Medeor Hospitals Ltd vs Registrar Of Companies, Nct, Delhi & ...

(Arising out of Order dated 28.08.2018 passed by the (National Company Law Tribunal, New Delhi Bench in C.P No -80/14/ND/18)

IN THE MATTER OF: M/s. Medeor Hospitals Limited (Formerly Known as Rockland Hospitals Limited) B-33-34, Qutab Institutions Area, New Delhi - 110 016 ...Appellant

Vs

Registrar of Companies, Delhi ...Respondent

Present: For the Appellant:Mr Pankaj Yadav with Ms Varsha Yadav, Mr Sameer Yadav, Ms Priya Ranjan Dubey, Advocates. For the Respondent : Mr PS Singh, Sr Panel counsel with Ms Annu Singh and Mr Vibhav Singh, Advocates.

JUDGMENT

(29th January, 2020)

Justice Jarat Kumar Jain, Member (Judicial).

1. The Appeal is preferred by M/s. Medeor Hospitals Limited against

the order passed by the National Company Law Tribunal ('for short

NCLT') New Delhi on 28.08.2018 in C.P No. 80/14/ND/2018 by

which NCLT rejected the Application of the Appellant Company for

conversion of Public Limited Company to a Private Limited

Company.

2. NCLT passed the impugned order on 28.08.2018. Thereafter vide

order dated 05.10.2018 the name of the company has been changed

from Rockland Hospitals Ltd to M/s Medeor Hospitals Ltd. Hence

this appeal is filed in the name of Medeor Hospitals Ltd.

Company Appeal (AT) No.394/2018 2

3. The Appellant i.e. M/s. Medeor Hospitals Limited formerly known as

Rockland Hospitals Ltd was incorporated on 4.8.2004 under the

Companies Act, 1956 as a public limited company having its

registered office at B-33-34, Qutub Institutional Area, New Delhi-

110 016. The appellant company is the wholly owned subsidiary

company of VPS Healthcare Private Limited, which is having its

registered office at Royal Towers, Door No.-41/113 E,

Marottichuvadu Road, Edapally, Kochi Ernakulam Kerala 682 024.

The Appellant Company has a total of 8 equity shareholders. While

the holding Company M/s. VPS Health Care Private Limited is

holding almost 100 % of the issued share capital, 7 other

shareholders are holding one share each on behalf of M/s. VPS

Health Care Private Limited. The Management of the company is of

the view that it can effectively carry out its business as a private

limited entity without impacting or affecting debts, liabilities,

obligations, or contracts incurred or entered into by or on behalf of

the company. Its funds requirements are primarily met by its

shareholders and it does not intend to raise any funds from the

public. Under such circumstances with a view to do away with the

numerous compliances required for a public limited company, a

decision was taken by the Board of Directors at their Meeting held

on 14.8.2017 at 11 AM and has resolved to convert the company

from public limited to private limited company subject to approval of

members at a General Meeting of the Company and subject to

approval of NCLT. On the same day for holding Extra Ordinary

Company Appeal (AT) No.394/2018 3

General Meeting (for short EOGM) at 12 Noon, notices were issued

to shareholders. Shareholders have given their consent for holding

EOGM at a shorter notice. Hence EOGM held at 14.8.2017 at 12

Noon and concluded at 1 PM. In the Meeting the members of the

appellant company have accorded their unanimous consent for

conversion of company from public to private limited company. On

25.8.2017 in the prescribed form the intimation has been sent to the

Registrar of Companies. Thereafter on 30.10.2017 the appellant

company filed petition under Section 14(1) of Companies Act, 2013

before NCLT which was registered as CP No.71/14/ND/2017

(referred to as first petition). First petition was filed within three

months from the date of passing of special resolution dated

14.8.2017. However, it was withdrawn when the NCLT on 6.12.2017

indicated that the petition for conversion can be filed only after

expiry of three months from the date of passing of special resolution.

Therefore, on 6.12.2017 the appellant withdrew the first petition and

on 19.12.2017 appellant company filed second petition before NCLT

which is registered as CP No.80/14/ND/2018.

4. The Petition is annexed with the certified copy of the Resolution

passed in the EGM dated 14.08.2017, compliance of filing MGT - 14

with the office of the ROC. Form NCLT No. - 3B was issued to the

creditors on 16.01.2018. Copies of letters conveying their no

objections received from 35 Creditors including Secured Creditor

who constitute 87% of the total debt have been filed. However, the

Creditors who are holding only 0.05% of the total debt of the

Company Appeal (AT) No.394/2018 4

Appellant Company plus contingent debt of 1.39 (total 1.44%) have

raised objection to the present Petition. The Appellant Company has

taken extension for conducting the AGM for 2016-2017. Therefore,

the latest audited financial statement of the Company is of

31.03.2016 was annexed with the present Petition. As per the

prescribed procedure on 16.1.2018 in regard to conversion of

appellant company public notice was published in English and Hindi

newspaper i.e. Indian Express and Jansatta.

5. On 29.1.2018 Shri Prabhat Kumar Srivastava and Shri Rishi Kumar

Srivastava filed objections before the NCLT.

6. The NCLT after elaborate discussion found that the petition was

delayed as filed after three months from the date of passing of special

resolution. In the notice for EOGM no reasons have been assigned

for giving shorter notice and Board resolution of the holding

company has not been filed. It is also seen by the NCLT that on

17.10.2016 statutory auditor has resigned and on same date new

auditor M/s Dayanand Yadav & Co was appointed and the new

auditor signed the balance sheet on the same date, it raises a doubt

as to how in one day new auditor can conduct the audit. Two

independent directors resigned after passing of resolution for

conversion, this fact is not mentioned in the petition. It is also found

that the claims of two objectors namely Mr. Prabhat Kumar

Srivastava and Mr. Rishi Kumar Srivastava and M/s Ernest and

Young LLP are pending before Arbitral Tribunal. During such

pendency it would not be appropriate to permit conversion of the

Company Appeal (AT) No.394/2018 5

company from public to private limited. In view of these

shortcomings the NCLT has rejected the petition.

7. Being aggrieved with the impugned order the appellant company

filed this appeal.

8. Learned counsel for the appellant submits that the appellant

company filed the first petition under Section 14(1) before the NCLT

on 30.10.2017 within three months from the date of passing of

special resolution dated 14.8.2017. The Tribunal on 6.12.2017

indicated that such petition can be filed only after expiry of the three

months times from the date of passing of special resolution as per

Rule 68(1) of NCLT Rules, 2016. Therefore the appellant withdrew

the first petition on 6.12.2017 and filed 2nd petition on 19.12.2017.

Thus the petition is well within limitation.

9. Learned counsel for the appellant further submits that the EOGM

dated 14.8.2017 was convened by giving a shorter notice to all the

shareholders and they have given their written consent which is

annexed with the petition. The holding company i.e. VPS Healthcare

Pvt Ltd vide Board Resolution dated 17.6.2017, Dr Shamsheer V.P.,

Managing Director and Mr. Hafiz Ali, Director of the company were

severally authorized to act as representatives of the company to

attend and vote in the Meeting of the appellant company. Such

resolution has already been filed with the petition.

10. Learned counsel for the appellant also submits that NCLT has not

considered that statutory auditors M/s Delloit Hasken and Sells

resigned on 17.10.2016. However, new auditor M/s Dayanand

Company Appeal (AT) No.394/2018 6

Yadav & Co was appointed as Tax Auditors on 2.9.2016 and

statutory auditors on 17.10.2016. Hence, the new auditor M/s

Daya Nand Yadav & Co was working on the tax audit of the appellant

company since 2.9.2016 and prepared the form ADT-I and Balance

Sheets. In such circumstances new auditor signed the documents

as previous auditor has resigned. Therefore, there is no question of

doubt so far as Aditya Kumar Bhandari's complaint to the Institute

of Chartered Accountants of India against M/s Daya Nand Yadav &

Co. is concerned the same is disposed of by ICAI holding that the

auditor is not guilty. Copy of such order filed alongwith written

submission.

11. It is also submitted that appellant company is a unlisted Public

company of which almost 100% shareholding by VPS Healthcare Pvt

Ltd. Hence sub-rule (1) of Rule 4 of Companies (Appointment and

Qualifications of Directors) Rules 2014 would not be applicable to

the appellant company. Thus appellant company is not required to

appoint independent directors. It is true that during the pendency

of these proceedings two independent directors of the company have

resigned and one new director has been appointed. This fact does

not affect the proceedings in any manner.

12. It is also submitted that the appellant company has settled the

claims with all the objectors and filed their no dues certificates. So

far as the objection of Ernest and Young is concerned the conversion

of the appellant company shall not affect the responsibility and

liabilities of either of the party as per the agreement. In such

Company Appeal (AT) No.394/2018 7

circumstances the impugned order be set aside and appellant

company be permitted for conversion of public limited company to

private limited company.

13. Registrar of Companies, New Delhi has been impleaded as

Respondent in this appeal. However, they have not raised any

objection in allowing the appeal.

14. Having considered the oral and written submissions, we have

perused the record.

15. Firstly we have considered the issue of limitation For this purpose it

is useful to refer Rule 68(1) of NCLT Rules 2016 which reads as

under:

"68.Petition under Section 14- (1) A petition under the second provision

of sub-section(1) of Section 14 of the Act for the conversion of a public

company into a private company, shall, not less than three months

from the date of passing of special resolution, be filed to the Tribunal

in Form No.NCLT-1 and shall be accompanied by such documents as

are mentioned in Annexure B."

16. Rule 68(1) of NCLT Rules 2016 provides that a petition under section

14(1) of Companies Act, 2013 for conversion of a public company

into private company shall, not less than three months from the date

of the passing of special resolution, be filed to the Tribunal in Form

No.NCLT-1. It means such petition shall be filed after three months

from the date of passing of special resolution. The appellant

company has passed the resolution on 14.8.2017. 1st petition was

Company Appeal (AT) No.394/2018 8

filed on 30.10.2017 which was pre-matured. Therefore, and it was

withdrawn on 6.12.2017 and Second petition was filed on

19.12.2017 i.e. after three months from the date of passing of special

resolution. Thus the petition is well within limitation

17. As per record on 14.8.2017 Board Meeting was held at 11 AM and

immediately thereafter for holding of EOGM a shorter notice was

issued. All 8 shareholders have given their written consent for a

shorter notice (See Page 80 to 86 of additional paper book) Then

EOGM was held on the same day between 12 AM to 1 PM. In the

EOGM resolution for conversion of appellant company from a public

company to a private company was passed.

18. At the relevant date i.e. on 14.8.2017 the Section 101 of the

Companies Act 2013 reads as under:-

"101-Notice of Meeting -(1) A general meeting of a company may

be called by giving not less than clear twenty-one days' notice

either in writing or through electronic mode in such manner as may

be prescribed:

Provided that a general meeting may be called after giving a

shorter notice if consent is given in writing or by electronic mode by

not less than ninety-five per centof the members entitled to vote at

such meeting."

19. As discussed above in this case all the shareholders have given their

written consent for calling EOGM after giving shorter notice.

Company Appeal (AT) No.394/2018 9

20. The VPS Hospital is holding company of almost 100% of shares of

appellant company. The holding company vide Board Resolution

dated 17.6.2017 severally authorized Dr. Shamsheer V.P., Managing

Director and Mr Hafiz Ali, Director of the company to act as

representatives of the company to attend and vote at any Meeting of

the Members for an on behalf of the company (See Board Resolution

at Page 1019 Vol 7 of Paper Book). Thus Dr. Shamsheer, Managing

Director being a representative of holding company attended the

EOGM dated 14.8.2017 of the appellant company.

21. We have gone through the Board Resolution of holding company

dated 17.6.2017, written consent of share holders for shorter notice

and the resolution dated 14.8.2017. We find no illegality or

irregularity in passing resolution dated 14.8.2017.

22. Appellant company vide appointment letters dated 2.9.2016 (See

page 1128 of Vol.7) appointed M/s Dayanand Yadav & Co Tax

Auditor and after appointment M/s Daya Nand Yadav & Co had

reviewed and signed the financial statements for the FY 2015-16. In

such circumstances the explanation given by the appellant company

is satisfactory as to how M/s Daya Nand Yadav & Co has signed the

financial statements for the year 2015-2016.

23. Mr. Aditya Kumar Bhandari erstwhile director of the appellant

company has lodged a complaint to the Institute of Chartered

Accountants against M/s Daya Nand Yadav & Co. In this regard the

appellant has placed before this Tribunal a letter dated 14.1.2019 of

ICAI addressed to Mr.Daya Nand Yadav. The ICAI exonerated Mr.

Company Appeal (AT) No.394/2018 10

Daya Nand Yadav from professional misconduct falling within the

meaning of Clause (8) of Part I of the First Schedule, Clause (2) of

Part IV of the First Schedule and Clauses (4)(5)(6)(7) & (8) of Part I of

the Second Schedule to the Chartered Accountants Act, 1949 read

with Section 22 of the said Act. Accordingly the complaint against

M/s Dayanand Yadav & Co made by MR. Aditya Kumar Bhandari

has been closed by ICAI.

24. NCLT observed that after EOGM dated 14.8.2017 two independent

directors of the company have resigned and this fact is not disclosed

in the petition but confirmed latter only when objection was raised.

In this regard we have considered the submission of learned counsel

for appellant and we are in agreement that the appellant company

is wholly owned subsidiary and unlisted public company. Therefore,

in view of sub-rule (2) of Rule 4 of the Companies (Appointment &

Qualification of Directors) Rule 2014 appointment of at least two

independent directors is not necessary. Hence non-disclosures of

resignation of two independent directors will not affect the merit of

the petition in any manner.

25. Learned counsel for the appellant has placed on record the No dues

certificates obtained from Paul's Pure Pharmacy dated 1.5.2018,

Medex India dated 17.8.2018, Rishi Kumar Srivastava dated

10.8.2016, Mr. Prabhat Kumar Srivastava dated 10.8.2016, Mala

Srivastava for her husband Rajesh Kumar dated 10.8.2016, Aditya

Kumar Bhandari dated 10.8.2016 (See at Page 1021 to 1027 of Vol

7).

Company Appeal (AT) No.394/2018 11

26. The dispute between Ernest and Young and appellant company is

pending before the Arbitral Tribunal hence the conversion of

appellant company shall not affect the responsibility and liabilities

of the appellant company.

27. With the above discussions we are of the view that the appellant

company has fulfilled the conditions for conversion and

shortcomings pointed out by the NCLT are inconsequential.

Therefore, we set aside the impugned order and approve the special

resolution dated 14.08.2017 for conversion of appellant company

from public company to private company. No order as to costs.

(Justice Jarat Kumar Jain) Member (Judicial)

(Mr. Balvinder Singh) Member (Technical)

(Dr.Ashok Kumar Mishra) Member (Technical) New Delhi

Bm

Company Appeal (AT) No.394/2018