TMI Blog2019 (5) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... ting for the modified scheme i.e. payment of 100% debt and no objections given by some of the creditors in court, the new scheme appears to have got the support of more than 70% of the value of unsecured creditors but still falls short of three-fourth of the value of the creditors. Secured Creditors - HELD THAT:- It is stated by the learned senior counsel for the petitioner that there are only two secured creditors. Both were present in the meeting but could not vote as their representatives were not duly authorized. The net result is that the Chairman had no option but to invalidate the proceedings and hold that the meeting could not reach at a conclusion. Essentially the meeting lacked quorum. However, as rightly pointed by the learned senior counsel for the petitioner, none of the two secured creditors has filed any objections in court against the scheme. It be appropriate for this court to completely outrightly reject the scheme and to scuttle the initiative sought to be taken by the petitioner company to try and revive itself. In equity it would be in the interest of justice that a fresh meeting is called of the unsecured creditors to vote freshly for the newly propou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any in UAE which is projected to generate revenues of ₹ 163.10 crores in the next 12 months. It is pleaded that the scheme proposed would enable the petitioner company to generate business of ₹ 150 crores in 2017-18. Alongwith the application the audited balance sheet for the year 2014-15 was filed and unaudited financial sheet statement for the year 2015-16 was filed. The Scheme creates four Classes of creditors namely Class A for Creditors of statutory dues, Class B secured creditors, unsecured creditors are part of Class C and Class D creditors are the dues of the employees. The scheme proposes to pay 100% of the amount due and payable for statutory dues within a period of 24 months. Similar is the position regarding Class B secured creditors. Regarding unsecured creditors, the Scheme proposes payment of 50% of the total outstanding amount within a period of 24 months. Regarding Class D employees dues, the Scheme proposes payment of 100% of monthly salary of all employees, 100% payment of annual bonus of all employees below the grade of assistant manager and 50% of the outstanding bonus of above the grade of assistant manager again within a period of 24 months. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir debts whereas all other creditors were being paid 100% of the dues. Representative of the company intervened and stated that they will try to pay 100% of the dues even to the unsecured creditors. 24 unsecured creditors voted at the meeting. As per the report, 11 creditors voted for the resolution being a value of ₹ 1,35,03,221.36/-. 12 creditors voted against being a value of ₹ 5,42,08,965/-. The Chairman hence submitted that the resolution had failed. I may only note that some of the unsecured creditors being four had voted stating that they accept the scheme if 100% of the outstanding dues of the unsecured creditors are being paid by the petitioner company. The Chairman of the meeting had, however, taken these votes as against the resolution. This was so because as per the scheme only 50% was payable and there was no formal amendment to the scheme. 6. I may also note that two objections have been filed against the scheme. One objection is filed by DLF Assets Private Limited being CA 1109/2018. The second objection being CA 979/2018 has been filed by My Kind of Vacations Private Limited . As far as My Kind of Vacations Private Limited is concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuineness and bona fide of the scheme for dues. 10. Learned senior counsel appearing for the petitioner has refuted the contentions of the learned counsel for the objector. Regarding the passing of the scheme in the meeting of secured and unsecured creditors he submits that these resolutions were duly passed. Regarding the secured creditors, he submits that there are only two secured creditors of the respondent company and both were present in the meeting. Representatives of the bidder were present in court. However, the bidding could not take place for technical reasons as they were not carrying the letters of authority. He submits that these secured creditors have not chosen to file any objections in this court meaning thereby that they are agreeing to the scheme. He further submits that in the course of meeting the petitioner had offered to pay 100% of the outstanding principal debt to the unsecured creditors. In the course of voting some of the creditors present had voted in favour of the scheme for the newly propounded arrangement, namely, 100% of the principal amount to be repaid. However, as this was not part of the origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id applications. 12. I may note that in the main petition the petitioner has made both the prayers, namely, for permission to convene the meetings of the concerned creditors and to also approve and implement the proposed scheme of arrangement to pay the creditors. The Punjab and Haryana High Court in Alpha Corp. Development Private Limited vs. Euthoria Developers Private Limited (supra) had noted as follows:- 10. The learned Judge held that upon pronouncement of the order dated 25.10.2016, no order was reserved by this Court and, as a result thereof, this matter cannot be retained by the High court. The learned Judge observed that under the aforesaid notification this Court has jurisdiction for passing an order only in a case which has been reserved by it. There are certain important aspects of this issue regarding the aforesaid notification which were probably not brought to the notice of the learned Judge. Firstly, it must be noted that this was a composite petition for directions and for the sanction of the Scheme of Arrangement. There has been no objection to the maintainability of a composite petition. In other words, it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, such as the latest financial position of the company, the latest auditor' s report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like.] ( 3) An order made by the Court under sub- section (2) shall have no effect until a certified copy of the order has been filed with the Registrar. ( 4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constituting or defining the constitution of the company. ( 5) If default is made in complying with sub- section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to ten rupees for each copy in respect of which default is made. ( 6) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: 1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held. 2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 Sub-Section (2). 3. That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and 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 concerned meetings as contemplated by Section 391 Sub-section (1). 5. That a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting of the creditors and shareholders has been convened and held, or consent of the requisite number of creditors obtained. While according sanction, there are mandatory requirements, such as to see whether the meeting of the concerned was duly held and conducted, that it was accepted by a competent majority, that it was for common advantage, reasonable, prudent and proper in every aspect. 19. Reference may also be had to the judgment of the Supreme Court in Administrator of the Specified Undertaking of the Unit Trust of India and Another vs. Garware Polyster Ltd., (supra) wherein the Supreme Court held as follows:- 32. Section 391 read with Section 393 of the Act postulate that where a compromise or arrangement is proposed between a company and its creditors or any class of them; or between a company and its members or any class of them, the court is required to direct holding of meetings of creditors or class of creditors or members or class of members who are concerned with such a scheme. In the event majority of the creditors representing three-fourths in value of the creditors or class of creditors or members or class of mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saged payment of 50% of the debt. Some of the voters had in their ballot papers indicate that in case 100% payment of the debt was being made, they would be willing to accept the scheme. Taking into account such consents, the value of the votes for the modified scheme i.e. payment of 100% debt as recorded is ₹ 2,79,54,873/- and the value of the votes against is ₹ 3,97,05,744/-. 24. I may also note that there is an error in the report of the Chairman. He has noted only 11 votes for the original scheme whereas there are actually 12 votes for the original scheme. The unsecured creditor Mahadev Travels has voted for the scheme and has a debt of ₹ 1,05,77,364/-. This is clear from the ballot paper attached. Some of the creditors who had not voted had filed objections in court against the scheme. However three of the creditors have withdrawn their objections on learning that the petitioner is ready and willing to pay 100% of the debt. CA No. 979/2018 was filed by one objector-My Kind of Vacations Pvt. Ltd. who has claimed a sum of ₹ 23,16,838. The other creditor is Global Logic Indi Pvt. Ltd. who has claimed ₹ 2,22,69,36 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Holding Finance Pvt. Ltd. (supra) In the decision of Mazola Theatres (P) Ltd. v. New Bank of India Ltd. [1975] (2) 1975 1 (Delhi), the Court has observed as follows: The meeting contemplated in section 391 is analogous to an extra ordinary general meeting of the company, in as much as a three-fourth majority is required to pass the required resolution. The normal rule is that the consent of the shareholders whether it is unanimous or by a three-fourths majority, must be obtained in a meeting summoned on the orders of the court under section 391. This is in accordance with the general principle, that members must act in a general meeting. Inroads have, however, been made on this formal doctrine. Firstly, the consent of all or virtually all the shareholders given even outside a meeting is sufficient to comply with the requirements of a meeting. Secondly, written resolutions instead of those passed in meetings are now capable of being registered, e.g., section 192 of the Companies Act. Thirdly, the doctrine of lifting the veil of incorporation and looking at the reality of the action of the members enables the court to hold that consent of the overwhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the court to upset a scheme which has subsequently obtained the requisite majority's approval. 26. Keeping in view the above judgment this Court can take into account consents received for the scheme after the meeting. Hence, the consent given in court by the three unsecured creditors, namely, My Kind of Vacations Private Limited, Global Logic Ind. Pvt. Ltd. and Inficare Software Technologies (P) Ltd. can be taken into account. After taking them into account the result comes as follows:- Value in favour of Scheme - ₹ 7,02,15,486.36/- Value against the Scheme - ₹ 2,91,79,948/- Total value - 70215486.36 + 29179948.00 9,93,95,434.36 3/4th of the total due = (99395434.36) = ₹ 7,45,46,575.77/- It f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29. Similarly, reference may also be had to the judgment of the Karnataka High Court in S.M.Holding Finance Private Limited vs. Mysore Manufacturers Ltd. (in liquidation), 1991 (3) KarLJ 447. In that case the Karnataka High Court was dealing with a plea that the unsecured creditors had not approved the scheme of 3/4th majority in the meeting that was held. However, the unsecured creditors who opposed the scheme in the meeting later on filed an individual affidavit in Court agreeing for approval of the scheme/meeting 3/4th of the unsecured creditors. It was urged that as in the meeting of unsecured creditors there was no 3/4th majority voting and approving the scheme as a rectification has taken place the objections of some of the unsecured creditors be rejected. The court held as follows:- 39. In the backdrop of this decision as well as on proper interpretation of section 391(2) which is not mandatory, but directory and there has been substantial compliance that three-fourths value of the unsecured creditors have agreed to and approved the scheme, the contention of the objector that there was no proper compliance with the Act and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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