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Judgments

Spentex Industries Limited vs. Indo Rama Synthetics (India) Limited  [DELHI HIGH COURT, 21 May 2013]
Corporate - Income Tax Act, 1961, ss. 2(19AA) and 392(1)(b) - Scheme of demerging of spinning business - Modification of Scheme - Denied - Sustainability - Petition was preferred by respondent for sanctioning of a Scheme and which was sanctioned on 27-2-2003 - Simultaneously, respondent had also approached HC and which also sanctioned the Scheme qua the respondent - Under the said Schemes sanctioned by HC, the spinning business of the respondent was demerged as a going concern and transferred to respondent, with the respondent retaining the polymer business - Respondent subsequently in or about December, 2006 was amalgamated with the appellant - Application was filed by the appellant u/s. 392(1)(b) of Act for modification of the Scheme qua respondent sanctioned by HC for a direction to the respondent to transfer certain assets including a part of the housing colony occupied for use by the workers/employees of the erstwhile respondent to the appellant or in the alternative to pay to the appellant the value of the said assets amounting to Rs.61,30,56,983/- which was dismissed by HC - Hence instant petition - Appellant contended that though administrative block, SOC Building, Heath Centre, Septic Tank and Sock Pit, Fire Hydrant System, Invertors Chilled Water Plant, Sewage Treatment Plant, Communication System, Computer and Office Equipment and certain other equipment all valued at Rs.8,44,38,916/- and staff and worker colony, DG Set, Electricity sub-Station, Chillers, Part of Administrative block to be completed and Security Barracks valued at Rs. 61,30,56,983/- i.e. total of Rs.69,74,95,899/- were also being used for the spinning business and were essential for the continuance of the spinning business, but were under the Scheme not transferred to respondent - Further, that it was not as if respondent to which spinning business / undertaking earlier of the respondent, was transferred, upon demerger continued to carry on the business without assets; however continued use of the said assets by respondent for running the spinning business was made possible under the MOU - Also that since the scheme proclaimed to be s. 2(19AA) of Act compliant, the Scheme should, in exercise of powers u/s. 392(1)(b) of Act, should be made s. 2(19AA) of Act compliant by transferring rights in assets to the appellant as successor of respondent or by paying price thereof to the appellant which was the successor of respondent - Held, filing of the application u/s. 392(1)(b) of Act by the appellant after nearly three years of acquiring the said spinning business by purchase of shareholding of respondent was found by HC to be nothing but an act of greed and arm twisting the respondent to continue allowing the appellant to use the said assets - HC failed to see, as to how the appellant who had earlier represented to HC that the assets were not essential to the running/operation of the spinning business, could be heard to the contrary - Change of shareholding of a Company which had in law been conferred the status of a juristic person, did not entitle the company to wriggle out of past commitments/representations - Merely because over the years, the shareholders of the predecessor of the appellant had changed and the predecessor was amalgamated with the appellant and control and management of the appellant was with different persons did not entitle the appellant to take a different stand - As far as S. 2(19AA) of Act, on which the entire argument of the appellant hinged, was concerned, HC agreed with the respondent that for the Court to sanction a Scheme of demerger, compliance of s. 2(19AA) of Act was not essential - Reference to s. 2(19AA) of Act in the Scheme was only for the purpose of making the transaction tax neutral - Same could not be said to be a pivot around which the Scheme revolved or essential to its workability - HC was therefore of the opinion that the non- compliance even if any with S. 2(19AA) of Act, would not render the Scheme unworkable - Appeal dismissed.
(1) Shah Pulp and Paper Mills Limited, Mumbai; (2) Mahendra H. Shah; (3) Hirji T. Shah; (4) Amritlal K. Shah; (5) Ashok Z. Shah; (6) Hansa A. Shah; (7) Divyesh A. Shah vs. (1) Pravinchandra Hirji Shah; (2) Shantilal K. Shah; (3) Ramesh K. Shah; (4) Amritlal K. Shah; (5) Pushpaben K. Shah; (6) Ketan K. Shah; (7) Keshavji Shah; (8) Keshavji Shah; (9) Ketan K. Shah; (10) Ramesh K. Shah; (11) Rohit Plasto Pack Private Limited, Mumbai  [BOMBAY HIGH COURT, 17 May 2013]
(A) Corporate - Companies Act, 1956, ss. 10F, 397, 398, 402 (g) - Sale of undertaking - Oppression on minority - Sustainability - It was case of appellants that respondents together hold 40 per cent shareholding in appellant no.1/Company and appellants together hold balance 60 per cent - Appellants provided investments from time to time, as their personal guarantees and also pledged their respective shares as security against loans from Banks and Financial Institutions for functioning and expansion of business of Company - None of respondents ever provided personal guarantee for Company - In early 2006, after due consideration of present and future market demands as well as technical reports, expansion of Company was proposed - Therefore it was necessary to procure extra funds by way of advances/loans from financial institutions and also raise addl. funds by further issue of share capital - It was decided that if expansion plan failed, then it would be in interest of shareholders to sell undertaking while Company was still a profit making concern and had not run into financial crunch - Notices for convening an EGM (Extraordinary General Meeting) on 24-5-2006, along with requisite explanatory statement and proposed resolutions for same were sent to all shareholders including respondents - EGM was accordingly held and attended by respondent Nos. 1 to 3 and respondent No. 10 - Respondent Nos. 1 to 3 indicated that they were not willing to provide guarantees and pledge their shares in Company as security to Bank and that their protest should be noted - Appellants contended that Company would not be able to raise necessary finance - Not a single vote was therefore cast in favour of expansion of plant and machinery - Hence, alternate resolution for sale of undertaking was taken up for voting - Respondent No.1 suggested amendment viz. offers received for sale of undertaking be placed before shareholders and thereafter they should be given opportunity to give higher offer and purchase undertaking - Amendment was put to vote and defeated - According to appellants, amendment suggested by respondent No. 1 was defeated because it was felt that this would prevent serious bids from being received - One 'G' also proposed amendment to resolution for sale of undertaking, which was to the effect that Board of Directors of Company should not accept to sell undertaking for consideration less than paid up capital of Company, without taking consent of General Body of Company - This amendment was also put to vote and was passed by majority - Alternate resolution i.e. sale of undertaking was also passed by majority - Pursuant to resolution passed at EGM, Committee for Disposal of Undertaking constituted by General Body held meetings in relation to modalities for proposed sale of undertaking of Company, and on 8-6-2006 issued advertisement for sale of undertaking of Company in newspapers - Copy of advertisement was also forwarded to respondents - Respondents having failed to obtain for themselves right to better the best bid, and refused to make bid in open auction for undertaking, filed petition before CLB invoking provisions of ss. 397 and 398 of the Act - CLB held that it was just and necessary to protect interest of respondent group in Company and to have proportional representation on Board of Company, passed impugned order u/s. 402 (g) of the Act - Hence instant appeal - Whether respondents were oppressed on account of sale of undertaking as passed relevant resolutions in EGM held on 24-5-2006 - Held, it was clear that it would not be possible for Company to raise finance required to expand and upgrade plant as proposed by resolution No.1 - It was for this reason that resolution No. 2 to sell undertaking was taken up - Further, proposed procedure for sale of undertaking was totally transparent and was, in fact, not opposed by respondent No.1 except that respondent No.1 proposed amendment to said resolution giving a pre-emption right to members of Company to better bids received for undertaking - Therefore, it was clear that respondent No. 1 himself, was not per se opposed to the sale of undertaking - However, even after resolution No. 2 was passed, no bids for undertaking were received from respondents - Therefore, there was no question of respondents 'feeling' oppressed on account of resolution for sale of undertaking having been passed at EGM held on 24-5-2006 - Exercise of powers by CLB could not be divorced from the case for alleged oppression made out by petitioner before CLB and other existing circumstances which might necessitate such directions being issued - Alleged case of respondent as regards 'oppression' was demonstrably false and untenable - Once respondents expressly gave up all prayers in petition except prayer for appointing respondent No.1 as a Director on Board of Directors of Company and direct Company to reserve permanent seat on Board for a nominee of respondents, it was not open to CLB to pass drastic and extreme directions which went far beyond limited relief sought by respondents and which would have effect of creating a deadlock in affairs of Company where none existed earlier - Appeal allowed.

(B) Corporate - Companies Act, 1956, ss. 10F, 397, 398, 402 (g) - S. 402 (g) of the Act - Ambit and Scope - What was the ambit and scope of powers conferred on CLB u/s. 402 (g) of the Act - Held, powers of CLB of granting reliefs, in the event of there being a case made out u/ss. 397 and 398 were of widest amplitude - S. 402 (g), therefore required and empowered CLB to mould appropriate relief outside cls. (a) to (f) to meet the exigencies of the case - In instant case, by issuing unwarranted, drastic and extreme directions in impugned order, CLB had without any basis whatsoever placed control of Company in hands of minority i.e. respondent group, thus enabling respondents to achieve indirectly a virtual veto right on all issues and ability to paralyze functioning of Company - Hence, directions were passed by CLB were extremely detrimental and prejudicial to the interest of appellant No.1 Company and were therefore not permissible u/s. 402 of the Act - Appeal allowed.

(C) Corporate - Companies Act, 1956, ss. 10F, 397, 398, 402 (g) - Beyond scope of pleadings - Power of CLB - Extent of - Could CLB ignore pleadings and submissions of parties and make any order or direction so as to deal with a situation of alleged deadlock because of infighting and disputes between parties, despite no material to prove such a situation was placed before it - Held, neither was there any deadlock in functioning of Company nor was any case of deadlock pleaded and/or proved by respondents - Respondents' petition was based on false and frivolous allegations and was without merit - Impugned order was set aside - Appeal allowed.

Ram Kohli vs. Indrama Investment Private Limited Select Holiday Resorts Limited  [DELHI HIGH COURT, 16 May 2013]
SST Media Private Limited (in Liquidation) vs. Official Liquidator, High Court, Calcutta  [CALCUTTA HIGH COURT, 14 May 2013]
V. L. S. Finance vs. Union of India and others  [SUPREME COURT OF INDIA, 10 May 2013]
Corporate - Practice & Procedure - Companies Act, 1956, ss. 211(7), 621A(7), 621A(1)(7) - Compounding an offence - Permissibility - Registrar of Companies/respondents filed complaint in Trial Court alleging that accused/company/appellant without any right shown land in Schedule of fixed assets punishable u/s. 211(7) of the Act - However, accused filed an application before Company Law Board for compounding offence - Company Law Board, by its order compounded offence against accused on payment of Rs. 1000/- for each offence each year - Aggrieved by same, appellant preferred appeal before HC contending that power of compounding could be exercised by criminal Court and not by Company Law Board - HC dismissed appeal - Hence, instant appeal - Whether Company Law Board could compound offence punishable with fine or imprisonment or both without permission of Court - Held, an offence committed by an accused under the Act not being an offence punishable with imprisonment only or imprisonment and with fine was permissible to be compounded by Company Law Board either before or after institution of any prosecution u/s. 621A(7) of the Act - Criminal Court also possesses similar power to compound an offence after institution of prosecution - However, power u/s. 621A(1)(7) of the Act were parallel powers to be exercised by Company Law Board or authorities mentioned therein and prior permission of Court was not necessary for compounding offence when power of compounding was exercised by Company Law Board - Hence, impugned order of HC did not require any interference - Appeal dismissed.
Birla Corporation Limited vs. Harshvardhan Lodha and others  [CALCUTTA HIGH COURT, 10 May 2013]
Committee-Gfil vs. Libra Buildtech Private Limited and others  [SUPREME COURT OF INDIA, 10 May 2013]
Sanjeev Goyal and others vs. Rajiv Goyal and others  [DELHI HIGH COURT, 10 May 2013]
Arbitration & ADR - Corporate - Arbitration and Conciliation Act, 1996 ss. 9, 17, 34 - Memorandum of family settlement - Arbitration proceedings - Propriety - During course of hearings of Company Petitions, the Company Law Board directed petitioners and respondents to amicably resolve their disputes - Thus, parties entered into Memorandum of Family Settlements (MOFS) - Main inter-se disputes between respondents no. 6 to 14 and 15 to 17 have already been settled under MOFS and substantial disputes between respondent nos. 1 to 5 and respondent nos.6 to 14 were also resolved - However, disputes for compliance of terms and conditions of MOFS between petitioners and respondents were still to be resolved with regard to compliances of their respective obligations as per final settlement - During pendency, 3 applications were also filed by respondent nos. 1 to 5 who sought directions to permit them to give effect to resolution dt.19-10-2011 - Hence, instant petition - Held, under scheme of s. 9 of the Act, it was not necessary for Court to decide all disputes raised by parties which were even not mentioned in prayer clause - Court while considering petition u/s. 9 of the Act for interim protection had to strike balance between parties in order to preserve property in interest of parties which were of urgent in nature, till same were decided by Arbitrator on merit after hearing parties - Thus, at instant stage, HC was inclined to decide issues which were urgent, rest of reliefs and disputes raised by parties had to be considered by Arbitrator who was appointed by parties themselves -Respondent nos. 1 to 5 were allowed to give effect to resolution if passed in Extraordinary General Meeting and with regard to other reliefs sought by said respondents same were to be considered before Arbitrator who would decide same as per their own merits after hearing parties - Main petition was also disposed of, with liberty to seek other prayer if available in law by moving interim application u/s. 17 of the Act before Arbitrator who would consider same as per their own merits - Petition filed by same petitioners against respondents as well as respondent no. 18 sought termination of mandate of sole Arbitrator, there were no pleadings or positive statement on behalf either of parties to effect that till March, 2012 any party accepted him as Arbitrator - Prior to that, in fact, respondent no. 18 was acting as mediator with regard to disputes relating to meaning, interpretation and implementation of mutual settlement - Thus, all acts done by respondent no. 18 prior to raising their disputes as mediator and not being Arbitrator - With regard to allegations made by petitioners, about biasness, personal involvement, vengeance towards petitioners, were concerned, said challenge was possible in form of objections to final award u/s. 34 of the Act in view of settled proposition of law - It was admitted case of petitioners that Arbitration proceedings had commenced after filing of instant petitions and petition under said facts and circumstances was not maintainable - Petition dismissed.
Birla Education Trust and others vs. Birla Corporation Limited and others  [CALCUTTA HIGH COURT, 10 May 2013]
(1) Chandran Ratnaswami; (2) K. C. Palanisamy and others; (3) Paul Rivett vs. (1) K. C. Palanisamy and others; (2) State and another; (3) Ramaswamy Athappan and others Etc.; (4) V. Balakrishnan and another  [SUPREME COURT OF INDIA, 09 May 2013]
Corporate - Criminal - Practice & Procedure - Indian Penal Code, 1860, ss. Cheating - Indian Contract Act, 1872 - Economic offences - Induced complaints/malafide complaints - Sustainability - Appellants, Canadian citizen, entered into a joint venture agreement(JVA) with respondent No.1 - On an application before Company Law Board(CLB) by appellants against respondent No. 1 for mismanagement, CLB directed respondent to return the investment back to appellant - Respondent No. 1 filed various criminal cases against appellants, which were closed - However, criminal case in question was reopened and charge-sheet was submitted against appellants - Trial Court issued look out notice and NBW against appellants - Appellants challenged Trial Court order before HC - Single Judge allowed appellant to travel on furnishing security deposit - Respondent no.1 challenged Single Judge order before DB, which was allowed - Hence, instant appeal - Whether DB was justified in passing the impugned order - Held, dispute arose out of JVA was fully and finally settled by CLB and also HC and several directions were issued for compliance including return of amount by respondent No.1 to appellant and to become sole owner of those companies - After dispute was finally settled by CLB and HC in appeal, respondent No. 1 approached Economic Offences Wing, who refused to entertain complaint - Respondent No. 1 then moved complaint before Trial Court for initiating criminal action against appellant for breach of contract, which was dismissed by Trial Court holding same as nothing but to take vengeance - Trial Court further held that if conditions of agreement were violated respondent had to seek remedy under the 1872 Act or Company Law instead of filing criminal case - Suppressing said complaint and order passed by Trial Court, respondent No. 1 tried again by filing a complaint before Trial Court for initiating criminal action against appellants for breach of contract and conspiracy - Although FIR was registered, but a closure report as a mistake of fact was prepared - HC while passing order observed that Court should frown upon conduct of respondent No. 1 in indulging in repeated harassment of appellants - Irrespective of dispute with regard to closure of case, a fresh life was given to criminal case at instance of Superintendent of Police(SP), who directed re-investigation and in course of said criminal proceeding irrespective of FIR appellants were harassed and on technicalities various orders for surrender, arrest and their detention had passed - Neither HC nor Trial Court had ever applied their mind and considered conduct of respondent No. 1 and continuance of criminal proceedings in respect of disputes, which were civil in nature and finally adjudicated by competent authority i.e. CLB HC in appeal - Respondent No. 1 had manipulated and misused the process of Court so as to deprive appellants from their basic right to move free anywhere inside or outside country - However, it would be unfair if appellants were to be tried in such criminal proceedings arising out of alleged breach of a JVA specially when such disputes had finally resolved by Court of competent jurisdiction - Hence, allowing criminal proceedings arising out of FIR to continue should be an abuse of process of Court and, therefore, for ends of justice such proceedings ought to be quashed - HC High Court failed to look into the matter while passing impugned order - Appeals disposed of.


Notifications

8 /2013 (10 Apr 2013) (Notification)
Relaxation of additional fees and extension of last date in filing of various forms with the Ministry of Corporate Affairs-reg. - Circular dated 10-04-2013
NA (15 Mar 2013) (Notification)
Companies Directors Identification Number (Amendment) Rules, 2013 - Notification dated 15-03-2013
G.S.R. 87(E) (15 Feb 2013) (Notification)
Principal notification number G.S.R.978, dated 28-05-1963 - Amendments - Notification dated 15-02-2013
S.O. 93(E) (08 Jan 2013) (Notification)
Central Government exempts a banking company - Notification dated 08-01-2013
710/1/(M)/1 (29 Dec 2012) (Notification)
Draft : Company Secretaries (Amendment) Regulations, 2012 - Notification dated 29-12-2012
G.S.R. 931(E) (24 Dec 2012) (Notification)
Companies (Central Government’s) General Rules and Forms (Seventh Amendment) Rules, 2012 - Notification dated 24-12-2012
G.S.R. 930(E) (24 Dec 2012) (Notification)
Companies Directors Identification Number (Third Amendment) Rules, 2012 - Notification dated 24-12-2012
G.S.R. 929(E) (24 Dec 2012) (Notification)
Companies Directors Identification Number (Third Amendment) Rules, 2012-Notification dated 24-12-2012
S.O. 2978(E) (21 Dec 2012) (Notification)
Delegation of powers or may itself exercise the powers under the Companies Act, 1956 - Public interest - Notification 21-12-2012
S.O. 2977(E) (21 Dec 2012) (Notification)
Amendment in notification Ministry of Industry (Department of Company Affairs) number G.S.R. 1060(E) - Notification dated 21-12-2012

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Circulars

10 /2013 (08 May 2013) (Circular)
Applicability of Regulation 17(6) in processing the work items - Circular dated 08-05-2013
DNBS(PD) CC.No.322/03.10.001/2012-13 (01 Apr 2013) (Circular)
Core Investment Companies-Guidelines on Investment in Insurance - Circular dated 01-04-2013
7 /2013 (20 Mar 2013) (Circular)
Relaxation of additional fees and extension of last date in filing of various forms with the Ministry of Corporate Affairs-reg. - Circular dated 20-03-2013
6 /2013 (14 Mar 2013) (Circular)
Clarification under Section 372A(3) of the Companies Act, 1956 - Circular dated 14-03-2013
DPSS (CO) PD No.1462/02.14.003/2012-13 (28 Feb 2013) (Circular)
Security and Risk Mitigation Measures for Electronic Payment Transactions - Circular dated 28-02-2013
DNBS (PD).CC. No 321 /03.10.42 /2012-13 (27 Feb 2013) (Circular)
KYC norms/AML Standards/CFT/Obligation of banks under PMLA, 2002 - Circular dated 27-02-2013
DPSS. CO. EPPD No. 1400/04.03.01/2012-13 (18 Feb 2013) (Circular)
NEFT - Introduction of Continuous Release of Credit Messages - Circular dated 18-02-2013
DNBS.CC.PD.No.320/03.10.01/2012-13 (18 Feb 2013) (Circular)
Guidelines on Fair Practices Code for NBFCs-Grievance Redressal Mechanism-Nodal Officer - Circular dated 18-02-2013
5 /2013 (12 Feb 2013) (Circular)
Filing of Balance Sheet and Profit and Loss Account in extensible Business Reporting Language (XBRL) mode for the financial year commencing on or after 01-04-2011 - Circular dated 12-02-2013
4 /2013 (11 Feb 2013) (Circular)
Debenture Redemption Reserve (DRR) - Clarification - Circular dated 11-02-2013

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