Case Note & Summary
The appeal was filed by Laxmi Pat Surana against the judgment and order of the learned Company Judge dated 1 March 2013, which sanctioned a scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956. The scheme involved the demerger of a division of Pantaloon Retail (India) Ltd. to Peter England Fashions and Retail Ltd., with shareholders of the demerged company receiving proportionate shares in the resulting company. The appellant had a separate dispute with Pantaloon Retail regarding a sub-license agreement for premises in Kharagpur, which was the subject of arbitration proceedings. The Calcutta High Court had directed the respondents to furnish a bank guarantee of Rs.6.50 crores in connection with that dispute. The appellant opposed the scheme on the ground that his claim against Pantaloon Retail was not adequately protected. The learned Single Judge sanctioned the scheme, holding that the court's jurisdiction was supervisory and not appellate, and that statutory compliances had been met. The appeal was lodged on 20 June 2013, but by then the scheme had already been implemented: Form-21 was filed with the Registrar of Companies on 8 April 2013, and the shares of the resulting company were listed on the Bombay Stock Exchange on 17 July 2013. The Division Bench noted that the scheme had been implemented and that the appellant's claim was already secured by a bank guarantee. The court found no merit in the appeal and dismissed it, observing that the appellant's remedy lay in the arbitration proceedings.
Headnote
A) Company Law - Scheme of Arrangement - Sanction by Company Court - Supervisory Jurisdiction - The company court's jurisdiction while sanctioning a scheme is supervisory and not appellate; once statutory compliances are met and the scheme is not against public interest, the court may sanction it. (Paras 5-6)
B) Company Law - Scheme of Arrangement - Implementation - Effect on Appeal - Where a scheme of arrangement has been fully implemented, including filing of Form-21 and listing of shares, an appeal against the sanction order is devoid of merit and liable to be dismissed. (Paras 3, 6)
Issue of Consideration
Whether the appeal against the sanction of a scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956 should be entertained after the scheme has been implemented.
Final Decision
Appeal dismissed as devoid of merit. The court held that the scheme had been implemented and the appellant's remedy lay in arbitration proceedings.
Law Points
- Scheme of arrangement
- sanction by company court
- supervisory jurisdiction
- implementation of scheme
- appeal dismissed as devoid of merit
Case Details
2013 LawText (BOM) (10) 59
APPEAL (L) NO.273 OF 2013 IN COMPANY SCHEME PETITION NO.849 OF 2012
DR.D.Y.CHANDRACHUD, M.S.SONAK
Mr.Simil Purohit i/by Ms.Sheela K. Mistry for Appellant, Mr.H.S.Sethi for Respondents
Pantaloon Retail (India) Ltd. And others
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Nature of Litigation
Appeal against order sanctioning scheme of arrangement under Sections 391 and 394 of Companies Act, 1956.
Remedy Sought
Appellant sought to challenge the sanction of the scheme of arrangement.
Filing Reason
Appellant had a dispute with Pantaloon Retail regarding a sub-license agreement and claimed that the scheme did not protect his interests.
Previous Decisions
Company Court sanctioned the scheme on 1 March 2013; Calcutta High Court had directed furnishing of bank guarantee of Rs.6.50 crores in related arbitration proceedings.
Issues
Whether the appeal against the sanction of a scheme of arrangement should be entertained after the scheme has been implemented.
Whether the appellant's claim was adequately protected under the scheme.
Submissions/Arguments
Appellant argued that his claim against Pantaloon Retail was not protected under the scheme.
Respondents contended that the scheme had been implemented and the appellant's claim was secured by a bank guarantee.
Ratio Decidendi
Once a scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956 is sanctioned and implemented, an appeal against the sanction order is not maintainable, especially when the appellant's claim is already secured by a bank guarantee and can be adjudicated in separate proceedings.
Judgment Excerpts
The appeal is taken up for hearing and final disposal, by consent and on the request of the learned counsel.
The scheme of arrangement contemplates that a division of Pantaloon Retail India Limited shall stand transferred to Peter England Fashions and Retail Limited.
The appeal was lodged on 20 June 2013. Office objections have not been removed and the appeal has been placed in the normal course by the registry for admission.
The claim of the Appellant in arbitration which was initially in the amount of Rs.22.00 crores, has since been enhanced to Rs.220 crores.
The learned Single Judge by the impugned judgment and order dated 1 March 2013 sanctioned the scheme of arrangement holding that : (i) When such a claim is presented before the Court for sanction, the jurisdiction of the Court is supervisory and not appellate; (ii) Once it is established - as it has been - that requisite statutory compliances were made that the scheme was not against public interest and the requisite number of shareholders had accepted the scheme.
Procedural History
The Company Court sanctioned the scheme on 1 March 2013. Form-21 was filed on 8 April 2013. Shares were listed on 17 July 2013. Appeal was lodged on 20 June 2013. The appeal was heard and dismissed on 15 October 2013.
Acts & Sections
- Companies Act, 1956: 391, 394
- Arbitration and Conciliation Act, 1996: 9
