High Court · 2011

Heard Mr. K N Choudhury, learned Senior Counsel for the petitioner. 2. This is an application filed by the petitioner under Sub-Section (3) of Section 101 of the Companies Act, 1956 (hereinafter referred to as ’the Act’) pr aying for dispensing with the requirement of settling of list of creditors of th e petitioner company as required under Sub-Section (2) of Section 101 of the Act . 3. It is submitted by Mr. K N Choudhury, learned Senior Counsel for the pe titioner that the Reserve Bank of India has created a forum called Corporate Deb t Restructuring Cell ( (cid:28)CDR (cid:29) Cell) where all India Financial Institutions and Ban ks are members and the industries which are declared as Non Performing Assets bu t which are potentially viable are taken up for revival by suitable financial pa ckages. Decisions taken in CDR forum are binding on all financial institutions a nd implementation of CDR scheme is mandatory for all financial institutions. The learned senior counsel for the petitioner also submits that CDR Empowered Group constituted under the guidelines of Reserve Bank of India in its proceedings he ld on 17.03.2008 and subsequent dates i.e. 17.03.2009 and 23.03.2009 approved a scheme for revival of the petitioner Company. As per the CDR settlement, one tim e settlement ( (cid:28)OTS (cid:29) in short) of Rs.65.57 crores is payable against the total li ability of Rs.764.07 crores. The said CDR settlement amount of Rs.65.57 crores i s projected to be payable in installment, as under - i) Rs.16.40 crores on an upfront payment basis. ii) Rs.49.17 crores by issue of optionally cumulative convertible debentures. iii) Balance unpaid liability of Rs.698.50 crores in the form of Rupee Term Loan , NCD, Preference Shares (i.e. RCCP and CCP) and other instruments issued by the petitioner company at various times and purported to be held by the financial i nstitutions is fully waived under CDR scheme. 4. It is submitted further by the learned senior counsel for the petitioner that 25% of the CDR settlement amount has already been paid. The petitioner contends that all dues owed by it to the lenders have bee 5. n agreed to be settled and or waived and accordingly it has been agreed by the l enders under the CDR package that 81,46,250 preference share of Rs.100/- each ag gregating to Rs.81,46,25,000/- (Rupees eighty one crores forty six lakhs twenty five thousands) issued by the petitioner were to be waived and, therefore, cance lled as per the previsions of Section 100 of the Act. It is submitted on behalf of the petitioner that in this regard the petitioner company has obtained indivi dual sanction from all the institutions and banks confirming the CDR decision. T he individual sanction from the financial institutions and banks confirming the CDR decision may be noticed from pages 332-360 of the paper book. 6. The learned senior counsel for the petitioner also submits that as manda ted by Section 100 of the Act, a special resolution was adopted in the Annual Ge neral Meeting of the Company held on 16.12.2010 proposing to reduce the share ca pital of the petitioner company by an amount of Rs.81,46,25,000/- by effecting c ancellation of 81,46,250 shares, held by share holders subject to confirmation b y this Hon’ble Court. 7. Mr. Choudhury further submits that majority of the unsecured creditors a re promoters and directors, who collectively approached the CDR forum and accept ed the final settlement. In this regard the learned senior counsel draws the att ention of this Court to paragraphs 20, 21 and 22 of the Company Petition and con tends that out of the total unsecured creditors of 1758.65 lakhs, unsecured cred itors aggregating to Rs.1521.21 lakhs (86.50%) have given their consent for the reduction of capital, in as much as, a certificate dated 27.05.2011 has also bee n issued by the auditors of the company in the aforesaid regard. It is further c ontended that out of the balance unsecured creditors of Rs.237.44 lakhs, an amou nt of Rs.209.32 lakhs is outstanding for a period of more than three years, i.e. earlier that the year 2007. Balance unsecured creditors amounting to Rs.28.11 l akhs are in regular course of business with the petitioner company. In this rega rd the petitioner seeks to contend that even if the total unsecured creditors ar e construed to be worth Rs.237.44 lakhs, the total assets (Fixed + WIP + Current Assets) being Rs.2,50,39,75,112/- (as averred in paragraph 20 of the petition), the interest of unsecured creditors would not in anyway be prejudicially effect ed. On the contrary by cancellation of the preference shares, the financial stat us of the potential company will improve and consequently the prospects of the u nsecured creditors to recover their dues will become bright. In this regard the petitioner has drawn attention of this Court to pages 362-370 of the Company Pet ition. 8. It will be noticed that by letters dated 30.05.2011, Sri Hemant B. Vyas and Sri N G Vedak, Directors of the Company have given consent as major unsecure d creditors of the company for reduction of share capital. It will be further no ticed from consent letters dated 30.05.2011 of the aforesaid two Directors/unsec ured creditors that, as per the CDR settlement scheme, no unsecured creditors wo uld be effected by the proposed reduction, in as much as, only CDR members i.e. the financial institutions, who are subscribers of the preference share in quest ion would be effected by the cancellation/reduction of the said Cumulative Conve rtible Preference Shares (CCPS) and Redeemable Cumulative Convertible Preferenc e Shares (RCCPS). 9. It is further submitted by the learned senior counsel for the petitioner that proposed reduction does not involve any diminution of any liability of the petitioner company to the unsecured creditors, in as much as, the proposed redu ction of the share capital as prayed for willn’t prejudice the interest of the c reditors, much less the unsecured creditors. 10. Heard the learned senior counsel for the petitioner. Perused the Company Petition and noted the provisions contained in Sections 100 and 101 of the Act read with Rules 46 and 47 of the Companies (Court) Rules, 1959. It is seen from the CDR Empowered Group proceeding dated 17.03.2008, 18.03.2009 and 23.03.2009 t hat, One Time Settlement (OTS) of Rs.65.57 crores have been approved by the CDR Empowered Group as per the guidelines framed by the Reserve Bank of India. In te rms of the approved CDR scheme the lenders i.e. the secured creditors have agree d that 81,46,250 preference shares of Rs.100/- each totaling to Rs.81,46,25,000/ - (Rupees eighty one crores forty six lakhs twenty five thousands) issued by the petitioner Company are to be waived/cancelled as per Section 100 of the Act. Th is Court has noticed that the company adopted a special resolution in the afores aid regard in the AGM held on 16.12.2010 towards reduction of its share capital. This Court has also noticed that the petitioner company has obtained individual sanction/no objection from all the financial institutions and the Banks/secured creditors confirming the CDR decision. Further majority of the unsecured credit ors who are promoters and directors of the company collectively approached the C DR forum and accepted the final settlement. Though there are unsecured creditors aggregating to Rs.237.44 lakhs but the total assets of the company as may be no ticed from paragraph 20 of the Company Petition being Rs.2,50,39,75,112/- are su fficient to take care of the interest of such unsecured creditors. 11. Having heard the learned senior counsel for the petitioner and also havi ng noted the facts as alluded hereinabove this Court is of the view that, except for cancellation of preference shares issued to secured creditors, who are all parties to the CDR scheme, proposed reduction of share capital in no way would p rejudice the interest of the unsecured creditors. Therefore, this Court is of th e considered view that the petitioner has been able to make out a case for dispe nsing with the requirement of complying with the provision of Sub-Section (2) of Section 101 of the Act. Consequently this Court is inclined to invoke the power under Sub-Section (3) of Section 101 of the Act. Accordingly it is directed tha t the petition be advertised in prescribed form without however enlisting the li st of creditors including the unsecured creditors. 12.