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Judgment
Justice Rakesh Kumar Jain:
1.This contempt case has been filed to punish the alleged contemnor on account of wilful and disobedience of the order dated 20.10.2020, passed by this Tribunal.
In brief, a petition bearing CP (CAA)/190/MB.I/2017 under Section 230 to 232 of the Companies Act, 2013 (in short ‘the Act’) was filed by the Company ‘Kumaka Industries Limited’ for sanctioning of a scheme of arrangement between the Company and its equity shareholders. The Petition was originally filed before the Hon’ble Bombay High Court but because of notification issued by the Ministry of Corporate Affairs (MCA) on 07.12.2016, notifying the Companies (Transfer of Pending Proceedings) Rules, 2016, the said petition was transferred to NCLT, Special Bench, Mumbai.
The material provisions of the proposed scheme of arrangement were:-
“a. Ratification of reduction of 18,09,750 shares by conversion of 24,13,000 partly paid-up shares to 6,03,250 fully paid-up shares.
b. Reduction of share capital by cancellation and extinguishment of 10375 fully paid-up shares allotted to 406 shareholders and transfer of fully paid up 10375 by the promoters at the rate of 0.005 paise per share to restore the right of the said 406 shareholders.
c. Rearranging and numbering the distinctive number of shares to reconcile the same with the paid-up share capital.
d. Issue and allotment of 21,04,865 fully paid-up shares as bonus shares to the public shareholders of the company other than promoters”
The Tribunal vide its order dated 06.07.2020, passed the following order:-
“26. Having thus repelled the last vestiges of challenge, we notice from the material on record that the scheme appears to be fair and reasonable and does not violate any provisions of law and is not contrary to public policy or public interest. BSE Limited has stated in its letter dated 15 September 2015 that there are no adverse observations. In the absence of anything inherently abhorrent in the scheme, we see no reason why the scheme should not have the imprimatur of this Tribunal.
Since all the requisite statutory compliances have been fulfilled, CP (CAA) 190/MB.I/2017 is made absolute in terms of prayer clause (a) to (c) of the petition.”
The order dated 06.07.2020 was challenged in appeal under Section 421 of the Act by Ashish O. Lalpuria. The said appeal was allowed by this Tribunal on 20.10.2020 with the following observations:-
“33. In light of the above observations the appeal is allowed and we set aside the impugned order dated 06.07.2020 passed by NCLT, Mumbai.
We are further directing the Respondent No. 1 Company to undo all the actions taken in line with scheme sanctioned by the NCLT, Mumbai Bench. The Regional Director, Western Region, Mumbai may observe the compliances of the same. No order as to cost.”
The Appellant in the appeal has now filed this contempt petition alleging that direction contained in the order passed by this Tribunal on 20.10.2020 has not been complied with in respect of Part B of the material provisions of the proposed scheme of arrangement (Supra).
During the pendency of this contempt petition, an order was passed by this Tribunal on 05.12.2022 which read as under:-
M/s Kumaka Industries Ltd. sought sanction of a scheme of arrangement between it and the equity shareholders. The said application was assigned CP(CAA)/190/MB/2017 and was allowed by the Tribunal vide order dated 06.07.2020. The material provisions of the proposed scheme of arrangement are as under:
“(a) Ratification of reduction of 18,09,750 shares by conversion of 24,13,000 partly paid up shares to 6,03,250/- fully paid up shares.
(b) Reduction of share capital by cancellation and extinguishment of 10375 fully paid up shares allotted to 406 shareholders and transfer of fully paid up 10375 by the promoters at the rate of 0.005 paise per share to restore the rights of the said 406 shareholders.
(c) Rearranging and numbering the distinctive numbers of shares to reconcile the same with the paid-up share capital. (d) Issue and allotment of 21,04,865 fully paid up shares as bonus shares to the public shareholders of the company other than promoters.”
The impugned order was challenged by one of the shareholders, namely, Ashish O. Lalpuria by way of CA (AT) No. 136 of 2020. The said appeal was allowed by the order dated 20.10.2020. The operative part of the order read thus:
“In light of the above observations the appeal is allowed and we set aside the impugned order dated 06.07.2020 passed by National Company Law Tribunal, Mumbai. We are further directing Respondent No. 1 Company to undo all the actions taken in line with the scheme sanctioned by the NCLT, Mumbai Bench. The Regional Director, Western Region, Mumbai may observe the compliances of the same. No order as to cost.”
This petition is filed for the alleged disobedience of the order dated 20.10.2020 by Respondent No. 1 to 5. It is pertinent to mention that during the course of hearing, the Regional Director, Western Region, Mumbai was also made a party as Respondent No. 6 to assist the court.
During the course of hearing, Counsel for the Appellant submitted that he has no issue with regard to clause ‘d’ of the proposed scheme, which read as under:
“(d) Issue and allotment of 21,04,865 fully paid up shares as bonus shares to the public shareholders of the company other than promoters.”
However, he has argued that Respondents have deliberately disobeyed the order of this Tribunal by not undoing the scheme which was sanctioned by the order of the Tribunal which has been set aside by the order dated 20.10.2020. According to the Appellant, the transfer of shares of 406 shareholders has not been made part of the record so far.
Be that as it may, Sandeep Bajaj Counsel for Respondent No. 1 & 2 (Contesting Respondents) prays for a short accommodation to file an affidavit of the concerned person about the compliance of order in respect to Clause ‘b’ & ‘c’ mentioned hereinabove.
Let the needful be done on or before next date of hearing. List again on 23rd January, 2023.
Thereafter, the Respondent No. 1 filed an affidavit dated 19.01.2023 in which the following averments have been made:-
“I. I state that vide order dated 05.12.2022, the Honourable National Company Law Appellate Tribunal was pleased allow the respondents to file the additional affidavit explaining the compliance of Clause 'b' and 'c' mentioned in the order. The Respondent humbly files the present affidavit in compliance of the same order.
II. I state that vide order dated 06.07.2020 the learned National Company Law Tribunal allowed the scheme of arrangement, which order was reversed by the order of this Honourable Appellate Tribunal vide its order dated 20.10.2020 Therefore, the Respondent No. 1 Company was required to reverse the things which were carried out in compliance of the Learned NCLT order. The entire mechanism followed by the Company before the Learned NCLT order, after the NCLT order and after the NCLAT order is explained hereinbelow. The Affiant has filed the Additional Affidavit dated 20 May 2022, in which the affiant has filed the Shareholding Patterns submitted to the Stock Exchanges explaining the changes in Shareholding Pattern by which the changes in shareholding in compliance of all such orders are reflected.
III. Before the order of NCLT approving the scheme of arrangement, the Public and Promoter Shareholding of the Company was as follows:
At page 90 of the Additional Affidavit dated 20 May 2022 the shareholding pattern as on 30.06.2020 of the Respondent No. 1 Company is annexed. Which reflects the Promoter Shareholding an Public Shareholding as follows:-
Category
Number of Shares
1.
Promoter Shareholding
10582150
2.
Public Shareholding
1503475
IV. Vide order dated 06.07.2020 scheme of arrangement was sanctioned which allowed the company, inter alia, following part, which is ‘b’ i.e.
Reduction by cancellation and extinguishment of 10375 fully paid shares held by 406 shareholders in public shareholding category, and
Transfer of 10375 shares held by promoters to the same 406 shareholders to restore their rights.
V. Therefore, after implementation of the scheme the shareholding pattern as narrated above, will look as follows:
Sr.
Category
Number of Shares
1.
Promoter Shareholding
10571775 i.e.
(10582150 before
implementation –
10375 as per the scheme
2.
Public Shareholding
1503475
Because it will mathematically have no effect, as the effect of it was directly made in the books.
The abovementioned shareholding gets reflected in the shareholding pattern filed for the quarter ended 30.09.2020 annexed at Pg. 99 at the additional affidavit dated 20.05.2022.
VI. Thereafter, the Hon’ble NCLAT vide order dated 20.10.2020 reversed the order of NCLT. Due to which the above referred step was simply required to be reversed, which means the shares of promoters were only required to be restored to its original number of –
Sr.
Category
Number of Shares
1.
Promoter Shareholding
10582150
2.
Public Shareholding
1503475
The same was also complied with and resultantly the shareholding pattern filed for the quarter ended 15.09.2021reflects the same which starts at Page no. 108 of the additional affidavit dated 20.05.2022.
The affiant summarises the above movement in following table as follows;-
Sr.
Category
Number of Shares
As on prior to the
implementation
of scheme page
90 of the
affidavit dated
20.05.2022
As on 30.09.2020
After implementation
of the scheme
page no. 99 of
the additional
affidavit dated
20.05.2022
As on 15.09.2021
i.e. in
compliance
of NCLAT
order. Pg.
108 of the
additional
affidavit
dated
20.05.2022
1.
Promoter
shareholding
10582150
10571775 i.e. (10582150 before implementation 10375 as per the scheme0
105821150
2.
Public Shareholding
1503475
1503475 Because it will mathematically has no effect.
1503475
VII. As reflected from the above explanation, I humbly state that the order dated 20.10.2020 in respect of ‘b’ and ‘c’ has been fully complied with and therefore, the contempt application in respect of the same does not survive.
VIII. Therefore, it is humbly submitted and prayed that the present application is liable to be dismissed.”
The Petitioner has filed the counter affidavit dated 09.02.2023 in which he has raised the grievance that:-
“I say that the said step of taking the ISIN has not been undone till date by the Respondent Contemnors and they are enjoying the said connectivity on this basis of the order dated 06.07.2020 of the NCLT which was set aside by the Hon’ble NCLAT vide their order dated 20.10.2020. This fact has also been confirmed by the Respondent Company vide an email written by the Company dated 03.11.2022 in response to a query raised by the Petitioner in relation to payment of Rs. 45,000/- made towards custody charges as shown in their balance sheet for the financial year 2021 and 2022. The Respondent Contemnors, on 03.11.2022 vide their email in para (1) have stated that the amount of Rs 45,000/- is paid towards NSDL connectivity. A copy of the email written by the Respondent No. 1 to the Petitioner is marked as Exhibit D.”
We have heard Counsel for the parties and perused the record.
In so far as, the order dated 20.10.2020 is concerned, this Tribunal had allowed the appeal and set aside the order dated 06.07.2020 passed by the NCLT, Mumbai and further directed Respondent No. 1 Company to undo all the actions taken in line with the scheme sanctioned by the NCLT, Mumbai.
We had particularly asked Counsel for the Respondent Company in this regard and recorded the order dated 05.12.2022 pursuant to which Respondent No. 1 has filed an affidavit in which it is categorically averred that the effect of the scheme which was sanctioned by the Tribunal has been undone after the reversal of the order by this Tribunal and regard may be had to paragraph III to VII of the said affidavit which we have already reproduced hereinabove.
We are satisfied that the order passed by this Tribunal has been complied with and the objection raised in this contempt petition has nothing to do with the direction issued which were to be complied with by the Respondent No. 1, therefore, we do not find any merit in the present contempt petition and the same is hereby dismissed though without any order as to costs.