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TMI Blog2010 (2) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... . Special terms and conditions (i) The existing equity capital of the company is to be reduced by 50 per cent. by reducing the face value of the shares from Rs. 10 to Rs. 5 in terms of section 18(2)(f) of the SICA without the requirement of following the provisions of sections 100 to 103 of the Companies Act, 1956 and without following any other SEBI or other guidelines in this regard. (ii) After the reduction of equity capital as mentioned above, unsecured loan of Rs. 200 lakhs and further amount of Rs. 600 lakhs inducted by the promoters and interest dues of Rs. 50 lakhs to IDBI will be converted into equity. For this purpose, exemption shall be granted from the provisions of sections 81(1A), 295, 372A and other applicable provisions of the Companies Act, 1956, the SEBI Guidelines for preferential allotment of shares and from the provisions of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, the SEBI (Disclosure and Investor Protection) Guidelines, 2000, the SEBI (Central Listing Authority) Regulations, 2003 and ceiling on promoters holding. (iii) The SEBI and stock exchange (s) on which the shares are listed shall revoke the suspension of trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rms of the sanctioned scheme without any cost or charges and the company shall be exempted from the provisions of the Companies Act, the SEBI Guidelines and the listing requirements. Therefore, it is contended that if there were specific directions, the respondents being subordinate authorities ought to have implemented the directions forthwith and in spite of notice having been issued to the respondents as they failed to implement the order of the BIFR, the petitioner is before this court by way of the present writ petition. 5. Mr. M. Krishnappan, learned senior counsel appearing for the petitioner would contend that if the respondents are aggrieved by the direction issued by the BIFR, the remedy lies by way of an appeal to the appellate authority in terms of section 25 of the Act. Further, in terms of section 32, the directions issued by the BIFR under the provisions of the Act shall have an overriding effect over the other provisions and the effect of other laws and therefore, there cannot be any impediment for implementing such directions. Further, learned senior counsel would contend that the writ petition is maintainable before this court, since part of the cause of action h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en discontinued with effect from May 18, 2007 and this order has not been questioned. Further, learned counsel would submit that the company has since come out of the BIFR as its net worth has turned positive and the question of implementing these directions does not arise. Finally, learned counsel placed emphasis on the letter sent by the first respondent to the Deputy Director of BIFR on February 27, 2009, wherein it had pointed out as to what are the requirements to be complied with for carrying out such directions. Further, it has been requested that all the facts may be placed before the BIFR for consideration. Therefore, learned counsel would submit that the writ petition cannot be entertained at this stage. 9. Mr. S. Senthil Kumar, learned counsel appearing for the second respondent would contend that the directions given by the BIFR had been issued without notice to the second respondent. By relying upon section 19 of the Act, learned counsel would submit that if the BIFR requires any authority to provide any financial assistance or such other relief, the draft scheme is required to be circulated to such authority within a period of 60 days for their consent. However, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed creditors, etc. Thereafter, a draft rehabilitation scheme has been prepared giving certain reliefs and concessions and in that it is seen that the Government of Tamil Nadu was directed to consider declaring the company as a relief undertaking and granting all reliefs and concessions as per the standard package of the Government, the Commercial Tax Department was directed to consider granting extension in time, reschedulement, etc. Notwithstanding, the electricity board was directed to consider granting exemption from payment of fuel surcharge/peak hour consumption charges, etc., and various other directions to other Departments to consider exemption under the provisions of the Income-tax Act, 1961, the Central Excise Act, 1944, etc. In clause No. 10, the BIFR has issued certain directives which are to be effected and implemented by respondents Nos. 1 and 2. However, one fact to be noted is that the direction issued by the BIFR is in the nature of positive direction though in the earlier paragraphs of the same scheme, the State Government or the income-tax authorities were only directed to consider the case of the petitioner for granting exemption. Therefore, the respondents are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the Deputy Director of the BIFR, the first respondent has been requested to place all the facts before the honourable BIFR for their consideration. It appears that this letter dated February 27, 2009, has not been placed before the BIFR for its consideration. In my view, the respondents are to be heard before passing such an order. In fact, this court in the case of Pentamedia Graphics Ltd. v. Bombay Stock Exchange [2008] 145 Comp. Cas. 327 , referred above, while considering whether a no objection certificate from the stock exchange was mandatory, while approving a scheme of arrangement under the Companies Act and as to whether any scheme approved by the court containing a clause for listing before an exchange must necessarily comply with the mandate of securities laws, rules, regulations and guidelines, held as follows (page 344): "31. A perusal of the bye-laws of the stock exchange show that bye- laws 34 and 35 are the relevant ones containing the list of conditions. Bye-law 34 mandates the Governing Board to consider and in its discretion subject to such terms as it deems proper, approve or defer or reject any application for admission of the securities of a company to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tically enure to the protection of investing public, particularly in a case of this nature. It must be noted that any scheme of arrangement or compromise centers more on the internal affairs of the company and the projection of its image on the public rather than one keeping in forefront the interest of the investing public. Hence, given the constitution of the stock exchange and the purport of the securities laws, sub-clause (g) contemplates that the scheme does not in any way violate the principles of the securities laws, as enumerated therein. Hence, when in compliance of sub-clause (f), the concerned stock exchange comes forward with its objection before the court passes an order of approval, the granting of the approval necessarily involves the examination of the objection from the stock exchange, so that the public interest is protected. Where a stock exchange places its objection to any clause on listing before the court, keeping in mind the interest of parties, the court may pass an order subject to modification or on the satisfactory explanation from the petitioner, grant the scheme. It must however be kept in mind that non-participation or non-issuance of a no objection c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction on matters before it." 14. Therefore, compliance with the procedural formalities has been held to be mandatory. In that view of the matter without rendering any finding on the contentions raised by the respondents as regards the scope of the directions issued by the BIFR in clause 10 of the sanctioned scheme dated January 22, 2007, there will be a direction to the BIFR to take on file the letter submitted by the first respondent dated February 27, 2009 and issue notice to the petitioner as well as respondents Nos. 1 and 2 and afford them an opportunity of hearing and thereafter, pass appropriate orders on the merits in accordance with law with regard to the directives which was issued in clause No. 10 of the scheme dated January 22, 2007. Considering the fact that the petitioner-company is in the path of revival and the conditions of the scheme have to be kept in force till June 2011, it is appropriate for the BIFR to decide the matter at the earliest preferably within a period of three months from the date of receipt of the copy of this order. It is needless to state that when the BIFR decides the issue, the question of limitation need not be insisted. 15. Further, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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