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21. That is how the matter is once again before a Division Bench of this court.

Q.1 Whether a scheme under Section 391-392 of the Companies Act is maintainable in a winding up petition filed by the Reserve Bank of India under Section 45MC(1) of the Reserve Bank of India Act, 1934?

The first question which we have to examine is whether an application for sanctioning a scheme under sections 391/392 of the Companies Act is maintainable in a winding up petition filed by Reserve Bank of India under section 45 MC(1) of the RBI Act. Mr Parag Tripathi, appearing on behalf of the RBI submitted that CRB Capital was a defaulting NBFC and as a consequence was liable to be wound up under Section 45MC of the RBI Act. He further submitted that Chapter III B of the RBI Act was specially introduced to control NBFCs and to deal with defaulting NBFCs when they committed defaults or violations. It was also contended that by virtue of Section 45Q, the provisions of Chapter III B would override all other laws including the Companies Act. It was, therefore, contended that when RBI had filed the winding up petition alleging serious defaults on the part of CRB Capital, the company Judge ought to have considered the winding up petition on merits and that sanctioning of a scheme without considering the winding up petition on merits was unsustainable. It was also submitted that the scheme propounded by CRB Capital and sanctioned by the learned company Judge with certain modifications is contrary to the provisions of Chapter III B of the RBI Act and therefore the same cannot be sustained in law. It was also submitted that the learned company Judge was only impressed by the fact that the majority of creditors (secured and unsecured) and shareholders had passed the scheme and therefore the same ought to be sanctioned. The learned counsel referred to the decision of the Supreme Court in the case of Miheer H Mafatlal v. Mafatlal Industries Limited:

23. It was also submitted that any scheme under Section 391 of the Companies Act has to be in compliance with the provisions of Chapter III B which includes section 45QA of the RBI Act and a petition for winding up under Section 45MC(1)(d) of the RBI Act cannot be defeated by allowing a scheme under Section 391 of the Companies Act which is in violation of the statutory provision contained in Section 45QA of the RBI Act.

24. Mr Sudhanshu Batra appearing on behalf of CRB Capital submitted that there is no prohibition on considering a scheme under Sections 391/392 of the companies Act during the pendency of a winding up petition filed by RBI under Section 45MC of the RBI Act. In fact, according to him, Section 45MC(4) makes all the provisions of the Companies Act, 1956 "relating to winding up of a company" applicable to a winding-up proceeding initiated on the application made by RBI under Section 45MC of the RBI Act. He then submitted that Part VII of the Companies Act dealt with winding up. Chapter I thereof contained preliminary provisions dealing with modes of winding up and contributories. Chapter II of Part VII dealt with the cases of winding up by the Court/Tribunal. Section 433 which stipulated the circumstances in which a company could be wound up fell within this chapter. And, so did Section 446, which provided for stay of suit on the passing of a winding up order. Section 446(2)(c), according to Mr Batra, empowered the Court/Tribunal, notwithstanding anything contained in any other law for the time being in force, to have jurisdiction to entertain or dispose of any application made under Section 391 by or in respect of the company. Therefore, according to Mr Batra, a scheme under Section 391 of the Companies Act can be entertained even in the case of a winding up proceeding under section 45MC of the RBI Act. He referred to the decision of the Supreme Court in the case of M/s Doypack Systems Pvt. Ltd. v. Union of India: (1988) 2 SCC 299, in order to explain the meaning of the expression "in relation to". According to him, the Supreme Court held that the said expression was one of expansion and not of contraction. He submitted that even in T.N. Kalyana Mandapam Assocation v. Union of India: (2004) 5 SCC 632, the Supreme Court had recognized that the expression "in relation to" ought to be given an expansive or wide meaning and should not be construed narrowly. Consequently, Mr Batra, submitted that a scheme under Sections 391/392 could very well be considered by the company court even in a case of winding up under Section 45MC of the RBI Act inasmuch as Section 45MC(4) of the RBI Act itself makes it clear that all the provisions of the Companies Act "relating to" winding up of a company shall apply to a winding up proceeding initiated on the application made by RBI under Section 45MC of the RBI Act. With regard to the alternative arguments raised by Mr Parag Tripathi that even if it is assumed that a scheme under Section 391 can be maintained in the backdrop of a winding petition under Section 45MC of the RBI Act, such a scheme would not be maintainable if it was contrary to the provisions of Chapter III B of the RBI Act, the learned counsel for CRB Capital submitted that the scheme sanctioned by the learned company Judge was not contrary to the provisions of Chapter III B of the RBI Act.

28. The learned counsel appearing on behalf of SEBI, adopted the arguments of Mr Parag Tripathi. He submitted that a scheme could not be contrary to statutory provisions and, in any event, could not contain any terms or conditions which trenched upon the power of SEBI under the Securities & Exchange Board of India Act, 1992 (hereinafter referred to as the SEBI Act). The other submissions of the learned counsel for SEBI were essentially centred on the next question and we shall refer to them when we deal with that question.

34. These questions have overlapping considerations and, therefore, are being dealt with together. It was contended by Mr Parag Tripathi, on behalf of the RBI, that the scheme could not be sanctioned as the concessions sought were beyond the scope of Section 391 of the Companies Act. First of all, the scheme envisaged a direction to the Income Tax Department to stay its demands and vacate ex-parte orders. The scheme also envisaged that the company be permitted to file appropriate petitions before the appropriate Court and get any delay in filing the same condoned. It was contended that income tax proceedings could not be the subject matter of a scheme under Section 391 of the Companies Act. Reliance was placed on the Supreme Court decision in the case of S.V. Kandeakar v. V.M. Deshpande: (1972) 1 SCC 438. Insofar as the criminal cases were concerned, it was contended that the scheme envisaged that all civil and criminal cases be "vacated or stayed sine die". It was contended that the learned company Judge erred in law in sanctioning this part of the scheme. It was submitted that a Division Bench of this court in D.K. Kapur v. R.B.I.: 2001 (105) Company Cases 643 (Delhi), had clearly held that the expression "suit or other legal proceedings" used in Section 446(1) of the Companies Act and the expression "suit or proceeding" used in Section 446(2) of the Companies Act, 1956 did not include criminal proceedings and therefore the company Judge could not have sanctioned the scheme as it required the 'vacation or stay sine die' of the criminal cases against CRB Capital. This was clearly beyond the jurisdiction of the company court under Section 391/392 of the Companies Act, 1956. It was further contended that the acts committed by CRB Capital or its directors were allegedly in violation of the law and guidelines laid down in various Acts including the RBI Act, SEBI Act and Income Tax Act. It was, therefore, submitted that by moving an application for sanction of a scheme of re-payment/compromise under Section 391 of the Companies Act 1956, CRB Capital could not, in law, ask for the concessions / reliefs or vacation / stay of the proceedings for such violation allegedly committed. The scheme could not take away the right of the prosecuting agency of going after the persons who were in clear contravention of the statutory provisions. It was contended that the intention / object behind Section 391 of the Companies Act is to provide a mechanism for re-structuring or for a financial re-arrangement but it could not be used as an instrument for getting away from the penal consequence of violation of a law. As such it was contended that a scheme under Section 391/392 of the Companies Act could not set aside or quash quasi-judicial orders passed by statutory authorities like SEBI, Income Tax Department or the RBI in exercise of the powers conferred on them by the relevant statute. It was also contended that criminal and income tax proceedings pending against CRB Capital and/ or its directors could not be stayed by the company court while sanctioning a scheme under Sections 391/392 of the Companies Act, 1956.