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2018 (2) TMI 1452 - AT - Companies LawComply with the arbitration award - Violation of the provisions of the Companies Act, 2013 - whether the Company can convert a loan into equity shares if at the time of raising the money, the company had not passed special resolution? - removal of the Petitioners as Directors - Held that:- The arguments of the learned counsel for the Appellants is that this Section could not have been applied and if at all Section 81 of the Old Act would be relevant, as according to him, when the loans were raised, at that time the New Act was not in force. We find that there is no substance in this argument. When the New Act is in force and conversion of loan has to be done, the conversion would be permissible only as per the new provisions. In view of sub-Section (3) of Section 62 when the question of issue of further share capital is taken up, conversion of loan into share capital would be permissible provided there was special resolution passed by the company in General Meeting which granted option as a term attached to the loan raised by the Company permitting conversion of such loan into shares of the company. It cannot be that moment a document is executed, the party goes and takes over the Companies and starts doing whatever he likes without following any procedure for transfer of shares, administration etc. Till the Petitioners resigned as Directors or were removed under established procedure under the Companies Act, or in execution, it will not be permissible not to send any notices to them and declare that they have not attended meetings and they discontinued to be Directors under Section 167 of the New Act. The Appellants themselves in the NCLT relied on Section 167 to claim that the Original Petitioners were not Directors. As such, they were bound to show that duly notified and called meetings were not attended to so as to attract Section 167 of the New Act. Original Petitioners have filed an Execution Petition before the High Court of Calcutta to give effect to the award. Even the Appellant No. 1 has filed application under Section 17 of the Arbitration Act as has been referred above. It would be more appropriate for the parties to cooperate with each other and comply with the Arbitration Award as has been passed between the signatory parties and do the necessary legal compliances as per the Arbitration Award for implementation/execution of the same. If it is done mutually, execution would not be necessary, otherwise the aggrieved parties would naturally have the option of the execution of the award. Till that time, it is necessary for the parties not to commit such acts as would attract violation of the provisions of the Companies Act, 2013. For such reasons, we are unable to interfere with the impugned order. We decline to interfere with the impugned order. The appeal is disposed of accordingly. We, however, make it clear that the Appellant No. 1 and Respondents are free to either mutually comply with the Arbitral Award or take steps permissible, under provisions of the Companies Act, 2013 or resort to Execution under the Arbitration and Conciliation Act, 1996.
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