2017 Supreme(AP) 48

IN THE HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH
A. Ramalingeswara Rao, J.
Asmitha Microfin Limited (Asmitha) - Petitioner
Company Petition Nos. 200 and 201 of 2016
Decided On : 03-02-2017

Headnote:

Civil Law - Finance Institutions (Regulation of Money Lending) Act, 2010 - Companies Act - Section 433, 392, 391, 393, 100 to 104, Sections 391 to 394 and 391(2) - Company Petitions are being disposed of by this common order as they relate to the scheme of arrangement agreed between the two companies who are the petitioners in both the Company Petitions - Public limited company incorporated Its registered office is situated - Authorized share capital of the said company as on divided into equity shares of preference shares issued subscribed and paid-up share capital of the company is fully paid-up equity shares of each and optionally convertible cumulative redeemable preference shares - Petition SHARE Limited (SHARE) was registered as a public limited company and it is having its registered office Its authorized share capital as on divided into equity shares of preference shares of Rs. 10/- each issued subscribed and paid-up share capital as on - Companies are engaged in the business of providing financial and support services to marginalized sections of society particularly underserved rural and urban women across India - Erstwhile State of Andhra Pradesh passed Pradesh Micro Finance Institutions (Regulation of Money Lending) Act regulating the loan disbursement and recovery process for micro finance institutions in Andhra Pradesh - Provisions of the said Act reduced the revenue generation of the companies - Reduced revenues of both the companies have caused both of them to service their repayment obligations to their creditors out of the recoveries made by them from their business in States other than Andhra Pradesh - Obligations coupled with limited fresh loans to the companies lenders created liquidity issues - Petitioners thought of segregating their respective businesses and consolidate in order to face the challenges - Board of Directors of both the companies met on and approved the scheme of arrangement between the two companies to be operative from the appointed date subject to approval and direction of this Court - Held, Banks themselves writing off the loans - In this present scenario the Court has to cautiously examine the scheme of arrangement and this Court considers the tenability of the objection with regard to transfer of business relating to States to one company and States in another company exposing the business in Telugu States to greater risk. This Court has no expertise to evaluate the risk - It is also noticed that Limited is not a member of Micro Finance Institutions Network whereas SHARE is a member - There is reduction in the equity, conversion of OCCRPS into ordinary equity shares involved in the present scheme of arrangement - In the absence of any expertise this Court cannot give any conclusive finding except placing before the CDR EG for a decision on the scheme of arrangement though legal requirements are met substantially as the CDR EG itself deferred its decision in view of the pendency of the present Company Petitions before this Court - Mechanism was evolved by the Reserve Bank of India to ensure timely and transparent mechanism for restructuring of corporate debts of viable entities facing problems for the benefit of all concerned - It is also intended to minimize the losses to the creditors and other stock holders through an orderly and coordinated restructuring programme - It is a voluntary non-statutory system based on Debtor-Creditor Agreement and Inter-Creditor Agreement and the principle of approvals by super majority of 75% creditors which makes it binding on the remaining 25% to fall in line with the majority decision - It consists of three tiers, namely, CDR Standing Forum CDR Empowered Group and CDR Cell - In view of the petitioner company having an Inter-Creditor Agreement which is binding on the Companies any order passed by this Court approving the scheme of arrangement would have an impact on such agreement - Though the banks or creditors to the Companies are part of CDR mechanism the scheme was not evaluated by the CDR mechanism as such. Some banks attended the creditors meeting and some banks did not. The HDFC Bank raised objections - Registrar of Companies within thirty (30) days from the date of receipt of decision of CDR EG and he shall take all necessary consequential action in accordance with law - In case the CDR EG does not approve the scheme and suggest any modifications, the same shall be taken into account and the modified scheme of arrangement shall be placed before this Court for its sanction - Petition Nos. 200 and 201 of 2016 are, accordingly, disposed - Ordered Accordingly.