of the Companies Act, the Registrar of Companies could not have exercised his discretion to not permit the conversion of an unlimited company to a limited company in case the company's net worth was negative or where the company was in default of its annual returns or financial statements under the provisions of the Companies Act or if an inquiry, inspection or investigation was pending against the company. 20. Resultantly, even if the net-worth of the company was negative or even if there was an inquiry, inspection or investigation pending against the company, the Registrar of Companies had no other alternative but to accept the application. 21. This Court is of the opinion that the lacuna in the Companies (Incorporation) Rules, 2014 is being sought to be cured by the 2016 Amendment. Since the purpose of the amendment is to cure the defects which existed in the law by giving discretion to the RoC to satisfy himself that there are sufficient means in the company to answer their debts even after conversion, it cannot be said that it would operate only to applications filed after the 2016 amendment. Merely filing an undertaking as mandated under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw is applied to an act or transaction in the process of completion.... The foundation of these concepts is the distinction between completed and pending transactions....' T.C. Hartley, Foundations of European Community Law, p. 129 (1981). *** Retrospective.-Looking back; contemplating what is past. Having operation from a past time. 'Retrospective' is somewhat ambiguous and that good deal of confusion has been caused by the fact that it is used in more senses than one. In general, however, the courts regard as retrospective any statute which operates on cases or facts coming into existence before its commencement in the sense that it affects, even if for the future only, the character or consequences of transactions previously entered into or of other past conduct. Thus, a statute is not retrospective merely because it affects existing rights; nor is it retrospective merely because a part of the requisite for its action is drawn from a time antecedent to its passing." (Vol. 44, Halsbury's Laws of England, 4th Edn., p. 570, para 921.) 22. The question of retrospectively affecting the award is factually of academic interest. It was admitted before the High Court t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect past transactions. Curative and validating statutes operate on conditions already existing and are therefore wholly retrospective and can have no prospective operation." (emphasis supplied) 23. Similarly, the Apex Court in State of Kerala v. B. Six Holiday Resorts (P) Ltd., (2010) 5 SCC 186, while adjudicating on the issue of retrospectivity of rules in public interest held as under: "17. This question is directly covered by the decision of this Court in Kuldeep Singh v. Govt. of NCT of Delhi [(2006) 5 SCC 702] relating to the grant of licences for sale of Indian-made foreign liquor. This Court held: (SCC pp. 713 & 715, paras 29-31 & 36) "29. It is not in dispute that the State received a large number of applications. It was required to process all the applications. While processing such applications, inspections of the proposed sites were to be carried out and the contents thereof were required to be verified. For the said purpose, the applications were required to be strictly scrutinised. 30. Unless, therefore, an accrued or vested right had been derived by the appellants, the policy decision could have been changed. 31. What would be an acquired or accrued r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration does not confer any vested right on the applicant. The application has to be decided in accordance with the law applicable on the date on which the authority granting the registration is called upon to apply its mind to the prayer for registration." 21. The applicant contended that it had a vested right because of the several time-bound orders of the High Court and those orders were deliberately flouted by the Excise Authorities. An identical contention was rejected by this Court while considering the issue with reference to sanction of a licence under the Building Rules in Howrah Municipal Corpn. v. Ganges Rope Co. Ltd. [(2004) 1 SCC 663] This Court held: (SCC pp. 679-80, paras 36-37) "36. ... Neither the provisions of the Act nor general law creates any vested right, as claimed by the applicant Company for grant of sanction or for consideration of its application for grant of sanction on the then existing Building Rules as were applicable on the date of application. Conceding or accepting such a so-called vested right of seeking sanction on the basis of the unamended Building Rules, as in force on the date of application for sanction, would militate against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quire grant of a licence subject to the fulfilment of certain eligibility criteria either to safeguard public interest or to maintain efficiency in administration, it follows that the application for licence would require consideration and examination as to whether the eligibility conditions have been fulfilled or whether grant of further licences is in public interest. Where the applicant for licence does not have a vested interest for grant of licence and where grant of licence depends on various factors or eligibility criteria and public interest, the consideration should be with reference to the law applicable on the date when the authority considers applications for grant of licences and not with reference to the date of application." 24. The Division Bench of this Court in its Order dated 03.03.2020 had only directed the RoC to decide the application of the Petitioner afresh in accordance with law. As of today there is no challenge to the 2016 Regulations. This Court is of the opinion that since the 2016 Amendment was only curative in nature and only intended to protect the interests of the creditors, the amended rules, therefore, must apply to applications which are pendin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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