Bhaskara Pantula Mohan, Member - (1.) Petition under consideration was filed on 19th July, 2017 under the provisions of Sec. 14 (1) of Companies Act, 2013 (herein below referred as "the Act") . At the outset, it is worth to reproduce the relevant portion of the Section as unden- " Alteration of Articles'" 14. (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 subsection (2) shall, subject to the provisions of this Act, be valid as if it were originally in the articles"
(2.) The issue of conversion of Private Company into Public Company and vice-versa is to be dealt with by NCLT (henceforth referred as "Tribunal") within the ambits of Section 14 of the Act. This Section prescribes that a company, either a Public Company or a Private Company, can alter its Article if such condition is contained in its Memorandum, but by a special resolution. Such alteration, for the purpose of this section, has the effect of conversion of a Public Company into a Private Company. The issue in hand is dealt with by second proviso to Section 14 (c) which says that any alteration having the effect of conversion of a Public Company into a Private Company shall not come into operation except with the approval of the Tribunal. The Tribunal shall make such order as it may deem fit. Further, a procedure is also laid down to give effect of the order of the Tribunal in sub-section (2) of Section 14 of the Act. This subsection has prescribed that a copy of such alteration of the Articles along with a copy of the order of the Tribunal, approving the alteration, is required to be filed with the Registrar of Companies, within fifteen days. The Registrar thereupon shall register the change. The Companies Act, 2013 has further made it clear to remove any ambiguity by legislating sub Section 3 of Section 14 that any such alteration of the Articles registered shall be valid as if it were originally in the Articles, meaning thereby, the change so incorporated of "Conversion" shall be in supersession of the old clauses of an Article.
(3.) In addition to the introduction of Section 14 in Companies Act, 2013, the MCA vide a Notification dated 21st July, 2016 (published in Gazette of India on 22nd August, 2016 GSR 716 (E) ) also framed National Company Law Tribunal Rules, 2016. The Rule connected to conversion of Public Company to Private Company is Rule 68 which has laid down the guidelines for the implementation of such conversion. A Petition for conversion of Public Company to Private Company is required to accomplish the conditions laid down under Rule 68 of NCI-T Rules 2016. For the purpose of disposal of this Company Petition the conditions accomplished by this Petitioner as prescribed in the Rule are examined as under:- A) The Board of Directors of M/s. Sigma Laboratories Limited (Petitioner) have decided in their meeting held on 16th March, 2017 to convert the Petitioner Company "Sigma Laboratories Limited" to Private Limited Company by the name and style of "Sigma Laboratories Private Limited". And at the Extraordinary General Meeting held on 24th April, 2017 at the Petitioner Company's registered office at 43 (South) R A Kidwai Road, Wadala, Mumbai - 400031, Maharashtra, India, a Special Resolution has been passed for conversion of the Petitioner Company from Public Limited Company to Private Limited Company. The Members have voted in favour of the resolution. B) The reason for conversion into a Private Company [Rule 68 (2) (e) ] as set out in the Petition is specified as under:- "IV. FACTS OF THE CASE ARE GIVEN BELOW" a) The Company was originally incorporated on 30th March, 1987 as a Private Limited Company with the name Sigma Laboratories Private Limited. Later the Sigma Laboratories Private Limited converted into a Public Limited Company due to the provisions of Section 43 A of the Companies Act, 1956 as Deemed Public Company from 1st July, 2000 and its name got changed from Sigma Laboratories Private Limited to Sigma Laboratories Limited. The Company is involved in the business activities such as to acquire and take over as a running concern the business of manufacture of all kinds of drug and pharmaceutical preparations formulations. b) The Board of Directors of the Applicant company were contemplating to convert the status of the Company from Public Limited to private Limited as the company was originally formed as a Private Limited. The Company was considering that since the Applicant Company has no benefit of having status as Public Limited Company and it has no plan for listing of its securities on any stock exchange. There are lesser compliances in the case of Private Limited Company, which facilitates better management, quick decision making and is also economical in terms of various compliance related cost in long run. Considering the aforesaid, the Board of Directors and shareholders have approved to convert the Company into a Private Limited. The current status of the Company is "Unlisted Public Company". c) On 16th March, 2017 the Board approved the conversion of the Company into Private Company and for alteration of Articles of the Company. d) The members approved the proposed alteration in the Extra Ordinary General Meeting held on 24th April. 2017. e) To give effect of the proposed conversion, Memorandum of Association (MOA) and Articles of Association (AOA) of the Company shall undergo a change. C) As shown in their Company Petition the capital structure of Petitioner Company is as under:- 1 .PARTICULARS OF COMPANY: i. The Authorized Share Capital of the Company is Rs. 20,00.00,000/-(Rs. Twenty Crores only) . ii. The issued, subscribed and paid-up Share Capital of the Company is Rs. 17,00,00,000/- (Rs. Seventeen crores only) . iii. The compilation consists Publication of Notification depicting intention of conversion in compliance of Rule 68 (5) of NCLT Rules, 2016.;