Case: Laxmi Pat Surana Vs. Pantaloon Retail (India) Limited &amp; Others

a claim is presented before the Court for sanction, the jurisdiction of the Court is supervisory and not appellate;(ii) Once it is established - as it has been - that requisite statutory compliances were made that the scheme was not against public interest and the requisite number of shareholders had accepted the scheme, the Court cannot refuse to sanction the scheme by questioning the wisdom and commercial interest of the general body of shareholders;(iii) The claim of the Appellant is pending adjudication in arbitral proceedings. Pending an arbitral award, it would not be appropriate for the Company Court to rule on the merits of the case or to record prima facie findings;(iv) Though a specific opportunity was granted to the Appellant to place an affidavit particularizing the details of the fraud alleged, the Appellant had not placed any particulars on record;(v) The claim of the Appellant has been secured by furnishing of a bank guarantee of Rs.6.50 crores in terms of the judgment of the Calcutta High Court.6. The learned counsel for the Appellant submits that :(i) The Appellant is a creditor who has a claim in the arbitration against Pantaloon Retail India Limited. No notice was issued to the Appellant though the company had undertaken before the Company Court while obtaining an order of dispensation of a meeting of the creditors that it would be by issuing individual notices to all creditors having a claim above Rs.1.00 lakh; and(ii) The accounts of the company would reveal liabilities of Rs.58.29 crores. No details of the creditors have been shown.7. Now, it is a well settled principle of law, following the decision of the Supreme Court in MiheerH. Mafatlal Vs. Mafatlal Industries Ltd. (AIR-1997-SC-506) that that the jurisdiction of the Court when a scheme of arrangement comes up for sanction is supervisory and not appellate. The court does not sit in judgment over the commercial wisdom of the shareholders. The jurisdiction of the Company Court is confined to determining whether there has been a compliance with the statutory requirements; whether the scheme has the support of a requisite majority; whether the required meetings of the creditors, or as the case may be, of the members were held; whether necessary material has been placed before the creditors, or as the case may, before the members; and whether the scheme is violative of any provision of law or contrary to public policy. The scheme must be just, fair and reasonable to prudent men of business.8. In the present case, it is not in dispute that the Company Court has dispensed with the convening of a meeting of the creditors on the undertaking of the company to furnish individual notices to all creditors of a value of Rs.1.00 lakh and above. The learned counsel for the First Respondent states that an affidavit was duly filed before the Company Court. Insofar as the Appellant is concerned, he has a claim in arbitration which is in dispute and pending adjudication. The claim of the Appellant is secured by furnishing of a bank guarantee of Rs.6.50 crores of a nationalized bank as directed in the judgment of the Calcutta High Court. The initial claim of the Appellant, as noted in the order of the learned Single Judge, was Rs.22.00 crores, which has been enhanced subsequently to Rs.220 crores. Be that as it may, we find no merit in the contention of the Appellant that the scheme must be held to be invalid for want of notice to the Appellant. In this regard, we are in respectful agreement with the judgment of a learned Single Judge of this Court in SarthakIndustries Limited Vs. British Motor Car Co. (1934) Ltd. (Company Scheme Petition No.377 of 2011 decided on 16 September 2011), where the learned Single Judge has held as follows :9. the objector or intervener cannot, on the basis of the claim which has been made against the transferee company, succeed and oppose the scheme when such a claim is pending adjudication. Once it has been pointed out that the sum is a disputed liability and it is being adjudicated, then, to my mind, it will not possible to withhold sanction and approval to the scheme only on account of such a claim. In the affidavits that have been filed by the parties, they have placed their own version in support of their claims and counter claims. This Court is not a forum which could adjudicate and decide the same. Admittedly, the parties are before the Arbitral Tribunal which has taken cognizance of these versions and they are being adjudicated. Nothing prevents the intervener/objector, on the basis of the contents of the balance sheet in making an application for securing the alleged admitted sum. Once such a course is available under the Arbitration and Conciliation Act, 1996 and even thereafter when the intervener/objector secures and obtains an award crystalising the claims, then, all the more there is no reason to withhold the approval and sanction to the scheme. Nothing has been pointed out in the statutory provisions relied upon, which would indicate that this court, can on the strength of a disputed claim, withhold the sanction and approval to the scheme.9. We do not find merit in the contention that there was no disclosure of necessary particulars. Though this submission has been vehementally urged, we must also take note of the observation of the learned Single Judge that sufficient opportunity was granted to the Appellant to file an affidavit setting out particulars of fraud. No such affidavit was filed.10. Having considered the submissions in support of the appeal, we are of the view that no interference of the Court is warranted. The claim of the Appellant is subject to an arbitration proceeding and is in dispute. The claim has been secured by furnishing of a bank guarantee as directed by the Calcutta High Court. In the meantime, during the pendency of the appeal, the scheme has been duly implemented. Hence, no case for interference in appeal is made out.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]8. In the present case, it is not in dispute that the Company Court has dispensed with the convening of a meeting of the creditors on the undertaking of the company to furnish individual notices to all creditors of a value of Rs.1.00 lakh and above. The learned counsel for the First Respondent states that an affidavit was duly filed before the Company Court. Insofar as the Appellant is concerned, he has a claim in arbitration which is in dispute and pending adjudication. The claim of the Appellant is secured by furnishing of a bank guarantee of Rs.6.50 crores of a nationalized bank as directed in the judgment of the Calcutta High Court. The initial claim of the Appellant, as noted in the order of the learned Single Judge, was Rs.22.00 crores, which has been enhanced subsequently to Rs.220 crores. Be that as it may, we find no merit in the contention of the Appellant that the scheme must be held to be invalid for want of notice to the Appellant. In this regard, we are in respectful agreement with the judgment of a learned Single Judge of this Court in SarthakIndustries Limited Vs. British Motor Car Co. (1934) Ltd. (Company Scheme Petition No.377 of 2011 decided on 16 September 2011), where the learned Single Judge has held as follows :9.he objector or intervener cannot, on the basis of the claim which has been made against the transferee company, succeed and oppose the scheme when such a claim is pending adjudication. Once it has been pointed out that the sum is a disputed liability and it is being adjudicated, then, to my mind, it will not possible to withhold sanction and approval to the scheme only on account of such a claim. In the affidavits that have been filed by the parties, they have placed their own version in support of their claims and counter claims. This Court is not a forum which could adjudicate and decide the same. Admittedly, the parties are before the Arbitral Tribunal which has taken cognizance of these versions and they are being adjudicated. Nothing prevents the intervener/objector, on the basis of the contents of the balance sheet in making an application for securing the alleged admitted sum. Once such a course is available under the Arbitration and Conciliation Act, 1996 and even thereafter when the intervener/objector secures and obtains an award crystalising the claims, then, all the more there is no reason to withhold the approval and sanction to the scheme. Nothing has been pointed out in the statutory provisions relied upon, which would indicate that this court, can on the strength of a disputed claim, withhold the sanction and approval to the scheme.9. We do not find merit in the contention that there was no disclosure of necessary particulars. Though this submission has been vehementally urged, we must also take note of the observation of the learned Single Judge that sufficient opportunity was granted to the Appellant to file an affidavit setting out particulars of fraud. No such affidavit was filed.10. Having considered the submissions in support of the appeal, we are of the view that no interference of the Court is warranted. The claim of the Appellant is subject to an arbitration proceeding and is in dispute. The claim has been secured by furnishing of a bank guarantee as directed by the Calcutta High Court. In the meantime, during the pendency of the appeal, the scheme has been duly implemented. Hence, no case for interference in appeal is made out.