opportunities before nclt and nclat - vinod...
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Vinod Kothari Vinod Kothari & Company
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www.vinodkothari.com / www.india-financing.com Email: [email protected] / [email protected]
Opportunities before NCLT and NCLAT
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International Scenario (1/2) • United Kingdom
▫ In the U.K., there are more than 70 Tribunals that decide up to 1 million cases per year No Tribunal for company law matters
Courts has been vested with adjudicatory powers in respect of both insolvency resolution and winding up and liquidation.
• Canada ▫ The Canadian Supreme Court laid down a three-fold test to determine when and to
what extent judicial power should be vested in Tribunals
First Test Whether the power was exercised by the superior court or district or subordinate court
while framing the constitution?
▫ If the power was not of the type exercised by the judiciary, it could be conferred upon a Tribunal
▫ If the power was exercised by the judiciary – go to second test
Second Test Determine whether the functions of the Tribunal are really judicial functions?
▫ Whether the Tribunal is called upon to decide a private dispute – If yes, then it is acting in a judicial capacity
▫ If the power being exercised is primarily a judicial power – go to third test
Third Test Whether adjudicating function is the sole or central function?
▫ If yes – Tribunal is exercising judicial power ▫ Cannot be taken away from the Courts.
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NCLT and NCLAT & its Powers | Vinod Kothari
• Australia
▫ In Australia, there can be administrative or civil
Tribunals
Administrative Tribunals are concerned with executive
actions of government
Civil Tribunals are concerned with resolving private
disputes
• More cases are decide by the Tribunals than Courts in
U.K., Canada and Australia
▫ Company law disputes are resolved only by Judiciary
and not by quasi-judicial Tribunals
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International Scenario (2/2)
Evolution of NCLT and NCLAT
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Indian Scenario (1/3)
• Eradi Committee Report ▫ The High Level Committee on Law relating to Insolvency of Companies under
the Chairmanship of Justice Eradi (popularly known as ―Eradi Committee Report‖)
Made proposal for the NCLT Recommended to amend the provisions of Part VII of the Act, 1956
Setting up of National Tribunal which will have (Para 7.1) – ▫ Jurisdiction and power presently exercised by CLB under the Act, 1956
▫ power to consider rehabilitation and revival of companies – presently entrusted to BIFR/ AAFIR under SICA
▫ jurisdiction and power relating to winding up of companies - presently vested in the High Courts
Winding up proceeding pending in High Courts under Act, 1956 shall stand transferred to NCLT (Para 7.8) ▫ for expeditious disposal of those cases
Recommended that an appeal shall lie to the High Court ▫ However, Parliament recommended the formation of NCLAT
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• Consolidation of Tribunals under Independent Agency
▫ L. Chandrakumar v. Union of India (1997)
The Supreme Court held that all Tribunals should be
bought under an independent nodal agency so that they
are free from executive control
Court further held that until such an agency can be
established
All tribunals must be bought under a single Ministry, i.e. the
Law Ministry
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Indian Scenario (2/3)
• Advisory Group on Bankruptcy Laws ▫ In Dec 1999, RBI constituted a Standing Committee to examine the
global standards and codes in various segments of the financial system On Feb 8, 2000, an Advisory Group on 'Bankruptcy Laws‘ was set up
under the Chairmanship of Dr. N. L. Mitra Popularly known as Dr. N. L. Mitra Committee
The Committee examined the Justice Eradi Committee Report and recommended a Special Bankruptcy Bench in each High Court
• Companies (Second Amendment) Act, 2002 ▫ NCLT is designed to replace the jurisdiction of the existing CLB, the
BIFR and the High Court in the exercise of its jurisdiction as a Company Court NCLT was originally proposed, based on Eradi Committee
recommendations, to be established pursuant to an amendment in the Act, 1956 in 2002 The provisions of the Companies (Second Amendment) Act, 2002 could not
be notified due to non-establishment of the NCLT pursuant to petition filed before the Madras High Court.
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Indian Scenario (3/3)
Constitutional validity of NCLT (1/2)
• Thiru. R. Gandhi v. Union of India
▫ The Madras Bar Association challenged the constitutional validity the amendment effected to the Act, 1956 by Second Amendment Act, 2002
Madras High Court by its order dated March 30, 2004 held that the establishment of NCLT and NCLAT was not unconstitutional
Various provisions of parts I-B and I-C of the Act 1956 were defective and were required to be subsequently amended
• Union of India v. R. Gandhi (2007)
▫ Both the parties appealed before the Supreme Court
The Case was heard by a 3 member bench
3 questions were posted before the Constitutional Bench
▫ Unfortunately, all 3 questions were not precisely answered
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• Union of India v. R. Gandhi, President, Madras Bar Association (2010) ▫ The Supreme Court agreed with the decision of the High
Court and held that creation of NCLT and NCLAT are not unconstitutional Recommended suitable amendments to be made in Parts I-B
and I-C of the Act, 1956
• Madras Bar Association v. Union of India (2013) ▫ The Petitioner referred to Constitution Bench judgment of
Supreme Court in Madras Bar Association v. Union of India, wherein establishment of National Tax Tribunal has been held to be unconstitutional Supreme Court disposed the writ petition stating that the
constitution of NCLT and NCLAT is not unconstitutional Some of the sections particularly pertaining to appointment of
members on the benches were defective
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Constitutional validity of NCLT (2/2)
NCLT and NCLAT & its Powers | Vinod Kothari
Companies (Amendment) Bill, 2016
• Proposes to amend the provisions under section 411
(3) and section 412 (2) vis-à-vis Part IB and IC of the
Act, 1956 in accordance with the directions of the
Supreme Court
▫ However, the appointment of members to NCLT and
NCLAT is done as per the directives of the Supreme
Court
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Differences between Court and
Tribunal
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Difference between Court and Tribunal
• The difference was pointed out by the Constitutional Bench in Union of India v. R. Gandhi (2010) ▫ Courts are established by the State and are entrusted with the State's
inherent judicial power for administration of justice in general. Tribunals are established under a statute to adjudicate upon disputes
arising under the said statute, or disputes of a specified nature. Therefore, all courts are Tribunals. But all Tribunals are not courts.
▫ Courts are exclusively manned by Judges. Tribunals can have a Judge as the sole member, or can have a
combination of a Judicial Member and a Technical Member who is an `expert' in the field to which Tribunal relates. Some highly specialized fact finding Tribunals may have only Technical Members, but they are rare and are exceptions.
▫ While courts are governed by detailed statutory procedural rules, in particular the Code of Civil Procedure and Evidence Act, requiring an elaborate procedure in decision making, Tribunals generally regulate their own procedure applying the provisions
of the Code of Civil Procedure only where it is required, and without being restricted by the strict rules of Evidence Act.
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Tribunal vis-à-vis Civil Courts • Tribunals whether they pertain to income-tax or sales-tax or
excise or custom or administration, have now become an essential part of the judicial system ▫ Section 430 of the Act, 2013, has given exclusive jurisdiction to
the Tribunals and Appellate Tribunals established under the Act, 2013 to entertain and decide the applications filed under the Act
▫ No other court or authority can exercise any jurisdiction, powers or authority in relation to these matters except Supreme Court and High Court exercising jurisdiction under
Articles 226 and 227 of the Constitution. NCLT benches consist of 2 members, of which, one shall be judicial member and the other shall be a technical member
▫ Any aggrieved person by the order of NCLT may take the matter up to NCLAT
▫ In case of further grievance, the aggrieved person may go to Supreme Court
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Question of Law and facts (1/2) • Question of fact
▫ Questions of fact is a question pertaining to factual examination, evidence, documents, circumstances, etc. Cannot be challenged before the High Court
• Question of law ▫ Questions of law pertains to the interpretation or application of
law Can be challenged before the High Court and the High Court has
jurisdiction on deciding such questions
• Mixed question of law and fact ▫ Mixed questions of law and facts, these questions first involve
the ascertainment of facts on the evidence presented and then a determination of rights of the parties on application of the appropriate principle of law to the facts ascertained. The finding of the Tribunal on facts found has to be treated as
final, the legal effect of such finding is a question of law and can be reviewed by the High Court
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• Power and role of NCLAT
▫ Power of appeal to the NCLAT is not limited to questions
of law only
Since NCLAT is not a court - its power to review the rulings
of the NCLT cannot be limited to pure questions of law
▫ The role of the NCLAT is akin to the first appeal under
several laws, and therefore, both question of fact, as
well as mixed questions of fact and law, can be
agitated before the NCLAT
However, when it comes to the second and ultimate
appeal, it is only questions of law that can be taken up to
the Supreme Court [section 423]
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Question of Law and facts (2/2)
Constitution of NCLT and NCLAT
• The Central Government constituted the NCLT and NCLAT -
▫ To exercise and discharge the powers and functions as conferred on it under the Act, 2013; and
▫ For hearing appeals against the orders of the NCLT, respectively, with effect from the 1st day of June, 2016 vide notification no. S.O. 1932(E). and S.O. 1933(E). dated 01st June, 2016.
All pending cases with CLB stand transferred
The Benches are expected to be fully functioning effective July 01, 2016
Draft Rules have however not yet been finalised and enforced
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Constitution of Benches and Notified
Sections • The Central Government came up with another
notification -
▫ Till now, the CG has constituted -
11 Benches
With Principal Bench in New Delhi
▫ Notified 29 sections/sub-sections of the Act, 2013 w.e.f.
June 01, 2016
▫ Application for winding up u/s 271 (1) (a) of the CA,
2013 to be made before NCLT has also been notified
▫ Application under Insolvency and Bankruptcy Code,
2016 are to be made before NCLT
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What all matters go to NCLT
• 1956 Act and 2013 Act
NCLT and NCLAT & its Powers | Vinod Kothari
20 Section of CA, 13 Provisions
7(7) Incorporation by false or incorrect information or any fraudulent action
2nd proviso sec 14 Alteration of Articles effecting conversion of a Public Company into a Private
Company
48(2) Cancel variation of shareholders’ rights
55(3) Power of Tribunal to approve issuance of further redeemable preference shares
58 (3) &(4) Appeal to Tribunal in case of refusal by company to register transfer of shares
59(1) Appeal to Tribunal for rectification of Register of Members
Proviso to sec
61(1)(b)
Consolidation and divide all or any of its share capital resulting in change in
voting percentage
62 (4) to (6) Conversion of loan obtained from or debentures issued to Government by a
company into shares
66 Reduction of share capital
71(9) Application by Debenture Trustee restricting a company to incur further
liabilities
71(10) Application by any or all of the debenture holders to order redemption of
debentures
73(4) Payment of sum due or loss or damage incurred by a deposit holder
74(2) Application to Tribunal by a company to allow further time to repay deposit
97 Power of Tribunal to call AGM
98 Power of Tribunal to call meetings of members, etc.
119(4) Power of Tribunal to order immediate inspection of the minute books
130 Re-opening of books of accounts on Court’s or Tribunal’s order
131 Voluntary revision of financial statement or Board’s Report
140(5) Change of auditor if the auditor has acted in a fraudulent manner
• 1956 Act and 2013 Act
NCLT and NCLAT & its Powers | Vinod Kothari
21 Section of
CA, 13
Provisions
169(4) Direction that a representation by a director being removed by the members need not be
read out at GM
213 Investigation into the affairs of the company
221 Freezing of assets of company on inquiry and investigation
222 Imposition of restriction upon securities
224(5) Order for disgorgement of asset, property/cash in case fraud in company
230 Compromise or make arrangements with creditors and members
231 Enforce compromise or arrangement
232 Merger and Amalgamation of companies
237(4) Appeal by any aggrieved person by any assessment of compensation made under sub-
sect(3)
238 Refusal by registrar for registration of offer of schemes involving transfer of shares
241, 242 Power of Tribunal on an application made to it for relief in cases of oppression, etc.
245 Class Action
252 Appeal by a person aggrieved by the order of Registrar notifying company as dissolved
253 Application to Tribunal by any secured creditor for declaration of a company as sick
company
254 Application by secured creditor for determination of measures for revival and
rehabilitation
258 Order for initiating the proceedings of winding up by the Tribunal
266 Power of Tribunal to assess damages against delinquent directors, etc.
271 to 303 Deals with winding up of a company by a Tribunal
Voluntary winding up under Bankruptcy
Code, 2016 • Through IBC, 2016, section 304 to 323 of CA, 13
pertaining to voluntary liquidation of companies got
omitted.
• Accordingly, such cases will be entertained by NCLT
under section 59 of IBC and rules thereof.
▫ Enforced w.e.f 1st April, 2017
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Notified sections
Section enforced vide Removal of
Difficulties Order • Various sections got enforced on September 12, 2013 and
March 26, 2014
• Lot of sections pertained to making application before NCLT
▫ However NCLT was not constituted by then
• MCA vide the Companies (Removal of Difficulties) Third Order, 2014 and Companies (Removal of Difficulties) Fourth Order, 2014 clarified that such powers to rest with CLB
• As regards powers u/s 14, due to pendency of enforcement of second proviso to sub-section (1), in terms of Circular 18 of 2014 dated June 11, 2014 such powers of conversion were to be exercised by RoC
▫ In view of powers delegated to RoC u/s 31 of the Act 1956 vide notification dated SO 1538 (E) dated 10.07.2012
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Sections for which power was vested with
CLB vide RoD Order • Accordingly the sections which were already in force
were:
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Section Provision
2 (41) Application for having financial year different from that as provided under the Act (Notification S.O.902 (E) dated 26th March, 2014)
58 (3) and (4) Appeal to tribunal in case of refusal by company to register transfer of shares (Notification dated 12th September, 2013)
59(1) Appeal to tribunal for rectification of register of members (Notification dated 12th September, 2013)
73(4) Application to tribunal to order payment of sum due or loss or damage incurred by a deposit holder (Notification S.O.902 (E) dated 26th March, 2014)
74 (2)
Application for extension of time for repayment of deposit (Notification S.O. 1459(E) dated 6th June, 2014)
Brief comparison- 1/7
• 1956 Act and 2013 Act
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Section under
the Act, 2013
Provisions for making application to NCLT Whether enforced Similar section under
the Act, 1956
7(7) Power of Tribunal to give order where a company has
been incorporated by false or incorrect information or
any fraudulent action
Enforced New provision
Second proviso
to sec 14
Power to give order for alteration of Articles of
Association of a company effecting conversion of a
Public Company into a Private Company
Enforced Proviso to 31 (1)
48(2) Power of Tribunal to cancel variation in case of holder
of not less than ten percent of the issued shares of that
class did not consent to such variation
Enforced 106 and 107
55(3) Power of Tribunal to approve issuance of further
redeemable preference shares
Enforced New provision
58 (3) & (4) Appeal to Tribunal in case of refusal by company to
register transfer of shares
Enforced 111
59(1) Appeal to Tribunal for rectification of Register of
Members
Enforced 111A
Brief comparison- 2/7
• 1956 Act and 2013 Act
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Section under
the Companies
Act, 2013
Provisions for making application to
NCLT
Whether enforced Similar section under the
Companies Act, 1956
Proviso to sec
61(1)(b)
Approval of Tribunal for consolidation and
divide all or any of its share capital resulting
in change in voting percentage of
shareholders
Enforced 94
62 (4) to (6) Appeal to Tribunal in case of conversion of
loan obtained from or debentures issued to
Government by a company into shares
Enforced 81, 94A(1)
66 Confirmation by Tribunal for reduction of
share capital
Enforced 100 to 105
71(9) Application to Tribunal by Debenture
Trustee restricting a company to incur
further liabilities
Enforced 117, 117A, 117B, 117C, 118,
119 and 122
71(10) Application by any or all of the debenture
holders to order redemption of debentures
Enforced 117, 117A, 117B, 117C, 118,
119 and 122
73(4) Application to Tribunal to order payment of
sum due or loss or damage incurred by a
deposit holder
Enforced 58A
74(2) Application to Tribunal by a company to
allow further time to repay deposit
Enforced New provision
97 Power of Tribunal to call AGM Enforced 167
Brief comparison- 3/7
• 1956 Act and 2013 Act
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Section under
the Companies
Act, 2013
Powers given to NCLT Whether enforced Similar section under the
Companies Act, 1956
98 Power of Tribunal to call meetings of members,
etc.
Enforced 186
119(4) Power of Tribunal to order immediate inspection of
the minute books
Enforced 196
130 Re-opening of books of accounts on Court’s or
Tribunal’s order
Enforced New provision
131 Application to Tribunal for voluntary revision of
financial statement or Board’s Report
Enforced New provision
140(5) Power of Tribunal to order change of auditor if the
auditor has acted in a fraudulent manner
Enforced New provision
169(4) Power of Tribunal to direct that a representation
by a director being removed by the members need
not be read out at the general meeting
Enforced 284
213 Investigation into the affairs of the company Enforced 237
Brief comparison- 4/7
• 1956 Act and 2013 Act
NCLT and NCLAT & its Powers | Vinod Kothari
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Section under
the Companies
Act, 2013
Powers given to NCLT Whether enforced Similar section under the
Companies Act, 1956
221 Freezing of assets of company on inquiry
and investigation
Enforced New provision
222 Imposition of restriction upon securities by
the Tribunal
Enforced 250
224(5) Power of Tribunal to give order for
disgorgement of asset, property or cash
and also for holding director, KMP, officer
or other person personally liable without
any limitation of liability in case report of
an inspector states that fraud has taken
place in a company and due to such fraud
any director, KMP or other officer has
taken undue advantage
Enforced 242, 243, 244
230[[except sub-
section (11) and
(12)]
Power of Tribunal to compromise or make
arrangements with creditors and members
Enforced 390, 391, 393 and 394-A
231 Power of Tribunal to enforce compromise
or arrangement
Enforced 392
232 Merger and Amalgamation of companies Enforced 394
Brief comparison- 5/7 Section under the
Companies Act,
2013
Powers given to NCLT
Whether enforced
Similar section under the Companies Act, 1956
233 Merger or amalgamation of certain
companies.
Enforced New Provision
234 Merger or amalgamation of company
with foreign
company.
Enforced New Provision
235 Power to acquire shares of shareholders
dissenting from scheme or contract
approved by
majority.
Enforced
395
236 Purchase of minority shareholding. Enforced
New Provision
237(4) Appeal to Tribunal by any aggrieved
person by any assessment of
compensation made by the prescribed
authority under sub-section (3)
Enforced 396
238 Appeal to Tribunal in case of refusal by
registrar for registration of offer of
schemes involving transfer of shares
Enforced
New Provision
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Brief comparison- 6/7
• 1956 Act and 2013 Act
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Section under the
Companies Act,
2013
Powers given to NCLT Whether enforced Similar section under the
Companies Act, 1956
239 Preservation of books and papers of amalgamated companies
Enforced 396A
240 Liability of officers in respect of offences
committed prior to merger, amalgamation,
etc.
Enforced
New provision
241, 242 Power of Tribunal on an application made to
it for relief in cases of oppression, etc.
Enforced 397, 398, 401, 402, 403 and
404
245 Class Action Enforced New provision
248 Power of Registrar to remove name of
company
from register of companies.
Enforced
249 Restrictions on making application under
section
248 in certain situations.
Enforced
250 Effect of company notified as dissolved. Enforced
251 Fraudulent application for removal of name. Enforced
252 Appeal to Tribunal by a person aggrieved by
the order of Registrar notifying company as
dissolved
Enforced 560(6)
Brief comparison- 7/7 Section under the Companies Act, 2013
Powers given to NCLT Whether enforced Similar section under the
Companies Act, 1956
253 Application to Tribunal by
any secured creditor for
declaration of a company
as sick company
Omitted through IBC 424A
254 Application to Tribunal by
any secured creditor for
determination of measures
for revival and
rehabilitation of a sick
company
Omitted through IBC New provision
258 Order for initiating the
proceedings of winding up
by the Tribunal
Omitted through IBC New provision
266 Power of Tribunal to assess
damages against
delinquent directors, etc.
Omitted through IBC 424-K
271 to 303 Deals with winding up of a
company by a Tribunal
Enforced 426, 427, 433, 434, 439,
439A, 443 to 448, 450, 455
to 462, 464 to 470, 475 to
479, 481, 483 NCLT and NCLAT & its Powers | Vinod Kothari
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Transfer of matters to NCLT
• By way of notification date June 1, 2016, the CG -
▫ Transferred all the matters/ proceedings/ cases
pending before the CLB to NCLT which shall be dispose
by the NCLT in accordance with the provisions of the
Act, 2013 or the Act, 1956 (to the extent applicable).
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Transfer of pending winding up
proceedings
Winding up on the
grounds of inability to
pay debts
Pending as on
Dec 15, 2016
before HC?
New application
under IBC, 2016
Petition
served under
Rule 26 of the
Court Rules?
Remain with HC
under the Act, 1956
Transfer to NCLT
under the Code
No
Yes
Yes
No
Transfer of pending proceedings-1/2
Winding up on the
grounds OTHER THAN
inability to pay debts
Pending as on
Dec 15, 2016
before HC?
New application
under the Act, 2013
Petition
served under
Rule 26 of the
Court Rules?
Remain with HC
under the Act, 1956
Transfer to NCLT
under the Act, 2013
No
Yes
Yes
No
Transfer of pending proceedings-2/2
Procedure to be followed by NCLT
and NCLAT
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NCLT and NCLAT & its Powers | Vinod Kothari
Principles of natural justice • The phrase, ―the principles of natural justice,‖ is explained by Maugham J. in
Maclean v. The Workers' Union (1929) as follows:
▫ The phrase, ―the principles of natural justice,‖ can only mean in this
connection the principles of fair play so deeply rooted in the minds of
modern Englishmen that a provision for an inquiry necessarily imports
that the accused should be given his chance of defence and explanation
• In A. K. Kraipak & Ors. Etc vs Union Of India & Ors (1970)
▫ The Supreme Court held that, ―The aim of the rules of natural justice is to
secure justice or to put it negatively to prevent miscarriage of justice.
These rules can operate only in areas not covered by any law validly
made. In other words they do not supplant the law of the land but
supplement it.-The concept of natural justice has undergone a great deal
of change in recent years. In the past it was thought that it included just
two rules namely (1) no one shall be a judge in his own case (Nemo debet
esse judex propria causa) and (2) no decision shall be given against a
party without affording him a reasonable hearing (audi alteram partem)
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Procedural powers of NCLT and NCLAT
under CPC • Every Bench constituted by the Board is vested with the powers of a Civil Court,
while trying a suit, under the CPC, 1908 in respect of the following matters. Section 10ZA sub-section (2) deals with the powers as under: ▫ summoning and enforcing the attendance of any person and examining him on oath;
[Section 27 to 32 and Orders V and XVI]
▫ requiring the discovery and production of documents; [Section 30 and Orders XI and XIII]
▫ receiving evidence on affidavits; [Section 30(c) and Order XXIX]
▫ subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872 (1 of 1872), requisitioning any public record or document or copy of such record or document from any office; [Order XIII and XVI]
▫ issuing commissions for the examination of witnesses or documents; [Ss. 75, 76 and 77 and Order XXVI]
▫ reviewing its decisions; [Sections 114 and Order XLVII]
▫ dismissing a representation for default or deciding it ex parte;
▫ setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and
▫ any other matter which may be prescribed by the Central Government.
• It may be noted that although the Tribunal exercises the powers of the court in respect of the above matters, it is not a court. NCLT and NCLAT & its Powers | Vinod Kothari
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Power of NCLT under CRPC and IPC
• Section 424 (4) of the Act, 2013
▫ The Tribunal shall be deemed to be a Civil Court for purpose of section 195 and Chapter XXVI of the CrPC, 1973
Section 195 - contempt of lawful authority of public servants, for offences against public justice and for offences relating to documents given in evidence
Chapter XXVI – offences affecting the administration of justice
▫ Every proceeding before the Tribunal shall be deemed to be a judicial proceeding within the meaning of section 193 & 228 and section 196 of the IPC, 1860
Section 193 – punishment for false evidence
Section 228 - Intentional insult or interruption to public servant sitting in judicial proceeding
Section 196 - using evidence known to be false
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Enforcement of orders of Tribunal
• Any order made by the Tribunal may be enforced in
the same manner as if it was a decree made by a
civil court in a suit before it –
▫ The Tribunal either enforce the order itself or may send
it for execution to the court within the local limits of
whose jurisdiction -
the registered office of the company is situated in case the
order is against the company, or
the person concerned voluntarily resides or carries on
business, in case the order is against any such person
• Section 424 (3)
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Jurisdiction of Civil Court
42
NCLT and NCLAT & its Powers | Vinod Kothari
Ouster of civil court jurisdiction • The provision of this section ousts the jurisdiction of the civil courts and
replaces the same by the jurisdiction of NCLTs and NCLATs. • In The Secretary Of State vs Mask And Co. (1940)
▫ Lord Thankerton held: ―it is also well-settled that that even if jurisdiction is so excluded, the civil courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.‖
• In Union of India v. Delhi High Court Bar Association (SC) ▫ The Supreme Court has held that the objective of ouster of jurisdiction of
civil courts is to replace the same by Tribunals; however, the objective is not to leave aggrieved persons without any remedy at all. The important dictum in law is ubi jus ibi remedium (where there is a right there is a remedy).
• In Dhulabhai v. State of MP (1969) ▫ The Supreme Court laid down elaborate principles based on which the
exclusion of civil jurisdiction on matters covered by special courts shall be determined.
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Jurisdiction of Civil Court
• Civil Courts have jurisdiction to try all the suits of a civil
nature excepting suits of which their cognizance is either
expressly or impliedly barred
▫ Section 9 of the CPC, 1908 -
• The Judicial Committee observed in Secretary of State v.
Mask & Co (1940)
▫ It is settled law that the exclusion of the jurisdiction of the civil
courts is not to be readily inferred, but that such exclusion must
either be explicitly expressed or clearly implied.
• Section 430 expressly mentions that the civil court shall
have no jurisdiction on the matters on which NCLT or
NCLAT are having jurisdiction under this Code.
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Power of Civil Court • Section 424 (2) of Act, 2013
▫ summoning and enforcing the attendance of any person and examining him on oath;
▫ requiring the discovery and production of documents;
▫ receiving evidence on affidavits;
▫ subject to the provisions of sections 123 and 124 of the Indian Evidence Act, 1872, requisitioning any public record or document or a copy of such record or document from any office;
▫ issuing commissions for the examination of witnesses or documents;
▫ dismissing a representation for default or deciding it ex parte;
▫ setting aside any order of dismissal of any representation for default or any order passed by it ex parte; and
▫ any other matter which may be prescribed.
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Right to legal representation (sec. 432)
• A party to any proceeding or appeal before NCLT or
NCLAT
▫ Either appear in person or authorise one or more –
Chartered Accountants, or
Company Secretaries, or
Cost Accountants, or
Legal Practitioners, or
Any other person
▫ So any other person can go before the NCLT and
represent?
The scope remains vide enough
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Applicability of Limitation
• Section 433 provides that the provisions of the
Limitation Act, 1963 shall, as far as may be, apply to
proceedings or appeals before the Tribunal or the
Appellate Tribunal, as the case may be.
• Further draft rule 2 (38) defines ―prescribed period‖
as “the respective or relevant period to be reckoned as
defined in the Limitation Act, 1963”
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Applicability of Limitation • Section 358 is a non-obstante clause
▫ Shall override anything contained in the Limitation Act, 1963 or any other law for the time being in force
▫ Company being wound up by the Tribunal - the period from the date of commencement of the winding up of the company to a period of 1 year immediately following the date of the winding up order shall be excluded
• Part III of the Limitation Act provides for computation of period if limitation
▫ The term ‗period of limitation‘ means the period of limitation prescribed for any suit, appeal or application by the Schedule (section 2 (j) of Limitation Act)
▫ In proceedings for the winding up of a Company, the period beginning with the date of institution of such proceeding and ending with the expiry of 3 months from the date of appointment of such receiver or liquidator, as the case may be, shall be excluded while computing the period of limitation
• Provisions of Limitation Act and Act, 2013 are inconsistent?
▫ Limitation period shall be calculated applying the principles under Limitation Act
Such limitation shall be further extended by the period of 1 year.
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Major Impact of Bankruptcy Code on
Winding Up • Insertion of new definition (section 2 (94A))
▫ ―winding up‖ means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.
• Shall be omitted
▫ Section 289 – powers of Tribunal on application for stay of winding up
▫ Sections 304-323 – Voluntary winding up
▫ Section 325 – Application of insolvency rules in winding up of insolvent companies
• Section 326 substitutes – overriding preferential payments
▫ Insertion of explanation w.r.t. definition of workmen, workmen's dues and workmen‘s portion
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Contempt rules applicable (sec 425)
• NCLT and NCLAT shall have the same jurisdiction,
powers and authority as vested with High Courts
▫ Under the provisions of the Contempt of Courts Act,
1971
• The provisions of the Contempt of Courts Act, 1971
shall have effect subject to modification
▫ Reference to a High Court shall be construed to include
reference to NCLT and NCLAT
▫ Reference to Advocate-General (section 15 of CCA,
1971) shall be construed as a reference to Law Officers
as the CG may specify.
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▫ Rules of natural justice applicable, but CPC not - Section
424 (1)
▫ Tribunals may regulate their procedure - Section 424 (1)
▫ Powers of Civil Court – Section 424 (2)
Powers vested in a Civil Court under the Code of Civil
Procedure, 1908
▫ Contempt rules applicable - Section 425
▫ Delegation of powers to officers or employees: Section 426
▫ Seeking assistance of executing authorities mainly Chief
Metropolitan Magistrate, Chief Judicial Magistrate or he
District Collector – Section 429
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Provisions of the Act dealing with powers of
the Tribunals
Powers under Articles 226 and 227
• In L. Chandra Kumar v. Union Of India And Others ▫ The Supreme Court held that, the jurisdiction conferred upon the
High Courts under Articles 226/227 and upon the Supreme Court under Article 32 of the Constitution is part of the inviolable basic structure of our Constitution.
▫ All decisions of these Tribunals will be subject to scrutiny before a Division Bench of the High Court within whose jurisdiction the concerned Tribunal falls.
▫ The Tribunals will, nevertheless, continue to act like Courts of first instance in respect of the areas of law for which they have been constituted.
• In R.K. Jain v. Union Of India And Ors (1993) ▫ The Court held that the Tribunals created under Articles 323A
and 323B could not be held to be substitutes of High Courts for the purpose of exercising jurisdiction under Articles 226 and 227 of the Constitution
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Compromises and arrangements
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Compromises, Arrangements and
Amalgamations- 1/11
• Sections enforced
None of the sections under this chapter have been enforced
Draft rules under this chapter have also not been finalised
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Compromises, Arrangements and
Amalgamations- 2/11 • Power to compromise or make arrangements with
creditors and members (Section 230) -1/2 The following have been added in furtherance to section 391 of Act, 1956:
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Increased disclosures to accompany the application – details about CDR, valuation report by registered valuer
If 90% by value of creditors agree by way of affidavit, then meeting of creditors can be dispensed with by NCLT
Notice of meeting to state effect of the arrangement on creditors, KMP, promoter and non-promoter members and debenture holders
Notice to be served on creditors, members, debenture holders. Voting to be allowed by way of postal ballot also
Power to object the scheme is with persons holding 10% of shareholding or having outstanding debt of 5% of total outstanding debt – frivolous contests by small creditors avoided
Head count test for meetings done away with
Compromises, Arrangements and
Amalgamations- 3/11 • Power to compromise or make arrangements with
creditors and members (section 230) -2/2
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Order of NCLT to be filed with RoC within 30 days of receipt of order. That the order shall have no effect until filed, is not provided
Notice and other documents to be served on CG, IT
authorities, RBI, SEBI, RoC, CCI, OL
Acquisition of control of unlisted company,
acquisition of 50% or more of share capital of unlisted
company can also form a part of compromise of
arrangement – Draft Rule 11
Application to be made under Form no. AMG.7 specifying
any grievance against takeover of unlisted
companies
Compromises, Arrangements and
Amalgamations- 4/11
• Manner and form of application to NCLT
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230 (1)
• Application to be made • by the company or member or creditor or liquidator (if company is in liquidation) to NCLT
for an order directing calling of a meeting of members or creditors • Rules have now specified Form AMG-1 for making such application along with such
documents as may be prescribed in the said Form
Decide on notice/meetings
• NCLT will pass an order fixing the time, date, quorum, manner of circulation of notice etc. • Rule 3 (3) (a) has empowered the NCLT to decide the class of creditors and/or of members
whose meeting or meetings have to be held for considering the proposed compromise or arrangement
230 (3)
• On the direction of the NCLT, the notice calling meeting of members/creditors is to be sent along with a statement
• Earlier, the scheme of arrangement was required to accompany the notice however, the Rules have now prescribed the detailed contents of such statement to be sent along with the notice
Compromises, Arrangements and
Amalgamations- 5/11 • Sending of notice to members/creditors
• Contents of the explanatory statement
• (a) parties involved in such compromise or arrangement;
• (b) in case of amalgamation or merger, appointed date, share exchange ratio (if
applicable) and other considerations, if any;
• (c) summary of valuation report (if applicable) including basis of valuation and
fairness opinion of the registered valuer, if any;
• (d) details of capital/debt restructuring, if any;
• (e) rationale for the compromise or arrangement;
• (f) benefits of the compromise or arrangement as perceived by the Board of
directors to the company, members, creditors and others (as applicable);
• (g) amount due to unsecured creditors.
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Compromises, Arrangements and
Amalgamations- 6/11 • MCA Circular on section 394A of Act 1956 and section
230 (5) of Act 2013 U/s 394A court must issue notice to the Central Government to take into consideration any
representations that the Government may make.
▫ This power has been delegated to the Regional Directors
Practically there are areas of uncertainty regarding role of RDs
▫ often the RDs raise issues pertaining to the substantive aspects of the scheme such as valuation and share exchange ratio
▫ In other cases the issues are confined to procedural or administrative aspects.
▫ There has also been some level of variation in different regions as to the manner in which the RDs respond to the scheme in terms of substance as well as process
In order to streamline the process of representation by the RD, the Ministry of Corporate Affairs has issued a general circular to all RDs
▫ Requiring them to invite specific comments from the Income Tax Department within 15 days of receipt of the notice before filing the representations in court
In case of lack of response from the Income Tax Department, it may be presumed that there are no objections.
However, u/s 230 (5) of Act 2013, it is the duty of the company to notify all government departments along with the notice of the court-convened meetings.
▫ Those authorities may make their representation directly. Again, if there is no timely response from the authorities (i.e. within 30 days from the receipt of notice), then it is presumed that they have no representations.
▫ Rule 5.4 prescribes the same shall be sent in Form AMG.5
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Compromises, Arrangements and
Amalgamations- 7/11
• Objections to the Scheme- 230 (4)
Proviso to Section 230(4) empowers
▫ members holding at least 10% of shareholding or
▫ creditors holding 5% of total debts to raise objections to the scheme
Objections to a scheme of an unlisted company involving takeover can be objected by any stakeholder or shareholder by filing a petition with NCLT in Form AMG.7.
▫ Such petition is also required to be advertised in accordance with NCLT Rules.
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Compromises, Arrangements and
Amalgamations- 8/11 • Minority interest to Corporate convenience-section 230 (6)
‗Headcount test‘ being deleted under section 230(6) and ruling
out the opportunity to raise objections by minority shareholders by incorporating proviso to section 230(4)
230 (6) corresponds to section 391(4) of Act, 1956 ▫ under section 391(4) of Act, 1956 approval to a scheme of arrangement
requires the majority by way of: Persons in number attending and voting i.e. the ‗headcount test‘
Value of shares held i.e. ‗voted-share test‘
Difficulty in applying head count test was discussed in JJ Irani Committee Report dated May 31, 2005
▫ It discussed that since the voted value test is also a criterion to determine the intent of shareholders, head-count test may be done away with
▫ suggested that the requirement may be modified to provide only for approval by 3/4th in value of shareholders and creditors, present and voting.
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Compromises, Arrangements and
Amalgamations- 9/11
• Merger and amalgamation of companies (section
232)—1/2
Section 232 of the Act lays down a separate set of
procedure for schemes involving mergers, demergers or
reconstructions.
However, NCLT may direct the applicability of provisions
relating to calling of meetings, sending notices, raising
objections, manner of votes etc specified for schemes of
compromise to apply to schemes of
merger/demerger/reconstruction also.
An order approving such schemes shall be passed by NCLT
in Form AMG.10.
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Compromises, Arrangements and
Amalgamations- 10/11
• Merger and amalgamation of companies (section
232)—2/2
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Documents to be circulated
Order of NCLT
Miscellaneous
• Draft of proposed terms of scheme, valuation report, supplementary accounting statement to be circulated for the creditor’s meeting
• Apart from matters stated u/s 394(1), the order of NCLT can also state the manner of the allotment of shares of the transferee company to a non-resident shareholder, the transfer of the employees of the transferor company to the transferee company
• Order to be filed within 30 days of receipt of certified copy of order
• File yearly statement with RoC indicating whether the scheme is being complied with or not
• Shares cannot be held by the company in the name of a trust
Compromises, Arrangements and
Amalgamations- 11/11
• Fast track Mergers(section 233) Scheme of arrangement between:
▫ two or more small companies
▫ between a holding company and its wholly-owned subsidiary company
Rules have specified that wholly owned subsidiaries would mean such companies in which the whole beneficial shareholding is with the holding company
▫ No need to make application to tribunal subject to sub-sections (5) and (6)
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Process in a nut shell – 1/2
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Process in a nut shell – 2/2
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Oppression and mismanagement
Oppression and Mismanagement- 1/17
• Sections enforced Section 241 and 242 deal with application and power of Tribunal for
relief in case of oppression and mismanagement
Both these sections have been notified by MCA vide its Notification
S.O. 1934(E) dated June 1, 2016 except clause (b) of Sub-section (1)
and clause (c) (g) of sub-section (2) of section 242.
Unfortunate to see the ―liable for winding up‖ condition being kept on
hold; indicating lack of understanding
This was the very genesis of the provision
Just and equitable grounds for winding up of the company existed
• Significant changes:
▫ Section 397 was a class right; section 398 was a mass right
▫ Both have been clubbed
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Oppression and Mismanagement- 2/17
• Applicable Provisions Companies Act, 1956- Chapter VI
▫ Section 397- dealt with relief to members in case of oppression
Subject to the principle that it is just and equitable that the company be wound up
▫ Sec 398- relief to members in case of mismanagement
Companies Act, 2013-Chapter XVI
▫ Section 241 and 242
Both the oppression and mismanagement provisions under the existing 397 and 398 have been now clubbed u/s 241
▫ However, seemingly, mismanagement has been completely submerged under oppression
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Oppression and Mismanagement- 3/17
• Meaning of terms
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Oppression is a grievance – a representative action
One member against another member in a manner that shareholder‘s right of the
complaining member is affected
Mismanagement is a derivative right
Where a member comes on behalf of the Company and allege that the company‘s
affairs are being mismanaged
Oppression and Mismanagement- 4/17
• History of expression-Oppression
Section 397 gives right to the aggrieved shareholder to come
forward in case of ―oppression‘‘
Similar rights have been given to shareholders under the UK
Companies Act, 1985 under section 459 and thereafter, in
section 994 of the 2006 Act, in case the shareholder has reasons
to prove that the conduct is ―unfairly prejudicial‖.
It has been held that the term unfairly prejudicial is much wider
in scope than oppression.
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Oppression and Mismanagement- 5/17
• Legality of act of oppression Legal acts and oppressive acts – an act may be legal, yet oppressive. ▫ A conduct technically legal and correct may nevertheless be such so as to justify oppression
and
▫ conversely, a conduct involving illegality and contravention of the Act may not suffice to warrant the remedy of oppression.
There should be always an unfair abuse of powers and an impairment of confidence in the probity with which the company's affairs are being conducted so as prove oppression. Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd., (1981) 51
Com Cases 743 at 777.
The Apex Court observed that ―the true position is that an isolated act, which is contrary to law, may not necessarily and by itself support the inference that the law was violated with a mala fide intention or that such violation was burdensome, harsh and wrongful. But a series of illegal acts following upon one another can, in the context, lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed.‖ http://www.indiankanoon.org/doc/292160/
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Oppression and Mismanagement- 6/17 • Foss vs Harbottle (1843)
▫ Derivative actions by shareholders recognised in case of fraud upon minority
• Ebrahimi (1973) ▫ One of the most significant rulings; recognised concept of
incorporated patnerships
• O’Neill v Phillips (1999) In O‟Neill v Phillips (1999) 1 WLR 1092 Lord Hoffman, in a judgment
with which all his colleagues agreed, explained that conduct which was unfairly prejudicial to members of the company was not ‗palm tree‘ unfairness. Instead ordinarily unfairness involves a breach of the terms on which it had been agreed that the company‘s affairs should be conducted.
Concept of ―unfair prejudice‖ was incorporated in UK Act in 1980 (subsequently incorporated in 1985 and section 994 of CA 2006 In India, though the term is not used in the statute, but forms part of
several leading rulings of Courts
Unfair prejudice instead of ―oppressive‖ as used in Indian law
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Leading US rulings on oppression • Several US rulings hold that in close corporations, majority shareholders owe fiduciary duty to
minority shareholders
• Examples of breach of fiduciary duties
▫ Failing to pay dividends when the corporation has the financial wherewithal to do so
▫ Causing the corporation to pay the majority shareholders compensation which is excessive and unfair to the minority and/or the corporation
▫ Paying the majority shareholders compensation amounting to a de facto dividend to the exclusion of the minority shareholder
▫ Denying shareholders participation in management of the corporation or a voice in decision-making processes
▫ Attempting to implement an unfair stock redemption plan that favors the majority shareholders
▫ Failing to provide the minority shareholder documents necessary to properly evaluate his interests when selling his shares
▫ Not allowing minority shareholders to participate in capital calls or otherwise protect themselves from dilution of their equity
▫ Using corporate funds to pay the personal expenses of other shareholders or related parties (such as family)
▫ Failing to provide financial statements or other information shareholders have a right to receive
▫ Engaging in acts designed to freeze the minority shareholder out of the corporation rather than give him his fair share of his investment
▫ Denying a shareholder any return on the shareholder‘s equity while refusing to buy-out the shareholder‘s shares for Fair Value
▫ See more at: http://www.srr.com/article/shareholder-oppression-fiduciary-duty-and-partnership-litigation-closely-held-companies#sthash.FBu65p3R.dpuf
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Oppression and Mismanagement- 7/17
• Just and Equitable principle 1/3
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The principle of making application on ―just and equitable‖ ground for winding up the company was under case of oppression in the Act 1956
• The same seems to be now applicable for both oppression and mismanagement u/s 242
• This may be nothing but a gross drafting negligence
Mismanagement cannot be a grievance for establishing ―just and equitable‖ principle
Mainly for enforcement of shareholder’s rights
Oppression and Mismanagement- 8/17
• Just and Equitable 2/3
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Just and equitable ground
Loss of faith
Mistrust
Loss of substratum
Loss of mutual understanding
Oppression and Mismanagement- 9/17
• Just and Equitable 3/3
Oppression is rampant in ▫ Closely held companies
▫ Family companies Familial relationships
▫ Quasi- partnerships
Usually the terms of the coming together is imbibed in ▫ Articles of Association (Articles) of the company,
▫ Shareholders‘ agreement, or
▫ Memorandum of Understanding between partners
The members therefore have a ‗legitimate expectation‘ ▫ Shareholders also therefore have a fiduciary duty
▫ There is restriction upon the transfer of the members‟ interest in the company
Where there is breach of such legitimate expectation, one can apply under oppression proceedings and claim winding up of the company ▫ Therefore, this principle of winding up was not required for cases under
mismanagement
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Quasi partnerships • Significant Indian rulings
▫ Needle India Industries ▫ Kilpest ▫ Haldia Petrochemicals ▫ Ruby General Hospital ▫ Chloro Controls India
• Significant UK rulings ▫ Westbourne Galleries (1973)
3 features: (1) an association formed or continued on the basis of a personal relationship involving mutual confidence, (2) an understanding that all, or some, of the shareholders shall participate in the conduct of the business and (3) restrictions on the transfer of shares, so that a member cannot take out his stake and go elsewhere.
▫ In Crowley v Bessell and others [2015] EWHC 1518, a partnership was converted into a company. Removal of director, without buying his shares, was held unfairly prejudicial
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Oppression and Mismanagement- 10/17
• Legitimate expectation 1 / 2
Legitimate expectation calls for superimposition of equitable consideration which may arise only if there are any of the following ingredients:
▫ an association formed or continued on the basis of a personal relationship, involving mutual confidence—this element will often be found where a pre-existing partnership has been converted into a limited company;
▫ an agreement, or understanding, that all, or some (for there may be „sleeping‟ members), of the shareholders shall participate in the conduct of the business;
▫ restriction upon the transfer of the members‟ interest in the company—so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere as held in Re, Westbourne Galleries Ltd., (1972) 2 All ER 492 (HL).
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Oppression and Mismanagement- 11/17
• Legitimate expectation 2/2
Needle Industries (India) Ltd. v. Needle Industries Newey (India)
Holdings Ltd., (1981) 51 Com Cases 743 at 777
It was held in the case that, ―a conduct which lacks probity,
conduct which is unfair to and which causes prejudice to the
Petitioner in the exercise of his legal and propriety rights as a
shareholder‖ must be shown to exist.
http://www.indiankanoon.org/doc/292160/
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Oppression and Mismanagement- 12/17
• Minimum number of applicants 1 / 2 Section 244 corresponds to the present section 399 of the
Act Same as those under sec. 399 of the Act 1956.
In case of company with share capital: not less than one hundred in number or not less than one-tenth of the total number of members whichever is less or any member(s) holding not less than one-tenth of the issued share capital
in case of company without share capital: not less than one-fifth of the total number of its members
Apparently, even a single shareholder can file an application u/s 242 under the proviso to sec 244 There was similar provision u/s 399 (4) of Act, 1956 ▫ If the NCLT waives the requirement of minimum number of
members
▫ Therefore most cases where 399 formed the basis of maintainability goes away completely
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Oppression and Mismanagement- 13/17
• Minimum number of applicants 2/2 Consequences of power to NCLT for waiving off the minimum
requirement
▫ leaving the doors of minority protection open to just any member shareholder
Can cause increase in vexatious litigations
Looking at the consequences of the invoking of the provision of section 241, is it correct to open the doors to anyone and everyone
▫ As such person can even cause winding up of company u/s 271 (1) (g)
NCLT has been only empowered to waive the condition under the section and not the requirements of the section
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Oppression and Mismanagement- 14/17 • Reliefs under the section- Section 242(2) provides for the following reliefs (vis-à-vis
u/s 402 of Act 1956): ▫ Regulation of conduct of affairs of a company
▫ the purchase of shares or interests of any members of the company by other members thereof or by the company and consequent reduction of capital
▫ restrictions on the transfer or allotment of the shares of the company
▫ the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, and any other person
▫ the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property made or done by or against the company within three months before the date of the application under the section;
▫ removal of the managing director, manager or any of the directors of the company;
New power
▫ recovery of undue gains made by any managing director, manager or director during the period of his appointment as such and the manner of utilisation of the recovery including transfer to Investor Education and Protection Fund or repayment to identifiable victims;
New power
▫ appointment of such number of persons as directors, who may be required by the Tribunal to report to the Tribunal
New power
▫ imposition of costs
Explicitly provided
▫ any other matter for which, in the opinion of the Tribunal, it is just and equitable
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Oppression and Mismanagement- 15/17
• Serious implications
Therefore, pre-condition of just and equitable ground cannot
be waived
Can a single shareholder allege loss of trust and faith and
therefore seek reliefs?
▫ Single shareholder may exploit this power to coax
companies into meeting their illegal demands by using NCLT
▫ A venue opened for enthusiasts
Therefore, can one or two shareholders ask for the grave
consequences under the section?
Can a single shareholder represent other members too?
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Oppression and Mismanagement- 16/17
• Effect of alteration of MoA and AoA [242 (5) , (6), (7) and (8) vis-a-vs sec 404 of Act 1956)
▫ change is with respect to the imposition of fine
▫ Earlier the fine was Rs 50000 for both the offending company and officer in default and there was no mentioning about imprisonment,
but now the fine leviable on company is increased to Rs. one lakh and extendable to Rs twenty-five lakhs.
▫ fine on the officer in default, the same may be coupled up with imprisonment and fine which shall not be less than twenty-five thousand but may extend to rupees one lakh.
Similar modifications for Consequence of termination or modification of certain agreements
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Oppression and Mismanagement- 17/17
• S.246-Additional applicability of section 337-341 to oppression and mismanagement ▫ Sections 337-341 provide for liabilities for certain offences in course of
winding up
▫ Since oppression proceedings go on the same footing, these powers are applicable here as well.
▫ Offences covered fraud,
accounts not being kept properly,
Liability for fraudulent conduct of business,
Tribunal to assess damages against delinquent directors, etc.
▫ Liability under sections 339 and 340 to extend to partners or directors in firms or companies.
• Impleadment of Parties ▫ Section 405 of the Act 1956 explicitly provided for adding of
respondents in case Tribunal was satisfied No such provision under the Act 2013
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Freeze action
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Power under application for Freeze Action-
1/9 • Provision of law
The closest precedent was section 250 of the 1956 Act, however,
much narrower in scope
NCLT shall have powers to ―freeze the transfer or disposal of assets
of the Company‖
When?
▫ in the event of any inquiry or investigation or
▫ reference by the Central Government or
▫ a complaint by such number of members specified under Sec 244 (1)
▫ creditors having one lakh amount outstanding.
▫ Any other person having reasonable ground
This power is an extension to powers under the current section
397, 398, 237, 247 and 250 of the Act 1956
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Power under application for Freeze Action-
2/9 • What is freeze action? A freeze action or a freezing injunction is a court order which prevents a
party from disposing of or dealing with its assets
Under section 221 freeze can be imposed on
▫ removal, transfer or disposal of
Funds
Assets
Properties of the company
Therefore, apart from the present remedies, the section provides for
further remedies by way of injunctions
▫ However, even under oppression/mismanagement proceedings, such restraints
are given
▫ So what is different about these freeze actions?
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Power under application for Freeze Action-
3/9 • Procedures Who can make a reference for freezing injunction?
▫ On a reference made to it by the Central Government or
▫ In connection with any inquiry or investigation into the affairs of a company under sec 216 or
▫ on any complaint made by number of members as specified under sub-section (1) of section 244 Similar to sec 399 of Act 1956
not less than one hundred in number or not less than one-tenth of the total number of members whichever is less or any member(s) holding not less than one-tenth of the issued share capital
in case of company without share capital not less than one-fifth of the total number of its members, or Proviso empowers even a single person to make an application if Tribunal is
satisfied
▫ a creditor having one lakh amount outstanding against the company or
▫ any other person having a reasonable ground
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Power under application for Freeze Action-
4/9 • Requirements of notice No express provision/rules laid down currently
▫ given the current scenario it does not seem it will be
necessary for the party referring to serve a notice on
the defendant
▫ thus an ex-parte order can be passed by NCLT.
On the other hand giving notice might lead to assets/properties
being disposed off.
▫ Therefore while seeking such ex-parte orders urgency
and risk needs to be established
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Power under application for Freeze Action-
5/9 • When can an application be made? When any of the above stated parties have
▫ a reasonable ground to believe that the removal, transfer or disposal of funds, assets, properties of the
company is likely to take place in a manner that is prejudicial to the interests of the company or
its shareholders or
creditors or
in public interest
▫ NCLT should apply balance of convenience
What is important to note is that power to apply extends to any other person ▫ This would mean to include the members of the public in general
▫ History of the use of word ―other person‖ is there with regards to inspection provisions under Act 1956 and UK Act Judicial authorities have held that ―other person‖ would mean to include
larger section of the society, and therefore, includes members of public
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Removal, transfer or disposal
• The key words in defining the scope of section 221 will be removal transfer or disposal
• Given the intent of the section, a mere exchange of assets or sale of assets should not fall under the section
▫ Removal, transfer or disposal must be such as to deprive the shareholders, creditors or the company of what is being disposed off
• The section cannot be triggered for inter-shareholder disputes
• The section also seems to be in the nature of derivative remedy
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Power under application for Freeze Action-
6/9 • NCLT power to waive the minimum application
requirement
The minimum requirement is same as for application u/s 241
Apparently, even a single shareholder can file an application
u/s 221 under the Proviso to sec 244
▫ If the NCLT waives the requirement of minimum number
of members
▫ Therefore, frivolous and motivated litigations are likely
to take a rise
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Power under application for Freeze Action-
7/9 • Reliefs under the section
Provision can literally put the business of a company to halt
▫ as the said section can be invoked for removal, transfer
or disposal of funds, assets, properties of the company
▫ In case of halt on disposal of funds, it will be practically
impossible for a company to run the business for
transfer of funds.
For example the company may have to make payment to
its suppliers
but in case of getting reliefs under this section, the company
may not be able to do so.
▫ Thus, businesses may come to deadlock
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Power under application for Freeze Action-
8/9 • Consequences of such waiver of minimum requirement Given the gravity of the provision, the waiver provision ▫ Leaves the doors of minority protection open to just any
member shareholder Looking at the consequences of the invoking of the provision
of section 221, is it correct to open the doors to anyone and everyone
▫ As such person can cause stagnancy to the business This section cannot be intended to protect the rights of any single
shareholder
▫ any impact on the interests of a single shareholder cannot be and should not be the ground for operation of this section.
It depends of the rulings of NCLT to set limits to the open-ended powers under the section keeping in mind the severity of the provisions
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Power under application for Freeze Action-
9/9 • Breach of orders of NCLT Fine shall be imposed on the company as well as the officers in
contravention
The company shall be punishable with fine which shall not be less than
▫ one lakh rupees but which may extend to twenty-five lakh rupees and
Every officer of the company who is in default shall be punishable with
▫ imprisonment for a term which may extend to three years or
▫ with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.
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Class action
Powers under application for Class Action- 1
• Sections enforced
Section 245 deals with application to Tribunal for
Class Action
The section has been notified by MCA vide its
Notification S.O. 1934(E) dated June 1, 2016
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Powers under application for Class Action- 2
• History Began in the equity courts of seventeenth-century England as a bill of peace
English courts would allow a bill of peace to be heard if
▫ the number of litigants was so large that joining their claims in a lawsuit was not
possible or practical
Class action aimed at monetary settlements originated in the USA and is still
predominantly a US phenomenon
The Satyam fallout had created uproar in the country
Prior to the enactment of Companies Act 2013, class actions suits have been
filed as “representative suits” under Civil Procedure Code 1908 or under the
pretext of public interest litigations.
▫ Order 1 Rule 8 provides that where there are numerous persons having the same
interest in a suit, one or more persons may, with the permission of the court, either
sue, or defend the suit, for the benefit of all interested
▫ Further, court to publicize a representative suit either by service, or depending on the
number of persons involved, by public advertisement.
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Powers under application for Class Action- 3
• Class action
▫ Sec 245 incorporates a broad so-called class action provision
▫ Based on recommendation of JJ Irani Committee
The Irani Committee made a sort of an aggregated reference to class
action and derivative action
▫ The earlier version of the Bill included creditors as well - that has been
omitted
As the creditors can enforce their claims through contracts/ agreements
with borrower companies
▫ Further, no inclusion of debenture holders, other stakeholders
▫ Introduced to bring together stakeholders with common interest on a
shared platform to lower costs of litigation and boost the efficiency of
the legal adjudication.
▫ Concept of class action is present in some other sections too
Sec 37 in case of any offences in relation to security issuance
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Powers under application for Class Action- 4
• Constitutionality
Has the potential of breaching into the basic powers of civil
courts, and therefore, goes far beyond the specialized powers
conferred on the NCLT to deal in matters pertaining to corporate
laws
▫ As such, its constitutionality will remain doubtful.
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Powers under application for Class Action- 5
• Shareholders’ remedies shareholder(s) pursuing his personal remedies
▫ for instance, refusal to transfer a share, or any wrong done against the rights of the shareholder;
shareholder(s) pursuing a derivative remedy, that is, pleading on behalf of the company for a wrong done against the company
▫ for example, proceedings against mismanagement under the present law or derivative action permitted under the UK Companies Act 2006
shareholder(s) pursuing class action or collective remedy, that is, pleading on behalf of a whole class of shareholders
▫ say against a fraud or misappropriation of money
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Powers under application for Class Action- 6
• Advantages of class action
Presumably, class suits minimize litigation by avoiding multiple
suits.
The amount of compensation being claimed by each claimant may
be too small to warrant individual pursuit.
Class action is not limited to shareholder action. Shareholder
activism is only a facet of class action
▫ it ranges widely including consumer litigation, public
interest matters, and so on
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Powers under application for Class Action- 7
• Threats of Class Action July 2008 report titled Securities Class Litigation by US Chamber
Institute for Legal Reform begins itself like this: ▫ “Private securities class actions present a serious threat to the health of the U.S.
economy. The costs of securities litigation are enormous, but the benefits are miniscule. The culture of abusive class actions, driven by a multibillion dollar plaintiffs‟ lawyer industry, is eroding the competitiveness of U.S. capital markets at a time when they face perhaps their greatest threat from foreign competition. The system is broken, and Congress must enact the reforms needed to fix it”
Suits are more a matter of negotiation and settlement, than a matter of justice
The legal cost is not all-the dip in the value of the market cap of the sued entity is also a direct loss caused by the litigation.
▫ This is referred to as Disclosure Dollar Loss, and for the securities class litigation in just
one year, viz., 2008, this number was a mind boggling USD 856 billion
Cornerstone Research: Securities Class Action Fillings, 2008 A Year in Review
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Provision of section 245
• The provision has been placed in the chapter dealing with oppression and mismanagement
• The management or conduct of the affairs of the company has to be prejudicial to the interest of
▫ The company
▫ The members
▫ Depositors
• No reference to prejudice to a class of members
▫ Hence, the section cannot be deployed for minority protection
• Whether the instances mentioned in sec 245 (1) (a) to (h) are presumed to prejudicial
▫ Debatable question
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Statistics-Class Action cases filed
• In 2015, 234 securities class actions were filed in
federal courts, more than in any year since 2008, at
the height of the financial crisis
• The number of filings in 2015 is 8% higher than in
2014, and about 6% higher than the average rate of
the preceding five years
• Source: NERA Report on “Recent Trends in Securities
Class Action Litigation: 2015”
▫ See figures in next slide
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Statistics
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Statistics- Investor Loss
• In 2015, aggregate investor losses on all filed cases
totaled $183 billion, a decrease of more than 25%
from four years ago, but a marked increase of more
than 25% over 2014 and 15% over 2013.
• In 2015, however, the pattern changed, and three
cases with investor losses of over $10 billion were
filed, the two largest being against Canadian issuers.
• Source: NERA Report on “Recent Trends in Securities
Class Action Litigation: 2015”
▫ See figures in next slide
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Statistics- Investor Loss
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Application for Class Action
• Act 2013-Where does class action lie?
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Similar as in case of oppression and mismanagement
• (a) to restrain the company from committing an act which is ultra vires the articles or memorandum of the company;
• (b) to restrain the company from committing breach of any provision of the company’s memorandum or articles;
• (c) to declare a resolution altering the memorandum or articles of the company as void if the resolution was passed by suppression of material facts or obtained by mis-statement to the members or depositors;
• (d) to restrain the company and its directors from acting on such resolution;
• (e) to restrain the company from doing an act which is contrary to the provisions of this Act or any other law for the time being in force;
Application for Class Action
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Continued…
(f) to restrain the company from taking action contrary to any resolution passed by the members;
(g) to claim damages or compensation or demand any other suitable action from or against—
• (i) the company or its directors for any fraudulent, unlawful or wrongful act or omission or conduct or any likely act or omission or conduct on its or their part;
• (ii) the auditor including audit firm of the company for any improper or misleading statement of particulars made in his audit report or for any fraudulent, unlawful or wrongful act or conduct; or
• (iii) any expert or advisor or consultant or any other person for any incorrect or misleading statement made to the company or for any fraudulent, unlawful or wrongful act or conduct or any likely act or conduct on his part;
(h) to seek any other remedy as the Tribunal may deem fit.
Application for Class Action
• Important issue
Can class action be filed on behalf of all members?
▫ If yes, would the damages be awarded to the class as
whole or to only those who brought the action
it may also include those members who were or might be
behind the wrongs complained of.
▫ If no, then how would the same classify as ―class‖ with
respect to class action
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Application for Class Action • Who can be sued? As per the provisions of section 245 (1) (g) a class action suit can
be brought against: ▫ The Company ▫ Directors of the Company
▫ Auditors and audit firm In case of auditors, the liability extends to not only the defaulting or
alleged partner but also to the firm.
▫ Any expert or advisor or consultant or any other person For any fraudulent, unlawful or wrongful act or conduct or any likely act
or conduct on his part
difficult to escape the provisions by the professionals as the clause has a wide meaning
▫ Prima facie in violation with the principles of privity of contract Only parties to the contract can sue each other to enforce their rights
or claim damages
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Application for Class Action
Who can apply u/s 245? Provisions set out under draft rules
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Members
Company having share capital-
200 members or ten per cent. of the total number of its members, whichever is less; or
any member or members singly or jointly holding not less than ten percent of the issued share capital of the company Company not having a share capital, not less than one-fifth of the total number of its members
Depositors
One hundred depositors or ten per cent. of the total number of depositors, whichever is less; or
any depositor or depositors singly or jointly holding not less than ten percent of the total value of outstanding deposits of the company
Application for Class Action
• Oppressive Act
The section deals that in the event of oppressive act, costs to
be paid to the applicant
Note, a member already has right under section 241
Therefore, the section fails to demarcate circumstances when
a member can proceed under section 241 and when can
reliefs be sought under section 245.
▫ The underlying principle of class action, which aims at
reducing multiplicity of suits, gets frustrated and
nullified.
▫ Therefore, a member can resort to both section 241 and
sec 245
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Application for Class Action
• Consequences of class action suit
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Order passed by the Tribunal shall be binding
on
• the company, • its members, • depositors, • auditors, advisors,
consultants, experts and other persons associated with the company.
Failure to comply with the order attracts
• fine of Rs. 5 Lakh extendable up to Rs. 25 Lakh and every officer in default shall be punishable with an imprisonment of 3 years and with fine of Rs. 25 thousand extendable upto Rs. 1 Lakh.
Application for Class Action
• Consequences of frivolous action
In case of vexatious or frivolous action by members
The Tribunal may
▫ Reject the application and
▫ make an order that the applicant shall pay to the opposite party such
cost, not exceeding Rs. 1 lakh, as may be specified in the order
The minimum members joining can be 100
▫ Therefore, cost per person is barely Rs. 1000
▫ More the members, lesser the cost
▫ Such minimal amount may not be enough to deter frivolous litigation.
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Application for Class Action
• Opt out
Can a plaintiff opt out of the application?
No such provision under the Act 2013
In the US, Courts have held that the principle of ―Due Process‖
requires that absent class members be given adequate notice,
adequate representation, and adequate opportunity to opt out,
before they can be bound by a final judgment in the suit.
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Application for Class Action- Process
• Process of Applying
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On admission of a class action application, NCLT to issue public notice to all members or depositors of class
Within 7 days of admission
Publish in newspaper with vernacular language in state of registered office and English daily
• No requirement of widely circulation
Company to place public notice on its website
Notice to be also place on website of Tribunal, MCA, RoC, Stock exchange until disposal of application by Tribunal
Date of newspaper=date of service of public notice to members of company
Application for Class Action- Process
• Details of public notice
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Name of lead applicant Grounds of application
Reliefs sought
Statement for compliance with minimum number of applicants
details of the admission of the Application and the date by which the form of opt out
Statement that the application admitted by the Tribunal is after considering the matters stated under section 245 (4) and it is satisfied that the application may be admitted
Date and time of the hearing of the said application
Time within which representation may be filed with the Tribunal on the application
Other particulars as the Tribunal thinks fit
Application for Class Action- Process
• Procedure
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Serve public notice to depositors and
members
Similar applications to be consolidated into
single application
Two class action for same cause of action shall not be allowed
Company and any other person responsible for the oppressive act shall
pay for the cost and expenses
Notice of every application made to
Tribunal shall be sent to Central Govt.
Tribunal to consider CG representation before
passing order
Winding up
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NCLAT & its
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Kothari
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Different modes of winding up companies • Resolution and Winding up in case of a default – Chapter II and III of this Code
• Winding up on any of the grounds listed in section 271, as amended by the Code –
Section 271 of Companies Act
• Voluntary winding up (other than summary winding up process below) – Chapter V
of this Code.
• Summary winding up of companies having assets upto Rs 1 crore – sections 361-365
of Companies Act, 2013
• Winding up of unregistered companies including partnership firms and foreign
companies – sections 375 and 376 of Companies Act, 2013
• Dissolution without winding up by merger – section 232 (3) (d) of the Companies Act,
2013
• Removal of the name of a defunct company from register of members – section 248
of the Companies Act, 2013
• In case of financial service providers, until explicit provisions are enacted, either the
Companies Act 2013, and/or the relevant special laws, will continue to prevail.
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Insertion of new definition
• Winding up – section 2 (94A)
▫ Pursuant to Insolvency and Bankruptcy Code, 2015
▫ ―winding up‖ means winding up under this Act or
liquidation under the Insolvency and Bankruptcy
Code, 2016, as applicable.
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Winding up under the Act, 2013
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Winding up of a company by the Tribunal
• Sections enforced
Section 271 to 303 of the Companies Act, 2013 deals with
provisions related to winding up of a company by the Tribunal
None of the sections under this chapter have been enforced
The rules are also under draft stage
Code proposed substitution of various sections/sub-sections of the
Act, 2013 dealing with winding up
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Winding up of a company by the Tribunal
• Circumstances under which Company is wound up by Tribunal A company may on a petition, be wound up by the Tribunal ▫ If the Company has by special resolution, resolved that the
Company be wound up by Tribunal
▫ If the Company acts against the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality
▫ On an application made by Registrar or any person authorised by CG that the affairs of the company have been conducted in a fraudulent manner
▫ If the Company has defaulted in filing of financials/annual returns for immediately preceding five consecutive FY
▫ If the Tribunal thinks it is just and equitable for the Company to be wound up
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Winding up of a company by the Tribunal
• Who may present a petition?
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Company Any contributories
All or any persons 1. Company;
2. Contributories
Registrar Any person
authorised by the CG
By CG or SG – if acted against the
interest of the sovereignty and
integrity
Winding up of a company by the Tribunal
• Powers of Tribunal The Tribunal on receiving a petition for winding up may pass any
of the following orders, within 90 days of such presentation of petition:
▫ Dismiss it, with or without costs;
▫ Make an interim order
▫ Appoint a provisional liquidator of the company till the making of a winding up order;
▫ Make an order for winding up of the company;
▫ Any other order as it thinks fit.
No suit or other legal proceeding shall be commenced or proceeded with (in case of existing suit) except with the leave of the Tribunal.
▫ The Tribunal shall dispose of such application within 60 days.
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Liquidation under the Code
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Liquidation – when?
Order of Liquidation +
Public Announcement + Intimation to the
Registrar
On rejection of Resolution Plan
AA does not receive a Resolution Plan on or
before the expiry of the maximum time permitted
for CIR
Crs. Committee decides to liquidate C.Dr. at any time during CIR process, before
confirmation of any Resolution Plan
C.Dr. contravenes the Resolution Plan approved
by AA, and any other person being prejudicially affected applies against
such contravention
Commencement of Liquidation
Process
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Snapshot of liquidation process (1/2) • Passing of liquidation order
▫ No suit or other legal proceeding shall be initiated Without prior approval of the AA
Shall not apply to any proceeding pending in appeal before the SC or a HC
Such transactions as may be notified by the CG in consultation with any financial sector regulator
• Appointment of liquidator
• Form an estate of assets ▫ Shall be called as liquidation estate
• Power to access any information systems ▫ for the purpose of admission and proof of claims and identification of the liquidation
estate
• Receive or collect the claims of creditors ▫ within a period of 30 days from the date of the commencement of the liquidation process
• Verify claims of all the creditors ▫ After verification shall either admit or reject the claim
Communicate the decision within 3 days of such admission or rejection of claims
• Determine the value of claims admitted
• Creditor may appeal to the AA against the decision of the liquidator rejecting the claims ▫ within fourteen days of the receipt of such decision
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Snapshot of liquidation process (2/2)
• Liquidator shall apply to the AA for avoidance of –
▫ Preferential transactions
▫ Undervalued transactions
▫ Transactions defrauding creditors
▫ Extortionate credit transactions
• Proceeds from the sale of the liquidation assets shall be distributed in
the order of priority
• Make an application to the AA for dissolution
▫ On assets being completely liquidated
• AA shall pass an order
▫ Copy shall be forwarded to the authority with which the C.Dr. is registered
Within 7 days from the date of such order
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Voluntary Liquidation
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Voluntary Liquidation
• Sections 304 – 323 shall be omitted
▫ Pursuant to Insolvency and Bankruptcy Code, 2013
• The process of voluntary winding up shifts from the
Companies Act/LLP Act to the Code.
▫ See subsequent slides for process
• The Code has just one section (section 59) dealing
with voluntary winding up as compared to 38 sections
(sections 484 to 521) under the Act, 1956 and 20
sections (sections 304 to 323) under the Act, 2013.
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Voluntary winding up – CA, 2013 & CA, 1956
Bids adieu • CA,1956 segregated into two types
▫ members‘ voluntary winding up and creditors‘ voluntary winding up
▫ CA, 2013 eliminated distinction between members‘ voluntary winding up and
creditors‘ voluntary winding up
making creditors‘ approval necessary in all cases.
These sections have not been notified
Shall be omitted pursuant to section 255 read with eleventh schedule of the Code
• The distinction between members‘ voluntary winding up and creditors‘
winding up was retained in the UK, Hong Kong and Singapore
• If company is indeed insolvent, why will the creditors opt for a voluntary
winding up
▫ Creditors‘ voluntary winding up is members‘ option;
▫ The company is either not solvent or the directors are unsure of the solvency
▫ Bears full consensus of the members
▫ Liquidator is appointed by the creditors
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Bidding good bye to creditors voluntary
liquidation • Under the voluntary winding up option –
▫ Both a declaration of solvency, as also creditors‘ resolution, were made mandatory.
▫ Notably, Act, 1956 provided that the directors may make a declaration of solvency [section 488 of Act, 1956], the Act, 2013 [section 305] says, the directors shall make a declaration of solvency.
▫ Additionally, the 2013 Act makes the obtention of creditors‘ resolution also necessary, and provides that if the creditors are of the view that the company may not be able to pay its debts in full, then the company shall file a petition for compulsory winding up [section 306 (3) (b)].
Thus, the process of creditors‘ voluntary winding up came to an end
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Voluntary Liquidation under the Code
• An application for voluntary liquidation of a corporate person registered as a company shall meet the following conditions: ▫ a special resolution of the shareholders of the company requiring the corporate
debtor to be liquidated voluntarily; or
▫ a resolution of the shareholders of the company in a general meeting requiring the company to be wound of voluntarily as a result of expiry of the period of its duration, if any, fixed by its articles or on the occurrence of any event in respect of which the articles provide that the company, as the case may be;
▫ a declaration from majority of the directors of the company verified by an affidavit stating that – they have made a full inquiry into the affairs of the company and they have
formed an opinion that either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets sold in the voluntary liquidation; and
the company is not being liquidated to defraud any person;
▫ audited financial statements and record of business operations of the company for the previous 2 years; and
▫ a report of the valuation of the assets of the company, if any prepared by a registered valuer
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No occurrence of
default
Pre-condition
Initiation of Voluntary
liquidation proceedings by
CP
Conditions
for VL of a
Company Declaration of Solvency
by majority of
directors, supported by
specified documents
OR/SR by shareholders
to liquidate the Co. and
to appoint liquidator
Creditors‘ resolution
(2/3rd majority in value)
Notification to RoC
and the Board by the
Co.
Complete winding
up and liquidation
Application by
liquidator to AA for
dissolution of CP
Order of dissolution
by AA
Copy of order to be
forwarded to
Registrar
Conditions and
procedures as
specified by Board
Within 14 days
Date of
Commencement of
Liquidation
Proceedings
Within 7 days of the resolution(s)
OR: When the winding
up is a result of expiry of
the period of duration of
the Co. fixed by its
articles or on the
occurrence of any event
in respect of which the
articles so provide;
SR: In other cases
Volu
nta
ry L
iquid
ati
on
Within 4 weeks
Within 7 days
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Appeal
141
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NCLT
• Comparative between section 10FQ of the Act, 1956,
section 421 of Act, 2013 and section 61 of the Code
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Points for discussion S. 10FQ of the Act, 1956 S. 421 of the Act, 2013 S. 61 of the Code
The authority the order of
which is appealable
NCLT NCLT NCLT
When an appeal cannot
be filed
Where the order was
made by NCLT with the
consent of parties.
Where the order is made
by NCLT with the consent
of parties.
No such provision
Who can file an appeal? Any person aggrieved Any person aggrieved
Any person aggrieved
Appellate authority
NCLAT NCLAT NCLAT
Time-limit for filing an
appeal
Within 45 days Within 45 days Within 30 days
Extension of time-limit No limit specified, though
there is a provision for
extension
Not exceeding 45 days Not exceeding 15 days
Expeditious disposal by NCLT and NCLAT
(Section 422) • Every application or petition or appeal presented
before the NCLT or NCLAT
▫ Shall be disposed within 3 months from the date of presentation before NCLT or NCLAT
• If such application or petition or appeal not disposed within 3 months
▫ NCLT or NCLAT, as the case may be, shall record the reasons for not disposing application or petition or appeal within prescribed time
The president or Chairperson, as the case may be, after taking into account the reasons so recorded may extend the period
Not exceeding 90 days
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143
Supreme Court
• Comparison – Section 10GF of Act, 1956, section 423 of
Act, 2013 and section 62 of the Code
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Points of
comparison
S. 10GF of the Act,
1956
S. 423 of the Act,
2013
S. 62 of the Code
Who can file an
appeal?
Any person aggrieved
by the order of NCLAT
Any person
aggrieved by the
order of NCLAT
Any person
aggrieved by the
order of NCLAT
Appeal may be
made before
Supreme Court Supreme Court Supreme Court
Time-limit for filing
an appeal
Within 60 days Within 60 days Within 45 days
Extension of time-
limit
Not exceeding 60
days
Not exceeding 60
days
Not exceeding 15
days