TMI Blog2013 (2) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid. Further, since the consequent reduction of capital does not involve either the diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, the interest of creditors of IMFA are not affected. The modification sought in this petition is merely a small portion of the scheme and does not involve any substantial modification of the scheme – This does not affect the interest of any shareholder of either the erstwhile shareholder of ICCL or IMFA or creditor of IMFA adversely and there cannot be any possible objection to the same. As decided in S. K. Gupta's case [1979(1)TMI 195 – SC], the company court has been conferred power of widest amplitude under section 392 not only to give direction but to make such modifications in the scheme as the court may consider necessary and the only limit on the power of the court being that such directions can be given and modifications can be made for the proper working of the scheme - petition is allowed and the scheme sanctioned modified to the extent that 3,45,466 equity shares -consequent reduction of share capital of IMFA to the above extent is confirmed – In favour of peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of IMFA. However, since a company cannot hold its own shares, 8,64,902 equity shares being the entitlement of IMFA should have been cancelled resulting in reduction of share capital of IMFA/ICCL within the meaning of sections 100 to 103 of the Act. However, in order to enrich the small shareholders of ICCL (i.e., the shareholders other than promoters, persons acting in concert with promoters, financial institutions, banks, foreign institutional investors and shareholders who are shareholders of IMFA before giving effect to the scheme), it was provided under clause 13 of the scheme that the aforesaid 8,64,902 equity shares, being the IMFA s entitlement, will be allotted to a trust for the sale of the said shares by the trust to small shareholders of ICCL at a discount of not less than 50 per cent. to the market price. As per clause 13.2 of the scheme, offer was to be made by the trust to the small shareholders in one or more lots, preferably within a period of 18 months but in any case not later than period of 3 years. Aforesaid clause 13 is reproduced below : "12.1 Allotment of shares of trust 13.1 Shares of IMFA to be issued in accordance with this scheme, in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust fund in accordance with the provisions of this trust deed, making the payment of the trust fund to the beneficiary and the trustee having satisfied all obligations of the trustees under this trust deed. (c)If by the expiry of the term or varied term, the IMFA trust shares are not sold as aforesaid, the same shall be transferred to the beneficiary on the date of the foregoing expiry resulting in cancellation of such shares." 6. As provided in clause 13 of the scheme, the IMFA s entitlement being 8,64,902 equity shares of IMFA were allotted to the trust. Similarly, as provided in clause 13 of the scheme and in the trust deed, the aforesaid 8,64,902 equity shares of IMFA were offered by the trustees to small shareholders of ICCL in proportions to their shareholding in ICCL as on the record date, i.e., November 27, 2006, at the discounted rate of Rs. 50 per share as against the market price of Rs. 207.85 prevailing at that time vide offer letter dated August 14, 2009, to each small shareholder individually sent by UPC post. Under the said offer, the small shareholders were given time till September 30, 2009, to accept the offer. 7. The trustees also authorised the chief fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs on February 21, 2011. 13. No objection to the petition has been filed by any person pursuant to the notice of hearing published in the newspapers. Learned counsel for the petitioner submits that since only the rights of the shareholders of IMFA and/or erstwhile ICCL are affected by the modification sought in this petition, no other person, in any event, has any right to object to the modification of the said scheme. She further submits that since the consequent reduction of capital does not involve either the diminution of liability in respect of unpaid share capital or the payment to any shareholder of any paid-up share capital, the interest of creditors of IMFA are not affected in any manner and hence they do not have any right to object to the modifications sought in this petition. 14. Under section 392 of the Companies Act, the court sanctioning a scheme has the power to supervise the carrying out of the scheme and may, at the time of sanction of the scheme or at any time thereafter, give such directions in regard to any matter or make such modifications in the scheme, as it may consider necessary for the proper working of the scheme. The hon ble Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 392 is to provide for effective working of the compromise and/or arrangement once sanctioned and over which the court must exercise continuous supervision (see section 392(1)), and if over a period there may arise obstacles, difficulties or impediments, to remove them, again, not for any other purpose but for the proper working of the compromise and/or arrangement. This power either to give directions to overcome the difficulties or if the provisions of the scheme themselves create an impediment, to modify the provision to the extent necessary, can only be exercised so as to provide for smooth working of the compromise and/or arrangement. To effectuate this purpose the power of widest amplitude has been conferred on the High Court and this is a basic departure from the scheme of the U. K. Act in which provision analogous to section 392 is absent." 15. In this case, the modification is sought by the petitioner for cancellation of 3,49,466 equity shares of IMFA which have not been accepted by the small shareholders of erstwhile ICCL offered to them at a discount of 50 per cent. pursuant to the said scheme. This situation was not conceived at the time of framing the said sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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