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IN THE HIGH COURT OF DELHI AT NEW DELHI
Jayant Nath, J.
In Matter Of Iyogi Technical Services Private Limited - Petitioner
Company Application (M) No. 135 of 2016
Decided On : 20-03-2019
Companies Act - Scheme of Arrangement - Section 391 - 391(1)(a) - 391(2) - 391(3) - 391(4) - 391(5) - 391(6) - 391(7) - Summary of Acts and Sections: The court considered the application filed under section 391 of the Companies Act, 1959 for dispensing with the meeting of shareholders and convening a meeting of secured and unsecured creditors of the applicant company to approve and implement the proposed scheme of arrangement to pay the creditors. The court discussed the mandatory requirements of Section 391 and the need for compliance with statutory procedures, including the requisite meetings and the approval of the scheme by the majority of creditors. The court also emphasized the importance of disclosing all material facts relating to the company, such as the latest financial position, and the need for the scheme to be just, fair, and reasonable. The court referred to various judgments to support its analysis and decision.
Fact of the Case:
The applicant company filed an application under section 391 of the Companies Act, 1959, seeking dispensation with the meeting of shareholders and convening a meeting of secured and unsecured creditors to approve and implement a proposed scheme of arrangement to pay the creditors. The company's financial position, proposed scheme, and the meetings of the creditors were discussed in detail.
Finding of the Court:
The court found that the scheme had clear approval from the statutory creditors and employees, but there was confusion in the meetings of unsecured and secured creditors. The court considered the reports of the Chairman of the meetings and the objections filed against the scheme. The court also discussed the subsequent developments, including consents received for the scheme after the meeting, and the need to give another opportunity to the company to put the new scheme to vote.
Issues: The main issues revolved around the compliance with statutory procedures, the approval of the scheme by the majority of creditors, the disclosure of material facts relating to the company, and the need for the scheme to be just, fair, and reasonable. The court also addressed the confusion in the meetings of unsecured and secured creditors and the subsequent developments affecting the approval of the scheme.
Ratio Decidendi: The court emphasized the mandatory requirements of Section 391 of the Companies Act, the need for compliance with statutory procedures, and the importance of disclosing all material facts relating to the company. The court also highlighted the significance of the scheme being just, fair, and reasonable, and the need for the majority approval of creditors. The court's decision to give another opportunity to the company to put the new scheme to vote reflected the principle of equity and the interest of justice.
Final Decision: The court directed the petitioner company to convene a fresh meeting of the unsecured creditors to consider and approve the modified scheme for repayment of 100% of the outstanding debt and a meeting of the secured creditors. The court granted liberty to the petitioner to move an appropriate application to convene such meetings based on the new scheme for unsecured creditors.
Jayant Nath, J.
Co.Appl.(M) 135/2016 & CA 1107/2018 & 1109/2018
1. This application has been filed under section 391 of the Companies Act, 1959 for dispensing with the meeting of shareholder and convening a meeting of secured and unsecured creditors of the applicant company and to pass an order approving and implementing the proposed scheme of arrangement to pay to the creditors. The case of the petitioners is that the applicant company was incorporated on 28.2.2007 as a private limited company which was engaged in the business of providing technical support and computer maintenance services to in-home users, small offices and business enterprises having customers in various countries like United States, United Kingdom, Australia etc. The petitioner company was granted status of an approved "Special Economic Zone" unit. It is pleaded that the revenues demonstrated a phenomenal growth in 2013-14 and 2014-15 with revenues being Rs.520 crores and Rs.500 crores respectively. However, a financial crunch was posed in the year 2014-15 when IBM, the company's largest partner transferred the Master Services Agreement (MSA) to some other company. It is pleaded that in order to improve its net worth the company made a partnership agreement with a large telecom company in UAE which is projected to generate revenues of Rs.163.10 crores in the next 12 months. It is pleaded that the scheme proposed would enable the petitioner company to generate business of Rs.150 crores in 2017-18. Along with the application the audited balance sheet for the year 2014-15 was filed and unaudited financial sheet statement for the year 2015-16 was filed. The Scheme creates four Classes of creditors namely Class A for Creditors of statutory dues, Class B secured creditors, unsecured creditors are part of Class C and Class D creditors are the dues of the employees. The scheme proposes to pay 100% of the amount due and payable for statutory dues within a period of 24 months. Similar is the position regarding Class B secured creditors. Regarding unsecured creditors, the Scheme proposes payment of 50% of the total outstanding amount within a period of 24 months. Regarding Class D employees dues, the Scheme proposes payment of 100% of monthly salary of all employees, 100% payment of annual bonus of all employees below the grade of assistant manager and 50% of the outstanding bonus of above the grade of assistant manager again within a period of 24 months.
2. On 25.10.2016 this court had directed convening of a meeting of the secured creditors, statutory creditors, unsecured creditors and employees respectively. The Quorum of the meeting was fixed as 50% in number and more than 50% in value of the total unsecured debt.
3. The meeting as directed on 25.10.2016 was held after several extensions having been sought from this court. The concerned Chairmen have filed their report.
4. I may note that under Rule 79 of the Company (Court) Rules 1959 where a proposed compromise or arrangement is agreed to with or without modification in the meeting, the company has to present a fresh petition to the Court for confirmation of the compromise/arrangement. In the present case, the petitioner has not filed a fresh petition for confirmation as provided in the above Rule. It was argued that the petitioner has filed a composite petition for appropriate orders under section 391 to 394 of the Companies Act in terms of Rule 67 of the Rules and Rule 79 of the Rules taking into account both the stages. Reliance was placed on judgment of the Punjab and Haryana High Court in Alpha Corp. Development Private Limited vs. Euthoria Developers Private Limited, MANU/PH/0165/2007 to contend that this course is permissible.
5. A perusal of the report of the Chairperson of the respective meeting would show as follows:-
(i) In the meeting that took place of the employees of the respondent compan
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