IN RE Vs. INDURI FARM LTD
LAWS(NCLT)-2016-10-2
NATIONAL COMPANY LAW TRIBUNAL
Decided on October 04,2016

IN RE Appellant
VERSUS
INDURI FARM LTD Respondents

JUDGEMENT

M.K. Shrawat, Member - (1.)Petition under consideration was filed on 16th August, 2016 under the provisions of section 14 of Companies Act, 2013 ('the Act'). At the outset, it is worth to reproduce the relevant portion of the section as under:
"14. Alteration of articles. - (1) Subject to the provisions of this Act and the conditions contained in its memorandum, if any, a company may, by a special resolution, alter its articles including alterations having the effect of conversion of-

(a) a private company into a public company; or

(b) a public company into a private company:

Provided that:...

Provided further that any alteration having the effect of conversion of a public company into a private company shall not take effect except with the approval of the Tribunal which shall make such order as it may deem fit.

(2) Every alteration of the articles registered under sub-section (2) shall, subject to the provisions of this Act, be valid as if it were originally in the articles "

It is important to clarify that the transition period of Companies Act, 1956 into Companies Act, 2013 was fairly large; hence, in the interregnum, certain arrangements were made by the Ministry of Corporate Affairs, and one of such arrangements was in respect of the provisions of section 14 of Companies Act, 2013. In this regard, during the hearing of this CP, a notification dated 11th June, 2014 is placed on record; relevant portion extracted below:

"Attention of the Ministry has been drawn to difficulties being faced by stakeholders while filing Form INC-27 for conversion of a public company into a private company. The relevant provisions of Companies Act, 2013 [second proviso to sub-section (1) and sub-section (2) of section 14] have not been notified. In view of this, the corresponding provisions of Companies Act, 1956 [Proviso to sub-section (1) and sub-section (2A) of section 31] shall remain in force till corresponding provisions of Companies Act, 2013 are notified. The Central Government has delegated such powers under the Companies Act, 1956 to the Registrar of Companies ('RoCs') vide item No. (c) of the notification number SO No. 1538(E) dated the 10th July, 2012 and this delegated power remains in force. Applications for such conversions, therefore, have to be filed and disposed as per the earlier provisions.

2. This issues with the approval of the Competent Authority...."

(2.)By issuance of the notification it was made clear that the corresponding provisions of Companies Act, 1956 shall remain in force till corresponding provisions of Companies Act, 2013 are notified. As a result, the impact of this Notification was that after the MCA Notification dated 1st June, 2016 (to be discussed hereinbelow), the applicability of the old provisions along with the attached rules got suspended. To proceed with the matter, it is requisite to hold that rule 33 of the Companies (Incorporation) Rules, 2014, which had prescribed that for effecting the conversion of a private company into a public company was to be approved by the competent authority, i.e., Central Government; had become redundant.
(3.)My reason to hold rule 33 as redundant is two-fold:
"(a) First is that section 14(2) of the Act, 2013 vide an Official Gazette of India, Extraordinary, Part II dated 1st June, 2016 [SO 1934(E) in exercise of the powers conferred the Central Government has appointed/declared the date 1st June, 2016, as the date on which certain provisions of the Act came into force, and among the long list of several sections, the second proviso to sub-section (1) of section 14 and sub-section (2) of section 14 were included. As a result, the powers conferred vide section 14(2) of the Act to the Tribunal (NCLT) to pass an appropriate order in connection of proposed conversion had superseded the old provisions. Therefore, the operation of rule 33 of the Companies (Incorporation) Rules, 2014 shall be limited to give effect of the order of NCLT by the Registrar within 15 days on receipt.

(b) Second reason to proceed with the matter is that once the provision of section 14(2) (now stood notified supra) has enshrined power to NCLT; hence, the statute prevails over the Rules. There are no two opinions in respect of this accepted position of interpretation of statute."

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