Vedanta Limited vs Registrar Of Companies

Vedanta Ltd. ...Appellant

Vs.

Registrar of Companies, Mumbai ...Respondent

Present: For Appellant : Dr. A.M. Singhvi, Sr. Advocate with Mr. Diwakar Maheshwari, Mr. Karun Mehta, Ms. Pratiksha Mishra, Mr. L.N. Sharma, Advocates For Respondents : Mr. Kamal Kant Jha, Sr. Panel Counsel, GOI with Mr. Ajay Panwar, Asst. Registrar, ROC. Ms. Priyanka and Mr. Animesh Singh, Advocates for ROC (Mumbai).

ORDER

(09th December, 2022)

1. The Appellant has filed the present appeal under Section 421 of the

'Companies Act, 2013 (hereinafter referred as to 'Act') against the

impugned order dated 26th August, 2022 in CA (CAA) No. 195/2022.)

and impugned order dated 30th September 2022 in CA No. 464 of 2022

in CA (CAA) No. 195/2022) passed by National Company Law Tribunal,

Mumbai Bench-V (hereinafter referred as to 'Tribunal').

Company Appeal (AT) No. 181-182 of 2022 2

2. The Appellant has filed these applications for approval of the scheme

for capital reorganization of the Appellant company thereby providing

for transfer of amounts standing to the credit of General Reserve to

Retained Earnings.

3. The Appellant has urged for dispensation of meeting of Secured

Creditors and Unsecured Creditors.

4. The Appellant has sought following reliefs:

• That the Appellate Tribunal may be pleased to allow the present

Appeal and declare that the requirement to obtain consent

affidavits of all the secured creditors and unsecured creditors of

at least 90% value of the unsecured creditors, in a scheme of

arrangement under Section 230(1) (b) is contrary to the well-

established law;

• That the Appellate Tribunal be pleased to rectify Paragraphs 19

and 20 of the Impugned Order dated 26th August 2022 in

Company Scheme Application No. CA(CAA) No. 195 of 2022

passed by National Company Law Tribunal Court V, Mumbai

Bench;

• That the Appellate Tribunal may be pleased to set aside

Impugned Order dated 30.09.2022 in CA No. 464 of 2022 in

Company Appeal (AT) No. 181-182 of 2022 3

CA(CAA) No. 195 of 2022 passed by National Company Law

Tribunal Court V, Mumbai Bench etc.

5. The Tribunal in its order dated 26th August, 2022 has permitted holding

of meeting of Equity Shareholders in accordance with the provisions of

the Act and the Companies (Compromise, Arrangements and

Amalgamation) Rules, 2016 as prayed by the Company. However, the

Appellant company is assailing para 19 & 20 of the said order which

are depicted as below:

"19. The Learned Counsel for the Applicant Company

submits that as on of 31st March 2022 the Applicant

Company has 227 Secured Creditors having an aggregate

value of Rs. 3,10,53,53,71,281 details of which are annexed

as to the Company Scheme Application. The present Scheme

is an arrangement between the Applicant Company and its

shareholders, under the provisions of Section 230 of the

Companies Act, 2013. The Scheme provides for capital

reorganisation of the Applicant Company, inter alia,

providing for transfer of amounts standing to the credit of

General Reserves to Retained Earnings of the Applicant

Company. No consideration is proposed to be issued

pursuant to the Scheme. Thus, the Secured Creditors of the

Company Appeal (AT) No. 181-182 of 2022 4

Applicant Company shall, in no way, be affected by the

Scheme, as there is no reduction in the amount payable to

any of the creditors and no compromise or arrangement is

contemplated with the creditors. Further, there is no outflow

of cash from the Applicant Company and the Scheme would

not in any way adversely affect the operations of the

Applicant Company or the ability of the applicant company to

honour its commitments or to pay debts in the ordinary

course of business. Therefore, the convening and holding of

a meeting of the Secured Creditors of the Applicant Company

is dispensed with. The Applicant Company undertakes to

serve notice to all their respective Secured Creditors by

Registered Post-AD/Speed Post, and email-ids, if available

with Applicant Companies and in case the e-mail ids are not

available, by way of registered post acknowledge due

enclosing a copy of Scheme, with instructions that they may

submit their representations, if any, to the Tribunal within a

period of 30 days from the date of receipt of such notice and

copy of such representations shall simultaneously be served

upon the Applicant Companies. It shall be the responsibility

of the Applicant Companies to ensure that every Secured

Company Appeal (AT) No. 181-182 of 2022 5

Creditors is put on notice regarding the Scheme, so that they

may take an informed decision thereon and file consent

affidavit of all Secured Creditors at the time of Filing of

Company Petition.

20. The Learned Counsel for the Applicant Company submits

that as on 31st March 2022 the Applicant Company has

3,656 Unsecured Creditors having an aggregate value of Rs.

1,08,93,26,59,597 the details of which are annexed to the

Company Scheme. The Scheme provides for capital

reorganisation of the Applicant Company, inter alia,

providing for transfer of amounts standing to the credit of

General Reserves to Retained Earnings of the Applicant

Company. No consideration is proposed to be issued

pursuant to the Scheme. Thus, the Unsecured Creditors of the

Applicant Company shall, in no way, be affected by the

Scheme, as there is no reduction in the amount payable to

any of the creditors and no compromise or arrangement is

contemplated with the creditors. Further, there is no outflow

of cash from the Applicant Company and the Scheme would

not in any way adversely affect the operations of the

Applicant Company or the ability of the applicant company to

Company Appeal (AT) No. 181-182 of 2022 6

honour its commitments or to pay debts in the ordinary

course of business. Therefore, the convening and holding of

meeting of the Unsecured Creditors of the Applicant

Company is dispensed with. However, the Applicant

Company is directed to issue notice to all their respective

Unsecured Creditors, by Registered PostAD/Speed Post, and

e-mail ids, if available with the Applicant Company and in

case the e-mail ids are not available, by way of registered

post acknowledge due enclosing a copy of the Scheme, with

instructions that they may submit their representations, if

any, to the Tribunal within a period of 30 days from the date

of receipt of such notice, and copy of such representations

shall simultaneously be served upon the Applicant Company.

It shall be the responsibility of the Applicant Company to

ensure that every Unsecured Creditors is put on notice

regarding the Scheme, so that they may take an informed

decision thereon and file consent affidavit of all Unsecured

Creditors of at least the value of 90% Unsecured Creditors at

the time of filing of Company Petition."

6. Brief facts of the case:-

Company Appeal (AT) No. 181-182 of 2022 7

i. The Share Capital of the Appellant as on 31st March 2022 is as

under:

ii. The details of other equity including General Reserves (as defined in the

Scheme) of the Appellant as on 31st March 2021 are as under:

Company Appeal (AT) No. 181-182 of 2022 8

iii. The Board of Directors of the Appellant vide resolution dated 29th

October 2021 has approved the said Scheme. The rationale of the

Scheme is set out below:

Company Appeal (AT) No. 181-182 of 2022 9

I. "Over the years, the Company has built up significant reserves

through transfer of profits to the reserves in accordance with

provisions of the erstwhile Companies Act, 1956 and erstwhile

rules notified thereunder, namely, the Companies (Transfer of

Profits to Reserves) Rules, 1975.

II. Steady growth in sales volume, balanced capital expenditure

for continuing operations has helped the Company achieve a

strong track record of generating cash flows. With healthy

business practices in place, the Company expects that it will

continue its growth trajectory and its business operations will

keep generating incremental cash flow over the coming years.

III. The Company is of the view that the funds represented by the

General Reserves are in excess of the Company's anticipated

operational and business needs in the foreseeable future,

thus, these excess funds can be utilized to create further

shareholders' value, in such manner and to such extent, as

the Board of the Company in its sole discretion, may decide,

from time to time and in accordance with the provisions of the

Act and other Applicable Law.

IV. The Scheme is in the interest of all stakeholders of the

Company."

Company Appeal (AT) No. 181-182 of 2022 10

iv. The equity shares of the Appellant are listed on the BSE Limited and

National Stock Exchange of India Limited. The Appellant has already

submitted the said Scheme with BSE Limited and National Stock

Exchange of India Limited for their respective "no objection(s)" in

compliance with Regulation 37 of the Securities and Exchange

Board of India (Listing Obligations and Disclosure Requirements)

Regulations, 2015 and under SEBI Master Circular No. SEBI/ HO/

CFD/ DIL1/ CIR/ P/ 2021/ 0000000665 dated 23rd November

2021. The Appellant has received observation letters dated 7th

April 2022 from National Stock Exchange of India Limited and

19th April 2022 from Bombay Stock Exchange Limited.

v. As on 31st March 2022, the Appellant had 227 Secured

Creditors having a value of Rs 31053 Crore Approx. and 3,656

Unsecured Creditors having a value of Rs 10893 Crore Approx.

vi. The Company Scheme Application was filed by the Appellant herein

under Section 230 of the Act read with Companies (Compromise,

Arrangement and Amalgamations) Rules, 2016 before Tribunal on

31.07.2022, wherein the Appellant inter alia sought directions for:

(a) convening meeting of the Equity Shareholders of the Appellant

and if thought fit, approve, with or without modification(s), the

proposed Scheme of Arrangement between Vedanta Limited and its

Company Appeal (AT) No. 181-182 of 2022 11

shareholders and (b) dispensing with the requirement of convening

meetings for the secured creditors and unsecured creditors of the

Appellant.

vii. The Scheme provides for capital reorganization of the Appellant,

inter alia, providing for transfer of amounts standing to the credit of

General Reserves (as defined in the Scheme) to Retained Earnings

(as defined in the Scheme) of the Appellant, pursuant to the

provisions of Section 230 (1) and other applicable provisions of the

Act. This Scheme also provides for various other matters consequent

and incidental thereto.

viii. The Appellant sought dispensation with the requirement of holding

meetings of the secured creditors and unsecured creditors, broadly

on the grounds that:

(i) The Scheme is under Section 230(1)(b) of the Act, providing

for capital reorganization of the Appellant and no

consideration is proposed to be issued pursuant to the

Scheme.

(ii) The creditors of the Appellant shall, in no way, be affected by

the Scheme, as there is no reduction in the amount payable

to any of the creditors and no compromise or arrangement is

contemplated with the creditors.

Company Appeal (AT) No. 181-182 of 2022 12

(iii) Further, there is no outflow of cash from the Appellant. Thus,

the Scheme would not, in any way, adversely affect the

operations of the Appellant or the ability of the Appellant to

honor its commitments or to pay its debts in the ordinary

course of business.

7. Ld. Sr. Counsel Dr. A.M.Singhvi, appearing on behalf of the Appellant

Company has tried to persuade the Bench that the direction of the

Tribunal to the Appellant Company to mandatorily obtain consent

affidavits from its creditors is unwarranted and is not backed by Judicial

Precedence and the provisions of the Section 230 of the Act.

8. The Ld. Sr. Counsel also submitted that the scheme so proposed by the

Appellant Company is an arrangement with its shareholder providing for

transfer of amounts standing to the credit of General Reserve to Retained

Earnings of the Appellants and the creditors are not affected by this and

hence no consent from Creditor is mandated. He cited the judgment of

Hon'ble High Court of Andhra Pradesh in the matter of Teck-men Tools (P.)

Ltd.1 where he has submitted that the requirement of obtaining consent

arises only, if the arrangement is between the company and its creditors

and not with shareholders.

1 [2009] 150 Comp Cas 800 (AP)

Company Appeal (AT) No. 181-182 of 2022 13

9. The Ld. Sr. Counsel further submitted that even Section 230 of the Act is

not prescribing for mandatory obtaining consent certificate. The Creditors

remained unchanged and there is no reduction in payment to creditors

then why such requirement of their consent.

10. The Ld. Sr. counsel for the Appellant even cited the judgment of

Nestle India Limited and suggested that this judgment provides for Non-

holding of meeting of unsecured creditors unless they are affected by it.

Similarly, Ld. Sr. Counsel also cited the order passed by the Hon'ble High

Court of Bombay in the mater of Hindustan Unilever Limited (Company

Summons for Directions 346 of 2016) to supplement his views that if a

scheme is not prejudicial to the interest of creditors, then there is no

requirement of holding meeting of creditors or dispensing that meeting.

Similarly, the High Court of Punjab and Haryana in the matter of Sargon

Geosynthetics Limited v/s Maccaferri Environmental Solutions Private

Limited2 while dealing with the objection raised by an Unsecured Creditor

objecting to the sanctioning of the Scheme without the approval of the

creditors observed that unless it is proved that the scheme is fraudulent

or that the scheme is likely to adversely affect their rights, the objection to

waiver of meeting or scheme of amalgamation would not survive. Copy of

the Order passed by High Court of Punjab and Haryana in Sargon

2 (2008 SCC OnLine P&H 906)

Company Appeal (AT) No. 181-182 of 2022 14

Geosynthetics Limited v/s Maccaferri Environmental Solutions Private

Limited. The Calcutta High Court in Bengal Tea Industries Ltd v/s Union

of India3 while dealing with objections raised on behalf of the Regional

Director observed that since the scheme did not provide for any

arrangement with the creditors of the company nor adversely affects the

interest of the creditors it is not necessary in law to call a meeting of the

creditors and obtain their views on the scheme.

11. Since in the appeal there was no Respondent, this Tribunal vide

order dated 14.10.2022 directed the Appellant to implead ROC Mumbai as

party Respondent. Thereafter, we heard Ld. Sr. Counsel for the Appellant

as well as Mr. Kamal Kant Jha, Sr. Panel Counsel, GOI who has appeared

on behalf of ROC/Respondent alongwtih Mr. Ajay Panwar Assistant

Registrar, ROC.

12. For brevity and clarity the views of the Respondent which covers also

his submissions before this Appellate Tribunal are enumerated hereunder:

3

(Appeal No. 418 of 1986)

Company Appeal (AT) No. 181-182 of 2022 15

Company Appeal (AT) No. 181-182 of 2022 16

Company Appeal (AT) No. 181-182 of 2022 17

13. It is necessary to reproduce the order dated 30.09.2022 passed by

the Tribunal for better appreciation and clarity on the issue:

Company Appeal (AT) No. 181-182 of 2022 18

Company Appeal (AT) No. 181-182 of 2022 19

Company Appeal (AT) No. 181-182 of 2022 20

Company Appeal (AT) No. 181-182 of 2022 21

14. We have carefully gone through the submission made by the Ld.

Counsel for the parties, documents available on record and our

observations are as under:

a. The undisputed fact are given hereunder:

i. Scheme of Arrangement - This Scheme of Arrangement

provides for capital reorganization of the company, inter alia,

providing for transfer of amounts standing to the credit of the

General Reserve to the Retained Earnings of the Company.

This scheme also provides for various other matters

consequential thereto or otherwise integrally connected

therewith.

ii. Rational for the scheme - Over the yeas, the Company has

built up significant reserves through transfer of profits to the

reserves in accordance with provisions of the erstwhile

Companies Act, 1956 and erstwhile rules notified thereunder,

namely, the Companies (Transfer of Profits to Reserves) Rules,

1975.

iii. "General Reserve" means and includes the amounts as

reflected in the financial statement - Balance Sheet of the

company, as 'General Reserves' under 'Other Reserves', which

have been built primarily through transfer of retained

Company Appeal (AT) No. 181-182 of 2022 22

undistributed profits, pursuant to the provisions of the

companies Act, 1956 and the erstwhile Rules notified

thereunder, namely the Company (Transfer of Profits to

Reserves) Rules, 1975.

"Retained Earnings" means and include the amounts as

reflected in the financial statements of the company, as

'retained earnings' under 'Reserves and Surplus', and

representing the cumulative profit/(loss) of the company.

iv. Paid up share capital of the company approx. Rs 372

Crores

v. Retained Earnings Rs. 13038 Crore, General Reserve Rs.

12,587 Crore

vi. Secured Creditors Rs.31,053 Crore approx. includes

nationalized banks, mutual funds, private sectors banks

etc.

vii. Unsecured Creditors Rs.10,893 Crores approx. includes

small creditors of a value of Rs. 10,000 and above also.

viii. Promoters Group shareholding percentage 69.69%

b. The hurting point for the Appellant company in the orders of Tribunal

is that the Applicant company is directed to ensure that every secured

creditor is put on notice regarding the scheme and so also every

Company Appeal (AT) No. 181-182 of 2022 23

unsecured creditor is put on notice regarding the scheme so that all of

them may take an uniformed decision thereon and file consent affidavit

of all secured creditors and in respect of unsecured creditors 90% of

the value of unsecured creditors at the time of filing of company

petition.

c. BSE vide e-letter dated 19.04.2022 has put certain conditions which

includes followings:

• "As per SEBI Circular dated Feb 01, 2022 read with Master

Circular, the company is required to submit "No Objection

Certificate" from the lending scheduled commercial

banks/Financial institutions debentures trustees, from not les

than 75% of the secured creditors in value.

• Company shall ensure that the financials in the Scheme including

financials considered for valuation report are not for period more

than 6 months old.

• Company shall ensure to separately and prominently disclose to

the shareholders and NCLT via the draft scheme of arrangement

documents following information/ facts:

i.The rationale for transferring Rs. 12,587 Crore standing to the

credit of the General Reserve to the Retained Earnings of the

Company for the previous financial years.

Company Appeal (AT) No. 181-182 of 2022 24

ii.Explain the purpose behind the proposed transfer of funds from

one of the free reserve account to another account through the

scheme."

d. The Scheme reflects that the fund reflected by General Reserve are in

excess of the companies anticipated operational and business needs in

the forcible future and meant to create further shareholders value in

such manner as the Board of the Director of the Company in its sole

discretion decide from time to time. This reflects not a healthy sign

when approx.70% of the shareholding is with the promoters and

company debt content is 3 times of (Equity + General Reserve) and if

we remove General Reserve which is a free reserve to provide cushion

to the creditors then Debt content is one 13982 times of Equity. Once

amount lying in General Reserve infrastructure to Retained Earnings,

then Board of Directors approved Resolution allows free hand to

Directors to even issue Bonus shares or pay Dividend etc.

e. The General Reserve provides a cushion to the creditors of the

company, be it bankers or other secured and unsecured creditors. The

Company seems to be highly debt leverage. In such situation, General

Reserve provides at least some cushion to the bankers and other

creditors.

Company Appeal (AT) No. 181-182 of 2022 25

f. At page 110 of the Appeal paper book, the Company Secretary and

Compliance Officer has given an undertaking for non-applicability of

valuation report and fairness opinion for the scheme of arrangements

between the company and its shareholders as applied before the

Tribunal under Section 230 of the Act is also not a very healthy sign as

also not in compliance of BSE e-letter dated 19.04.2022. Valuation

report and fairness opinion are a must for the Scheme of Arrangement

so that for the listed company, the Stakeholders are fully aware of the

impact.

g. As far as citations of various judgments are concerned, it is not

appliable as the health of each company varies. Like the judgment cited

by the Ld. Sr. counsel for the Appellant, Hon'ble High Court of Andhra

Pradesh Teck-men Tools (P.) Ltd as stated supra para 28 & 30 read as

under:

"28 In the light of the settled legal position that the court has no power to usurp the rights of the class of members or creditors to decide for themselves whether or not to approve the scheme, even if it considers that they would have approved the scheme (Palmer's Company Law), would the court be justified in examining the scheme and recording its satisfaction that the interests of the creditors are not affected, when these are matters which the creditors should have been permitted to examine

Company Appeal (AT) No. 181-182 of 2022 26

and decide for themselves in a meeting to be called for this purpose?

30 The court should, ordinarily, exercise its discretion, in favour of convening a meeting of the creditors, even in a scheme of arrangement between the company and its members for the safest way of ascertaining, whether or not the creditors are adversely affected by the scheme, would be in a meeting of the creditors themselves, which the court, undoubtedly is entitled to convene under sub-section (1) of section 391. Dispensing with the holding of a meeting of the creditors should be an exception and not the norm. Among the exceptional circumstances would fall cases where the creditors of a class, either in their entirety or by a substantial majority, have given their letters of consent to the scheme of arrangement, obviating the need of holding a meeting of that class, as holding a meeting, in such an eventuality, would merely be an empty ritual and a useless formality. Even in exceptional cases, where the court is satisfied that a meeting of the creditors need not be held, it should record its reasons in arriving at such a decision. In cases where a meeting of the creditors is held, the court would ascertain their wishes looking not only at the resolutions passed in their meeting but also at

Company Appeal (AT) No. 181-182 of 2022 27

the report of the chairman of the meeting which would contain details of the proceedings in brief and the views expressed by the creditors in the meeting (I.C.I.C.I Ltd., in Re 104 Bom, LR 399:

(2003) 115 Comp Cas 465 (Bom)."

Other cited judgments of Appellants also required ascertaining the

impact of Scheme whether it is prejudicial to the interest of creditors?

h. In view of the aforesaid observations including assistance provided by

the RoC, Mumbai, it is very much clear that the order of the Tribunal

deserves to be uphold and rather scheme should have been rejected, if

it was not backed by valuation report, fairness opinion and consent of

Secured and Unsecured Creditors as required by Section 230(9) of the

Act which requires vide Section 230 (1) of the Act a compliance even if

compromise or arrangement is proposed between a company and its

members or between a company and its creditors etc. For a ready

reference, the Section 230 of the Act is depicted herein below:

"230. (1) Where a compromise or arrangement is proposed--

(a) between a company and its creditors or any class of

them; or

(b) between a company and its members or any class of

them,

the Tribunal may, on the application of the company or of

any creditor or member of the company, or in the case of a

Company Appeal (AT) No. 181-182 of 2022 28

company which is being wound up, of the liquidator,

appointed under this Act or under the Insolvency and

Bankruptcy Code, 2016, as the case may be,] order a

meeting of the creditors or class of creditors, or of the

members or class of members, as the case may be, to be

called, held and conducted in such manner as the Tribunal

directs.

Explanation.--For the purposes of this sub-section,

arrangement includes a re-organisation of the company's

share capital by the consolidation of shares of different

classes or by the division of shares into shares of different

classes, or by both of those methods.

(2) The company or any other person, by whom an

application is made under sub-section (1), shall disclose to

the Tribunal by affidavit--

(a) all material facts relating to the company, such as the

latest financial position of the company, the latest auditor's

report on the accounts of the company and the pendency of

any investigation or proceedings against the company;

(b) reduction of share capital of the company, if any, included

in the compromise or arrangement;

Company Appeal (AT) No. 181-182 of 2022 29

(c) any scheme of corporate debt restructuring consented to

by not less than seventy-five per cent. of the secured

creditors in value, including--

(i) a creditor's responsibility statement in the prescribed

form;

(ii) safeguards for the protection of other secured and

unsecured creditors;

(iii) report by the auditor that the fund requirements of the

company after the corporate debt restructuring as approved

shall conform to the liquidity test based upon the estimates

provided to them by the Board;

(iv) where the company proposes to adopt the corporate debt

restructuring guidelines specified by the Reserve Bank of

India, a statement to that effect; and

(v) a valuation report in respect of the shares and the

property and all assets, tangible and intangible, movable

and immovable, of the company by a registered valuer.

(3) Where a meeting is proposed to be called in pursuance of

an order of the Tribunal under subsection (1), a notice of such

meeting shall be sent to all the creditors or class of creditors

and to all the members or class of members and the

debenture-holders of the company, individually at the

address registered with the company which shall be

Company Appeal (AT) No. 181-182 of 2022 30

accompanied by a statement disclosing the details of the

compromise or arrangement, a copy of the valuation report,

if any, and explaining their effect on creditors, key

managerial personnel, promoters and non-promoter

members, and the debenture-holders and the effect of the

compromise or arrangement on any material interests of the

directors of the company or the debenture trustees, and such

other matters as may be prescribed: Provided that such

notice and other documents shall also be placed on the

website of the company, if any, and in case of a listed

company, these documents shall be sent to the Securities

and Exchange Board and stock exchange where the

securities of the companies are listed, for placing on their

website and shall also be published in newspapers in such

manner as may be prescribed: Provided further that where

the notice for the meeting is also issued by way of an

advertisement, it shall indicate the time within which copies

of the compromise or arrangement shall be made available

to the concerned persons free of charge from the registered

office of the company.

(4) A notice under sub-section (3) shall provide that the

persons to whom the notice is sent may vote in the meeting

either themselves or through proxies or by postal ballot to the

Company Appeal (AT) No. 181-182 of 2022 31

adoption of the compromise or arrangement within one

month from the date of receipt of such notice:

Provided that any objection to the compromise or

arrangement shall be made only by persons holding not less

than ten per cent. of the shareholding or having outstanding

debt amounting to not less than five per cent. of the total

outstanding debt as per the latest audited financial

statement.

(5) A notice under sub-section (3) along with all the

documents in such form as may be prescribed shall also be

sent to the Central Government, the income-tax authorities,

the Reserve Bank of India, the Securities and Exchange

Board, the Registrar, the respective stock exchanges, the

Official Liquidator, the Competition Commission of India

established under sub-section (1)of section 7 of the

Competition Act, 2002, if necessary, and such other sectoral

regulators or authorities which are likely to be affected by

the compromise or arrangement and shall require that

representations, if any, to be made by them shall be made

within a period of thirty days from the date of receipt of such

notice, failing which, it shall be presumed that they have no

representations to make on the proposals.

Company Appeal (AT) No. 181-182 of 2022 32

(6) Where, at a meeting held in pursuance of sub-section (1),

majority of persons representing three fourths in value of the

creditors, or class of creditors or members or class of

members, as the case may be, voting in person or by proxy

or by postal ballot, agree to any compromise or arrangement

and if such compromise or arrangement is sanctioned by the

Tribunal by an order, the same shall be binding on the

company, all the creditors, or class of creditors or members

or class of members, as the case may be, or, in case of a

company being wound up, on the liquidator [appointed

under this Act or under the Insolvency and Bankruptcy

Code, 2016, as the case may be,] and the contributories of

the company.

(7) An order made by the Tribunal under sub-section (6) shall

provide for all or any of the following matters, namely:--

(a) where the compromise or arrangement provides for

conversion of preference shares into equity shares, such

preference shareholders shall be given an option to either

obtain arrears of dividend in cash or accept equity shares

equal to the value of the dividend payable;

(b) the protection of any class of creditors;

Company Appeal (AT) No. 181-182 of 2022 33

(c) if the compromise or arrangement results in the variation

of the shareholders' rights, it shall be given effect to under

the provisions of section 48;

(d) if the compromise or arrangement is agreed to by the

creditors under sub-section (6), any proceedings pending

before the Board for Industrial and Financial Reconstruction

established under section 4 of the Sick Industrial Companies

(Special Provisions) Act, 1985 shall abate;

(e) such other matters including exit offer to dissenting

shareholders, if any, as are in the opinion of the Tribunal

necessary to effectively implement the terms of the

compromise or arrangement: Provided that no compromise or

arrangement shall be sanctioned by the Tribunal unless a

certificate by the company's auditor has been filed with the

Tribunal to the effect that the accounting treatment, if any,

proposed in the scheme of compromise or arrangement is in

conformity with the accounting standards prescribed under

section 133.

(8) The order of the Tribunal shall be filed with the Registrar

by the company within a period of thirty days of the receipt

of the order.

(9) The Tribunal may dispense with calling of a meeting of

creditor or class of creditors where such creditors or class of

Company Appeal (AT) No. 181-182 of 2022 34

creditors, having at least ninety per cent. value, agree and

confirm, by way of affidavit, to the scheme of compromise or

arrangement.

(10) No compromise or arrangement in respect of any buy-

back of securities under this section shall be sanctioned by

the Tribunal unless such buy-back is in accordance with the

provisions of section 68.

(11) Any compromise or arrangement may include takeover

offer made in such manner as may be prescribed: Provided

that in case of listed companies, takeover offer shall be as

per the regulations framed by the Securities and Exchange

Board.

(12) An aggrieved party may make an application to the

Tribunal in the event of any grievances with respect to the

takeover offer of companies other than listed companies in

such manner as may be prescribed and the Tribunal may,

on application, pass such order as it may deem fit.

Explanation.--For the removal of doubts, it is hereby

declared that the provisions of section 66 shall not apply to

the reduction of share capital effected in pursuance of the

order of the Tribunal under this section."

i. Hence, we do not find any inconformity in the order of the Tribunal

which is backed by both the provisions of the Act, law laid down by the

Company Appeal (AT) No. 181-182 of 2022 35

Hon'ble High Court, the health of the company which is highly debt

leveraged.

j. We accordingly, 'uphold' the order passed by the Tribunal. The Appeal

deserves to be dismissed and is dismissed. No order as to cost.

k. The 'Registry' is directed to send a copy to this order to the 'Registrar of

Companies, Mumbai' and also to 'National Stock Exchange' and

'Bombay Stock Exchange'.

Pending application, if any, stands disposed of.

[Justice Rakesh Kumar] Member(Judicial)

[Dr. Ashok Kumar Mishra] Member (Technical) Raushan

Company Appeal (AT) No. 181-182 of 2022