Sunil Ambwani, J. - (1.) Heard Shri Sunil Gupta, Senior Advocate; Shri Ravi Kant, Senior Advocate; Shri Jitendra Sethi and Shri Pushkar Mehrotra for applicant-companies; Shri Vipin Sinha for Punjab National Bank; Shri Tilak Bose assisted by Shri Piyush Agarwal for Malanpur Steels Ltd; Ms Roma Hameed for Hindustan Composite Ltd and Shri Shambhu Chopra and Shri Ravi Prakash Srivastava for Hindustan Sanitary Ware Ltd and Rasoi Ltd.
(2.) This Confirmation Petition under Section 391 read with Section 394 of Companies Act 1956 is for sanction a 'Scheme of Arrangement' between Willard India Limited-Application No. 1, (WIL) with its registered office at Village Bhandoria,P.O. Aurangabad, District Bulandshahr; Agauta Sugar & Chemicals Limited-Applicant No. 2 (ASCL) with its registered office A-24 Sector V, P.O. NOIDA, District Gautam Budh nagar; Chitavalasah Jute Mills Private Limited-Applicant No. 3 (CJMPL) with its registered office B-623, Kamla Nagar, Agra 282 004 and Perfect Career Consultants Private Limited-Applicant No. 4(PCCPL), with its registered office B-623, Kamla Nagar, Agra 282 004 and its respective shareholders and creditors.
(3.) By an order dated 18.5.2006, the Court issued directions to convene meeting of the equity shareholders and creditors of the four applicant companies to consider for approval the 'Scheme of Arrangement'. The meetings were convened for 26.6.2006, appointing as Chairman and Alternate Chairman of the meetings. The order dated 18.5.2006 provided:- 1. Heard Shri Ravi Kant, Senior Advocate; J.K. Sethi, Advocate and Shri Pushkar Mehrotra for applicant- companies; Shri Rajeev Nanda, Advocate assisted by Roma Hameed and Devyani Ashra in Company Petition No. 8 of 2006 and Shri Pankaj Bhatia in Company Petition No. 49 of 1998. 2. Five creditors winding up Petitions are pending to wind up Willard India Ltd, the applicant company No. 1. Out of these Company Petition No. 49 of 1998 Mukund Ltd, has been advertised in the year 2000. Willard India Limited has filed this application along with three other companies to convene meetings of the shareholders and the creditors (both secured and unsecured) for considering the scheme of arrangement of demerger and to consider an offer to the secured and unsecured creditors for payment of their principal amount at a reduced rate of interest. 3. In the affidavit of Shri Nand Kishor Rawat, Director of applicant company No. 1 filed today, it is stated that the scheme has received in principle approval of the consenting participants of 85.7% of the total outstanding of the respondent. It is contended in the affidavit that petitioning' creditors represent a small minority of the outstanding of the secured and unsecured creditors. In para 8 of this affidavit, it is stated that respondent company has 6217 workmen on its rolls; 30,000 cane growers supplying cane each year; 42,448 shareholders and 275 fixed deposit holders. The company had total income of Rs. 12870.97 lacs in the ending year 2004-05. By the scheme the companies propose to demerge their business to cooperate as a joint venture, share profits and to expand its activities. 4. Shri Rajeev Nanda, learned counsel for the creditor-petitioner Hindustan Composites Limited in pending Company Petition No. 8 of 2006 submits that the scheme is not bonafide. He submits that the applicant company No. 1 made several defaults, after extending promises and issued cheques to repay the Inter Corporate Deposits accepted in 1996. It has not even paid the part of the principal amount advanced as long back in the year 1996. He has labelled the scheme as a camouflage to avoid the dues of the creditors, and has pressed for advertisement of his petition. 5. Once a 'scheme of arrangement' has been presented to the Court with a request for convening of meetings of the shareholders and creditors to consider the terms which according to the applicant companies has received in principle approval of creditors of 85.7% of the total outstanding, the court has no jurisdiction to refuse to convening of the meetings. The word 'may' in Section 391 of the Companies Act gives discretion to the Court to convene the meetings. This discretion, however, has to be applied on the settled judicial principles for calling meetings to consider the scheme of arrangement. The order convening the meetings shall not be denied unless it is shown that the scheme violates any statutory provision of law or is an attempt to defraud the shareholders or creditors, or is not in public interest. 6. In Rainbow Denim Ltd. v. Rama Petrochemicals Ltd., 2003 Company Cases 640 , Supreme Court did not approve of the Company Judge making adverse observations on the scheme. It was held that the appropriate time for the Company Judge to consider the scheme is subsequent to the approval thereof by the shareholders and creditors of the company. 7. The creditor-petitioners have not alleged that the scheme violates any statutory provision of law or is not in the public interest. The petitioning-creditors are in minority but that is not a ground on which the Court may refuse to convene the meetings. 8. Shri Nanda appearing in Company Petition No. 8 of 2006 submits that the participation of his clients in the meetings may not be treated to have waived their rights to realise its debts with agreed rate of interest. He further submits that the Company Petition, in which he is appearing, may be advertised for which he has established good and sufficient grounds to wind up the respondent company. I find that Company Petition No. 49 of 1998 has already been advertised in the year 2000 and thus fresh advertisement need not be carried out. The petitioning creditors do not need any protection. Their participation in the meetings convened by the Court shall not waive their rights which may have accrued to them and is pursued by them in their company petition. The Court, however, will have to consider the effect of the resolution passed by the majority in the meetings, on the winding up petitions. 9. The scheme also provides for re-schedule ment of the payment of principal amount and liability of interest to the creditors. It will be open to each of the creditors or a class of creditors to put their views or to propose modalities of payment, rate of interest and the payment schedules in the meetings. Further, they will also have opportunity to object to the resolution if it is carried out in the meetings with or without any modifications. 10. Let the meetings of the shareholders and creditors of the companies be convened on the venue, dates, and time indicated as follows; JUDGEMENT_491_LAWS(ALL)4_2007.htm 11. Shri Avinash Tripathi and Shri Ashish Srivastava, Advocates are appointed as Chairman and Alternate Chairman respectively for the meetings of the shareholders and creditors of Willard India Limited-Applicant No. 1 and Agauta Sugar & Chemicals Ltd.-Applicant No. 2; Shri Rakesh Bahadur and Shri Arun Kumar Singh, Advocates are appointed as Chairman and Alternate Chairman respectively for the meetings of the shareholders and creditors of Chitavalsah Jute Mills Private Ltd-Applicant No. 3, and Perfect Career Consultants Private Limited-Applicant No. 4. They shall be paid Rs. 10,000/- for Chairman and Rs. 5000/- for Alternate Chairman for each meetings and an additional amount of 15% of their professional charges as incidental expenses. The applicant-companies shall make their travel arrangements by A.C. Ist Class and/or the Air Conditioned taxi and their stay at a respectable guest house or a hotel on their request. 12. The notice convening aforesaid meetings shall be sent under the signatures of the Chairmen at least 21 clears days before the date appointed for the meetings, along with the scheme and the statement as required to be furnished pursuant to Section 393 of the Companies Act, 1956, along with prescribed form of proxy by pre-paid letter post under certificate of posting, addressed to each of the share holders/members and creditors of the companies at their respective registered or last known address. 13. In addition, at least 21 clear days before the date appointed for the meetings in respect of companies, as aforesaid, advertisement convening the said meetings shall be made in 'Times of India' (English) published from Lucknow and Delhi; and 'Dainik Jagaran' (Hindi) published from Kanpur and New Delhi under the signatures of the Chairman appointed for the meetings separately giving full details of the meetings, place and time of the meetings. 14. The voting by proxy shall be permitted provided that the proxies in the prescribed form duly signed by the person entitled to attend and vote at the meeting, and in case of company or an association, by a duly authorised representative of such company/association are lodged with the respective companies at its registered office not later than 48 hours before the meetings. The quorum of the meeting shall be the same as is provided in the Article of Association of the respective companies. 15. The report will be submitted by the Chairman by 3.7.2006. List on 18.7.2006 for hearing. Copy by Monday." ;