In Re: B.C. Sen International Ltd.

Harish Tandon, J.—A point has evolved at the instance of the court as to whether notice to the Central Government shall be given on an application u/s 391(1) moved by way of judges summons, ex parte before issuing an order convening a meeting of the creditors or class of creditors or members or class of members as the case may be. The scheme is proposed for merger of the transferor-companies with a transferee-company, the salient features of which have been jotted down in paragraph 7 of the petition, which does not require an elaborate narration for the present purposes. Section 391 of the Companies Act, 1956 (''the Act'') provides the sanctioning of the scheme by the court, provided the court is satisfied that an application made under the said provisions contains all disclosure of material facts relating to the company, namely, the latest financial position of the company, latest auditor''s report on accounts of the company and pendency of any investigation proceeding in relation to the company. At the time of promulgating the Act, section 394A was not incorporated but was subsequently inserted by Act 31 of 1965 with effect from 15th October, 1965. By virtue of sub-sections (1) and (2) of section 643 of the Act, the Companies (Court) Rules, 1959 (''Court Rules'') was framed by the Supreme Court of India and assumes the Act of Parliament. The said rule came into force on and from 1st day of October, 1959. Rules 67 and 68 of the Court Rules provide for moving the application by way of judges summons ex parte, unless an application is taken out other than the company. In such event, the copy of the summons and the affidavit in support of the said judges summons shall be served on the company or where the company is being wound up on its liquidator, not less than 14 days before the date fixed for hearing of the summons. Rule 69 of the Court Rules contains the provisions relating to the directions at the hearing of the judges summons which further provides that upon hearing on the day when it is moved ex parte or any adjourned dale, the court can dismiss the summons. One of the directions as enshrined under rule 69 of the said rules contains the fixation of time and place of meeting or meetings of the creditors or class of the creditors and/or member or the class of the members relating to the proposed compromise or arrangement.

Section 391(1) of the said Act requires the holding of the meeting of the creditors or class of the creditors or the class of the members whereas sub-section (2) requires the agreement to the compromise or arrangement by majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members present and voting either in person or by proxy. I am not unmindful of the proposition of law that the court shall not sanction the scheme by the ipse dixit of the majority of the shareholders or creditors of their respective classes who voted in favour of the scheme unless the court examined the genuineness and bona fides of the scheme as held in In Re: Sakamari Steel and Alloys Ltd., . It can be equally contended that section 394A which requires notice to be given to the Central Government of every applications made u/s 391 or 394 does not put any fetter on the court in sanctioning the scheme upon looking into its representations or objections if it does not appear to be convincing. What is required u/s 394A is that the court shall take into consideration the representation of the Central Government before passing any order u/s 391 or 394 of the Act.

The sole question which arises in this matter relates to the stage at which the notice to the Central Government is to be given, whether at the initial stage of moving the judges summons ex parte or after direction for convening the meeting of the creditors or class of creditors or the members or its classes. There is no corresponding rules framed relating to section 394A of the said Act which was introduced subsequent to the framing of the Court Rules. Reliance could be directly made in this regard to a judgment rendered by this court in case of In Re: Bangeswari Cotton Mills Ltd., which clearly laid down that the notice to the Central Government on an application u/s 391(1) of the Act is not required to be given at the stage of moving the judges summons before calling the meeting of the members or creditors or its classes. It has been further observed that "any order" occurring in section 394A should be read as "any final order". The interpretation was given by this court in the above noted case so to avoid the conflict between section 394A and the rules framed so as to render the provision workable.

Although, the aforesaid point was not directly involved in case of In Re: Ucal Fuel Systems Ltd. and another, , the Madras High Court held that it is obligatory on the court to give notice to the Central Government of every application made to it u/s 391 or 394 as it would enable the Central Government to study the proposal and raised objections thereto, so that, the interest of the investing public at large may be taken into account by the court before sanctioning the scheme.

Neither Bangesivari Cotton Mills Ltd. nor Ucal Fuel Systems Ltd. (supra) laid down that the notice to the Central Government is optional but in unequivocal terms held that notice to the Central Government is imperative and/or obligatory before passing any order u/s 391 or 394 of the said Act. The Allahabad High Court in case of Hind Auto Indo Ltd. Vs. Premier Motors (P) Ltd. and Another, decanted to the views expressed in Bangeswari Cotton Mills Ltd. (supra) that the statute cannot be interpreted in a way to limit or abridge the ambit of the words used by adding words into it unless, there is some overriding need to reconcile a conflict with a statute provision. Before the Allahabad High Court not only the point whether the notice to the Central Government should be given on an application by the company u/s 391(1) of the Act before convening the meeting but another question was in consideration whether the shareholders of the company should be given a notice before holding and conducting the meeting. While answering the other question, the Allahabad High Court held:

One of the reasons given in the case of In Re: Bangeswari Cotton Mills Ltd., for adopting the view expressed there was, that the right of a party "to move" the summons ex parte will be defeated if it was necessary to send a notice of proceedings u/s 391(1) to the Central Government. With great respect, I find it very difficult to adopt this view. Moving a summons ex parte cannot, in my opinion, mean the passing of an order upon an application which had been moved by means of summons. The "moving" is confined to the initial stage at which notices are to be issued to persons concerned. At that stage the proceeding has necessarily to be an ex parte proceeding. But, the "hearing" takes place only after the summons have been served. That hearing cannot be ex parte in accordance with the intendment of the rules as I read it.

It is a well established rule of construction that a statute cannot be interpreted in such a way as to limit the ambit of the words used by reading words into it unless there is some overriding need to reconcile a conflict with a statutory provision. I fail to see the need for reading a limitation in section 394A of the Act confining the term "application" to a petition when the rules clearly indicate that the word "applications" cover applications by summons as well as applications by means of petitions. The limitation can only be introduced by adding words. It was held in Dr. Ishwari Prasad Vs. Registrar, University of Allahabad and Others, : "It is, however, a well known rule of construction that if there is nothing to modify or qualify the language which the statute contains it must be construed in the ordinary and natural meaning of the words". I find nothing either in the enactment or in the rules to indicate that the word "application" is used in section 394A for applications by petitions only. Nor do I find a conflict between section 394A (Sic and?) the Companies (Court) Rules.

The Allahabad High Court answered the first question in affirmative that the notice is required to be given to the members at the threshold stage of moving the application. The judgment of the Allahabad High Court was considered by the Apex Court in case o Chembra Orchard Produce Ltd. and Others Vs. Regional Director of Company Affairs and Another, and it is held that the interpretation given in Hind Auto Industries Ltd. (supra), if accepted, would render the scheme of the Court Rules unworkable. However, the Apex Court did not make any observations relating to the interpretation of section 394A of the Act which could be readily inferred from above observations:

In the impugned judgment, reliance is placed on the earlier judgment of the Allahabad High Court in Hind Auto Indo Ltd. v. Premier Motors (P) Ltd. From a bare reading of that judgment we find that the said case related to interpretation of section 394A of the Companies Act with which we are not concerned in this case. Be that as it may, there are observations in the said judgment, with respect, with which we do not agree, both on the interpretation of rules 67 and 69 on one hand as also on the basis of the practical effect of the interpretation given by the High Court in the present case. If at the threshold stage of directions to convene a meeting hearing is required to be given to the members as held in the impugned judgment, the scheme of the Companies (Court) Rules, 1959 will become unworkable.

Though the point involved in the instant matter was not directly the subject-matter in the judgment rendered by the Apex Court in case of Sesa Industries Ltd. Vs. Krishna H. Bajaj and Others, but this court felt necessary to take into consideration the observations made therein. In paragraph 34 of the said report, it is observed that when a scheme of amalgamation/merger of a company is placed before the court for its sanction, in the first instant, the court has to direct holding of the meetings in the manner stipulated in section 391 of the Act. The Apex Court took note of two provisos inserted to section 394 of the Act which provides that no scheme for amalgamation of the company which, is being wound up shall be sanctioned by the court unless the court has received a report from the Company Law Board or Registrar in relation to the affairs of the company being not prejudicial to the interest of the members or to the public interest and also from the official liquidator, in the like manner, in the event, an order for dissolution without the winding up of the company is to be passed. The Apex Court in above perspective held:

First proviso to section 394 of the Act stipulates that no scheme of amalgamation of a company, which is being wound up, with any other company, shall be sanctioned by the court unless the court has received a report from the Company Law Board or the Registrar to the effect that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest. Similarly, second proviso to the said section provides that no order for the dissolution of any transferor-company under clause (iv) of sub-section (1) of section 394 of the Act shall be made unless the official liquidator has, on scrutiny of the books and papers of the company, made a report to the court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest. Thus, section 394 of the Act casts an obligation on the court to be satisfied that the scheme of amalgamation or merger is not prejudicial to the interest of its members or to public interest.

The company court does not act as a court of an appeal and is equally not expected to put it seal of an approval on the scheme, either the majority of the shareholders have voted in favour of the scheme or the Company Law Board or the Registrar or the official liquidator has not put any adverse report. The two provisos to section 394 of the Act were added and enforced on the same day, when section 394A came into force. If the aforesaid provisos can operate after the meeting is convened, the language employed in section 394A of the Act suggest that the notice to the Central Government shall be given before passing any order u/s 391 or 394 of the said Act. The said provision cannot, therefore, have the restricted applicability at the post-meeting stage but can be applied before passing any order as contemplated u/s 391 or 394 of the said Act.

It is a settled proposition of law that the words are prima facie to be taken in their lawful and rightful sense for understanding the real purport and intend for which, they are used in the books of the statute. The words in the statute should be construed so as not to be considered at surplusage or superfluous. It has been held in case of Gurudevdatta VKSSS Maryadit and Others Vs. State of Maharashtra and Others,

Further we wish to clarify that it is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and unambiguous, then the courts are bound to give effect to that meaning, irrespective of the consequences. It is said that the words themselves best declare the intention of the law-giver. The courts have adhered to the principle that efforts should be made to give meaning to each and every word used by the Legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surpluses, if they can have a proper application in circumstances conceivable within the contemplation of the statute. Bearing in mind, the aforesaid principle of construction, if the expression "any new member society" occurring in the proviso to sub-section (3) of section 27 is construed, it conveys the only meaning that it refers to the societies to be formed hereafter and not of those societies which have already become member societies of the federal society. Therefore, the requirement of the completion of the period of three years from the date of its investing any part of its fund in the shares of such federal society would apply only to those societies which became member society of the federal society after 23rd August, 2000. In this view of the matter, the impugned judgment of the High Court does not suffer from any infirmity. Even if there remained any doubt in the matter of interpreting the proviso, in the Ordinance that has been promulgated on 27th February, 2001, called Maharashtra Ordinance 10 of 2001, after the first proviso to sub-section (3), a second proviso had been inserted, which has removed any doubt or controversy inasmuch as it has been indicated therein that the first proviso will not apply to the member society which has invested any part of its fund in the share of the federal society before the commencement of the Maharashtra Cooperative Societies (Amendment) Act, 2000 dated 23rd August, 2000. The aforesaid Ordinance also has been given a retrospective effect, to be effective from 23rd August, 2000. The Ordinance having been held to be valid by us as stated above, the so-called prohibition contained in the first proviso to sub-section (3) of section 27 will not apply to all those societies which have already become members of the federal society prior to 23rd August, 2000.

It is further held by the Supreme Court in case of Greater Bombay Co-op. Bank Ltd. Vs. United Yarn Tex. Pvt. Ltd. and Others, that the language of the section does not admit any doubtful interpretation as to the intention of the Legislature. The elementary rule of interpretation of statutes that the same should be given their plain grammatical meaning and no words can be added to read something into the section, which the Legislature had not intended. The aforesaid principle is reiterated in case o Bhavnagar University Vs. Palitana Sugar Mill Pvt. Ltd. and Others, in following words:

It is the basic principle of construction of statute that the same should be read as a whole, then chapter by chapter, section by section and words by words. Recourse to construction or interpretation of statute is necessary when there is ambiguity, obscurity, or inconsistency therein and not otherwise. An effort must be made to give effect to all parts of the statute and unless absolutely necessary, no part thereof shall be rendered surplusage or redundant.

True meaning of a provision of law has to be determined on the basis of what it provides by its clear language, with due regard to the scheme of law.

Scope of the legislation on the intention of the Legislature cannot be enlarged when the language of the provision is plain and unambiguous. In other words statutory enactments must ordinarily be construed according to its plain meaning and no words shall be added, altered or modified unless it is plainly necessary to do so to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute.

It is also well settled that a beneficent provision of legislation must be liberally construed so as to fulfill the statutory purpose and not to frustrate it.

In a recent judgment delivered in case of B. Premanand and Others Vs. Mohan Koikal and Others, the Apex Court held:

The literal rule of interpretation really means that there should be no interpretation. In other words, we should read the statute as it is, without distorting or twisting its language. We may mention here that the literal rule of interpretation is not only followed by Judges and lawyers, but it is also followed by the layman in his ordinary life. To give an illustration, if a person says "this is a pencil", then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. Life will become impossible. Hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean.

From the above principles, it cannot be said that the provisions contained u/s 394A of the Act can only be resorted after convening the meeting or before passing the final order either sanctioning or refusing to sanction the scheme. The said provision can be pressed at any stage on an application being moved u/s 391 or 394 of the Act depending upon the facts of the each case. Recourse to section 394A of the Act should not be readily adopted the moment, the application is moved but certainly should be adopted before sanctioning the scheme.

The facts narrated in the application and the scheme proposed does not envisage the invocation of the provision of section 394A before convening the meeting and this court, therefore, disposed of the application with the following directions:

A separate meeting of the equity shareholders of the applicant-company No. 1 i.e., B.C. Sen International Ltd. shall be convened and held at 4, Lee Road, First Floor, Kolkata-700020 on 14th August, 2013 at 4 P.M. for the purpose of considering and if thought fit approving with or without modification the scheme of amalgamation proposed to be made between the applicant-company Nos. 1 and 2 with the applicant-company No. 3, abovenamed.

A separate meeting of the equity shareholder of the applicant-company No. 2, i.e., Starz Foods (P.) Ltd. shall be convened and held at 4, Lee Road, First Floor, Kolkata - 700 020 on 14th August, 2013 at 4.30 PM for the purpose of considering and if thought fit approving with or without modification the scheme of amalgamation proposed to be made between the applicant-company Nos. 1 and 2 with the applicant-company No. 3, abovenamed.

A separate meeting of the equity shareholder of the applicant-company No. 3, i.e., B.C. Sen & Co. Ltd. shall be convened and held at 4, Lee Road, First Floor, Kolkata - 700020 on 14th August, 2013 at 5 P.M. for the purpose of considering and if thought fit approving with or without modification the scheme of amalgamation proposed to be made between the applicant-company Nos. 1 and 2 with the applicant-company No. 3, abovenamed.

At least 21 clear days before the date of the said meeting, an advertisement convening the same and stating that copies of the said scheme of amalgamation and of the statement required to be furnished pursuant to section 393 of the Act and Forms of Proxy can be obtained free of charge at the registered office of the respective applicant companies or at the office of its advocate, Raja Sarkar, advocate, Second Floor (Mezzanine), DPS India, 7A, Kiran Shankar Roy Road, Kolkata - 700 001, be inserted once each in "The Financial Express" and "Sambad Pratidin" in Kolkata. The publication in the Official Gazette is dispensed with.

In addition at least twenty-one clear days before the meeting to be held as aforesaid, notice convening the said meeting at the place and time as aforesaid, together with a copy of the said scheme of amalgamation, a copy of the statement required to be sent u/s 393 of the Act and the prescribed Form of Proxy be sent by registered post and/or personal messenger addressed to each of the said equity shareholders of the applicant-company at their respective registered or last known addresses.

The advocate-on-record of the applicant-company, abovenamed, do within fifteen days from this day file in court the form of the advertisement, the notice and statement to accompany the notice and the same shall be settled by the Assistant Registrar (Company) of this court.

Mr. Amitava Ghosh, advocate, failing him Mr. D.N. Sharma, advocate shall be the chairman of the meeting of the applicant-company No. 1, abovenamed, to be held as aforesaid, at a remuneration of 2000 gms.

Mr. D.N. Sharma, advocate, failing him Mr. Kuldeep Mallick, advocate shall be the chairman of the meeting of the applicant-company No. 2, abovenamed, to be held as aforesaid, at a remuneration of 2000 gms.

Mr. Kuldeep Mallick, advocate, failing him Mr. Amitava Ghosh, advocate shall be the chairman of the meeting of the applicant-company No. 3, abovenamed, to be held as aforesaid, at a remuneration of 2000 gms.

The chairmen appointed for the meeting or any person(s) authorised by them do issue the advertisements and send out the notices of the meeting referred to above.

The quorum for the said meeting of the equity shareholders of the applicant-company Nos. 1 and 3 be fixed at five persons, present in person or by proxy and the quorum for the said meeting of the equity shareholders of the applicant-company No. 2 be fixed at two persons personally or by proxy.

The voting by proxy be permitted, provided that a proxy in the prescribed form duly signed by the persons entitled to attend and vote at the meeting, is filed with the applicant-company at its registered office not later than forty-eight hours before the meeting. The chairmen shall have the power to adjourn the meeting, if necessary.

The value of each member shall be in accordance with the books of the applicant-company and where the entries in the books are disputed, the chairmen shall determine the value for the purpose of the meeting.

The chairmen do report to this court, the result of the said meeting within twenty-one days from the date of the conclusion of the said meetings and his report shall be verified by their respective affidavit.

Summons be signed as of date. C.A. No. 233 of 2013 is accordingly disposed of.