TMI Blog2012 (12) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... be stayed by the company court while sanctioning a scheme under Sections 391-392 of the Companies Act, 1956 - Held that:- “Suit or other legal proceeding” as appearing in Section 446(1) as also the expression “suit or proceeding” under Section 446(2) of the Companies Act do not include criminal proceedings. The same would be the position with regard to the expression “suit or proceeding” as appearing in Section 391(6) of the Companies Act. The consequence of this would be that a company court while examining or sanctioning a scheme under Section 391/392 of the Companies Act cannot stay any criminal proceedings as that is beyond the scope of the powers and jurisdiction of the company court. In Krishna Texport Industries Ltd. Versus DCM Ltd. (2008 (5) TMI 425 - HIGH COURT OF DELHI) an unequivocal view was taken that Section 391(6) of the Companies Act does not envisage either quashing or stay of criminal cases against the company or its Directors. Such criminal proceedings include those under Section 138 of the Negotiable Instruments Act, 1881. Statutory authority like SEBI or orders passed by RBI and the ITA under special enactments cannot be set aside while sanctioning a schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et aside the impugned judgment as also the scheme and remit the matter to the company court for consideration of the winding-up petition in accordance with law - no bar on CRB Capital propounding another scheme during the pendency of the said winding-up petition or even thereafter, in case winding-up is ordered. - C.A. Nos. 8/06, 9/06, 15/06, & 18/06 - - - Dated:- 21-11-2012 - MR BADAR DURREZ AHMED AND MS VEENA BIRBAL JJ. Advocates who appeared in this case: For the Appellant Mr Parag Tripathi, ASG with Mr Ramesh Babu, Ms Manisha Nair, Mr Srinjoy Banerjee, Ms Swati Setia and Mr Anuj Bhandari, Advocates for RBI. Mr Bhavanishankar V. Gadnis, Adv. for Madgaun Urban Co-operative Bank Ltd. in CM Nos. 12452-12453/2009. Mr Sanjeev Rajpal, Adv. for I.T. Department in CM No. 8021/2011. Ms Meenakshi Ogra with Mr Rajpal Singh and Ms Kanika Sharma for Applicant in CM No. 10739/2011. Mr Vijay Kumar for Karur Vysya Bank. For the Respondent Mr Sudhanshu Batra, Sr. Advocate with Mr Bhuvan Gugnani, Adv. for CRB Capital Markets Ltd. Mr Rajiv Bahl, for Official Liquidator Advocates who appeared in this case: For the Appellant Mr Diwakar Maheshwari, Adv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Liquidator, had objected to the scheme. However, the learned company Judge sanctioned the scheme with certain modifications primarily because the learned company Judge felt that the public interest would be met inasmuch as the small depositors would be paid. However, the appellants feel that the scheme as propounded and sanctioned is contrary to public interest as also contrary to statutory provisions and is opposed to public policy. In fact, the learned counsel for the RBI had submitted that during the pendency of a winding up petition filed by the RBI under section 45MC(1)(d) of the RBI Act no scheme under sections 391/392 of the Companies Act could, at all, have been entertained by the company court. Background facts: 3. We shall examine the submissions of the parties but, before we do that, it would be necessary to set out the sequence of events. According to the RBI, CRB capital was originally incorporated on 16.05.1985 as CRB Consultancy Private Limited which got converted into a public limited company on 04.03.1991 and the name was changed to its present form (CRB Capital Markets Limited) on 18.11.1991. CRB capital is a Non-Banking Financial Company (NBFC). Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gage or deal in any manner with its property and assets without prior written permission of RBI for a period of six months from the date of the order. Attention of CRB Capital was also drawn to the provisions of Section 58B(5) read with Section 58C of the RBI Act with regard to the liability of penalty in case there was any contravention of the order passed by the RBI. 6. It is also the case of RBI that it had received information from State Bank of India (SBI) through its letter dated 09.04.1997 regarding the alleged large scale misuse of the at par discounting facility by CRB Capital. A complaint had been lodged by SBI with the Central Bureau of Investigation (CBI). A civil suit for recovery of an amount of Rs. 60 crore had also been filed. The CBI, after investigation had filed the charge-sheet in the competent court of law at Mumbai and the case is pending trial. 7. It is further the case of RBI that CRB Capital made a representation for the lifting of the prohibitory order. RBI, however, decided not to rescind the order passed under Section 45MB(1) and advised CRB Capital to propose a plan delineating the maturity profile of the existing deposits and proposed source of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ached to the company court was appointed as a Provisional Liquidator and he was directed to take charge of all the assets and properties of the company along with books of accounts and other records of the company. It was also directed that till the next date, CRB Capital, its directors, servants and agents be restrained from disposing of, alienating and/or parting with possession of any of the assets of the CRB Capital. 11. It is submitted on behalf of RBI that in terms of the orders passed by the company court, the Provisional Liquidator had sealed all the premises of CRB Capital and had taken possession of the available assets and that the Provisional Liquidator had so far been able to recover an amount of Rs. 17.58 crore as on 30.09.2002 which was lying deposited with the Provisional Liquidator. 12. We may also point out that, in the meanwhile, an application had been filed by RBI before the company court seeking permission to file a criminal complaint against CRB Capital and its Board of Directors. The company court granted the permission and thereafter RBI filed a criminal complaint case No. 288/1/2000 on 02.06.2000 under Section 58E(1) read with Section 58B(5) and 58C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expiry of twelve months from the date of sanctioning of the scheme by the Hon ble Delhi High Court. b) Payment equivalent to balance 50% of the principal amount deposited/invested shall be discharged in the form of allotment of shares of CRB Capital Markets Ltd of Rs. 10/- each at par immediately upon receipt of approval from the competent authority. Considering the fact that the depositors of the various Co-Operative Banks are small and needy, payment to the Co- Operative Banks shall be made as follows: i) Payment equivalent to 25% of the principal amount shall be made within 3 months form (sic) the date of sanctioning of the scheme of Arrangemnet/Compromise by the Hon ble Delhi High Court. ii) Payment of balance 75% of the principal amount shall be made in 16 equal quarterly instalments commencing from the month following the expiry of six months from the date of sanction of the scheme of Arrangemnt/Compromise by the Hon ble Delhi High Court. iii) In view of the fact that two of the Co- Operative Banks namely The Gozaria Nagrik Sahkari Bank Ltd. and Boriavi Peoples Co-Operative Bank Ltd. who have been declared as weak Banks by their Apex Body, payment shall be made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme of compromise or arrangement, the propounder of the scheme sought certain concessions and reliefs for approval by the company court. The reliefs and concessions which were sought were set out in part Chapter IV of the modified scheme. The same were as under:- PART IV RELIEF AND CONCESSIONS SOUGHT BY THE PROPOUNDER OF THE SCHEME FOR REVIVAL OF THE COMPANY For a fair and proper implementation of the modified scheme of Compromise and or Arrangements as passed by the Secured Creditors, Unsecured Creditors and Shareholders of the company, the Propounder of the scheme has sought certain concessions and relief for approval by this Hon ble Court having regard to the fact that the Company has been out of business for a period of about 5 years and for the reason of the business activities of not only the Company but all its Group Companies came to a grinding halt on account of prohibitory order issued by the Reserve Bank of India on 9/4/1997 and the appointed of Official Liquidator as Provisional Liquidator of the Company. RELIEF AND CONCESSIONS SOUGHT 1. The orders passed by this Hon ble Court restraining the Company as well as other Group Companies from disposing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of preferential allotment as envisaged in the scheme under its relevant guidelines and such shares be listed at various Exchanges. 4. The Companies which have withheld shares lodged for transfer by the Company and its Group Companies be directed to register the transfer of such shares in favour of the Company and its Group Companies as the case may be and deliver the same to them. RESERVE BANK OF INDIA (i) All the Bank accounts of the Company as well as its Group Companies and its ex-Directors Officers which have been freezed be defreezed and Reserve Bank of India be directed to give necessary instructions to the Banks for making such accounts operative. (ii) Reserve Bank of India be directed to revoke its prohibitory orders passed u/s 45K(4) read with section 45MB(1) of RBI Act 1934. (iii) Reserve Bank of India be directed to accept the Application for Registration as NBFC u/s 45(1A) of Reserve Bank of India Act, 1934 on being filed by the Company. (iv) Reserve Bank of India be directed to restore its suspension order against in principal approval for setting up CRB Global Bank Ltd. (v) Reserve Bank of India be directed to restore the Licences granted to the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before any Court in India. j) All the cases filed by Provident Fund, Sales Tax, ESI and any other authorities against the Company and its Directors be stayed. k) Any other proceedings filed in any Court in India by any persom, Company and or Institutions including Public Interest Litigation, cases filed by GHC Ahmedabad etc. be vacated or stayed sine-die. 8. All the cases filed by the Company in various Courts for recovery of dues including Complaint cases against Debtors filed u/s 138 of Negotiable Instruments Act before the appointment of Provisional Liquidator by the Hon ble Court be transferred to the jurisdiction of this Hon ble Court and the various Courts where such cases are pending be directed to restore such cases before transfer in the event any such cases have been dismissed for any reasons including for nonappearance by the Provisional Liquidator. 9. CBI (i) Necessary directions be given to CBI to release the passports of Propounder of the Scheme and ex-Directors of the Company so as to enable the Company to resume dialogue with the Joint Venture collaborators in Mutual Fund and Security trading business and re-establish these collaborations. (ii) Necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idating the shares, securities or any other assets and necessary directions be given to the Banks allowing operation of the accounts to the Companies, allowing transfer of shares, securities etc. and to the Stock Exchanges for accepting such shares, securities etc. and the proceeds from such sales be permitted to use as Propounder s contribution to the scheme. 17. All the personal guarantees executed by the Directors of the Company to the Banks, Institutions and other parties be discharged. 18. The Bank accounts of various companies / firms which had dealings with the Company in the ordinary course of business be defreezed. Before the learned company Judge, RBI, SEBI, the Official Liquidator, Malanpur Steel Limited and GIIC had objected to the scheme, the main objector being the RBI. The RBI had contended that once an application under section 45MC(1)(d) of the RBI Act had been admitted it is only in extraordinary circumstances that an order of winding up ought not to be passed. And, that no such circumstances have been shown to exist by CRB Capital. It was also contended that during the pendency of a winding up petition under section 45MC(1)(d) of the RBI Act no scheme unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed judgment dated 24.01.2006, we find that the learned company Judge was of the view that public interest inherent in the scheme was evident from the fact that it seeks to benefit 1,34,000 deposit holders and about 36 co-operative banks and that many of the deposit holders were retired government personnel and senior citizens including widows and several other similarly situated deposit holders who were needy and depending on recurring income from the deposits made with CRB Capital. According to the learned company Judge the scheme contemplated a recovery plan for recovering arrears of dues, hire-purchase installments, loans and advances, re-organisation of share capital of the company by issuing shares of Rs. 10/- each at par with discharge of the dues of unsecured creditors including deposit holders and bond holders and engagement in non-fund based business activity The scheme also contemplated diversification of company business in areas such as information and technology, bio-tech and the growing market of media. The learned company Judge also noted that the scheme involved induction of funds by the propounders of the scheme to the extent of Rs. 10 crore. Although the scheme as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nationalized bank during the pendency of this petition in this Court and realization of substantial interest on such Fixed Deposits of Rs.17 crores. xxxx xxxx xxxx xxxx 52. Accordingly, while approving the scheme it is necessary to given the following directions for supervision and modification of the scheme:- (I) The condition with regard to the Deposit/Bond holders upto Rs. 5,000/- is modified and the term for repayment is thus reduced from the period of one year to a period of 9 months. Further the words "not exceeding Rs.10 crores in aggregate" is deleted as such a limit may hurt the small depositors. Furthermore, the scheme is modified and widows, retired government servants, disabled persons and senior citizens above 65 years shall be paid their entire principal amount deposited within one year from the date of sanctioning of the scheme. (II) With regard to the unsecured creditors including deposit and bond holders above Rs. 5000/-, (except the categories of widows, retired government servants and persons above 65 years) whose period of repayment as per the scheme is 5 annual equal instalments commencing from 12 months from the date of sanction of the scheme is modi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lemented, then the winding up petition shall revive and the company would be liable to be wound up. d. The petitioner shall file a certified copy of this order with the Registrar of Companies, Delhi Punjab Haryana within 30 days of the date of the receipt of the order. e. The office is directed to draw up the order in the prescribed form by incorporating the modifications postulated as per this judgment. 19. Initially these appeals were heard by a Division Bench of this Court and the same were disposed of by a judgment and/or order dated 29.02.2008. The Division Bench set aside the impugned judgment dated 24.01.2006 and remanded the matter to the company court for a fresh disposal in the following manner:- We accordingly set aside the impugned order passed by the Company Court and remit the matter back for a fresh disposal in accordance with law after addressing in particular following, among other, issues if any raised before it. i) Whether a scheme under Section 391-392 of the Companies Act is maintainable in a winding up petition filed by the RBI under Section 45 MC(1) of the RBI Act? ii) Whether a scheme under Sections 391-392 of the Companies Act could set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions 391/392 of the Companies Act is maintainable in a winding up petition filed by Reserve Bank of India under section 45 MC(1) of the RBI Act. Mr Parag Tripathi, appearing on behalf of the RBI submitted that CRB Capital was a defaulting NBFC and as a consequence was liable to be wound up under Section 45MC of the RBI Act. He further submitted that Chapter III B of the RBI Act was specially introduced to control NBFCs and to deal with defaulting NBFCs when they committed defaults or violations. It was also contended that by virtue of Section 45Q, the provisions of Chapter III B would override all other laws including the Companies Act. It was, therefore, contended that when RBI had filed the winding up petition alleging serious defaults on the part of CRB Capital, the company Judge ought to have considered the winding up petition on merits and that sanctioning of a scheme without considering the winding up petition on merits was unsustainable. It was also submitted that the scheme propounded by CRB Capital and sanctioned by the learned company Judge with certain modifications is contrary to the provisions of Chapter III B of the RBI Act and therefore the same cannot be sustain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-payment in case an NBFC made a default in re-payment. He submitted that section 58B(4)(AAA) provided for penalty in case of non-compliance of an order made by the Company Law Board under Section 45QA and this clearly implies that the provisions of section 45QA were mandatory and not directory. It was contended that a conjoint reading of Section 45QA(1), 45QA(2) and 58B4(AAA) made it incumbent upon an NBFC to re-pay the entire amount and these provisions make it clear that the liability is not merely a contractual liability but a statutory liability and therefore CRB Capital cannot be heard to submit that they had settled with the depositors for part-payment. 23. It was also submitted that any scheme under Section 391 of the Companies Act has to be in compliance with the provisions of Chapter III B which includes section 45QA of the RBI Act and a petition for winding up under Section 45MC(1)(d) of the RBI Act cannot be defeated by allowing a scheme under Section 391 of the Companies Act which is in violation of the statutory provision contained in Section 45QA of the RBI Act. 24. Mr Sudhanshu Batra appearing on behalf of CRB Capital submitted that there is no prohibition on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pathi that even if it is assumed that a scheme under Section 391 can be maintained in the backdrop of a winding petition under Section 45MC of the RBI Act, such a scheme would not be maintainable if it was contrary to the provisions of Chapter III B of the RBI Act, the learned counsel for CRB Capital submitted that the scheme sanctioned by the learned company Judge was not contrary to the provisions of Chapter III B of the RBI Act. 25. It was also contended on behalf of CRB Capital that disbursements have been made to the depositors and other investors under the scheme and in terms of an order dated 15.12.2010 passed by this court in these appeals, as a result of which, unsecured creditors have been given priority over the dues of the secured creditors as provided under section 529A and 530 of the Companies Act, 1956. It was, therefore, contended that the clock cannot be put back when a large number of unsecured creditors have already been paid. 26. Reliance was placed by the learned counsel for CRB Capital on a decision of a learned single Judge of the Karnataka High Court in the case of Maharashtra Apex Corporation Limited (supra). On the basis of the said decision it was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an order has been passed by the RBI under Section 45 MB or where a winding up petition has been filed by the RBI under Section 45MC of the RBI Act. It was also contended that where a winding up order is made against a company under Section 433 of the Companies Act, 1956 or on a petition of RBI under Section 45 MC of RBI Act, an application for sanction of a scheme can still be filed till such time the company in question is directed to be dissolved under Section 481 of the Companies Act. Consequently, according to the learned counsel, an application for sanctioning of a scheme under Section 391 of the Companies Act, 1956 is maintainable even when RBI has filed a winding up petition under Section 45MC of the RBI Act read with Section 433 of the Companies Act, 1956. However, the learned counsel submitted that no scheme under Section 391 of the Companies Act, 1956 can be allowed contrary to the statutory provisions including Section 45QA of the RBI Act, as otherwise, such a scheme would be against the law of the land and that would be against public policy. It was contended that a scheme under Section 391 of the Companies Act, 1956 could be approved by the company court only whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany shall be deemed to be unable to pay its debt if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the bank certifies in writing that such company is unable to pay its debt. (3) A copy of every application made by the bank under subsection (1) shall be sent to the Registrar of Companies. (4) All the provisions of the Companies Act, 1956 (1 of 1956) relating to winding up of a company shall apply to a winding up proceeding initiated on the application, made by the bank under this provision. It is apparent that the RBI has been given the power to file an application for winding-up of a Non-Banking Financial Company under the Companies Act, 1956 on being satisfied that any one or more of the four eventualities specified in Section 45 MC of the RBI Act exist(s). In these appeals we are concerned with Section 45MC(1)(d). Thus, if RBI is satisfied that continuance of an NBFC is detrimental to the public interest or to the interest of the depositors of the company, it may file an application for winding up of such a NBFC under the Companies Act, 1956. Sub-section (4) of 45MC makes it clear that all the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision as would be clear shortly, is contrary to the Supreme Court decision in the case of Miheer H. Mafatlal (supra). 31. In Maharashtra Apex Corporation Limited (supra) a learned single Judge of the Karnataka High Court was, inter alia, considering an argument that if the scheme entailed violation of statutory provisions contained in the RBI Act, it could not be sanctioned under Section 391 of the Companies Act. Repelling this contention, the learned single Judge in Maharashtra Apex Corporation Limited (supra) held as under:- Therefore, in the aforesaid provisions there is no specific provision which prohibits the court from according sanction if the terms of the scheme is contrary to any of the statutory provisions contained in the Companies Act or Reserve Bank of India Act or any other law which is applicable to the company.] In the absence of a specific provision if the terms of the scheme runs counter to the statutory provisions or would have the effect of violating those statutory provisions can the court accord sanction? xxxx xxxx xxxx xxxx 50. From the aforesaid provisions and the Judgments relied on, it is clear that the powers of the court under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fair to the class as a whole so as to legitimately bind even the dissenting members of that class. 4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings concerned as contemplated by Section 391 sub-section (1). 5. That all the requisite material contemplated by the proviso of sub-section (2) of Section 391 of the Act is placed before the Court by the applicant concerned seeking sanction for such a scheme and the Court gets satisfied about the same. 6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a part of public policy itself that statutory provisions are to be followed and are not to be disregarded or contravened. Therefore, a scheme which ignores or side-steps statutory provisions would clearly be opposed to public policy. 33. Therefore, the answer to the first question is that while a scheme under Sections 391/392 of the Companies Act could be considered by the company court even during the pendency of the winding up petition filed by RBI under Section 45MMC of the RBI Act, such a scheme cannot be sanctioned if it is in violation of any of the statutory provisions including the provisions of Chapter III-B of RBI Act. Q.2 Whether a scheme under Sections 391-392 of the Companies Act could set aside quasi-judicial orders passed by a statutory authority like SEBI constituted under the Securities and Exchange Board of India Act, 1992? Q.3 Whether the criminal and income tax proceedings pending against the company and its directors could be stayed by the company court while sanctioning a scheme under Sections 391-392 of the Companies Act, 1956? 34. These questions have overlapping considerations and, therefore, are being dealt with together. It was contended by Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement but it could not be used as an instrument for getting away from the penal consequence of violation of a law. As such it was contended that a scheme under Section 391/392 of the Companies Act could not set aside or quash quasi-judicial orders passed by statutory authorities like SEBI, Income Tax Department or the RBI in exercise of the powers conferred on them by the relevant statute. It was also contended that criminal and income tax proceedings pending against CRB Capital and/ or its directors could not be stayed by the company court while sanctioning a scheme under Sections 391/392 of the Companies Act, 1956. 35. Insofar as SEBI was concerned, the learned counsel appearing on its behalf submitted that SEBI has been entrusted by the SEBI Act with the duty of regulating the entire security market. The SEBI Act is a special Act whereas the Companies Act is a general Act. Moreover, the SEBI Act is a later Act and the Companies Act is a prior Act. It was, therefore, submitted that, being a special Act, the SEBI Act would override the provisions of the Companies Act, which is a general Act, to the extent there is inconsistency between the provisions of two Acts. It was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly as possible and endeavour shall be made by it to dispose of the appeal finally within six months from the date of receipt of the appeal. xxxx xxxx xxxx xxxx xxxx 20. Appeals. (1) Any person aggrieved by an order of the Board made, before the commencement of the Securities Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations made thereunder, may prefer an appeal to the Central Government within such time as may be prescribed. (2) No appeal shall be admitted if it is preferred after the expiry of the period prescribed therefor: Provided that an appeal may be admitted after the expiry of the period prescribed therefor if the appellant satisfies the Central Government that he had sufficient cause for not preferring the appeal within the prescribed period. (3) Every appeal made under this section shall be made in such form and shall be accompanied by a copy of the order appealed against and by such fees as may be prescribed. (4) The procedure for disposing of an appeal shall be such as may be prescribed: Provided that before disposing of an appeal, the appellant shall be given a reasonable opportunity of being heard. 36. It was con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was also contended that the decision of the Supreme Court in S.V. Kandeakar (supra) was inapplicable to the facts of the present case. Insofar as the stay of civil and criminal cases were concerned, it was contended that this was in exercise of the power under Section 391(6) of the Companies Act, 1956. Furthermore, it was contended that most of the criminal cases had been stayed on account of the consent letters obtained from the complainants. Reliance was placed once again on, inter alia, Maharashtra Apex Corporation Limited (supra). It was contended that the company court had power to stay the criminal proceedings if the complainants themselves had consented for the same. Consequently, it was submitted that it was within the powers of the company court under Section 391/392 of the Companies Act to set aside even quasijudicial orders passed by statutory authorities like SEBI, RBI and the Income Tax Department. It was also contended that the criminal and income tax proceedings could be stayed by the company court while sanctioning the scheme under Sections 391/392 of the Companies Act, 1956. Section 391 of the Companies Act reads as under:- 391. Power to comprom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in default, shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made. (6) The Tribunal may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Tribunal thinks fit, until the application is finally disposed of. Section 446 of the Companies Act reads as under:- 446. Suits stayed on winding up order. When a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose. (2) The Tribunal shall, notwithstanding anything contained in any other law for the time being in force, have jurisdiction to entertain, or dispose of (a) any suit or proceeding by or against the company; (b) any claim made by or against the company (including claims by or against any of its branches in India); (c) any application made under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Companies Act, 1956 clearly held :- The expression "other legal proceedings" must be read in ejusdem generis with the expression "suit" in section 446 of the Act. If so read it can only refer to any civil proceedings and criminal proceedings have to be excluded. Therefore, no permission was required to be taken from Company Court for filing criminal complaint either against the company or against its directors. xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx As we have held that the expression "suit" or "other legal proceedings" in section 446(1) and expression "suit or proceedings" under section 446(2) of the Companies Act, 1956 do not include a "criminal proceedings". Therefore, we need not address ourselves to the other question whether opportunity of being heard under rule 117 of the Company Court Rules 1959 ought to have been given to the appellant or not. Earlier, the Supreme Court in S.V. Kandeakar (supra) had examined the above expressions and had observed as under:- 17. Turning now to the Income Tax Act it is noteworthy that Section 148 occurs in Chapter XIV which beginning with Section 139 prescribes the procedure for assessment and Section 147 provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to transfer the assessment proceedings in a given case but the power on the plain language of Section 446 of the Act must be held to vest in that court to be exercised only if considered expedient. We are not impressed by this argument. The language of Section 446 must be so construed as to eliminate such startling consequences as investing the winding up court with the powers of an Income Tax Officer conferred on him by the Income Tax Act, because in our view the legislature could not have intended such a result. 18. The argument that the proceedings for assessment or reassessment of a company which is being wound up can only be started or continued with the leave of the liquidation court is also, on the scheme both of the Act and of the Income Tax Act, unacceptable. We have not been shown any principle on which the liquidation court should be vested with the power to stop assessment proceedings for determining the amount of tax payable by the company which is being wound up. The liquidation court would have full power to scrutinise the claim of the revenue after income tax has been determined and its payment demanded from the liquidator. It would be open to the liquidation c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (underlining added) 40. It is noteworthy that the Supreme Court in S.V. Kandeakar (supra) observed that the Income Tax Act was a complete code and was particularly so with respect to the assessment and re-assessment of income tax. The Supreme Court also clearly observed that the liquidation court could not perform the function of an Income Tax Officer while assessing the amount of tax payable by the assessee, even if the assessee be the company which was being wound up by the court. The orders made by the Income Tax Officer in the course of assessment or re-assessment proceedings were subject to appeal to the higher hierarchy under the Income Tax Act. The Supreme Court held that it would lead to an anomalous consequence if the winding-up court were to be held empowered to transfer the assessment to itself and assess the company to income tax. By similar logic, the SEBI Act as also the RBI Act were complete codes in respect of the subject matters they dealt with. Therefore, orders passed under the SEBI Act by SEBI, would have to be decided and determined in terms of that Act and cannot be interfered with by the company court while sanctioning a scheme under Section 391 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Tata Motors (supra) on which reliance had been placed by the learned counsel for SEBI. It was held by the Supreme Court that SICA was a specially constituted Act and that it was a self-contained code and therefore the jurisdiction of the company Judge in a case where a reference has been made to BIFR would be subject to the provisions of SICA. Similarly, the provisions of SEBI Act and RBI Act being special and complete codes in themselves with regard to their respective subject matters would over-ride the provisions of Companies Act in case there is any inconsistency between the said provisions. 42. A reference to Section 20A of the SEBI Act would also be appropriate. The said Section reads as under:- 20-A. Bar of jurisdiction. No order passed by the Board or the Adjudicating Officer under this Act shall be appealable except as provided in Section 15-T or Section 20 and no civil court shall have jurisdiction in respect of any matter which the Board or the adjudicating officer is empowered by, or under, this Act to pass any order and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any order p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en unless and until this concession and relief is given in the shape of a direction to the SEBI to grant approval for issuance of fresh shares to unsecured creditors. We have already seen that such a direction cannot be given. There are several other such directions which cannot be given including the direction in respect of criminal cases and stay of demands and vacation of ex-parte orders insofar as income tax authorities are concerned. We also find that the release of the passport of the propounders of the scheme would probably be contrary to the direction given by the criminal court inasmuch as that may have been a condition for grant of bail. Such a direction, once again, may be contrary to law. We are, therefore, of the view that once the reliefs and concessions are not there, the scheme itself becomes unworkable. This is apart from the fact that there are other serious concerns with regard to the paltry amount of funds proposed to be brought in by the propounders of the scheme in the context of the overall fund requirement. This is also apart from the fact that the scheme as propounded and as sanctioned by the company court, in fact, contravenes the provisions of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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