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Judgment
Jayant Patel, J.—The present application has been preferred for recalling of the order dated 13th September, 2005 passed by this Court in Company Petition No. 131 of 2005 and alternatively it is prayed to modify the said sanctioned Scheme of Compromise and/or Arrangement qua the Deep Discount Bonds holders (for the sake of convenience, hereafter referred to as ''DDB holders'') and to direct the respondent Company to pay the DDB holders, who have purchased the bonds after the date of the sanctioning of the Scheme in good faith and without notice thereof, interest at the rate of 15.5% per annum and the maturity value of Rs. 50,150/- as promised, guaranteed and assured at the time of issuance of the bonds. It is also prayed to condone the delay, if any, in filing of the present application.
Heard Mr. A.L. Shah, learned Counsel with Mr. Gandhi, learned Counsel for the applicant and Mr. M.J. Thakor, learned Counsel with Mr. Singhi, learned Counsel for the respondent for final disposal of the application.
It is an undisputed position that the Scheme of Arrangement was moved before this Court for sanction and the sanction has been granted by this Court on 13.9.2005 as per the order passed in Company Petition No. 131 of 2005 with Company Application No. 162 of 2005. It is also undisputed position that the meeting, as was ordered to be convened by this Court in the said proceedings, was held. Thereafter, at the meeting, by requisite majority in value of the persons or persons representing the class of the persons present at the meeting, the Scheme was approved. The procedure of publication of advertisement, inviting of objections was also completed and no objections in response to the public advertisement were received. The comments received on behalf of the Central Government was considered by this Court, thereafter the scheme has been sanctioned.
The basis of the present application as contended by the learned Counsel for the applicant is that DDB holders are a separate and distinct class of creditors and they ought not to have been classified into the category of secured creditors. It was submitted that even if DDB holders are considered as secured creditors, then also the interest of such DDB holders is separate and distinct and the terms of compromise offered to DDB holders, if considered with the contractual terms, it cannot be said that the same effect will be there, but in the submission of the learned Counsel, more prejudice will be caused to the DDB holders and, therefore, it was required for the company to treat DDB holders as a separate class and separate meeting was required to be convened, which has not been done in the present case. The submission, therefore, is that the mandatory procedure is not followed and, therefore, the Court may not get the jurisdiction to sanction the scheme or in alternate, it was submitted, the sanctioned scheme be recalled or modified, in any case, to the extent of maintaining the contractual rate of interest as was promised to the DDB holders, which would include the interest of the applicant herein.
Whereas the learned Counsel for the respondent Company contended that the DDB holders are secured creditors and they have been rightly classified as secured creditors. It is submitted by the learned Counsel for the respondent that in the scheme offered to all secured creditors, the rate of interest for future date after the appointed date and/or cut-off date was reduced to 10% per annum and such scheme of arrangement was common offered to all secured classes of creditors, therefore, it cannot be said that there was no proper classification at the time when the scheme was floated or at the time when the meeting was held by way of compliance to the statutory requirement.
The learned Counsel, in furtherance to the submission, contended that at the meeting of the secured creditors there was separate voting for each class, inter se, namely; in particular for DDB holders and even if internal consideration of the scheme amongst DDB holders is considered, the same would meet with the statutory requirement of having majority in value exceeding 75%. It was, therefore, submitted that the ground as sought to be canvassed on merits does not deserve to be accepted.
The learned Counsel for the respondent Company additionally contended that when the proceedings of scheme were on, the applicant has purchased DDB, therefore, apart from the fact that it would be binding to them when the interest was already represented by the predecessor in tile at the relevant point of time when one participated, other two, though were served with the notices, did not participate, it can hardly be heard from the mouth of the applicant, who has purchased the DDB pending the scheme that all process be considered de novo by de-classifying the existing secured creditors and thereby the recalling of the order.
It was submitted that had the applicant been aggrieved by the sanction granted by this Court, the proper remedy for the applicant was to prefer O.J. Appeal against the decision of the Company Court and such a Misc. Civil Application, that too, after a belated period of purchasing the DDB would not be maintainable.
Whereas, the learned Counsel for the applicant contended that when there was correspondence received, at that stage the applicant came to know about the aforesaid Scheme and at the earliest, the application has been preferred.
If the requirement of the statute is to be considered as per the provisions of Section 391 of the Companies Act (hereinafter referred to as ''the Act'') it refers to the meeting of the creditors or the class of creditors or of the members or class of members, as the case may be, and such meeting is to be held or conducted in the manner it is so directed by this Court. As per the requirement of the statute, the meeting of various classes of creditors may be required to be held, but creditors broadly are being classified into two categories namely; secured creditors and unsecured creditors. There may be internal separate class amongst the secured creditors and may also be amongst unsecured creditors, but what is essentially required to be considered is the terms of offer or the compromise offered or the arrangement offered to such class or classes of creditors. The examination of the facts of the present case in light of the aforesaid shows that as per the Scheme the existing lenders include various secured creditors as per the list Annexure-A. The list Annexure-A in the Scheme includes 1 to 6 various bankers, who might have provided secured loans to the applicant, whereas Item No. 7 includes other DDB holders. If the status of DDB holder is as that of the secured creditors, inclusion of such DDB holders in the category of secured creditors or thereby creating right at par with other secured creditors, who are bankers, who have extended loans by creation of the security cannot be termed as a dissimilar classification of the persons having different interests. The interest to be considered for the purpose of classification would be not based on individual contractual terms of such creditors, who are in the category of secured creditors, but is to be seen in light of the interest by way of security created or having security interest in the property of the company. The microscopic classification as sought to be canvassed based on the terms of each and every secured creditor at the time of creation of security with the company, is not a classification conceived by the scheme of the statute, nor can be termed as practicable when the scheme of arrangement is to be offered to large number of secured creditors.
Further, the important aspect of interest of the secured creditors can also be gathered on the basis of the terms to be offered to such secured creditors. Had the terms offered varied to each secured creditors, one might contend a separate classification, but if the term offered is common for all secured creditors, it can be said to be a homogeneous class of secured creditors, who are to be offered a common term or arrangement in the scheme. The scheme offered to the existing lenders vide clause No. B(i), (ii), and (iii) reads as under:
B) RELIEFS AND CONCESSIONS BY EXISTING LENDERS TO THE COMPANY:
(i) With effect from the Appointed Date the rate of interest/yield on all term loans, other debt facilities and DDBs availed from the Existing Lenders by the Company shall be reduced from their respective existing rates to 10% per annum. In respect of DDBs, the DDB holders shall be entitled to the contractual rate of interest/yield i.e. 15.5% per annum till the Cut-off date and thereafter with effect from the Appointed Date the interest/yield shall stand reduced to 10% per annum as stated hereinabove. The date of maturity for the DDB shall be April 2016 (as per original terms) and the maturity value per DDB calculated at the revised interest/yield would be Rs. 27,864/- per bond (subject to deduction of tax, if applicable). If DDB holders exercise option of Take Out by the Take-out Lenders, specified in the terms and conditions of the prospectus, then in that case the DDB holders shall be entitled to contractual interest/yield @ 12.75% per annum till the Cut-off date and 10% per annum from the Appointed Date upto the Take Out offer date i.e., on completion of 8 years from the date of allotment of DDBs. In case of Take Out, value per DDB calculated at the revised interest/yield would be Rs. 11,817/- per bond (subject to deduction of tax, if applicable). In respect of the Existing Lenders who have provided the term loans and/or other debt facilities other than DDBs, the interest @ 10% per annum shall be payable monthly.
(ii) All amounts of penal interest and/or compound interest and/or liquidated damages remaining due and unpaid upto the Cut-off date, relating to the term loans and/or other debt facilities availed from the Existing Lenders by the Company shall be availed by each relevant Existing Lender.
(iii) The debt after reduction of interest rate and waiver of penal interest and/or compound interest and/or liquidated damages as per Clause B0(i) and (ii) above, shall be payable to Existing Lenders who have provided term loans and/or other debt facilities in 108 equal monthly instalments starting from April 2005.
The aforesaid would show that apart from the other mode of payment and cut-off date, aspect of liability qua all existing lenders is reduced to the interest of 10% per annum irrespective of the contractual rate of interest. Since for DDB holders, certain options were provided in the DDB, the additional options of encahsment, etc., have been provided, but the offering of the term for reduction of the liability to 10% p.a., from the appointed date is common in respect of all the secured creditors, which includes DDB holders.
Therefore, it is not possible to accept the contention of the learned Counsel for the applicant that there was improper classification at the time when the meeting was to be convened or in compliance to the statutory requirement for offering the scheme of arrangement. The aforesaid is coupled with the circumstances that when the very scheme with the same classification was tendered to the Court in the proceedings of Company Application No. 162 of 2005 seeking directions to convene the meeting, the same was so permitted by this Court by the order dated 5.5.2005 and the meeting thereafter was held and the scheme was approved.
Mr. Thakor, learned Counsel appearing for the respondent, during the course of hearing, did refer to the material in furtherance to the Chairman''s report, wherein the voting for DDB holders is separately considered and as per the said material, amongst the DDB holders, 77.82% representing in value have supported and approved the scheme of arrangement as against the opposition of 22.18% in value. Therefore, if such material is to be considered, it can be said that even if the separate class of DDB holders is considered the fact remains that the scheme was approved by the requisite majority in value of the DDB present at the meeting and the requirement of statute could be said as having been complied with for accord of the sanction to the scheme.
The learned Counsel for the applicant had resisted the consideration of the said material as referred to by Mr. Thakor on the ground that such was not forming part of the Chairman''s report, nor produced at earlier point of time in the present application. Therefore, it was submitted that this Court may not consider the said aspect.
In my view for the reasons recorded herein above the classification of DDB holders in the category of lenders, who were secured creditors, as has not been found bad in law, such aspect may not assume much importance.
The reliance was place by the learned Counsel appearing for both the sides upon the decision of this Court in the case of Maneckchowk and Ahmedabad Manufacturing Company Limited reported in 1970 (40) Comp Cas 819 and another decision of this Court in the case of Maftlal Industry Limited reported in 1996 (87) Comp Cas 705 for showing the aspects of the mode and manner of classification to be made when any scheme is proposed for sanction. It appears that even if the principles as referred to in the aforesaid judgements are considered, in view of the reasons recorded herein above, the classification could not be said to be bad in law for inclusion of DDB holders in the category of secured creditors, which are under the broad head of existing lenders, more particularly when the term of compromise offered to all such classes was common.
In view of the aforesaid, I find that the application is meritless and hence, deserves to be dismissed. Therefore, dismissed. No order as to costs.