2015 Supreme(SC) 20

SUPREME COURT OF INDIA
Anil R. Dave, Dipak Misra, JJ.
Infrastructure Leasing & Financial Services Limited – Appellant
Versus
B.P.L. Limited – Respondent
CIVIL APPEAL NO. 2701 OF 2006
Decided On : 09-01-2015

Headnote:(a) Companies Act, 1956 – Section 391(1) – Proposal for compromise or arrangement – Compromise or arrangement need not be between all the creditors or all the members. (Para 19)

       (b) Companies Act, 1956 – Section 391 and 392 – Sanction of proposal for compromise or arrangement – Scope and ambit of jurisdiction of Company court restated – Proposal approved by requisite majority vote of members and creditors is not enough – Procedural requirements including meetings statutorily contemplated must be complied with. (Para 24)

       (1997) 1 SCC 579; (1891) 1 Ch 213; (1922) 2 Ch 723; (1995) Supp (1) SCC 499 – Relied upon

       (c) Companies Act, 1956 – Section 391 – Classification of creditors – Should be done on the basis of homogeneity and commonality of interest – An unsecured creditor who has filed a suit and obtained a decree would not become a secured creditor – He has to be put in the same class as other unsecured creditors. (Para 26)

       1892 (2) Q.B. 573 CA – Relied upon

       (d) Code of Civil Procedure, 1908 – Order XXXIV, Rule 14 and 15 r/w Order II Rule 2 – Unless the cause of action in both suits are same or identical, the subsequent suit will not be hit by Order II Rule 2 or constructive res judicata – Suit for satisfaction of hypothecation and suit for sale of mortgaged property between the same parties are maintainable – Consent award in an arbitral proceeding would not bar a suit for enforcement of the charge, instantly by hypothecation and relating to movable property – Order II, Rule 2 would not apply – Provisions of Rules 14 and 15 of Order XXXIV would not apply directly but the principle inherent under the said Rules would be applicable. (Para 35, 36

       AIR 1922 PC 228; AIR 1975 SC 207; AIR 1977 SC 1466; AIR 1980 SC 161; (2007) 11 SCC 75; (1970) 1 SCC 186; AIR 1996 SC 378 : (1995) 6 SCC 733; (1996) 1 SCC 735 – Relied upon

       (1998) 5 SCC 401 – Distinguished

       (e) Code of Civil Procedure, 1908 – Section 11 – Res judicata – Issue before company court – Quite different than that before arbitral tribunal – Status of appellant as secured creditor has not changed by arbitral award – Principle of res judicata not applicable. (Para 38)

       AIR 1996 SC 378 : (1995) 6 SCC 733; (2009) 2 SCC 526; (2008) 15 SC 673 – Referred

       (f) Indian Contract Act, 1872 – Section 63 r/w 176 and 177 – Appellant held to be registered secured creditor – This status not changed by arbitral award – Thus, appellant even while suing or participating an obtaining award for realization of money has his right over the charge in terms of sections 176 and 177 – Arbitral award passed on consent – Cannot lead to annulment of hypothecation – Appellant’s right under hypothecation as secured creditor not extinguished by arbitral award. (Para 41, 42, 43)

       AIR 1967 SC 1322 – Relied upon

       AIR 1929 Bom. 471; [1894] 22 Ca. 21; [1902] 27 Mad. 528 – Cited with approval

       AIR 1928 PC 99; (1969) 3 SCC 445; 62 IA 100 – Referred

       (g) Companies Act, 1956 – Sections 138 and 139 – Registration as secured creditor – Form 8 and 13 along with hypothecation deed filed with Registrar – All formalities having been completed – Appellant is secured creditor – He cannot be treated as unsecured creditor – As such would be bound by the scheme approved by the Company Judge. (Para 44, 45, 46)

       Facts of the case:

       The respondent BPL formed a JV with “Sanyo Electric Co. Ltd.”, Japan. Accordingly the BPL had to transfer its existing CTV business undertaking to the joint venture constituting BPL brand for CTV business manufacturing services, marketing and distribution. Both the companies BPL and Sanyo had equal partnership in the ratio 50:50 in the joint venture. The CTV business was valued at Rs.368 crores and BPL was required to invest approximately Rs.46 crores in the joint venture company and to receive a net cash inflow of Rs.322 crores. Initially, BPL proposed a scheme of arrangement which was finally modified and in the said scheme various business institutions and banks were involved. There were 36 creditors whose names featured in the scheme.

       After approval of the scheme the respondent filed an application under Section 391 (1) of the Companies Act read with Rule 9 the Companies (Court) Rules, 1959 seeking permission for holding a meeting for consideration for approval of compromise or arrangement proposed to be made between companies and the creditors. The second prayer had been made for orders governing the procedures to be complied with. There were 15 respondents.

       The present appellant, Infrastructure Leasing & Fin. Services Ltd., which was the 8th respondent, filed its counter-affidavit and in it, had raised objections to the prayer for stay of various proceedings before number of forums including Debt Recovery Tribunal, etc. on various grounds.

       Some of the respondents filed affidavits supporting the scheme and some others opposing the same, from many an angle.

       The Company Judge held that MCA No. 84/2004 was maintainable and other applications seeking grant of stay were sans merit and accordingly dismissed the same. Certain applications were kept to be considered at a later stage. The prayer of the respondents that they were not covered by the scheme proposed by the amendment and they are not secured creditors was rejected. Ultimately the Company Judge ordered that a meeting of secured creditors (working Capital Lenders and Term Lenders) be convened and held at the Registered office of the Applicant Company for the purpose of considering and if thought fit, approving with or without modification of the compromise/arrangement proposed.

       The 8th respondent filed Company Appeal No. 5 of 2005.

       The Division Bench dismissed the appeal.

       Finding of the Court:

       Appellant is a secured creditor and therefore bound by the scheme approved by the Company Judge.

       Result: Appeal dismissed.