Calcutta High Court
B. C. Sen International Limited & Ors vs Unknown on 25 June, 2013
Author: Harish Tandon
Bench: Harish Tandon
CA No. 233 of 2013
IN THE HIGH COURT AT CALCUTTA
ORIGINAL JURISDICTION
In the matter of:
B. C. Sen International Limited & Ors.
Before:
The Hon'ble Justice Harish Tandon
Date: 25th June 2013
Appearance:
Mr. Arindam Mukherjee, Advocate
The Court: The Court: A point has evolved at the instance of the
Court as to whether notice to the Central Government shall be given on an
application under Section 391 (1) moved by way of judges summons, ex
parte before issuing an order convening a meeting of the creditors or class
of creditors or members or class of members as the case may be. The
scheme is proposed for merger of the Transferor Companies with a
Transferee Company, the salient features of which have been jotted down
in Paragraph 7 of the petition, which does not require an elaborate
narration for the present purposes.
Section 391 of the Companies Act provides the sanctioning of the
scheme by the Court, provided; the Court is satisfied that an application
made under the said provisions contains all disclosure of material facts
relating to the Company namely the latest financial position of the
Company, latest auditor's report on accounts of the Company and
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pendency of any investigation proceeding in relation to the Company. At
the time of promulgating the Companies Act, 1956, Section 394A was not
incorporated but was subsequently inserted by Act 31 of 1965 with effect
from 15th October, 1965. By virtue of Sub-section 1 and 2 of Section 643 of
the Companies Act, 1956, the Companies (Court) Rules 1959 was framed
by the Supreme Court of India and assumes the Act of parliament. The
said rule came into force on and from 1st day of October, 1959. Rule 67 &
68 of the said rules provide for moving the application by way of judges
summons ex parte, unless an application is taken out other than the
Company. In such event, the copy of the summons and the affidavit in
support of the said judges summons shall be served on the Company or
where the Company is being wound up on its liquidator, not less than 14
days before the date fixed for hearing of the summons. Rule 69 of the said
rules contains the provisions relating to the directions at the hearing of the
judges summons which further provides that upon hearing on the day
when it is moved ex parte or any adjourned date, the Court can dismiss
the summons. One of the directions as enshrined under Rule 69 of the
said rules contains the fixation of time and place of meeting or meetings of
the creditors or class of the creditors and/or member or the class of the
members relating to the proposed compromise or arrangement.
Section 391 (1) of the said Act requires the holding of the meeting of
the creditors or class of the creditors or the class of the members whereas
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Sub-section 2 requires the agreement to the compromise or arrangement
by majority in number representing three-fourths in value of the creditors
or class of creditors or members or class of members present and voting
either in person or by proxy. I am not unmindful of the proposition of law
that the Court shall not sanction the scheme by the ipse dixit of the
majority of the shareholders or creditors of their respective classes who
voted in favour of the scheme unless the Court examined the genuineness
and bona fidies of the scheme as held in Sacamari Steel & Alloys Ltd.
reported in (1981) 51 Company Cases 266 (Bombay). It can be equally
contended that Section 394A which requires notice to be given to the
Central Government of every applications made under Section 391 or 394
does not put any fetter on the Court in sanctioning the scheme upon
looking into its representations or objections if it does not appear to be
convincing. What is required under Section 394A is that the Court shall
take into consideration the representation of the Central Government
before passing any order under Section 391 or 394 of the Companies Act.
The sole question which arises in this matter relates to the stage at
which the notice to the Central Government is to be given; whether at the
initial stage of moving the judges summons ex parte or after direction for
convening the meeting of the creditors or class of creditors or the members
or its classes. There is no corresponding rules framed relating to Section
394A of the said Act which was introduced subsequent to the framing of
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the Companies (Court) Rules, 1959. Reliance could be directly made in this
regard to a judgment rendered by this Court in case of Bangeswari Cotton
Mills reported in (1967) 37 Company Cases 195 (Cal) which clearly laid
down that the notice to the Central Government on an application under
Section 391 (1) of the Act is not required to be given at the stage of moving
the judges summons before calling the meeting of the members or
creditors or its classes. It has been further observed that "any order"
occurring in Section 394A should be read as "any final order". The
interpretation was given by this Court in the above noted case so to avoid
the conflict between Section 394A and the rules framed so as to the render
provision workable.
Although, the aforesaid point was not directly involved in case of
Ucal Fuel Systems Ltd. and another reported in 1992 (73) Company
Cases 63, the Madras High Court held that it is obligatory on the Court to
give notice to the Central Government of every application made to it under
Section 391 or 394 as it would enable the Central Government to study the
proposal and raised objections thereto, so that, the interest of the investing
public at large may be taken into account by the Court before sanctioning
the scheme.
Neither Bangeswari Cotton Mills nor Ucal Fuel Systems Ltd. & anr
laid down that the notice to the Central Government is optional but in
unequivocal terms held that notice to the Central Government is
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imperative and/or obligatory before passing any order under Section 391
or 394 of the said Act. The Allahabad High Court in case of Hind Auto
Indo Ltd. -vs- Premier Motors (P) Ltd. & anr. reported in AIR 1970
Allahabad 165 decented to the views expressed in Bangeswari Cotton
Mills that the statute cannot be interpreted in a way to limit or abridge the
ambit of the words used by adding words into it unless, there is some
overriding need to reconcile a conflict with a statute provision. Before the
Allahabad High Court not only the point whether the notice to the Central
Government should be given on an application by the Company under
Section 391(1) of the Act before convening the meeting but another
question was in consideration whether the shareholders of the Company
should be given a notice before holding and conducting the meeting. While
answering the other question, the Allahabad High Court held:
"11. One of the reasons given in the case of Bangeswari Cotton Mills,
1967-37 Com Cas 195 (Cal) (Supra) for adopting the view expressed
there was, that the right of a party "to move" the summons ex parte
will be defeated if it was necessary to send a notice of proceedings
under Section 391(1) to the Central Government. With great respect,
I find it very difficult to adopt this view. Moving a summons ex parte
cannot, in my opinion, mean the passing of an order upon an
application which had been moved by means of summons. The
"moving" is confined to the initial stage at which notices are to be
issued to persons concerned. At that stage the proceeding has
necessarily to be an ex parte proceeding. But, the "hearing" takes
place only after the summons have been served. That hearing cannot
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be ex parte in accordance with the intendment of the rules as I read
it.
12. it is a well established rule of construction that a statute cannot
be interpreted in such a way as to limit the ambit of the words used
by reading words into it unless there is some overriding need to
reconcile a conflict with a statutory provision. I fail to see the need
for reading a limitation in Section 394-A of the Act confining the term
'application' to a petition when the rules clearly indicate that the
word 'applications' cover applications by summons as well as
applications by means of petitions. The limitation can only be
introduced by adding words. It was held in Dr. Iswari Prasad v.
Registrar University of Allahabad, 1955 All LJ 244 (AIR 1955 All
131): "It is, however, a well known rule of construction that if ther is
nothing to modify or qualify the language which the statute contains
it must be construed in the ordinary and natural meaning of the
words". I find nothing either in the enactment or in the rules to
indicate that the word 'application' is used in Section 394-A for
applications by petitions only. Nor do I find a conflict between
Section 394-a (Sic and?) the Companies (Court) Rules."
The Allahabad High Court answered the first question in affirmative
that the notice is required to be given to the members at the threshold
stage of moving the application. The judgment of the Allahabad High Court
was considered by the Apex Court in case of Chembra Orchard Produce
Ltd. & Ors. -vs- Regional Director of Company Affairs & another
reported in (2009) 2 SCC 547 and it is held that the interpretation given
in Hind Auto Indo (supra), if accepted, would render the scheme of the
Companies (Court) Rules, 1959 unworkable. However, the Apex Court did
not make any observations relating to the interpretation of Section 394A of
the Companies Act which could be readily inferred from above
observations:
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"14. In the impugned judgment, reliance is placed on the earlier
judgment of the Allahabad High Court in Hind Auto Indo Ltd. v.
Premier Motors (P) Ltd. From a bare reading of that judgment we find
that the said case related to interpretation of Section 394-A of the
Companies Act with which we are not concerned in this case. Be that
as it may, there are observations in the said judgment, with respect,
with which we do not agree, both on the interpretation of Rules 67
and 69 on one hand as also on the basis of the practical effect of the
interpretation given by the High Court in the present case. If at the
threshold stage of directions to convene a meeting hearing is required
to be given to the members as held in the impugned judgment, the
scheme of the Companies (Court) Rules, 1959 will become
unworkable."
Though the point involved in the instant matter was not directly the
subject matter in the judgement rendered by the Apex Court in case of
Sesa Industries Ltd. v. Krishna H. Bajaj reported in (2011) 3 SCC 218
but this Court felt necessary to take into consideration the observations
made therein. In Paragraph 34 of the said report, it is observed that when
a scheme of amalgamation/merger of a company is placed before the Court
for its sanction, in the first instant, the Court has to direct holding of the
meetings in the manner stipulated in Section 391 of the Act. The Apex
Court took note of two provisos inserted to Section 394 of the Act which
provides that no scheme for amalgamation of the Company which is being
wound up shall be sanctioned by the Court unless the Court has received
a report from the Company Law Board or Registrar in relation to the affairs
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of the Company being not prejudicial to the interest of the members or to
the Public Interest and also from the official liquidator, in the like manner,
in the event, an order for dissolution without the winding up of the
Company is to be passed. The Apex Court in above perspective held:
"35. First proviso to Section 394 of the Act stipulates that no scheme
of amalgamation of a company, which is being wound up, with any
other company, shall be sanctioned by the Court unless the Court
has received a report from the Company Law Board or the Registrar
to the effect that the affairs of the Company have not been conducted
in a manner prejudicial to the interests of its members or to public
interest. Similarly, second proviso to the said section provides that
no order for the dissolution of any transferor company under clause
(iv) of sub-section (1) of Section 394 of the Act shall be made unless
the Official Liquidator has, on scrutiny of the books and papers of
the company, made a report to the Court that the affairs of the
company have not been conducted in a manner prejudicial to the
interests of its members or to public interest. Thus, section 394 of
the Act casts an obligation on the Court to be satisfied that the
scheme of amalgamation or merger is not prejudicial to the interest
of its members or to public interest."
The Company Court does not act as a Court of an appeal and is
equally not expected to put it seal of an approval on the scheme, either the
majority of the shareholders have voted in favour of the Scheme or the
Company Law Board or the Registrar or the Official Liquidator has not put
any adverse report. The two provisos to Section 394 of the Act were added
and enforced on the same day, when Section 394A came into force. If the
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aforesaid provisos can operate after the meeting is convened, the language
imployed in Section 394A of the Act suggest that the notice to the Central
Government shall be given before passing any order under Section 391 or
394 of the said Act. The said provision cannot, therefore, have the
restricted applicability at the post meeting stage but can be applied before
passing any order as contemplated under Section 391 or 394 of the said
Act.
It is a settled proposition of law that the words are prima facie to be
taken in their lawful and rightful sense for understanding the real purport
and intend for which, they are used in the books of the statute. The words
in the statute should be construed so as not to be considered at
surplusage or superfluous. It has been held in case of Gurudevdatta Vkss
Maryadit & Ors. -vs- B Maharashtra & Ors. reported in (2001) 4 SCC
534.
"26. Further we wish to clarify that it is a cardinal principle of
interpretation of statute that the words of a statute must be understood
in their natural, ordinary or popular sense and construed according to
their grammatical meaning, unless such construction leads to some
absurdity or unless there is something in the context or in the object of
the statute to suggest to the contrary. The golden rule is that the words
of a statute must prima facie be given their ordinary meaning. It is yet
another rule of construction that when the words of the statute are
clear, plain and unambiguous, then the courts are bound to give effect
to that meaning, irrespective of the consequences. It is said that the
words themselves best declare the intention of the law-giver. The courts
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have adhered to the principle that efforts should be made to give
meaning to each and every word used by the legislature and it is not a
sound principle of construction to brush aside words in a statute as
being inapposite surpluses, if they can have a proper application in
circumstances conceivable within the contemplation of the statute.
Bearing in mind, the aforesaid principle of construction, if the
expression "any new member society" occurring in the proviso to sub-
section (3) of Section 27 is construed, it conveys the only meaning that
it refers to the societies to be formed hereafter and not of those societies
which have already become member societies of the federal society.
Therefore, the requirement of the completion of the period of three years
from the date of its investing any part of its fund in the shares of such
federal society would apply only to those societies which became
member society of the federal society after 23-8-2000. In this view of the
matter, the impugned judgment of the High Court does not suffer from
any infirmity. Even if there remained any doubt in the matter of
interpreting the proviso, in the Ordinance that has been promulgated on
27-2-2001, called Maharashtra Ordinance 10 of 2001, after the first proviso to sub-section (3), a second proviso had been inserted, which has removed any doubt or controversy inasmuch as it has been indicated therein that the first proviso will not apply to the member society which has invested any part of its fund in the share of the federal society before the commencement of the Maharashtra Cooperative Societies (Amendment) Act, 2000 dated 23-8-2000. The aforesaid Ordinance also has been given a retrospective effect, to be effective from 23-8-2000. The Ordinance having been held to be valid by us as stated above, the so-called prohibition contained in the first proviso to sub-section (3) of Section 27 will not apply to all those societies which have already become members of the federal society prior to 23-8-2000."
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It is further held by the Supreme Court in case of Greater Bombay Coop. Bank Ltd -vs- United Yarn Tex (P) Ltd & Ors. reported in (2007) 6 SCC 236 that the language of the section does not admit any doubtful interpretation as to the intention of the legislature. The elementary rule of interpretation of statutes that the same should be given their plain grammatical meaning and no words can be added to read something into the section, which the legislature had not intended. The aforesaid principle is reiterated in case of Bhavnagar University -vs- Palitana Sugar Mill (P) Ltd. & Ors. reported in (2003) 2 SCC 111 in following words:
"23. It is the basic principle of construction of statute that the same should be read as a whole, then chapter by chapter, section by section and words by words. Recourse to construction or interpretation of statute is necessary when there is ambiguity, obscurity, or inconsistency therein and not otherwise. An effort must be made to give effect to all parts of the statute and unless absolutely necessary, no part thereof shall be rendered surplusage or redundant.
24. True meaning of a provision of law has to be determined on the basis of what it provides by its clear language, with due regard to the scheme of law.
25. Scope of the legislation on the intention of the legislature cannot be enlarged when the language of the provision is plain and unambiguous. In other words statutory enactments must ordinarily be construed according to its plain meaning and no words shall be added, altered or modified unless it is plainly necessary to do so to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute.12
26. It is also well settled that a beneficent provision of legislation must be liberally construed so as to fulfil the statutory purpose and not to frustrate it."
In a recent judgment delivered in case of B. Premanand & Ors. -vs- Mohan Koikal & Ors. reported in (2011) 4 SCC 266, the Apex Court held:
"24. The literal rule of interpretation really means that there should be no interpretation. In other words, we should read the statute as it is, without distorting or twisting its language. We may mention here that the literal rule of interpretation is not only followed by Judges and lawyers, but it is also followed by the layman in his ordinary life. To give an illustration, if a person says "this is a pencil", then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. Life will become impossible. Hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean."
From the above principles, it cannot be said that the provisions contained under Section 394A of the Companies Act can only be resorted after convening the meeting or before passing the final order either sanctioning or refusing to sanction the scheme. The said provision can be pressed at any stage on an application being moved under Section 391 or 13 394 of the Act depending upon the facts of the each case. Recourse to Section 394A of the Act should not be readily adopted the moment, the application is moved but certainly should be adopted before sanctioning the scheme.
The facts narrated in the application and the scheme proposed does not envisage the invocation of the provision of Section 394A before convening the meeting and this Court, therefore, disposed of the application with the following directions:
A separate meeting of the equity shareholders of the applicant company no. 1 i.e. B. C. Sen International Limited shall be convened and held at 4, Lee Road, First Floor, Kolkata - 700020 on 14th August 2013 at 4 pm for the purpose of considering and if thought fit approving with or without modification the Scheme of Amalgamation proposed to be made between the applicant company nos. 1 and 2 with the applicant company no. 3, abovenamed.
A separate meeting of the equity shareholder of the applicant company no. 2 i.e. Starz Foods Private Limited shall be convened and held at 4, Lee Road, First Floor, Kolkata - 700020 on 14th August 2013 at 4.30 pm for the purpose of considering and if thought fit approving with or without modification the Scheme of Amalgamation proposed to be made between the applicant company nos. 1 and 2 with the applicant company no. 3, abovenamed.
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A separate meeting of the equity shareholder of the applicant company no. 3 i.e. B. C. Sen & Company Limited shall be convened and held at 4, Lee Road, First Floor, Kolkata - 700020 on 14th August 2013 at 5 pm for the purpose of considering and if thought fit approving with or without modification the Scheme of Amalgamation proposed to be made between the applicant company nos. 1 and 2 with the applicant company no. 3, abovenamed.
At least 21 (twenty one) clear days before the date of the said meeting, an advertisement convening the same and stating that copies of the said scheme of amalgamation and of the statement required to be furnished pursuant to Section 393 of the Companies Act, 1956 and Forms of Proxy can be obtained free of charge at the registered office of the respective applicant companies or at the office of its Advocate, Raja Sarkar, Advocate, Second Floor (Mezzanine), DPS India, 7A, Kiran Shankar Roy Road, Kolkata - 700001, be inserted once each in "The Financial Express"
and "Sambad Pratidin" in Kolkata. The publication in the Official Gazette is dispensed with.
In addition at least 21 (twenty one) clear days before the meeting to be held as aforesaid, notice convening the said meeting at the place and time as aforesaid, together with a copy of the said scheme of amalgamation, a copy of the statement required to be sent under Section 393 of the Companies Act, 1956 and the prescribed Form of Proxy be sent 15 by registered post and/or personal messenger addressed to each of the said equity shareholders of the applicant company at their respective registered or last known addresses.
The Advocate-on-Record of the applicant company, abovenamed, do within 15 (fifteen) days from this day file in Court the form of the advertisement, the notice and statement to accompany the notice and the same shall be settled by the Assistant Registrar (Company) of this Court.
Mr. Amitava Ghosh, Advocate, failing him Mr. D. N. Sharma, Advocate shall be the Chairman of the meeting of the applicant company no. 1, abovenamed, to be held as aforesaid, at a remuneration of 2000 Gms.
Mr. D. N. Sharma, Advocate, failing him Mr. Kuldeep Mallick, Advocate shall be the Chairman of the meeting of the applicant company no. 2, abovenamed, to be held as aforesaid, at a remuneration of 2000 Gms.
Mr. Kuldeep Mallick, Advocate, failing him Mr. Amitava Ghosh, Advocate shall be the Chairman of the meeting of the applicant company no. 3, abovenamed, to be held as aforesaid, at a remuneration of 2000 Gms.
The Chairmen appointed for the meeting or any person(s) authorised by them do issue the advertisements and send out the notices of the meeting referred to above.16
The quoram for the said meeting of the equity shareholders of the applicant company nos. 1 and 3 be fixed at 5 (five) persons, present in person or by proxy and the quorum for the said meeting of the equity shareholders of the applicant company no. 2 be fixed at 2 (two) persons personally or by proxy.
The voting by proxy be permitted, provided that a proxy in the prescribed form duly signed by the persons entitled to attend and vote at the meeting, is filed with the applicant company at its registered office not later than 48 (forty eight) hours before the meeting. The Chairmen shall have the power to adjourn the meeting, if necessary.
The value of each member shall be in accordance with the books of the applicant company and where the entries in the books are disputed, the Chairmen shall determine the value for the purpose of the meeting.
The Chairmen do report to this Court, the result of the said meeting within 21 (twenty one) days from the date of the conclusion of the said meetings and his report shall be verified by their respective affidavit.
Summons be signed as of date.
CA No. 233 of 2013 is accordingly disposed of.
Urgent certified photocopy of this order, if applied for, be made available to the parties upon compliance with all requisite formalities.
(Harish Tandon, J.) R. Bose AR(CR)