Case: Innovatherm Gmbh &amp; Another Vs. Sesa Goa Limited

had filed a petition under Sections 391-394 in the Calcutta High Court and in this context, learned Single Judge came to the conclusion that the Standard Chartered Bank being neither the shareholder, member and creditor of the transferee Company which was before the Court, had no locus to be heard in the said proceedings. Similar view has been taken by the Division Bench of this Court in the case of HindalcoIndustries Ltd in Company Petition No.293/2009 and connected Company Application No.234/2009. In the said case, The Company was Flagship Company of Aditya Birla Group. The Company proposed to undertake the financial restructuring exercise on the terms and conditions spelt out in the said proposed scheme and it was presented for approval under Section 391 read with Section 100 of the Companies Act. An objection was raised by one Ram Niranjan Kediya of Tourism Service Private Ltd. He was admittedly neither shareholder nor creditor of the petitioner Company. The question before the Court was whether he had any locus to raise any objection in relation to scheme propounded by the Company under Section 391 of the Companies Act and in that context, the Division Bench had observed that the said intervenor neither being the member or creditor of the Company, had no locus to intervene in the said petition. Learned Counsel for the appellants had vehemently urged that the facts of the said case were different since it was a petition filed under Section 100 of the Companies Act for financial restructuring and, therefore, the ratio of the said judgment does not apply to the facts of the present case. We are unable to accept the said contention of learned Counsel. The issue involved in the said case was identical and the question was whether any exercise which has to be carried out by the Company for restructuring as contemplated under Section 100 whether the intervenor, who was neither shareholder or creditor, can intervene and in such context, therefore, the Court had held that the said person had no locus. The ratio of the said case squarely applies to the present case.17. The Division Bench of this Court in the case of Securities and Exchange Board of India (SEBI) Vs. Sterlite Industries (India) Ltd. Reported in (2003) 113 Comp Cases 273(Bom.) also held that SEBI who had filed an application for intervention had no locus in the petition under Section 391 of the Companies Act not being shareholder or creditor of the Company. In the said case, it was contended that SEBI had interest in the said petition. The Division Bench however, did not accept the said contention and submitted that at the highest notice can be issued only to Central Government under Section 394-A and SEBI could not claim to have any locus in the said application under Section 391 of the Companies Act. In our view, the ratio of the said judgment would also directly apply to the facts of the present case.18. Delhi High Court in two separate judgments, namely in Company Petition No.54/1980 and Re: Telesound India Pvt Ltd (supra) has also taken a similar view and has observed that there is no provision of notice to creditors of the transferor Company at any stage either prior to making of the order or subsequent thereto except insofar as the creditors may have notice of it by public advertisement. Similarly, Delhi High Court in Union of India Vs. Asia Udyog Pvt Ltd (supra) has observed that such creditors of transferee Company would have no locus in the scheme of amalgamation filed by the transferor Company.19. It was also contended that in view of the provisions of Order I, Rule 10(2) of C.P.C. since the party whose rights are adversely affected is necessary party in a suit, on the same analogy the appellants being adversely affected by the order of acceptance of the scheme had right to hear in this petition. Reliance was placed on the judgment of the Apex Court in the case of RameshHirachand Kundanmal (supra). In our view, it will not be possible to draw the same analogy as is tried to be drawn on the basis of the provisions of Order I, Rule 10(2) of C.P.C. and consequently, the ratio of the said judgment cannot be made applicable to the facts of the present case.20. Reliance was placed on two judgments of learned Single Judge of this Court in the matter of ICICI Bank Limited and in the matter of Mayfair Limited (supra). In both these petitions, learned Single Judge has come to the conclusion that the creditor of the transferor Company would equally have right to file his objection to the scheme which is not just and fair to him or to the class of creditors to whom he belongs. In our view, we respectfully disagree with the view taken by learned Single Judge since the provision of Section 391 of the Companies Act cannot be extended to such extent that even third parties namely those persons who are not shareholders or creditors of the Company can be allowed to intervene in such petitions filed under Section 391 of the Companies Act. It is an admitted position that the appellants who are the creditors of transferee Company namely VAL, the demerged Company were duly heard in the petition filed by the said Company in the Madras High Court for getting their scheme sanctioned and the judgment of the Madras High Court is awaited. If the objection raised by the appellants in the said Court is accepted and the scheme is not approved by the Madras High Court, then, the entire scheme will fail and as such, it cannot be said that there is violation of principles of natural justice. We are, therefore, unable to accept the view taken by learned Single Judge in the said two decisions and overrule the said judgments.21. In our view, therefore, there is no merit in the contention raised by the learned Counsel appearing on behalf of the appellants.

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

Explanation:
0[ds]The restrictions, therefore, imposed on the category of person referred to in subsection (1)(a) and (b) of Section 391 of the Companies Act is not found in(2) of Section 392 of the Companies Act. Keeping in view the aforesaid provision, therefore, the rival contentions will have to be taken into consideration.12. In the present case, since the transferee Company is having its registered office at Madras, the petition was filed in the Madras High Court by the transferee Company and in the said petition, the appellants being the creditors of the transferee Company were duly heard and judgment has now been reserved by the Madras High Court onview of this, the final order passed in both the Courts would be dependent on both the transferor and transferee Company obtaining necessary sanction from the Court of competent jurisdiction. Even if one Court refuses to sanction the scheme, the entire scheme resultantly wouldguidelines, therefore, which are laid down by the Apex Court pertain to the power of the Court in taking into consideration the scheme not only from the point of view of majority shareholders or creditors but also from the point of view of minority shareholders and creditors. The submission made by learned Counsel appearing on behalf of the appellants, therefore, cannot be accepted and the ratio of this judgment of the Apex Court in the said case, is not of any assistance to thethe present case, the appellants are neither the shareholders nor creditors of the transferor Company and as such, the question of permitting them to intervene in the transferors petition filed under Section 391 of the Companies Act, does notour view, the ratio of the said judgment does not advance the case of the appellants any further in the facts and circumstances of the present case. Inthe present case, the appellants are neither the shareholders nor creditors of the transferor Company and as such, the question of permitting them to intervene in the transferors petition filed under Section 391 of the Companies Act, does notis not possible to accept the said submission. As we have pointed out hereinabove, the judgment in the case of MiheerMafatlal (supra) does not in any way apply to the creditors of the transferee Company and it does not lay down the ratio that the creditor of transferee Company would also have right to intervene in the petition filed by the transferor Company. Secondly, in the case of National Textiles Workmen Union (supra), the issue involved was regarding the workmen of the Company who had filed winding up petition and in that context, therefore, the Supreme Court held that the workers of the said Company would be adversely affected and, therefore, they had right and locus to intervene in the said winding upare unable to accept the said contention of learned Counsel. The issue involved in the said case was identical and the question was whether any exercise which has to be carried out by the Company for restructuring as contemplated under Section 100 whether the intervenor, who was neither shareholder or creditor, can intervene and in such context, therefore, the Court had held that the said person had no locus. The ratio of the said case squarely applies to the presentthe said case, it was contended that SEBI had interest in the said petition. The Division Bench however, did not accept the said contention and submitted that at the highest notice can be issued only to Central Government under Sectionand SEBI could not claim to have any locus in the said application under Section 391 of the Companies Act. In our view, the ratio of the said judgment would also directly apply to the facts of the presentour view, it will not be possible to draw the same analogy as is tried to be drawn on the basis of the provisions of Order I, Rule 10(2) of C.P.C. and consequently, the ratio of the said judgment cannot be made applicable to the facts of the presentour view, we respectfully disagree with the view taken by learned Single Judge since the provision of Section 391 of the Companies Act cannot be extended to such extent that even third parties namely those persons who are not shareholders or creditors of the Company can be allowed to intervene in such petitions filed under Section 391 of the Companies Act. It is an admitted position that the appellants who are the creditors of transferee Company namely VAL, the demerged Company were duly heard in the petition filed by the said Company in the Madras High Court for getting their scheme sanctioned and the judgment of the Madras High Court is awaited. If the objection raised by the appellants in the said Court is accepted and the scheme is not approved by the Madras High Court, then, the entire scheme will fail and as such, it cannot be said that there is violation of principles of natural justice. We are, therefore, unable to accept the view taken by learned Single Judge in the said two decisions and overrule the said judgments.21. In our view, therefore, there is no merit in the contention raised by the learned Counsel appearing on behalf of the appellants.