Cms Info Systems Ltd vs Bharatiya Kamgar Karamchari Mahasangh ...

(Arising out of judgement and order dated 5th December, 2023 passed by the National Company Law Tribunal, Mumbai Bench in Company Application No.560/2016 in company Petition (CAA) 306/MB/2010)

In the matter of:

CMS Info Systems Ltd, T-151, 5th Floor, Tower No.10 Railway station Complex, Sector -11 CBD Belapur, Navi Mumbai 400614 Appellant

Vs

1. Bharatiya Kamgar Karamchari Mahasangh & Ors 5, Navalkar Lane, 1st Floor, Prarthana Samaj, Girgaon, Mumbai 400004

Also at

A-19, 1st Floor, Wadala Shree Ram Industrial Premises, GD Ambedkar Marg, Beside Wadala Udyog Bhavan, Wadala (W), Mumbai 400031

2. CMS Securitas Ltd, J-3, Block B 1, Mohan Cooperative Industrial Estate New Delhi 110044 India

3. Mr. Rajiv Kaul, Executive Vice Chairman CEO and Whole time Director, M/s CMs Info System Ltd T-151, 5th floor, Tower No.10 2

Railway Station Complex, sector 11 CBD Belapur, Navi Mumbai 400614

4. M/s Baring Private Equity Asia 801, 8th floor, Piramal tower, Peninsula Corporate Park, Lower Parel, Mumbai 400013

5. M/s Sion Investment Holding Pte Ltd, 1 Raffles Place, No. 29-02 One Raffles Place Singapore 148616

6. M/s Blackstone Advisors India Pvt Ltd Express Towers, Nariman Point, Mumbai 400021 Respondents

For Appellant:Mr Arun Kathpalia, Sr. Advocate with Mr. Hemant Sethi, Mr. Gaurav H Sethi, Mr. Deetanshu Chandra and Mr. Rahul Pawar, Advocates.

For Respondent: Mr. Gaurav Mehta, Ms Riddhi Sancheti, Mr Anurag Anand and Mr. Mukul Kulhari, Advocates for R1. Mr. Prateek Kumar, Advocate for R4 to R6.

JUDGEMENT

JUSTICE YOGESH KHANNA, MEMBER (JUDICIAL)

This appeal is filed against order dated 5th December, 2023 passed by

the Ld. National Company Law Tribunal, Mumbai Bench in MA No.560/2016

in CP(CAA) No.306/MB/2010. It is alleged the Ld. NCLT had erroneously

directed the Board of Directors of the Appellant under a Scheme of

Arrangement with Respondent No.2 where the appellant is the Original

Transferee Company and Respondent No.2 is the Original Transferor

Company, to take the employees of the ATM and Cash Management Division

of Respondent No.2 as the appellant's employees.

3

2. Respondent No.2 has its registered office in Delhi and is the wholly

owned subsidiary of the Appellant having its registered office in Mumbai. It

is alleged the transferor entered into a Scheme of Arrangement with the

Appellant for demerger of ATM and Cash Management Division of the

Transferor Company to the Transferee Company for the purposes of

operational synergy and facilitating sharing of financial resources. The

scheme was approved by the High Court of Judicature at Bombay on 25th

October, 2010 in Company Scheme Petition No.306/2010, and thereafter also

approved by the High Court of Delhi by way of order dated 17th January, 2011

in Company Scheme Petition No.311 of 2010.

3. As per the terms of the Scheme, the appointed date was 1st April, 2009

and the Effective Date was 1st April, 2011.

4. The Respondent No.1 filed MA No.560/2016 in CP (CAA)

No.306/MB/2010 alleging the Respondent No.1 Union was not aware of

scheme and (b) the scheme was applicable to entire business of Respondent

No.2, including the take over of employees and identifying some of the

employees to transfer those to the appellant was wholly illegal. In support of

the argument that Respondent No.1 was not aware of the scheme, its learned

counsel referred to letters dated 13.4.2011, 25.5.2011 and 20.6.2011 wherein

the Respondent No.1 had requested the appellant to supply to the Respondent

No.1 information about the demerger of ATM and Cash Division of CMS

Securitas Ltd, i.e., Respondent No.2. It is alleged no such information was

ever provided despite requests. The learned counsel for Respondent No.1 also

referred to various clauses of the Agreement as under:- 4

"1.8 "ATM and Cash Management division" or "the Demerged Undertaking" means all the businesses, undertakings, properties and liabilities of whatsoever nature and kind and wheresoever situate of CMS Securities pertaining to its ATM and cash management business, on a going concern basis, together with all their assets and liabilities and shall means and include (without limitation) the following:

1.8.2 all the movable assets, properties, resources, facilities, utilities and services including without limitation all equipment, plant and machinery, utilities vehicles, furniture and fixtures, office equipment, computer systems and peripherals systems, implements, apparatus, instruments, spares, tools, fittings, communication facilities and capital work in progress and such other tangible movable property, as may be decided by the Board of Directors, which are engaged, deployed, employed or used in and pertaining to the ATM and Cash Management Division.

1.8.5 all contracts, deeds, bonds, agreements, leases tenancy rights, schemes, arrangements and other instruments as may be decided by the Board of Directors, of whatsoever nature in relation to the ATM and cash management division. 4.1 Upon the coming into effect of this Scheme and with effect from the Appointed Date and subject to the provisions of this Scheme in relation to the mode of transfer and vesting the ATM and Cash Management Division as defined under Clause 1.8 above shall, without any further act, instrument or deed, be demerged from CMs Securitas and transferred to and vested in CMS Info Systems or be deemed to have been demerged from CMS Securitas and transferred to an vested in CMS Info Systems as a going concern, so as to become as and from the Appointed Date, the estate, assets, rights title, interest and authorities of CMS Info Systems, pursuant to Section 394(2) of the Act and any other relevant provision of the Act and order of the Hon'ble High Courts sanctioning the Scheme, subject, however, to subsisting charges, if any.

6. Any and all existing contracts, (including customer contracts)' deeds' bonds' insurance policies, agreement, vehicle registrations, Iicenses' permissions' certification, lease arrangements, lease & license agreements, engagements and other instruments. if any, of *whatsoever nature relating to the ATM and Cash Management Division and to which'. CMS Securitas is party or to the benefit of which CMS Securitas may be eligible and subsisting or having effect on 'the Effective Date, shall remain in full force and effect against or in favour of CMS Info Systems, as the case may be, and may be enforced by or against CMS Info Systems as fully and effectually as if, instead of CMS Securitas, CMS Info Systems had been a party or 5

beneficiary or oblige thereto, without any further act or deed.

CMS Info Systems shall enter into and/or issue and/or execute deeds, writings or confirmations or enter into any tripartite arrangements, confirmations or novations, to which CMS Securitas will, if necessary, also be party in order to give formal effect to the provisions of this Scheme, if so required or becomes necessary. CMS Info Systems shall be deemed to be authorised to execute any such deeds, writings or confirmation on behalf of CMS Securitas and to implement or carry out all formalities required on the part of CMS Securitas to give effect to the provisions of this Scheme.

5. It was argued by the learned counsel for Respondent No.1 all these

clauses referred to above mean the entire business with all its staff etc had

merged with Transferor company, including all employees. It was argued the

ROC had also interpreted the scheme in similar manner viz. the entire

manpower is taken over by the appellant.

6. Thus the main crux of the argument of the Respondent No.1 union is it

was made aware of the demerger being undertaken by way of Scheme, only

by its certain well wishers who provided it with relevant information in 2016.

7. We have heard the appellant and respondents and perused the records.

On the issue of R-1 not being aware of the Scheme, contrary to the

submissions made by Respondent No.1 we find on 07.07.2009 the appellant

had published date of hearing of the Scheme Petition in two local newspapers,

one in English and one in Marathi putting the Scheme in public domain.

Public notices and advertisements were issued in terms of the mandate of

Chapter XV of Companies Act, 2013.

8. Though the Respondent No.1 by its letters dated 13.04.2011, 25th May,

2011 and 26.06.2011 addressed to Respondent No.2 had sought information

qua demerger of ATM and Cash Management Division but it is equally true 6

no such letters were written by Respondent No.1 after June 2011 which infact

is in line of argument of the appellant that all information on demerger of the

ATM and Cash Management Division of the Respondent No.2 was supplied to

Respondent No.1 and it was aware of the Scheme right from the Effective Date

i.e. 1st April, 2011, if not earlier.

9. It was argued the meetings were held on 20th July, 2011, 6th August,

2011, 24.08.2011, 12.09.2011 between the representatives of Transferor

Company/Respondent No.2 and Respondent No.1 Union wherein the

Respondent No.1 was informed of demerger that had taken place in

accordance with the Scheme. Pursuant to the meetings, the concerns of the

members of Respondent No.1 were duly addressed to and thereafter no

further communications was ever received from Respondent No.1 in this

regard. It was argued pursuant to several meetings held between July 2011

to August, 2011, specifically in a meeting held on 4th August, 2011 with the

representatives of Respondent No.1, complete details of the demerger Scheme

were provided. Further on 05.08.2011 a notice was issued to Respondent

No.1 by Respondent No.2, duly acknowledged by Respondent No.1 on

18.08.2011, qua the implementation of the Scheme and transfer of some of

the employees of Respondent No.2 to the Appellant. (See Page 19, Annexure

1 to the Rejoinder). Admittedly the appellant made a disclosure of the Scheme

in its Annual Report dated 29th September, 2011 for the year ending

31.03.2011.

10. The records would show the Respondent No.1 had expressly accepted

and acquiesced to the implementation of the Scheme and transfer of 45

employees of Respondent No.2 as identified and the Respondent No.1 had 7

signed and executed number of agreements/settlements/MOU with the

Respondent No.2. The details of the agreements executed by Respondent No.1

on behalf of and for the benefit of the employees of the Respondent No.2 from

2011 till 2016 and till the date of filing of the Miscellaneous Application,

interalia include wage negotiations, benefits for employees etc, as under:-

S.No. Location Particulars of Agreement 1. Mumbai Memorandum of Settlement dated 17 February 2011 (Annexure 10(Colly)@Pg.1152, Vol.VI) 2. Pune Memorandum of Settlement dated 17 February 2011 (Annexure 28, Ia for additional documents @ pg 1863, Vol.IX) 3 Chandigarh Memorandum of Settlement dated 8th May, 2012 (annexure 29 @ pg. 1879, Vol.IX) 4 Pune Memorandum of Settlement dated 11 April, 2015 (Annexure 30, IA for additional Documents @ pg 1895 vol.IX) 5 Mumbai Memorandum of Understanding dated 17 April, 2015 (Annexure 10 (colly) @ pg. 1165, Vol.VI) 6 Chandigarh Memorandum of Understanding dated 19 June 2015 (Annexure 31, IA for additional documents @ pg 1901, vol. IX)

11. Pertinently, even after filing of the Miscellaneous Application for the

employees at the Mumbai undertaking of the Respondent No. 2- Transferor

Company, who are members of Respondent No. 1, the Respondent No. 1 has

continued to negotiate and enter into agreements for and on behalf of

employees of Respondent No. 2 who are members of Respondent No. 1 at Pune

and Chandigarh. The details of such settlements are as under:

S.No. Location Particulars of Agreement 1. Pune Memorandum of Settlement dated 12 December 2019 (Annexure 32, IA for 8

Additional Documents @ pg 1906, vol. IX) 2. Pune Memorandum of Understanding dated 08 October 2021 (Annexure 33, IA for Additional Documents @ pg 1922, vol. IX) 3 Pune Memorandum of Settlement dated 14 September 2023 (Annexure 34, IA for Additional Documents @ pg 19423, Vol. IX) 4 Chandigarh Memorandum of Settlement dated 23 January 2023 (Annexure 35, Ia for Additional Documents @ pg. 1966, vol. IX)

12. It is relevant to note under these memorandums of settlement and

memorandums of understanding, as set out above, the employee-members of

the Respondent No. 1 Union derived several benefits. For instance, under the

Memorandum of Settlement dated 17 February 2011 entered into with the

Mumbai undertaking of the Transferor Company, the employee-members of

the Respondent No. 1 Union interalia derived benefits such as increment as

per the slabs mentioned under the agreement, one-time ex-gratia amount of

INR 18,000/-, additional increment of INR 3,600/- per month, among other

benefits. Similarly, under the Memorandum of Understanding dated 17 April

2015, the employees who were part of the Respondent No.1 Union interalia

derived benefits such as onetime ex-gratia amount of INR 18,000/- paid in the

month of April 2015 by the Respondent No. 2, Slab-wise 4 increment as

provided under the agreement, ad-hoc increment of INR 4,500/- per month,

increase of additional non-financial allowances as mentioned in the

agreement, one-time payment of INR 6,000/- per workman. 9

13. At all relevant times, the Respondent No. 1 Union was fully aware of the

Scheme, its implementation and who were the employees who had been taken

on by the Appellant under and pursuant to the Scheme.

14. Further it is relevant to note Clause 7.1 of the Scheme which provide all

such staff, employees and workmen of the Transferor company as identified

by its Board of Directors and who are in service on the effective date shall be

deemed to have become staff, workmen and employees of the transferee

company with effect from the appointed date without any break in their

service.

15. Clause 7.1 is as under:-

"7.1 On the scheme becoming operative, all staff, workmen and employees of the ATM and Cash Management Division of CMS Securitas as identified by the Board of Directors of CMS Securitas and who are in service on the effect date shall be deemed to have become staff, workmen and employees of CMS Info Systems with effect from the appointed date without any break in their service and on the basis of continuity of service, and the terms and conditions of their employment with CMS Info Systems shall not be less favorable than those applicable to them in CMS Securitas on the Effective Date."

16. In terms of the said clause, the Board of Directors of the Transferor

company i.e. Respondent No.2, passed a Resolution at the Board Meeting held

on 1.4.2011 identifying such employees for the purposes of the transfer, as a

consequence of which, their employment stood transferred to the transferee

company, while the rest of the employees continued to remain on the payroll of

the transferor company. Pertinently after the approval and implementation of

the Scheme, the employee-members of the Respondent No.1 Union from

Mumbai Region as well as all other employees of the transferor company across 10

other regions accepted the Scheme and raised no grievance regarding the

transfer of 45 employees as identified by the Board of Directors.

17. In 2016, the members of Respondent No.1 Union who were employed

with Respondent No.2 resorted to flash strikes and various unfair labour

practices as a result of which the appellant lost out on several clients and

suffered a huge detriment to its business and was forced to close down all its

four undertakings in Mumbai. The appellant was also constrained to

terminate its agreement with Respondent No. 2 on 10.3.2016 and it resulted

in closure of Respondent No.2's Mumbai undertaking which was intimated by

a closure notice dated 02.04.2016.

18. As a counter blast it appears the Respondent No.1 filed MA on 2.5.2016

contending the Scheme has not been implemented correctly alleged interalia

Clause 7.1 of the Scheme must be read to mean all employees of the Transferor

company stood transferred to the Transferee company with retrospective effect

from 25.10.2010 which is the date of approval of the order by the Bombay High

Court. Upon failure to obtain interim relief in the MA, the Respondent No.1

itself challenged the Closure Notice before the Industrial Tribunal and sought

reinstatement of their employees into the Transferor company with full back

wages. It is imperative to mention in a complaint filed by the Respondent

No.1 Union before the Industrial Court Mumbai on 1.1.2016 against

Respondent No.2, the members of the Respondent No.1 had acknowledged

the transferor company is their employer (See Page 1749 at Volume VIII).

19. The conduct of the Respondent No.1 union thus show it was aware of

the demerger and after its letter dated 13.4.2011, various meetings were held 11

with its office bearers and it never challenged the demerger at any stage and

rather went for implementation of the scheme by moving an application. It is

interesting to note all these communications and MOUs were signed by Bhai

Jagtap on behalf of Respondent No.1 and hence right from beginning R1

Union were involved at every stage and now cannot allege it was not aware

what was going on in the company.

20. Thus to say Clause 7.1 of the Scheme contemplate the transfer of all

the workmen of ATM and Cash Management Division of the transferor

company to the transferee company is entirely misplaced and the Ld. NCLT

erred in holding as such in its impugned order.

21. It is also pertinent to mention Section 231 of the Companies Act, 2013

does not permit the Tribunal to make substantial modifications to a Scheme

which has been approved by its Members. The Ld. NCLT could not have

interpreted the Scheme contrary to the intention of the Transferor and

Appellant. The intention of the Transferor and the Appellant was clear from

the unambiguous wording of the Scheme under Clause 7.1 and also coupled

with the fact the workmen not so identified by the Board continued in the

service of the transferor company, None of such persons were

abandoned/retrenched when the said Scheme was put into operation. Rather

the Transferor company and the Transferee company executed Manpower

Supply Agreements whereunder the Transferee company utilised the services

provided by the workmen of the Transferor company. The purpose of the

Scheme was not to retrench any of the staff, employees of the Transferor

company and the record would show such persons continued to be in service 12

of the Transferor company on terms which were not in any manner less

favourable to those available to the employees of the Appellant.

22. The records reveals the Scheme was fully implemented in April 2011 to

the knowledge of Respondent No.1 union and thereafter there have been

multiple wage settlements entered into for benefit of Respondent No.1 after

the implementation of the Scheme and there were no objections to the

implementation thereafter. As stated the entire problem started in 2015 when

the Members of Respondent No.1 resorted to flash strikes without any

justifiable reasons and without any notice at four undertakings of the

Appellant in Mumbai and resorted to several unfair labour practices which

resulted in several clients of the Appellant terminating their contracts with

the Appellant. This led to the appellant losing all its business.

23. Nevertheless, in its Miscellaneous application belated objection was

raised qua the implementation of the scheme after more than five years of its

implementation when despite the fact on several occasions the Scheme was

acknowledged by the employees of the transferor company, not just at

Mumbai but also at several other locations, including Pune and Chandigarh.

Those employees have also entered into MOU and Memorandum of Settlement

at those locations with the transferor company.

24. The facts reveal under the garb of interpreting the Scheme the

Respondent No.1 is seeking a modification of the Scheme which in fact is

impermissible. By way of the impugned order, the Ld. NCLT had rather

modified the express terms of the Scheme and had erroneously directed the

Board of Directors to take the employees of ATM and Cash Management 13

Division of Respondent No.2 as on appointed date provided such employees

also continue to remain in employment on the effective date. Clause 7.1 of

the Scheme only talks of the employees who were in service as on effective

date, i.e. 1.4.2011, were to be covered under the Scheme whereas the import

of para 8.5 of the impugned order requires an employee to be in the service

on appointed Date i.e. 1.4.2009 and remain in service as of Effective Date.

25. The Respondent No. 1 Union's misplaced reliance and self-serving

interpretation of the affidavit of the Regional Director, Western Region,

Ministry of Corporate Affairs after about 5 years of implementation of scheme

is nothing but a speculative counter blast to the closure notice by the

Respondent No. 2 company. Without prejudice to the same, the affidavit of the

Regional Director has to be read in terms of the Scheme, which contain the

twin requirement mentioned in Clause 7.1 as stated above. Accordingly, the

affidavit of the Regional Director, cannot be taken to modify the clear and

unambiguous provisions of the Scheme.

26. Notwithstanding the above, it is relevant to note only the ATM and Cash

management businesses of the Transferor Company were transferred to the

Appellant, while the remaining businesses remained with the Transferor

Company. Therefore, it is impractical and inconceivable to interpret the

Scheme to mean that all employees of the Transferor Company stood

transferred to the Appellant on the Effective Date

27. Lastly from the facts narrated above we are of the considered opinion

the Miscellaneous application was barred by limitation as was filed after

about five years of the implementation of the Scheme in 2011. 14

28. Thus in view of the above the impugned order is set aside and the MA

No.5/2010 stands dismissed. Appeal is thus allowed.

29. Pending applications are disposed of.

(Justice Yogesh Khanna) Member (Judicial)

(Mr. Ajai Das Mehrotra) Member (Technical) Dated:06-11-2024

BM