TMI Blog2024 (2) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... 020 (3) TMI 527 - DELHI HIGH COURT] had only directed the RoC to decide the application of the Petitioner afresh in accordance with law. As of today there is no challenge to the 2016 Regulations. This Court is of the opinion that since the 2016 Amendment was only curative in nature and only intended to protect the interests of the creditors, the amended rules, therefore, must apply to applications which are pending with the RoC, and the same must apply to the application of the petitioner/company. The right of the Petitioner for conversion from unlimited company to limited company has not been taken away. In fact, the petitioner/company had no vested right to be granted a certification of conversion to a limited liability company. The reasons given by the RoC for rejecting the application of the Petitioner on the ground that various prosecutions have been filed by the Serious Fraud Investigation Organization against the Petitioner for offences under the Companies Act and the IPC and that the e-Form 27 which was to be filed with the Registrar of Companies was not in compliance with Rule 37 of the 2016 Rules cannot be said to be so perverse especially keeping in mind the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by which the Registrar of Companies rejecting the conversion of the Petitioner's company from an Unlimited Liability Company to a Limited Liability Company . 4. Facts of the case reveal that the Petitioner is a company incorporated under the Companies Act, 1956 and is engaged in the business of wholesale cash and carry trading of footwear, apparels and sports equipment under the Reebok brand name through franchise based stores across India. It is stated that the Petitioner was set up as Joint-Venture (JV) company by Reebok International Limited (hereinafter referred to as 'the RIL'), a company registered under the laws of the United States of America. It is stated that the investment of RIL in the equity shares of the Petitioner/Company was done through Reebok (Mauritius) Company Limited, a subsidiary of RIL. 5. It is stated that after consideration of the changing conditions in the external environment in which the Petitioner/Company operated and on evaluating its organizational structure and further considering the changes in its strategy and key management of the Company, the shareholders and the Board of Directors of the Petitioner passed a resolution t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roached this Court by filing W.P.(C) 952/2017 challenging the communication dated 05.10.2016. It is stated that this Court vide Order dated 03.03.2020 directed the Respondent No. 2 to decide the application of the Petitioner afresh, in accordance with law, after giving adequate opportunity of being heard to the Petitioner. It is stated that pursuant to the Order passed by this Court, the Petitioner was invited by Respondent No. 2 for in-person hearing on 30.06.2020. Material on record discloses that after hearing the Petitioner, the application of the Petitioner was rejected vide Order dated 07.08.2020. 8. It is this Order which is under challenge in the present Writ Petition. 9. The reasons given by the Respondents for rejecting the application of the Petitioner are as under: a. that various prosecutions have been filed by the Serious Fraud Investigation Organization against the Petitioner for offences under the Companies Act and the IPC. b. that the e-Form 27 which was to be filed with the Registrar of Companies was not in compliance with Rule 37 of the 2016 Rules. c. to protect the interest of creditors, stakeholder and public interest and also keeping in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 18(3) of the Companies Act provides for conversion of companies which are already registered and it provides that the registration of a company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations and contracts may be enforced in the manner as if such registration had not been done. He, therefore, states that any debts, liabilities, obligations or contracts incurred or entered by or on behalf of the company with unlimited liability will continue to be enforceable against the company with limited liability as if the liability of the company and its members was unlimited. He, therefore, states that there cannot be any concerns regarding the liability of the members of the company on the date of conversion. He states that the laws in Singapore and UK have the same effect that the liability of the members gets limited only from the date the application for conversion gets approved. He, therefore, states that in view of the above, the major concerns raised by the RoC cannot survive. 12. The Ld. Senior counsel also states that any pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares held % of shareholding Reebok International Ltd. LLC. 233008420 99.03 Reebok (Mauritius) Company Limited 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 adidas America, Inc. 156750 0.07 February 24-2022 Shareholder name No. of shares held % of shareholding adidas Holding LLC 233008420 99.03 adidas (Mauritius) Limited (formerly known as Reebok (Mauritius) Company Limited) 2130377 0.91 adidas Technical Services Private Ltd. 2 0.00 adidas America, Inc. 156750 0.07 As of the date of this affidavit, the Petitioner Company's shareholding structure is as below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into it, that the amendment is considered to be a clarification or a declaration of the previous law and therefore applied retrospectively. iii) An explanation/clarification may not expand or alter the scope of the original provision. iv) Merely because a provision is described as a clarification/explanation, the Court is not bound by the said statement in the statute itself, but must proceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratory provision or whether it is a substantive amendment which is intended to change the law and which would apply prospectively. 18. Per contra, learned Counsel for Respondents relies on the Judgment of the Apex Court in Zile Singh v. State of Haryana, (2004) 8 SCC 1, wherein the Apex Court has held as under: 14. The presumption against retrospective operation is not applicable to declaratory statutes . In determining, therefore, the nature of the Act, regard must be had to the substance rather than to the form. If a new Act is to explain an earlier Act, it would be without object unless construed retrospectively. An explanatory Act is generally passed to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that they were not liable to pay the duty of 9s 4d per cwt., but Thomson, C.B., in giving judgment for the Attorney General, said: (ER p. 134) The duty in this instance was, in fact, imposed by the first Act; but the gross mistake of the omission of the weight, for which the sum expressed was to have been payable, occasioned the amendment made by the subsequent Act: but that had reference to the former statute as soon as it passed, and they must be taken together as if they were one and the same Act; (Price at p. 392) 19. It is contention of the learned counsel for the Petitioner that the Registrar only had to satisfy himself as to whether the provision of Chapter II which will be applicable to the registration of companies has been complied with or not as they existed on the day when the application was made. He states that if the ingredients had been complied with on the day of the application, the Registrar ought to have issued a certificate of registration in the same manner as it was under the earlier regime. Under Section 18(2) of the Companies Act, the Registrar of Companies could not have exercised his discretion to not permit the conversion of an unlimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past. 21. In Advanced Law Lexicon by P. Ramanath Aiyar (3rd Edn., 2005) the expressions retroactive and retrospective have been defined as follows at p. 4124, Vol. 4: Retroactive. Acting backward; affecting what is past. (Of a statute, ruling, etc.) extending in scope or effect to matters that have occurred in the past. Also termed retrospective. (Black's Law Dictionary, 7th Edn., 1999) Retroactivity is a term often used by lawyers but rarely defined. On analysis it soon becomes apparent, moreover, that it is used to cover at least two distinct concepts. The first, which may be called true retroactivity , consists in the application of a new rule of law to an act or transaction which was completed before the rule was promulgated. The second concept, which will be referred to as quasi-retroactivity , occurs when a new rule of law is applied to an act or transaction in the process of completion . The foundation of these concepts is the distinction between com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibition of the passage of retroactive laws refers only to retroactive laws that injuriously affect some substantial or vested right, and does not refer to those remedies adopted by a legislative body for the purpose of providing a rule to secure for its citizens the enjoyment of some natural right, equitable and just in itself, but which they were not able to enforce on account of defects in the law or its omission to provide the relief necessary to secure such right. 24. Craies on Statute Law (7th Edn.) at p. 396 observes that: If a statute is passed for the purpose of protecting the public against some evil or abuse, it may be allowed to operate retrospectively, although by such operation it will deprive some person or persons of a vested right. Thus public interest at large is one of the relevant considerations in determining the constitutional validity of a retrospective legislation. 25. The above position was elaborately noted in Virender Singh Hooda v. State of Haryana [(2004) 12 SCC 588] . 26. Curative statutes are by their very nature intended to operate upon and affect past transactions. Curative and validating statutes operate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of Rule 8-C notwithstanding the fact that the applications had been made long prior to the date on which Rule 8-C came into force. While it is true that such applications should be dealt with within a reasonable time, it cannot on that account be said that the right to have an application disposed of in a reasonable time clothes an applicant for a lease with a right to have the application disposed of on the basis of the rules in force at the time of the making of the application. No one has a vested right to the grant or renewal of a lease and none can claim a vested right to have an application for the grant or renewal of a lease dealt with in a particular way, by applying particular provisions. In the absence of any vested rights in anyone, an application for a lease has necessarily to be dealt with according to the rules in force on the date of the disposal of the application despite the fact that there is a long delay since the making of the application. 20. We may next refer to the decision in Union of India v. Indian Charge Chrome [(1999) 7 SCC 314] wherein this Court held: (SCC p. 327, para 17) 17. Mere making of an application for registration does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstand from the claim of a vested right set up by the respondent Company is that on the basis of the Building Rules, as applicable to their case on the date of making an application for sanction and the fixed period allotted by the Court for its consideration, it had a legitimate or settled expectation to obtain the sanction. In our considered opinion, such settled expectation , if any, did not create any vested right to obtain sanction. True it is, that the respondent Company which can have no control over the manner of processing of application for sanction by the Corporation cannot be blamed for delay but during pendency of its application for sanction, if the State Government, in exercise of its rule-making power, amended the Building Rules and imposed restrictions on the heights of buildings on G.T. Road and other wards, such settled expectation has been rendered impossible of fulfilment due to change in law. The claim based on the alleged vested right or settled expectation cannot be set up against statutory provisions which were brought into force by the State Government by amending the Building Rules . (emphasis in original) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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