Quinn Finance Unlimited Company vs Mack Soft Tech Pvt. Ltd

Quinn Finance Unlimited Company .Appellant

Vs.

Mack Soft Tech Pvt. Ltd. Respondent

Present: For Appellant: - Mr. Arun Kathpalia, Senior Advocate with Mr. Swapnil Gupta and Mr. Jayant Mehta, Advocates.

For Respondent: - Mr. Dhruv Mehta, Senior Advocate with Ms. Ranjana Roy Gawai, Mr. Krishna Keshav and Mr. Vivek Kumar, Advocates.

ORDER

10.08.2017: The appellant, a debenture holder filed an application

under section 71 of the Companies Act, 2013 for redemption of

Compulsorily Convertible Debentures (hereinafter referred to as "CCDs")

with following reliefs: -

`14. 1. In view of the facts and circumstances

mentioned herinabove, the Applicant prays that his

Hon'ble Tribunal may be pleased to:

(i) Direct the Respondent to redeem the CCDs forthwith

by conversion of the CCDs into 14,36,57,955 equity shares

of the Respondent having face value of INR 10 each and to

take all necessary corporate actions required to give effect

to such conversion and allotment in favour of the Applicant. -2-

(ii) Direct the Respondent to pay to the Applicant all

accruing coupon interest till the date of conversion,

including:

(a) an amount of INR 12,74,96,43 7. 10 (Rupees Twelve

Crores Seventy-four Lakhs Ninety-Six Thousand Four

Hundred and Thirty-Seven and Paisa ten) with interest

thereon from 30 September 2015 till date of payment at

the rate of 18% per annum.

(b) an amount of INR 24,49,36,817 (Rupees Twenty-

Four Crores Forty-Nine Lakhs Thirty-Six Thousand Eight

Hundred and Seventeen) with interest thereon from 30

September 2016 till date of payment at the rate of 18%

per annum."

2. While asking for the same, details of the debentures and redemptions

have been shown at paragraph 6.3 of the petition.

3. Within 30 days from the date of the completion of the pleadings, the

appellant filed an application for amendment under Rule 155 of the

National Company Law Tribunal Rules,2016 (hereinafter referred to as

"NCLT Rules") for amendment of prayer by adding alternative relief and

for amendment of some part of the pleadings, as quoted below: -

"7. It is therefore, necessary in the interest of justice and

for adjudicating the issues raised in the Section 71

Application for the Applicant to amend the Section 71

Application by adding the following pleadings: -3-

(i) After Para 6.3 of the Application to inset the following

Para 6.3A:

6.3 A. The Respondent has made clear its intention not

to redeem the CCDs by conversion into shares even on

the respective conversion dates stated above. On 24

November 2017, the Respondent shall fail to redeem the

first tranche of CCDs issued for an amount of INR 8.60

Crores on their maturity date"

(ii) After Para 14.1 (i) to insert the following Para

14. 1(1)(A):

"(i) A. In the alternative direct the Respondent to

redeem the CCDs by conversion into equity shares of the

Respondent on their conversion date as stated in Para 6.3

of the Application commencing with the conversion of

CCDs representing a value on INR 8,66,80, 000 into

86,68, 000 equity shares of the Respondent having aface

value of INR 10 each on 24 November 2017 and to take

all necessary corporate actions required to give effect to

such conversion and allotment in favour of the Applicant"

4. The Tribunal is empowered to make necessary amendment "for the

purpose of determining the real question or issue raised by or depending

on such proceeding", under Rule 155 of the NCLT Rules 2016, as quoted

below: -

"155. General power to amend. - The Tribunal may, within

a period of thirty days from the date of completion of -4-

pleadings, and on such terms as to costs or otherwise, as it

may think fit, amend any defect or error in any proceeding

before it; and all necessary amendments shall be made for the

purpose of determining the real question or issue raised by or

depending on such proceeding."

5. However, on hearing the Ld. Counsel for the parties, the Tribunal

by detailed impugned order dated 21st April, 2017 rejected the prayer

with following observations: -

"11. It is not the case of the petitioner that he came to know

new issue/facts after filing the present company petition

under Section 71 of the Companies Act, 2013, but it is his

case that amendment is necessary because of the

pleadings/defence taken in the reply filed by the

respondents. it is true that amendment of pleadings, as

per law, can be permitted at any stage of a case but it

should be permitted at a time well before pleadings of

a case is settled by parties and it should not cause any

injustice/ injury to other party and it does not alter basis of

suit/case or introduce a new ground. As stated supra, the

main case of the petitioner is that by virtue of DSSs/CCDs in

question, the respondent is liable to pay interest apart from

issue of equity shares by converting CCDs in question as

mentioned in the CP/CA. the Learned counsel for. the

Respondent has rightly contended that when the main -5-

petition itself is liable to be dismissed for the grounds raised

therein, asking to alter/amend pleadings is not at all tenable

and it would cause injustice to respondent. The applicant

Company has failed to point out any tenable ground so as to

allow it to amend the pleadings as sought and it cannot set

up its case basing on contents of reply filed by other party.

Therefore, Company Application in question is liable to be

rejected."

6. Ld. Counsel for the appellant contended that it was a fit case for

amendment for the purpose of grant of alternative relief. He also

submitted that such alternative prayer was necessary to be made in view

of the stand taken by respondent in its reply.

7. Ld. Counsel appearing on behalf of Respondent Company opposed

the submissions and submitted that the cause of action as shown in the

main petition will stand changed, if alternative relief is allowed. Referring

to the amendment petition, Ld. Counsel for the Respondent Company

further contended that certain allegations have been made by the

appellant at paragraph 6.3 of the amendment application, as quoted

above.

8. It is further contended that the debentures subscription agreement

is forged and the application is premature, therefore, it is fit to be

dismissed.

9. From the reasoning given by the Tribunal, we find that the Tribunal

while accepting that the Tribunal has power to allow amendment of a

petition observed "It is true that amendment of pleadings, as per law, can

be permitted at any stage of a case but it should be permitted at a time

well before pleadings of a case is settled by parties". The Tribunal also

observed "Learned counsel for the Respondent has rightly contended that

when the main petition itself is liable to be dismissed for the grounds

raised therein, asking to alter/amend pleadings is not at all tenable and

it would cause injustice to respondent".

10. From Rule-155, as quoted above, it is clear that the Tribunal has

power to allow amendment "within a period of 30 days from the date of

completion of pleading." Therefore, the Tribunal is wrong in holding that

"the amendment should be permitted at a time well before pleading",

which is against the prescribe procedure laid down by Rule- 155.

11. Further, for a decision on the question, whether a petition for

amendment is to be allowed or not, it is not open for the Tribunal to

express its opinion on the merit of the case by accepting the submissions

made on behalf of one or other party or to hold that 'it is fit case for

dismissal'. Tribunal while observing so not only exceeded its jurisdiction

by expressing its view prior to final hearing of the main petition. For the

reason aforesaid the observation of Tribunal on merit is fit to be set aside.

12. Now the question arises, whether in terms of Rule 155, it was

necessary and a fit case to amend the prayer for the purpose of I

determining the real question or issue raised by the appellant. From the

original prayer made by the appellant, we find that the appellant has

already prayed to direct the respondent to redeem the CCDs forthwith by

conversion of the CCDs into equity shares. In the alternative prayer,

almost similar prayer has been made to direct the respondent to redeem

the CCDs by conversion into equity shares on their maturity as pleaded

at paragraph 6.3 of the application.

13. Even without any amendment, it is always open to the Tribunal to

mould the prayer as made in a petition taking into consideration the

prayer already made. The appellant having already prayed for redemption

of CCDs, if alternative prayer is allowed, it would not change the

substantive relief as sought for in the original petition.

14. So far as the objection of respondent that the cause of action is

different or that it is premature or that amendment will take away the

right of respondent to take the pleading of premature petition, such plea

can be taken by respondent even during the final hearing. If the

application originally filed by appellant was premature, it is always open

to Tribunal to pass an appropriate order, either asking the parties to

move at appropriate stage or to await till cause of action arises. The other

objection, which Ld. Counsel for the respondent raised before this

Appellate Tribunal can also be taken care, if such objections are raised

during the hearing of the application.

15. In so far as inserting paragraph 6.3A of the amendment application

is concerned, as the same related to alleged intention of the respondent and has nothing to do in determining the real question or issue raised by

or depending on such proceeding such portion of amendment as sought

for cannot be allowed. In that view of the matter, while we uphold the

part of the impugned order, so far as amendment of prayer as sought for

paragraph 6.3A of the amendment petition and reject the application for

appellant to that extent, but allow the prayer and set aside the part of the

impugned judgment, in so far as it relates to amendment of relief by way

of alternative relief, as sought for paragraph 14.1 (ii) (a), of the amendment

petition. The impugned order dated 21st April, 2017 passed by Tribunal

stands modified to the extent above.

16. It is made clear that we have not expressed any opinion with regard

to merit of the case and/or the objections raised by the Ld. Counsel for

the respondent. The respondent is allowed to take all objections before

the Tribunal and appellant may suitably reply, based on pleadings

already made. It is for the Tribunal to decide such objection at the time

of final hearing independently without being influenced by any

observations made in the impugned order or by this Appellate Tribunal.

17. The appeal stands disposed of with aforesaid observations and

directions. However, in the facts and circumstances of the case, there

shall be no order as to cost.

(Justice S.J. Mukhopadhaya) Chairperson

(Balvinder Singh) Member(Technical)