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TMI Blog2013 (12) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... disgruntled. Nevertheless the effort backed by a compromise scheme is lauded and approved in the larger interest of the public who include depositors. 2. Three company petitions were originally filed to wind up three companies try one of its erstwhile directors under section 433(d) and (f) of the Companies Act, 1956 ('the Act') and the details are as follows : (i) CP No. 41 of 2009 - Business India Builders & Developers Ltd. (ii) CP No. 42 of 2009 - Business India Shares and Insurances (P.) Ltd. (iii) CP No. 52 of 2009 - Business India Commercial Hire Purchase India Ltd. The three companies aforesaid had collected money from the public during the years 2002-05 in the name "Business India Group" and failed to repay the same with interest as promised paving the way for several litigations. The only company which had assets is Business India Builders & Developers Ltd. and the main asset is 197 cents of land in Survey Nos. 172/03, 175/10, 172/04, 172/05C and 107/2 of Edappally Village. Two towers comprising of residential apartments were proposed to be constructed by Business India Builders & Developers Ltd. and the structural work of one tower is complete. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the Builder could be utilised to settle the dues of the creditors of the "Business India Group". This was a conscious move since there was no company by name "Business India Group" even though deposit receipts had been so issued to the various investors across the country. Moreover neither the Business India Commercial Hire Purchase India Ltd. nor the Business India Shares & Insurance Pvt. Ltd. had any assets whatsoever to be proceeded against by the depositors. 5. The salient features of the compromise agreement dated 24th May, 2011 to which Business India Investors Forum (represented by one Mr. S R Kalyanakrishnan) is also a party are as follows : (i) The first tower (Tower B) of the Project shall be completed within 8 months of accepting the scheme of compromise by this court and on lifting the orders of attachment and injunction in respect of the property. This, however, would not cover the completion of common facilities for the twin towers such as Club House, Swimming Pool, Landscape Garden, Health Centre, etc. (ii) The proposer on completion of the first tower (Tower B) shall hand over possession of 30 per cent of the total super built ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. This order was also affirmed by judgment dated 17th October, 2012 in Company Appeal No. 14/2012 by the Division Bench filed by the said Mr. S R Kalyanakrishnan and another in their personal capacity. It is intriguing as to how Mr. S R Kalyanakrishnan said to be representing an association of creditors earlier could file an appeal in an individual capacity without resigning from the association. It is equally baffling as to how Mr. S R Kalyanakrishnan could adopt a stand in appeal as regards the creditors which is diametrically opposite to the one pursued by him before the company court. 7. The Advocate Commissioner chaired the meeting of the shareholders of the company held at Ernakulam on 18th October, 2012 and the meeting of the creditors of the company held at Chengannur on 20th October, 2012. The scheme propounded by the Proposer was styled as "Scheme A" and the scheme propounded by one Mr. N G Samuel (a close associate of Mr. M G John) was styled as "Scheme B". The following was the voting pattern of the creditors of the Builder. Total number of creditors from old and new creditors list : 27 Total claims from old and new creditors list : 7,54,42,28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposer has secured requisite majority as contemplated under section 391 of the Act read with rule 77 of the Company (Court) Rules, 1959 ('the Rules'). Publication was effected in the Malayala Manorama and the Indian Express Dailies inviting objections if any against the sanctioning of the Scheme as contemplated under rule 80 of the Rules. Notice was also simultaneously taken to the Regional Director, Ministry of Corporate Affairs (Southern Region), Chennai on whose behalf has the Registrar of Companies, Kerala has submitted a report approving the Scheme. The further question is as to whether the Scheme approved by the majority of the creditors and shareholders of the Builder could be sanctioned under section 391 of the Act. It may also be incidentally noticed that the proposer has filed Company Petition No.42/2012 in addition to filing CA No.340/2011 in CP No.41/2009 for sanctioning the Scheme. Similarly the Builder has also filed CP No.5/2013 for sanctioning the Scheme wherein separate notice or publication was dispensed with in view of the formalities done in CA No.340/2011. A disposal of CA No.340/2011 in CP No.41/2009 wherein all the procedural formalities have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the parties and act as a court of appeal and undertake to scrutinise the scheme with a view to find out whether a better scheme could have been adopted. It does not, however, mean that the company court has to be act merely as a rubber stamp and give its imprimatur automatically whenever a scheme is put forth for approval. The broad contours of the jurisdiction of the company court to grant sanction to a scheme in terms of section 391 of the Act has been delineated in Miheer H Mafatlal v. Mafatlal Industries Ltd. [1996] 10 SCL 70 (SC) They are the following : (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 sub-section (2) of section 391. (3) That the meetings concerned 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shareholders had the relevant material to arrive at an informed decision for approving the scheme and that the same is just and fair to the class as a whole. The sanctioning of the scheme would result in the creditors of the entire "Business India Group" including that of the Builder to get repayment of the money due at least partially. I alertly note that neither the "Business India Group" nor the following companies have any asset to enable the creditors to proceed against the same for realisation of their dues : (i) Business India Commercial Hire Purchase India Ltd. (ii) Business India Shares & Insurance (P.) Ltd. Only the Builder has a property left that too a partially constructed residential apartment complex which can be sold in open market only after the same is completed for which money has necessarily to be pumped in. What is more disquieting is the fact that many decrees of civil court are unable to be executed for want of realisable assets of the company and the right of many of the creditors have become barred by limitation too. Even the creditors of the Builder have with their open eyes supported the scheme unequivocally for want of any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t whilst sanctioning the scheme, the company court is not required to act as a Super-Auditor. No doubt whilst considering the proposal for approval, the Company Judge is not required to examine the scheme in the way of a carping critic, a hair splitting expert, meticulous accountant or a fastidious counsel. However, at the same time, the court is not bound to superficially add its seal of approval to the Scheme merely because it received the approval of the requisite majority at the meeting held for the purpose." It has not been shown that the entire accounts are bogus or that the balance sheet of the Builder is replete with mistakes even though minor inaccuracies in the same cannot altogether be ruled out. That by itself is not a reason enough to overthrow the company petitions on the ground that the particulars fall short of the requisites under the proviso to section 391(2) of the Act as is alleged by Mr. S R Kalyanakrishnan. Suffice it to say that the affairs of the Builder are not fraudulent or the compromise scheme opposed to public policy as to warrant refusal of sanction in terms of section 391 of the Act. A compromise agreement is proposed generally as an alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X
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