TMI Blog2020 (10) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... through the observations made by the Regional Director, Western Region, Mumbai. These objections raised by the regional directors clearly points out the irregularities and non-compliances that were present at the time of sanctioning of scheme by the NCLT. The Company must be in compliance of the provision of law and cannot act just on the basis of a legal opinion. The respondent No. 1 Company should have instantly rejected the application money for 10,375 shares as the Application applied were for less than the minimum lot size i.e. 100 shares. The assertion of the Respondent No. 1 Company that it was unaware of the BSE Rejection Letter dated 6th May, 1999 until in the year 2012 is not tenable as the company was listed and must be in touch with the Exchange for various compliances. The scheme appears to be used as a course of action to rectify the irregularities previously done/committed by the Respondent No. 1 Company. Therefore, the grounds raised by the Regional Director for dismissing the petition seems to be just and reasonable - NCLT has overruled the objections raised by the Regional Director on the ground that the objections are mere on the procedural aspects and do not rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No. 1 Company and he pointed out certain irregularities and non-compliances and raised the objections that the Scheme of Arrangements is a mere rectification of action already taken by the Respondent company without obtaining approval of the Tribunal and other Regulatory Authorities as required under the provisions of Companies Act. NCLT, Mumbai passed the order dated 6th July, 2020 stating that the scheme appears to be fair and reasonable and does not violate any provision of law and is not contrary to public policy or public interest. Hence, the Appellant on being aggrieved by the order of NCLT, Mumbai have preferred this appeal under section 421 of Companies Act, 2013. 3. It is sated by the Appellant that on 12th January, 1995, the Respondent No. 1 company entered into capital market by way of Public Issue of 37,47,400 equity shares of ₹ 10/- each at an issue price of ₹ 160/- per share. Pursuant to the payment of application money of ₹ 40/- per share (consisting of 2.50/- against the face value of ₹ 10/- per share and ₹ 37.5/- towards the premium of ₹ 150/-), 37,47,400 shares were allotted to successful applicants by the company. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved that these authorities have accepted the revised capital status of the Company. 6. It is also submitted by the Appellant that despite receiving the above mentioned communication regarding adherence to provisions of Section 100 of Companies Act, 1956 from BSE on 23rd January, 1999, the Company made application to BSE for the said capital reduction. Thereafter on 6th May 1999, BSE communicated to the Company that it has rejected the Application for listing of these shares and that the Exchange has taken a serious view of the same. 7. It is also submitted by the Appellant that after the Depositories Act, 1996 came into force, SEBI alongwith Stock Exchange made it mandatory for all companies to register themselves with the depositories in order to facilitate dematerialisation of shares and trading of securities on the stock exchange platform was made mandatory in demat form in a phased manner. The Company, being fully aware of the rejection of the Listing Application did not adhere to the guidelines as prescribed by SEBI and Stock Exchanges and did not bother to register itself with the depositories as the revised Capital structure would not have been admitted by them. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant that after learning about the said order the Respondent No. 1 Company filed an application with BSE on 22nd July, 2013 for revocation of suspension of trading. However, no such evidence was attached in the petition filed by the company. Upon receipt of the letter from the Company, BSE advised the Company to implement Reduction of Capital through Scheme/ Court or approach Registrar of Companies (RoC) for alternative remedy. 11. It is further stated by the Appellant that the Company filed the Scheme of Arrangement before the Bombay High Court. On 11th December, 2015, the Company was directed to convene meeting of shareholders and creditors. As per the Order and as per the directions, a meeting of Equity Shareholders and Creditors was held on 8th February, 2016. Finally, on 8th March, 2016, the Company filed the scheme petition before the Bombay High Court and thereafter, in December 2016 for confirmation the said matter was transferred to NCLT, Mumbai Bench and numbered as CP 190 of 2017. 12. It is also stated by the Appellant that the Regional Director, Western Region, Mumbai also submitted its preliminary representation and requested NCLT to dismiss the Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the objections are mere procedural lapses than anything else and there is no illegality pointed out by them. However, NCLT has grossly failed in appreciating the entire facts and circumstances of the case to the conclusion which is opposed to every principle laid down under section 230-232. Furthermore, the Company has time and again misled the courts in the name of Bonus Shares to believe that the proposal is a scheme for the benefit of all raising serious doubts about the existence of these 406 shareholders and whether the Company is a shell company or not. 14. The Appellant further contended that he has the locus to file the present appeal and the embargo under section 230(4) would not apply to the Appellant as he has challenged that the proposal made by the Respondent Company in the form of a Scheme or Arrangement cannot be termed as Scheme or Arrangement as contemplated under section 230-232 of the Companies Act, 2013. Section 230(4) was created to stop shareholder holding less than 10% of the total number of the shares from objecting to an otherwise legal scheme. It nowhere contemplates that when there are questions of legality, breach of law, unfairness, non-compliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (twenty five) shares originally held by the appellant s father were transferred to the appellant without delay and in compliance of law, who is presently holding 15 (fifteen) shares out of the 1,20,85,625 (one crore twenty lakh eighty five thousand six hundred twenty five shares) shares of Respondent No. 1 Company. 18. It is further submitted by the learned counsel for respondent no 1 that the appeal filed is frivolous, vexatious and appears on the face of it to be malicious prosecution. It is averred that as per the said Scheme, the appellant shall be allotted 21 new bonus shares on its present 15 shares. Further, all rights of the shareholders including the appellants are duly protected. The Directors have no interest in the Scheme and it is a duly sanctioned investor friendly Scheme. The only purpose of the said appeal, according to learned counsel, is to harass and blackmail the respondent no 11, in order to avail some sort of ransom or monetary benefit. 19. It is further submitted that the vital part of the Scheme approved by NCLT is already implemented and at such an advanced stage, the Scheme cannot be challenged. The Scheme was already brought in effect on 01.08.2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel that the appellant has raised fresh objections and grounds for the first time as a matter of convenience and as an afterthought. The appellant had sufficiently raised his objections before the High Court of Bombay/ NCLT in the affidavit dated 22.08.2016. Learned counsel for the respondent averred that this is against the settled position of law that no new grounds can be raised in the appeal, if they were not originally pleaded before the original court of jurisdiction. 23. It is further submitted that all the arguments and contentions advanced by the appellant were sufficiently heard and considered by NCLT, only after which NCLT dismissed the said objections and approved the Scheme as being fair, reasonable, investor friendly and in the wider interest of the public shareholders. He has placed reliance on para 25 of the impugned order, dated 06.07.2020 which is reproduced below: 24. It is submitted by the learned counsel for Respondent No. 1 that the Appellant is trying to mislead and misguide this Tribunal by filing incomplete pleading and veiling the relevant documents which were originally filed before NCLT/ High Court of Bombay. Prima facie, it appears that the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent company have submitted that the Appellant holds only 15 shares of the Respondent No. 1 Company which represents only 0.00012% of the paid up capital of Respondent No. 1 Company. The said percentage of the shareholding of the appellant is not only negligible but drastically below the threshold of the percentage prescribed to object the scheme under Section 230(4) of the Companies Act, 2013. Even if the objection of the Respondent No. 1 Company that the Appellant has no locus standi under section 230 (4) to object the scheme is accepted but this will not affect the power of Regional Director as there is no such limitation prescribed for the Regional Director to file his objections as he is a public authority and has to look after the interest of the public/shareholders/investors at large. Thus the Objections raised by the Regional Director should be given due weightage/consideration. The Regional Director have made the following objections which are reproduced below: The company has acted only on the legal opinion dated 3.11.1997 and not acted on the basis of the letter and spirit of provisions of Section 100 of the Companies Act,1956. Subscription made by each of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts Directors holding them liable to actions as permissible under law. Only after the SEBI order the Respondent No. 1 Company was compelled to take a decision and therefore it brought forth a proposal, as a scheme in order to safeguard their directors and the Company. 30. It is pertinent to note under section 230 (5) provides that a notice under sub-section (3) along with all the documents in such form as may be prescribed shall also be sent to the Central Government, the income-tax authorities, the Reserve Bank of India, the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition Commission of India established under sub-section (1) of section 7 of the Competition Act, 2002, if necessary, and such other sectorial regulators or authorities which are likely to be affected by the compromise or arrangement and shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that they have no representations to make on the proposals. The basic intent behind this provisions of law is that these authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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