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TMI Blog2023 (4) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... stered office at 2 First Cross Road Kasturba Nagar Adyar Chennai 600020 PART II-THE MODIFIED SCHEME 1. The Scheme shall become effective from the Appointed Date, 2. The Company shall transfer all rights vested on it in the properties as set out in Annexure to Affidavit dated 26.10.2015 filed at the Madras High Court to a Trust created for the benefit of the Debenture holders 3. The Trust will be managed under the Directions of the Madras High Court which is vested with the power of supervision of the Scheme 4. All Debenture holders of the company will be beneficiaries of the Trust pro rate to their holdings as at 31.01.2013 including all amounts accrued if any as interest as on that date 5. All proceeds realised from the Trust properties shall be distributed net of expenses pro rata to the debenture holders at the end of each quarter and such payment shall be made within 2 weeks of the last date of each quarter 6. Payments from the Trust made to debenture holders will be treated as repayment of the debentures to extent of such repayment in the books of the Company upto to the value of Debenture outstanding 7. Payments from the Trust made to the debenture holders in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entitled but not obliged to use the legal services of Mr R Subramanian Advocate who is Director of the Company and Mr R Subramanian shall be bound to provide services without any professional charges whatsoever except however that all out of pocket expenses would be reimbursed 15. On and from the Effective Modified date the terms of repayment set out at the time of issue of debentures and under the scheme dated 31.01.2013 set out in CP 15/2014 shall stand modified by the terms set out here above and that there shall be no other amounts payable to the debenture holders other than as set out in this Modified scheme." 3. In the above modification, the applicant asked for transfer of all the rights vested in the properties as set out in Annexure to the affidavit dated 26.10.2015 filed at the Madras High Court, to a Trust created for the benefit of the debenture holder. Though he had stated the details with regard to the properties in the modification, which is available in the Annexure to the affidavit dated 26.10.2015, the said Annexure has not been furnished before this Court. However, the details with regard to the 14 properties have been furnished separately. Upon going throug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the 14 assets said to have mentioned affidavit dated 26.10.2015. Though the asset particulars are not available, both Mr.Prakash Goklaney, learned counsel for the applicant and Mr.R.Subramanian, party-in-person would submit that they provided the particulars with the regard to the 14 properties. Upon perusal of the details of those 14 properties, it is clear that there are lot of litigations pending and during the pendency of litigations, it was suggestion by the applicant to transfer those properties to a Trust as per the modification of the scheme. When that being the case, if modification is considered and any order is passed for transfer of those properties with litigation to the Trust, it will only be a relief for the Directors of VIL including Mr.R.Subramanian, partyin- person and other accused in the criminal proceedings and it will not at all provide any immediate relief for the debenture holders. 6. Further Mr.H.Karthik Seshadri, learned counsel, who is appearing for the debenture holders also submitted that this application for modification of scheme is filed only at the instigation of Mr.R.Subramanian, party-in-person, who is Ex-director of VIL. The applicant filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re holders but it appears that no steps have been taken on their part and no report was filed with regard to the collection of those advances and loans. 10. Further, the total amount outstanding to the debenture holders is about Rs.125 crores along with interest. If really the VIL and its sponsors had any intention to implement the scheme, they could have very well implemented the same with the realization of the current assets alone. When the scheme was approved, they have highlighted the above financial position and obtain the approval of this Court as well as the approval of the debenture holders. However, when the present modification has been filed, nothing has been mentioned about the recoveries made by VIL against the advances and loans mentioned in financial position as on 30.09.2013. 11. Under these circumstances, this Court is of the view that allowing the modification only affect the interest of the debenture holders and further it would be more beneficial for the promoters to safeguard them from all the criminal proceedings and other liabilities and thereby, they will absolve from all the responsibilities. Therefore, this Court cannot be wittingly or unwittingly be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government: Provided further that only such proceedings relating to cases other than winding up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal: Provided also that- (i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or (ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts; shall be dealt with in accordance with the provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959...." The other provision of relevance, in this regard, is Section 465 of CA 2013, which, in relevant part, is as under: ''65(1) The Companies Act, 1956 (1 of 1956) and the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) (hereafter in this section referred to as the repealed enactments) shall stand repealed: .... Provided further that until a date is notified by the Central Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the applications have to be transferred to NCLT, stands rejected and this Court will continue to hear these applications.'' From the above extract of the order dated 05.01.2017, there is no doubt that this Court rejected the earlier request for transfer primarily on the ground that this Court had sanctioned the Scheme and had initiated action pursuant thereto by also appointing an Administrator. This order is the subject matter of O.S.A.SR.No.26384 of 2017. Although an appeal was filed, the said appeal is stated to be at the stage of consideration of an application to condone the delay in filing thereof. Notwithstanding the above position, both Analog and Mr.Subramanian contend that the order dated 05.01.2017 does not preclude the reiteration of a request for transfer because the order dated 05.01.2017 is erroneous and, therefore, does not operate as res judicata. 11. In this regard, both Analog and Mr.Subramanian rely upon Section 231(3) of CA 2013. Sub Section 3 of Section 231 reads as under:- ''3. The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act san ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : All proceedings under the Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction, other than proceedings relating to winding up on the date of coming into force on these rules shall stand transferred to the Benches of the Tribunal exercising respective territorial jurisdiction: provided that all those proceedings which are reserved for orders for allowing or otherwise of such proceedings shall not be transferred.'' From the above Rule, it is evident that except proceedings reserved for orders, all other proceedings pending before the Companies Court are liable to be transferred. On the basis of this Rule, both Mr.Goklaney and Mr.Subramanian contended that since none of the pending applications are reserved for orders, they are liable to be transferred. 13. In the specific context of the Scheme, Analog, the propounder, initially filed applications to convene meetings of stakeholders to consider the draft scheme, and thereafter filed a petition to sanction the draft scheme upon approval by its stakeholders. By this process, the Scheme was sanctioned by order dated 30.04.2014 in C.P.No.15 of 2014. Subsequent thereto, applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petition and all applications relating to and arising out of a winding up petition or a scheme of arrangement, as the case may be, so as to enable one forum to deal with the same in a meaningful way. As regards proceedings relating to schemes of arrangement, the second proviso to Section 434(1)(c) of CA 2013 is applicable. This proviso uses the expression "only such proceedings...shall be transferred to the Tribunal" and makes it clear that if orders are reserved in the proceedings, the proceedings shall not stand transferred. Thus, in contrast to service of notice under Rule 26 (i.e. pre-admission), the cut-off is fixed further down the road at the point of reserving orders in the proceedings. Significantly, the cut-off criterion is if orders are reserved in the proceedings, and not in an application in the proceedings. In the case at hand, orders were passed in the petition under Section 391 as early as on 30.04.2014 and only consequential applications under Section 392 of CA 1956 are pending. If an analogy is drawn to winding up proceedings, once the Scheme was sanctioned, the applications under Section 392 of CA 1956 are similar to applications filed after a winding up order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Indeed, it bears repetition that the cut-off, as regards schemes of arrangement, is fixed at the advanced stage of reserving orders in the proceedings. Consequently, there is no provision analogous to the last proviso to Section 434(1) of CA 2013 to seek transfer of retained matters. In fine, these applications are completely misconceived and premised on the mistaken notion that CA 2013 provides for transfer of applications. 17. For reasons set out above, the order dated 05.01.2017 does qualify as res judicata and is not erroneous in any respect. In any event, for reasons set out in the preceding paragraphs, the specific applications and, indeed, the proceedings relating to the Scheme are not liable to be transferred to the NCLT. Except for the assertion that this Court has no jurisdiction, no reasons are set out in Comp.A.No.313 of 2021 to dismiss Comp.A.No.56 of 2021. For these misadventures, in the face of the earlier order of this Court, each set of applicants should be suitably rewarded. 18. As a corollary, Company Application Nos. 413 and 414 of 2019 and Company Application No.313 of 2021 are dismissed. Each set of applicant/s shall pay costs of Rs.1,00,000/- to the Tam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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