Madras High Court
M/S.Analog Financial Services Private ... vs T.Raghavan on 30 April, 2014
Comp.A.Nos.413 & 414 of 2019
and Comp.A.No.313 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
D AT E D : 03.02.2022
C O RAM :
The Hon'ble Mr. Justice SENTHILKUMAR RAMAMOORTHY
Comp.A.Nos.413 and 414 of 2019
and Comp.A.No.313 of 2021
in
C.P.No.15 of 2014
Comp.A.Nos.413 and 414 of 2019
M/s.Analog Financial Services Private Limited,
First Floor, Room No.3, Sundaram Complex,
No.20, Sastri Road, Tennur,
Trichy – 620 017.
Rep. by its Director R.Ganesh. ... Applicant
(in Comp.A.Nos.413 & 414 of
2019)
vs
1.T.Raghavan
2.Jayalakshmi Padmanabhan
3.R.Vijayashree
4.Sivakumar Thiagarajan
5.V.Panchapakesan
6.P.Lakshmi
7.Viswapriya (India) Limited,
75-C, II Main Road, Gandhi Nagar,
Adyar, Chennai – 600 020.
Rep. by its Director R.Subramanian.
_____________
https://www.mhc.tn.gov.in/judis
Page No.1 of 28
Comp.A.Nos.413 & 414 of 2019
and Comp.A.No.313 of 2021
8.The Deputy Superintendent of Police,
Economic Offences Wing,
Guindy, Madras – 600 032. ... Respondents
(in Comp.A.Nos.413 and 414 of 2019)
Comp.A.No.313 of 2021
1.Viswapriya (India) Limited,
75-C, II Main Road, Gandhi Nagar,
Adyar, Chennai – 600 020.
Rep. by its Director R.Subramanian.
2.R.Subramaniam ... Applicants
(in Comp.A.No.313 of 2021)
vs.
1.R.Shanker
2.M/s.Analog Financial Services Private Limited,
No.16-A, 8 & 9, First Floor,
No.20, Sastri Road, Tennur,
Trichy – 620 017.
Rep. by its Director R.Ganesh.
3.P.H.Arvindh Pandian
Administrator of Viswapriya (India) Ltd.
New No.115, 1st Floor, Luz Church Road
Mylapore, Chennai 600002
4.State of Tamil Nadu
Home Department
Rep. by Secretary
Fort, St.George,
Chennai - 600 009. ... Respondents
_____________
https://www.mhc.tn.gov.in/judis
Page No.2 of 28
Comp.A.Nos.413 & 414 of 2019
and Comp.A.No.313 of 2021
(in Comp.A.No.313 of
2021
Prayer in Comp.A.No.413 of 2019: This Application has been filed under
Order XIV Rule 8 of the original side Rules and Rule 9, 11(b) of the
Companies (Court) Rules and Section 434 of Companies Act 2013 praying
to transfer the C.A.No.367 of 2015 to National Company Law Tribunal
Chennai.
Prayer in Comp.A.No.414 of 2019: This Application has been filed under
Order XIV Rule 8 of the original side Rules and Rule 9, 11(b) of the
Companies (Court) Rules and Section 434 of Companies Act 2013 praying
to transfer the C.A.No.366 of 2015 to National Company Law Tribunal
Chennai.
Prayer in Comp.A.No.313 of 2021: This Application has been filed under
Order XIV Rule 8 of the Original Side Rules and Section 231 of Companies
Act 2013 and Section 392 of Companies Act, 1916 R/W Rule 6 & 9 of CC
Rules 1959 praying to dismiss the C.A.No.56 of 2021 with exemplary costs.
For Applicant : Mr.Prakash Goklaney
(Applicant's counsel in
Comp.A.Nos.413 and 414 of 2019)
Mr.R.Subramanian
(Party-in person for 2nd Applicant in
Comp.A.No.313 of 2021)
For Respondents : Mr.H.Karthik Seshadri
_____________
https://www.mhc.tn.gov.in/judis
Page No.3 of 28
Comp.A.Nos.413 & 414 of 2019
and Comp.A.No.313 of 2021
for M/s.Iyer and Thomas
(in all applications)
Mr.P.H.Arvindh Pandian
Administrator
(R-3 in Comp.A.No.313 of 2021)
Mr.Edwin Prabhakar, Spl G.P.
(R-4 in Comp.A.No.313 of 2021)
COMMON O R DER
All these applications arise out a petition filed by Analog Financial Services Private Limited(Analog) under Section 391 of the Companies Act, 1956 (CA 1956) seeking sanction of a scheme of compromise between M/s.Viswapriya (India) Limited (Viswapriya or the Company) and its creditors. In Comp. A. No.413 of 2019, Analog seeks the transfer of Comp.A.No.367 of 2019, which was filed to recall the order sanctioning the scheme of compromise and to consequently wind-up the sponsor, Analog. In Comp. A. No.414 of 2019, Analog seeks the transfer of Comp.A.No.366 of 2019, which was also filed to recall the order sanctioning the scheme of compromise and to consequently wind-up Vishwapriya. In Comp.A.No.313 of 2021, Viswapriya seeks the dismissal of Comp.A.No.56 of 2021, which was filed to direct sale of specific assets of Vishwapriya. _____________ https://www.mhc.tn.gov.in/judis Page No.4 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021
2. By order dated 30.04.2014, this Court sanctioned the scheme of compromise (the Scheme) proposed by Analog. In terms thereof, the secured debenture holders were directed to be paid their dues within the time limits specified in the Scheme in alteration of the original terms of repayment under the relevant debenture. The admitted position is that the Scheme was not adhered to either by the proponent of the scheme, Analog, or the Company, Viswapriya. Therefore, by subsequent proceedings under Section 392 of CA 1956, this Court appointed Mr.P.H.Arvindh Pandian, learned Senior Advocate, as the Administrator of Viswapriya. Thereafter, the learned Administrator submitted about five reports to this Court. In addition, depositors/debenture holders lodged complaints with the police. Pursuant thereto, a case was registered by the Economic Offences Wing - II in Crime No.5 of 2013 under Sections 402,420,120-B,468,471,409 IPC read with Section 109 IPC and Section 5 of the Tamil Nadu Protection of Interests of Depositors (in Financial Establishments) Act,1997( the TNPID Act). The accused in such proceedings, in order, were Viswapriya(A1), Akshaya Boomi Investment Private Limited(A2), Quatrangle Trading Services Limited(A3), Mr.Subramanian(A4), Mr.Narayanan(A5), Mr.Rajarathinam(A6) and Mr.T.S.Raghavan(A7). Subsequently, _____________ https://www.mhc.tn.gov.in/judis Page No.5 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 Mr.Subramanian was arrested on 19.09.2015, and several persons were added as accused in course of investigation. Upon completion of investigation, a charge sheet was filed before the TNPID Court, Chennai on 17.07.2019 and the same was taken on file in C.C.No.6 of 2020 dated 16.10.2020. Orders were obtained from the Government in relation to the attachment of movable and immovable properties. A petition to quash the proceedings is pending at the instance of the 15th and 17th accused in the proceedings. A status report dated 26.10.2021 has been filed by the Deputy Superintendent of Police, Economic Offences Wing -II, Guindy, Chennai - 32 in such regard.
3. Several applications were filed by debenture holders of the Company seeking relief such as the summoning of Mr.Subramanian so as to arrest and hold him in custody; to call for an investigation report from the Special Frauds Investigation Office(SFIO); to direct further investigation by the SFIO; to recall the orders sanctioning the scheme of arrangement; to clarify earlier orders passed under Section 391(6) of CA 1956. More recently, Comp.A.No.56 of 2021 was filed by a debenture holder seeking the sale of the movable and immovable properties set out in the Schedules _____________ https://www.mhc.tn.gov.in/judis Page No.6 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 thereto. As stated earlier, Vishwapriya and Mr.Subramanian seek dismissal of the said application on the ground that applications relating to the Scheme cannot be filed before this Court because this Court does not have jurisdiction over the same. Analog filed Comp.A.Nos.413 and 414 of 2019 seeking transfer of specific applications to the National Company Law Tribunal, Chennai (the NCLT) in view of the recent amendments to the Companies Act, 2013 (CA 2013). The said three applications are considered and disposed of by this order.
4. Mr.Prakash Goklaney, learned counsel for Analog, submitted that this Court is required to transfer the applications to the NCLT upon request by any person who is a party to the proceedings. According to him, once it is concluded that the Scheme could not be implemented, the most drastic consequence would be to order the winding-up of the Company. In such circumstances, upon request by a party thereto, in terms of the second proviso to Section 434(1)(c) of CA 2013, the applications of which transfer is requested must be transferred to the NCLT. In support of this contention, Mr.Prakash Goklaney referred to and relied upon the following judgments:
_____________ https://www.mhc.tn.gov.in/judis Page No.7 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021
(i) Jaipur Metals and Electricals Employees Organisation v.
Jaipur Metals and Electricals Ltd (2019) 4 SCC 227 (Jaipur Metals), whereby the Hon'ble Supreme Court held that all proceedings under Section 20 of the Sick Industrial Companies (Special Provisions) Act, 1985, which are pending before High Courts, must be transferred to the NCLT if a party files an application seeking transfer.
(ii) Forech India Limited v. Edelweiss Assets Reconstruction Company Limited and another (2019) 18 SCC 549, wherein the Hon'ble Supreme Court referred to the evolution of Section 434 of CA 2013 whereby the section was amended to enable a person to file a petition seeking transfer of cases retained by the High Court in accordance with the pre-amended Section 434.
(iii) Action Ispat and Power Private Limited v. Shyam Metalics and Energy Limited, (2021) 2 SCC 641, wherein, at paragraphs 7 & 8, the Hon'ble Supreme Court referred to the judgment in Jaipur Metals. Mr.Prakash Goklaney also contended that the order passed by this Court in C.A.No.1175 of 2016 in C.P.No.15 of 2014 on 05.01.2017 would not operate as res judicata as regards the present request for transfer. Although _____________ https://www.mhc.tn.gov.in/judis Page No.8 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 this Court concluded in the said order that the pending applications are not liable to be transferred to the NCLT, Mr. Prakash Goklaney contended that the said order did not notice Section 231(3) of CA 2013 and, therefore, the order does not preclude the filing of an application for transfer of these proceedings to the NCLT. For this proposition, the judgment in Canara Bank v. N.G.Subbaraya Setty and Another (2018) 16 SCC 228 was relied upon. In particular, reliance was placed on paragraph 34.2.1 of the judgment wherein the Hon'ble Supreme Court held that an erroneous decision in a former suit or proceeding does not qualify as res judicata in a subsequent suit or proceeding between the same parties.
5. Mr.R.Subramanian also made submissions on the same lines as Mr.Prakash Goklaney. Appearing as party-in-person, Mr.R.Subramanian contended that the earlier order of this Court dated 05.01.2017 in C.A.No.1175 of 2016 did not take into account Section 231(3) of CA 2013. Mr.R.Subramanian contended that Sub-section 3 of Section 231 enables the NCLT to apply Section 231 to a scheme of arrangement or compromise which was sanctioned by the High Court under Section 391 of CA 1956 _____________ https://www.mhc.tn.gov.in/judis Page No.9 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 prior to the entry into force of the provisions relating to compromises, arrangements and amalgamations in CA 2013.
6. According to Mr.R.Subramanian, only high courts were exercising the power to consider schemes of arrangement under CA 1956 before the entry into force of CA 2013. As a corollary, sub-section 3 of Section 231 of CA 2013 enables the jurisdictional NCLT to consider matters relating to the implementation of a scheme of arrangement which was sanctioned by any high court, including this Court. Thus, if Section 231(3) of CA 2013 is applied to the facts of this case, he contended that the NCLT has the authority to consider any application with regard to the implementation of the Scheme, which was sanctioned by this Court on 30.04.2014. Since the NCLT has the jurisdiction to consider applications relating to the implementation of the Scheme, he contended that this Court does not have the authority or jurisdiction to consider such applications in view of the Companies(Transfer of Pending Proceedings) Rules, 2016(the Transfer Rules). By referring to Rule 3 of the Transfer Rules, he contended that the said Rule applies to all proceedings other than proceedings for winding up. Consequently, Rule 3 applies to proceedings for sanction of a _____________ https://www.mhc.tn.gov.in/judis Page No.10 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 scheme of compromise. He contended that the petition under Section 391 of CA 1956 was disposed of by sanctioning the Scheme. Under Rule 3, he contended that the only exception to transfer is with regard to proceedings which are reserved for orders, either to be allowed or otherwise. None of the applications which are being considered, at present, are applications in which orders were reserved. Therefore, he contended that the exception is not attracted. If the exception is not attracted, he contended that the applications are liable to be transferred to the jurisdictional NCLT as requested by him and Analog. He placed reliance on the same judgments as those relied upon by Mr.Prakash Goklaney. In addition, he pointed out that an application was filed by Viswapriya before the NCLT under Section 231(3) of CA 2013. By such application, modifications to the Scheme were prayed for. The final contention of Mr.Subramanian is that CA 1956, including Section 391 thereof, has been repealed by Section 465(1) of CA 2013. Consequently, this Court lacks the authority and jurisdiction to consider and adjudicate these applications. For all these reasons, he submitted that these applications should not be dealt with by this Court and should instead be transferred to the NCLT.
_____________ https://www.mhc.tn.gov.in/judis Page No.11 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021
7. These contentions were refuted by Mr.H.Karthik Seshadri, learned counsel for the depositors/ debenture holders. Mr.Karthik Seshadri pointed out that a petition was filed under Section 391 of CA 1956 by Analog seeking sanction for a scheme of arrangement / compromise. Upon considering the draft scheme propounded by Analog, this Court sanctioned the Scheme by order dated 30.04.2014. The admitted position is that the Scheme could not be implemented because Analog and Viswapriya failed to honour the commitments and obligations undertaken under the Scheme. This resulted in the filing of multiple applications by depositors/ debenture holders. As a result, by order dated 22.08.2016 in C.A.Nos.113 of 2016, 651 and 652 of 2015 and 365 to 367 of 2015, this Court appointed Mr.P.H.Arvindh Pandian, Senior Advocate, as the Administrator of Viswapriya after noticing that the propounder of the Scheme had resiled from its obligations under the Scheme. Pursuant thereto, Mr.Karthik Seshadri pointed out that the learned Administrator had filed about five reports before this Court after conducting inquiries and investigations into the affairs of Viswapriya. In these circumstances, he contended that the proceedings are not liable to be transferred. He also pointed out that investigation is in progress before the TNPID Court and that assets of _____________ https://www.mhc.tn.gov.in/judis Page No.12 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 Viswapriya and its promoters have been identified for attachment. Therefore, the proceedings should be retained by this Court. Besides, he contended that this Court should take charge of the assets and affairs and initiate liquidation of Viswapriya and Analog.
8. The rival contentions raise several questions. Although the contention that CA 1956, including Section 391 thereof, was repealed was the last contention, this issue should be dealt with first for the following reason: if accepted, this Court cannot exercise authority to consider and decide these applications irrespective of the answer to the other queries. For such purpose, Section 434(1)(c) and the relevant provisos thereto are set out below:
“S.434. Transfer of certain pending proceedings.
(1)On such date as may be notified by the Central Government in this behalf,-
(c)all proceedings under the Companies Act, 1956, including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding-up of companies, pending immediately before such date before any District Court or High Court, shall stand transferred to the Tribunal and _____________ https://www.mhc.tn.gov.in/judis Page No.13 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 the Tribunal may proceed to deal with such proceedings from the stage before their transfer:
Provided that only such proceedings relating to the winding up of companies shall be transferred to the Tribunal that are at a stage as may be prescribed by the Central Government:
Provided further that only such proceedings relating to cases other than winding up, for which orders for allowing or otherwise of the proceedings are not reserved by the High Courts shall be transferred to the Tribunal:
Provided also that-
(i) all proceedings under the Companies Act, 1956 other than the cases relating to winding up of companies that are reserved for orders for allowing or otherwise such proceedings; or
(ii) the proceedings relating to winding up of companies which have not been transferred from the High Courts;
shall be dealt with in accordance with the provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959....” The other provision of relevance, in this regard, is Section 465 of CA 2013, which, in relevant part, is as under:
_____________ https://www.mhc.tn.gov.in/judis Page No.14 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 ''65(1) The Companies Act, 1956 (1 of 1956) and the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) (hereafter in this section referred to as the repealed enactments) shall stand repealed:
....
Provided further that until a date is notified by the Central Government under sub-section (1) of section 434 for transfer of all matters, proceedings or cases to the Tribunal, the provisions of the Companies Act, 1956 (1 of 1956) in regard to the jurisdiction, powers, authority and functions of the Board of Company Law Administration and court shall continue to apply as if the Companies Act, 1956 has not been repealed.''
9. Section 465 of CA 2013 indicates beyond doubt, by drawing express reference to Section 434 thereof, that these two provisions should be interpreted harmoniously by reading and applying both provisions. The third proviso to Section 434(1)(c) - which deals with matters retained by the High Court: matters other than winding up in sub-clause(i) thereof, and winding up in sub-clause (ii) thereof - stipulates categorically that such retained matters “shall be dealt with in accordance with the provisions of the _____________ https://www.mhc.tn.gov.in/judis Page No.15 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 Companies Act, 1956 and the Companies (Court) Rules, 1959. The second proviso to Section 465(1) uses the expression “as if the Companies Act, 1956 has not been repealed”. Thus, the unequivocal position that emerges is that CA 1956 and the Companies (Court) Rules, 1959 continue to apply to matters retained by the High Court. In effect, if validly retained, Section 465 of CA 2013 has no effect on the continued application of CA 1956 or the rules framed thereunder.
10. The question whether these proceedings are required to be transferred is, however, a distinct matter. Since this issue was considered previously, it warrants scrutiny whether the earlier order of this Court constitutes a bar to the present request for transfer. By order dated 05.01.2017 in CA No.1175 of 2016 and C.A.Nos.609 to 614 of 2016, this Court concluded that the proceedings are not liable to be transferred to the jurisdictional NCLT. In paragraph 12 of the said order, this Court held, in relevant part, as under:
''12....All these factors would clearly establish that the Scheme having been approved, and this court having appointed an Administrator, by order, dated 22.08.2016, it is for this Court to monitor as to whether _____________ https://www.mhc.tn.gov.in/judis Page No.16 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 the Scheme has been implemented or not, and what is the intent and purport for giving up the scheme and whether there were any hidden agenda for giving up the Scheme with an intention to stall the criminal proceedings, etc. Therefore, the submission of the Director of VIL, Mr.R.Subramanian, that the applications have to be transferred to NCLT, stands rejected and this Court will continue to hear these applications.'' From the above extract of the order dated 05.01.2017, there is no doubt that this Court rejected the earlier request for transfer primarily on the ground that this Court had sanctioned the Scheme and had initiated action pursuant thereto by also appointing an Administrator. This order is the subject matter of O.S.A.SR.No.26384 of 2017. Although an appeal was filed, the said appeal is stated to be at the stage of consideration of an application to condone the delay in filing thereof. Notwithstanding the above position, both Analog and Mr.Subramanian contend that the order dated 05.01.2017 does not preclude the reiteration of a request for transfer because the order dated 05.01.2017 is erroneous and, therefore, does not operate as res judicata.
_____________ https://www.mhc.tn.gov.in/judis Page No.17 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021
11. In this regard, both Analog and Mr.Subramanian rely upon Section 231(3) of CA 2013. Sub Section 3 of Section 231 reads as under:-
''3. The provisions of this section shall, so far as may be, also apply to a company in respect of which an order has been made before the commencement of this Act sanctioning a compromise or an arrangement'' Section 231 of CA 2013 mirrors Section 392 of CA 1956. These provisions are enabling provisions whereby the Court under Section 392 of CA 1956 or the NCLT under Section 231 of CA 2013, as the case may be, may consider applications relating to a scheme of arrangement sanctioned under earlier company law legislation such as the Indian Companies Act 1913 or CA 1956, as the case may be. Thus, Sub-section 3 of Section 231 is not a provision which confers exclusive jurisdiction to supervise schemes of arrangement on the NCLT. More importantly, S.231(3) is undoubtedly not a provision which divests this Court of jurisdiction in such matters.
12. This leads to the central issue: is it either obligatory or even appropriate, in exercise of discretion, for this Court to transfer the applications, as per Analog's request, to the NCLT? Both Section 434 of CA 2013 and the Transfer Rules throw light on this issue. At the outset, it should _____________ https://www.mhc.tn.gov.in/judis Page No.18 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 be noticed that Section 434(1)(c) of CA 2013 deals with all proceedings under CA 1956, collectively, including proceedings for winding up or schemes of arrangement. To put it differently, only the provisos deal separately with winding up proceedings and other proceedings, and not the principal clause. Secondly, it should be noticed that the above provision deals with proceedings and not applications or even petitions. While enumerating proceedings illustratively, the language used is “including proceedings relating to arbitration, compromise, arrangements and reconstruction and winding up of companies... shall stand transferred....” The expression “proceedings” is not defined either in CA 1956 or CA 2013. The expression “relating to” is also undefined but certainly widens the scope of the expression “proceedings”. In effect, Section 434 of CA 2013 deals with transfer of proceedings, including proceedings relating to a scheme of arrangement, and not transfer of individual applications or petitions relating thereto. As regards proceedings relating to schemes of arrangement, the second proviso to Section 434(1)(c) provides for transfer thereof if orders were not reserved. Rule 3 of the Transfer Rules also deals with the transfer of pending proceedings other than winding up proceedings. Rule 3 is as under:
_____________ https://www.mhc.tn.gov.in/judis Page No.19 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 ''Transfer of Pending Proceedings relating to cases other than winding up:
All proceedings under the Act, including proceedings relating to arbitration, compromise, arrangements and reconstruction, other than proceedings relating to winding up on the date of coming into force on these rules shall stand transferred to the Benches of the Tribunal exercising respective territorial jurisdiction:
provided that all those proceedings which are reserved for orders for allowing or otherwise of such proceedings shall not be transferred.'' From the above Rule, it is evident that except proceedings reserved for orders, all other proceedings pending before the Companies Court are liable to be transferred. On the basis of this Rule, both Mr.Goklaney and Mr.Subramanian contended that since none of the pending applications are reserved for orders, they are liable to be transferred.
13. In the specific context of the Scheme, Analog, the propounder, initially filed applications to convene meetings of stakeholders to consider the draft scheme, and thereafter filed a petition to sanction the draft scheme upon approval by its stakeholders. By this process, the Scheme was sanctioned by order dated 30.04.2014 in C.P.No.15 of 2014. Subsequent _____________ https://www.mhc.tn.gov.in/judis Page No.20 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 thereto, applications were filed under Section 392 of CA 1956 in C.P.No.15 of 2014 by various stakeholders. From the above narration, there is no doubt that all the applications and the petition under Section 391 are closely interconnected. The power under Section 392 of CA 1956 is a consequential power vested in the court, which sanctioned a scheme of arrangement, to supervise and ensure the implementation thereof, if feasible, or order winding up otherwise. Therefore, this power is ordinarily exercised only by the court which sanctioned the relevant scheme.
14. The contention of Analog and Mr.Subramanian that each application in C.P.No.15 of 2014 should be construed as an independent proceeding for purposes of Section 434 of CA 2013 remains to be considered. In the context of winding up proceedings, the legislative intent is clear from the first proviso to Section 434(1)(c) of CA 2013 read with Rule 5 of the Transfer Rules. The first proviso stipulates that the cut-off stage to determine whether the proceedings would stand transferred would be prescribed by the Central Government, and Rule 5 prescribes that the criterion or cut-off factor is whether the petition was served on the respondent under Rule 26 of the Companies (Court) Rules 1959. If served, _____________ https://www.mhc.tn.gov.in/judis Page No.21 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 the proceedings before the jurisdictional high court shall not stand transferred unless a request is made by a party thereto in terms of the amended last proviso to Section 434(1) of CA 2013. If the expression “proceedings” is construed as each individual application relating to a winding up petition, given the cut-off criterion, if the petition for winding up had crossed the Rule 26 stage, such petition would be retained by the relevant high court, whereas individual applications in the winding up petition would stand transferred. Clearly, this would result in ludicrous consequences. Even in the context of a scheme of arrangement, it could lead to a situation wherein the petition in which the scheme is sanctioned and individual applications in which orders are reserved would be retained by the high court concerned, whereas other applications relating to the same scheme of arrangement would stand transferred to the NCLT. In such event, the appeals arising out of the retained petition and applications would also remain in the high court. This would make a mockery of the object and purpose of transfer, which is to consolidate the petition and all applications relating to and arising out of a winding up petition or a scheme of arrangement, as the case may be, so as to enable one forum to deal with the same in a meaningful way. As regards proceedings relating to schemes of _____________ https://www.mhc.tn.gov.in/judis Page No.22 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 arrangement, the second proviso to Section 434(1)(c) of CA 2013 is applicable. This proviso uses the expression “only such proceedings...shall be transferred to the Tribunal” and makes it clear that if orders are reserved in the proceedings, the proceedings shall not stand transferred. Thus, in contrast to service of notice under Rule 26 (i.e. pre-admission), the cut-off is fixed further down the road at the point of reserving orders in the proceedings. Significantly, the cut-off criterion is if orders are reserved in the proceedings, and not in an application in the proceedings. In the case at hand, orders were passed in the petition under Section 391 as early as on 30.04.2014 and only consequential applications under Section 392 of CA 1956 are pending. If an analogy is drawn to winding up proceedings, once the Scheme was sanctioned, the applications under Section 392 of CA 1956 are similar to applications filed after a winding up order is passed under Section 433 read with 443 of CA 1956. Thus, this Court is dealing with applications at the post-sanction stage of proceedings initiated under Section 391 of CA 1956. In an appropriate case, where no applications are pending after the sanction of a scheme of arrangement, it may be possible for a party to request the jurisdictional high court for permission to prosecute an application under Section 231(3) before the jurisdictional NCLT. Upon _____________ https://www.mhc.tn.gov.in/judis Page No.23 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 consideration thereof, the jurisdictional high court may, at its discretion and not as a transfer by operation of law, transfer the proceedings, and enable prosecution of the application under Section 231(3) of CA 2013 by the applicant concerned.
15. In this case, as pointed out by Mr.Karthik Seshadri, the Scheme could not be implemented on account of default by the propounder and Viswapriya. Therefore, by order dated 22.08.2016, this Court recorded as under:
''11. I am of the view that a propounder of the scheme cannot resile from its obligation in the manner, in which, AFSPL today seeks to do; given what was portrayed to this Court, when the scheme was sanctioned in the first instance.'' After recording the above finding, the Court appointed Mr.P.H.Arvindh Pandian, Senior Advocate, as the Administrator. The said Administrator has also filed about five reports before this Court. Criminal proceedings are also pending before the TNPID Court and the learned Public Prosecutor has filed _____________ https://www.mhc.tn.gov.in/judis Page No.24 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 a status report dated 26.10.2021 in such regard. In addition, a contempt petition is pending before this Court.
16. While Mr.Goklaney and Mr.Subramanian referred to and relied upon several orders of the Hon'ble Supreme Court relating to Section 434 of CA 2013, the said orders pertain to winding up proceedings, which were retained by the High Court because such proceedings had crossed the stage of issuance of notice as per Rule 26 of the Companies (Court) Rules 1959. Pursuant to the amendment to Section 434 by the introduction of the last proviso thereto, a party to the proceedings is entitled to file an application for transfer in retained matters. Applications for transfer were filed in those cases by resorting to such proviso. In contrast, in the present case, as indicated above, the Scheme was sanctioned by this Court and several applications were dealt with thereafter under Section 392 of CA 1956. Indeed, it bears repetition that the cut-off, as regards schemes of arrangement, is fixed at the advanced stage of reserving orders in the proceedings. Consequently, there is no provision analogous to the last proviso to Section 434(1) of CA 2013 to seek transfer of retained matters. In _____________ https://www.mhc.tn.gov.in/judis Page No.25 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 fine, these applications are completely misconceived and premised on the mistaken notion that CA 2013 provides for transfer of applications.
17. For reasons set out above, the order dated 05.01.2017 does qualify as res judicata and is not erroneous in any respect. In any event, for reasons set out in the preceding paragraphs, the specific applications and, indeed, the proceedings relating to the Scheme are not liable to be transferred to the NCLT. Except for the assertion that this Court has no jurisdiction, no reasons are set out in Comp.A.No.313 of 2021 to dismiss Comp.A.No.56 of 2021. For these misadventures, in the face of the earlier order of this Court, each set of applicants should be suitably rewarded.
18. As a corollary, Company Application Nos. 413 and 414 of 2019 and Company Application No.313 of 2021 are dismissed. Each set of applicant/s shall pay costs of Rs.1,00,000/- to the Tamil Nadu State Legal Services Authority within two weeks from the date of receipt of a copy of this order. All the other pending applications shall be retained in this Court. List all pending applications on 11.02.2022. The Registry is directed to communicate a copy of this order to the National Company Law Tribunal, _____________ https://www.mhc.tn.gov.in/judis Page No.26 of 28 Comp.A.Nos.413 & 414 of 2019 and Comp.A.No.313 of 2021 Chennai, in view of the assertion by Viswapriya (India) Limited that an application under Section 231(3) of the Companies Act 2013 is pending before the said Tribunal.
03.02.2022
Index :Yes
Internet :Yes
rrg
SENTHILKUMAR RAMAMOORTHY J.,
r
rg
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https://www.mhc.tn.gov.in/judis
Page No.27 of 28
Comp.A.Nos.413 & 414 of 2019
and Comp.A.No.313 of 2021
Comp.A.Nos.413 & 414 of 2019
and
Comp.A.No.313 of 2021
in
C.P.No.15 of 2014
03.02.2022
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https://www.mhc.tn.gov.in/judis
Page No.28 of 28