Shriram Chits (Karnataka) Pvt. Ltd. & ... vs Registrar Of Co-Operative Socities & ...

[ arising out of Order dated 17th December, 2018 by NCLT, Bengaluru Bench in CP (CAA) No. 20/BB/2018 ]

IN THE MATTER OF:

1. Shriram Chits (Karnataka) Pvt. Ltd. 2. Shri Chits Private Limited 3. Shriram Chits (Maharashtra) Ltd. 4. Shriram Chits Tamil Nadu Private Limited ...Appellants

Vs.

Registrar of Co-operative Societies & Chits ...Respondent

Present: For Appellant : Mr. Krishnendu Datta, Ms. Pooja M. Saigal and Mr. Akshay Gupta, Advocates

JUDGMENT

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Appellant - 'Shriram Chits (Karnataka) Private Limited' filed an

application under Section 230 - 232 of the Companies Act, 2013 for

amalgamation of the companies, details as given below, which has been disposed

of by the National Company Law Tribunal, Bengaluru Bench, Bengaluru

('Tribunal' for short) with the following observations:

"11. Heard Shri K. G. Raghavan, learned Senior Counsel

appearing for the Petitioner. As stated supra, the

object and business of the Company involved in the 2

Scheme relates to Chit Funds or Kuries and all

similar kinds of schemes which encourage the habit

of savings by affording all facilities for the purpose

and more especially by opening Chit Savings, Thrift

savings, and other deposit schemes in relation to

trade or public, commercial and regular needs.

Therefore, the ordinary public is involved in the

business of the Company and the interest of those

ordinary public has to be taken care of while

sanctioning the scheme. It is not in dispute that the

Tribunal is empowered to sanction the Scheme.

However, cases like the present one where the

business lies with ordinary public, it is necessary for

the Company to take permission/approval from the

appropriate authorities. In the instant case,

Registrar of Chits is the concerned authority to

examine the issue in light of the terms and conditions

proposed in the Scheme. Therefore, in the interest of

justice, we are not inclined to sanction the Scheme

subject to condition that approval can be taken from

the Registrar of Chits after the sanction of Scheme.

Therefore, in the in the interest of justice, we are not

inclined to sanction the Scheme subject to condition

that approval can be taken from the Registrar of

Chits after the sanction of the Scheme. Therefore, we

Company Appeal (AT) No. 86 of 2019 3

are not inclined to dispose of the instant Petition by

granting liberty to the Petitioner to comply all

observations/objections as raised by the Regional

Director and the Registrar of Companies, especially

the observations/objection with respect to approval

of the Registrar of Chits in the interest of public/chit

holders and thereafter file afresh."

CASE OF THE APPELLANT :

The Appellant - 'Shriram Chits (Karnataka) Private Limited' filed an

application under Section 230 - 232 of the Companies Act, 2013 seeking

directions with regard to convening and holding of meeting of shareholders and

the creditors of the company for the purpose of approving with or without

modification, to obtain sanction of the Tribunal to the scheme of amalgamation,

whereby Shriram Chits Private Limited (Transferor Company No. 1), Shriram

Chits (Maharashtra) Ltd. (Transferor Company No. 2) and Shriram Chits

Tamilnadu Private Limited (Transferor Company No. 3) were to be amalgamated

with Shriram Chits (Karnataka) (hereinafter referred to as the

Appellant/Transferee Company).

2. The Appellant sought dispensing of the meeting of the shareholders and

creditors of the Transferee Company specifically stating that insofar as the

subscribers to the chits were concerned they were not the creditors of the

company and, therefore, a meeting of the subscribers was not required to be

called to consider the scheme.

Company Appeal (AT) No. 86 of 2019 4

3. The Tribunal, Bengaluru Bench by its order dated 15th January, 2018

dispensed with the requirements of convening and holding the meeting of the

equity shareholders in view of consent affidavits of the 2 shareholders who held

100% of the paid-up capital having been placed on record by way of an

amendment application.

4. According to the Appellant it has no 'secured creditors' and the 'unsecured

creditors' appearing in the books of the company as on 31st March, 2017, had

been paid and as on 15th November, 2017, the said 'unsecured creditors', were

no longer the creditors of the company.

5. Since the requirement of the holding and convening of meetings of the

equity shareholders and creditors of the company, on 28th February, 2018 the

Appellant filed the petition for sanction of the scheme of amalgamation under

Sections 230 - 232 of the Companies Act, 2013 read with Companies

(Compromise, Arrangements and Amalgamations) Rule, 2016. Notice was issued

to the office of the Regional Director, Registrar of Companies, Official Liquidator,

Income Tax Department and Reserve Bank of India. The Tribunal also directed

for publication of the notices in 'English daily Newspaper' (the Hindu), Bangalore

Edition and 'Udayavani, Kannada daily Newspaper', Bangalore Edition and

ordered to list the matter for hearing.

6. The publications were effected on 25th April, 2018 editions aforesaid and

the notices were served on the statutory bodies as per directions of the Tribunal.

7. In so far as the Transferor company No. 3 - 'Shriram Chits Tamil Nadu

Private Limited' is concerned the scheme of amalgamation/merger of the

'Transferor Companies' with the 'Transferee Companies' was sanctioned by the

Tribunal vide order dated 25th July, 2018.

Company Appeal (AT) No. 86 of 2019 5

8. The Regional Director/Registrar of Companies filed a detailed affidavit on

10th August, 2018 to the scheme wherein, inter-alia, the following stand was

taken and the following observations was made :

"(7) ROC has observed that since the chit companies are

controlled by registrar of chits of the concerned

state, necessary approvals, may be obtained from

the concerned authorities to the scheme in the

interest of public/chit holders.

The petitioner company vide its email dated

25th of July 2018 has submitted that the company

shall obtain all necessary approvals as required

under law on sanctioning of the scheme, wherever

applicable. The chit fund Act does not contemplate

any requirement of prior approval. The clause no.

3.2.4 of the scheme takes care of all the agreements

including the agreement entered into with the chit

subscribers and as, the interest of the chit

subscribers is adequately protected.

Hence this observation need not be pursued

further."

9. The Appellant Company filed an affidavit dated 28th August, 2018 in

response to the affidavit of the Registrar of Companies / Regional Director. No

objections was received by the Appellant from any party or persons in response

to the public notice issued and a memorandum dated 26th September, 2018 was

filed by the Appellant Company confirming the same.

Company Appeal (AT) No. 86 of 2019 6

10. The Appellant Company thereafter on 19th November, 2018 filed a

memorandum before the Tribunal summarising the response/stand of the

company with respect to each of the observations made by the Regional

Director/Registrar of Companies.

11. The detailed affidavit was filed by the Appellant Company in response to

the observations made by the Regional Director. The petition for sanction of the

scheme was taken up by the Tribunal and on hearing the parties, the impugned

order was passed by the Tribunal, Bengaluru Bench on 17th December, 2018

rejecting the scheme of amalgamation as observed aforesaid.

12. It is stated that insofar as the Transferor Company No. 1 (Shriram Chits

Private Limited) and Transferor Company No. 2 (Shriram Chits (Maharashtra)

Private Limited are concerned, the scheme of amalgamation/merger with the

Transferee Company was sanction by the National Company Law Tribunal,

Hyderabad Bench vide order dated 13th February, 2019.

13. This Appellate Tribunal on hearing the Appellant noticed that the

Appellant has followed all the procedure as prescribed under Section 230 - 232

of the Companies Act, 2013 and read with Companies (Compromise,

Arrangements and Amalgamations) Rules, 2016 and the Tribunal earlier,

Chennai Bench sanctioned the scheme of amalgamation/merger of Transferor

Company No. 3 (Shriram Chits Tamil Nadu Private Limited) with the Transferee

Company (Appellant) by order dated 25th July, 2018 and also sanctioned the

scheme of amalgamation/merger of the Transferor Company No. 1 (Shri Ram

Chits Private Limited) and Transferor Company No. 2 (Shriram Chits

(Maharashtra) Private Limited with the Transferee Company i.e. Appellant

(Shriram Chits (Karnataka) Private Limited) by order dated 13th February, 2019.

Company Appeal (AT) No. 86 of 2019 7

In spite of the same, it was not made clear as to why in spite of following all the

procedure and no objection by any of the party, except the observation made by

the Regional Director/Registrar of Companies, it was not made clear as to why

and under which clause company is required to take permission / approval from

the appropriate authority, we allowed the Appellant to implead 'Registrar of Chit

Funds, Karnataka, Bangalore as party respondent to the appeal to know whether

there is any requirement to take prior permission of Registrar of Chits for the

purpose of amalgamation or merger scheme under Section 230 - 232 of the

Companies Act, 2013.

14. Notices were issued to the 'Registrar of Co-operative Societies and Chits',

Bangalore but in spite of the said notice 'Registrar of Co-operative Societies and

Chits', Bangalore have not appeared nor brought on record any provision of law

or circular or guidelines issued by the competent Authority to suggest that for

merger of 'transferor companies' with 'transferee company', there is a need of

prior permission from the chit funds.

15. The Tribunal has not shown any provision and also not record any ground

while passing the impugned order dated 17th December, 2018. It is also not

made clear as to how such stand has been taken by the Tribunal while earlier

order of amalgamation as detailed above with regard to the Transferor Company

and the Transferee Company (Appellant) has been approved.

16. In view of the aforesaid finding, we set aside the impugned order dated

17th December, 2018 and remit the matter to the Tribunal to pass appropriate

order approving the scheme of amalgamation/merger under Section 230 -232

of the Companies Act, 2013 with such condition as required to be imposed in

terms of any law including 'The Chit Funds Act, 1982', taking into

Company Appeal (AT) No. 86 of 2019 8

consideration the Appellant - Transferee Company otherwise fulfils the

conditions and if so required may allow the Appellant/parties to take consent

of the foreman and all the subscribers to the chits in terms of section 15 of

the Chit Funds Act, 1982; approval of the registration of chits in terms of

Section 19 of the Chit Funds Act, 1982 which prohibits persons from carrying

on chit business in a new place of business without obtaining prior approval

of the concern registry of chits. The Tribunal is expected to pass final order

within three months from the receipt of the copy of this judgment.

The appeal is allowed with aforesaid observations and directions. No

costs.

[Justice S.J. Mukhopadhaya] Chairperson

[ Justice A.I.S. Cheema ] Member (Judicial)

[ Kanthi Narahari ] Member (Technical) New Delhi

3rd December, 2019

//ns//

Company Appeal (AT) No. 86 of 2019