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Corporate Updates 31 May 2014

May 31, 2014 Leave a Comment

Where the transferor company is a tenant of premises and upon merger of transferor company with the transferee company, it shall amount to sub-letting unless permission of landlord of the premises is obtained – the eviction petition under the local rent laws on the ground of sub-letting shall be maintainable against such transferee company.

Facts of the case

The Hon’ble High Court of Kolkatta held in the matter of Smt Premlata Arya & Anr. Versus Ambalal Sarabhai Enterprises Ltd. & Ors. the Plaintiff are owners of an office space in Kolkata. The plaintiffs purchased the premises from Calcutta Credit Corporation Limited, which had let out the same to Standard Pharmaceuticals Limited (the original tenant). The rents were being paid by the original tenant to the present plaintiffs. The Plaintiffs, in or about November, 1988 noticed for the first time that the original tenant has been describing itself as a division of the Defendant No.1, (Ambalal Sarabhai Enterprises Limited). The plaintiffs upon enquiry could discover that pursuant to a scheme of amalgamation the said original tenant has merged with the Defendant No.1 and have thereafter being dissolved without winding up. The defendants had come to occupy the said premises on the basis of such order sanctioning the scheme of amalgamation.

As the same amounted to an assignment of the tenancy of the original tenant without consent of the landlord, the plaintiffs filed the instant suit seeking eviction of the defendants from the suit premises and for mesne profits from May, 1986 till possession.

The plaintiffs further contended that the Defendant No. 2, 3 and 4 (sister concerns of Defendant 1) are also having their offices and are carrying on their business on the said premises. The plaintiffs, at no point of time, had ever given any permission or consent to the continuous occupation of the said defendants or use of the said premises or any portion thereof. The plaintiffs had duly served on the said defendants notices calling upon them to hand over possession of the premises to the plaintiffs. The defendants and each of them however has refused to make over a vacant possession of the suit premises.

The defendants contended that the defendants are protected by the tenancy agreement entered into on 22nd January, 1973 and by the scheme of amalgamation made by and between Standard Pharmaceuticals Limited and the Defendant No.1. As per the scheme sanctioned by Hon’ble Court and the Gujarat High Court, all assets, liabilities, rights and obligations including the aforesaid tenancy vested in Defendant No.1. Standard Pharmaceuticals Limited duly communicated confirmation and/or sanction of the said scheme of amalgamation to the plaintiffs whereupon the plaintiffs by actual acceptance and/or acquiescence recognized the Defendant No.1 as a tenant in respect of the suit premises. Moreover, the plaintiffs had actual notice of the petition for confirmation of the said scheme of amalgamation through advertisements published in newspapers. In this regard, the plaintiffs actually and by their conduct became bound by the tenancy agreement.

The defendants also contended that by virtue of the Tenancy agreement the consent of landlord permitting the tenant to sublet the tenanted premises to its associate companies was implicit in the said clause and did not require any fresh or further consent in writing. In the alternative, Ambalal Sarabhai Limited was an associate of Standard Pharmaceuticals Limited and the plaintiffs have knowingly received rents from the transferee company.

It was argued that the order of amalgamation operated in rent because of wide publicity. The plaintiffs ought to have known or could have ascertained with reasonable diligence that the original tenant company has been amalgamated with the Defendant No. 1. The acceptance of such rent and retention of the money even after discovery of the fact that the original tenant stood dissolved are the most telling aspect of the matter which requires a serious consideration and clearly disproves the claim of the plaintiffs that the defendant is a trespasser.

JUDGEMENT

Since the defendants are in wrongful occupation of the suit premises since 1986, the plaintiffs shall be entitled to mesne profits from May 1986 till recovery of possession.

The Court has appointed a member of the bar, as special officer to compute the mesne profits and submit the report before this Court. The learned counsel for defendants prayed for stay of operation of the judgment and decree. The same is considered and rejected.

CONCLUSION

In the event of amalgamation/merger of transferor company with the transferee, the transferee company is not entitled to continuation of tenancy unless the landlord of the premises has consented to such continuation of such tenancy and even if the landlord has accepted the rent for sometime, this will not make any difference. The landlord will be entitled to file suit for eviction on the ground of sub-letting.

Filed Under: Case law, Merger, News & Updates

Corporate Updates 24 May 2014

May 24, 2014 Leave a Comment

Case Law:

Conducting the meeting by way of an electronic voting and postal ballot, as purportedly mandated under the new provisions of the Companies Act 2013 is an additional facility to dispense with the requirement of holding a physical meeting of shareholders ???

Hon’ble Mumbai High Court in the matter of Approval of Scheme of Amalgamation of Wadala Commodities Limited With Godrej Industries Limited has observed that postal ballot and e-voting is an additional facility and cannot have the effect of dispensing the general meeting at all. Further, the court stated that gazette copy of many MCA rules are not available… hence in the opinion of the court they are not binding so far or at least from 1st April 2014.

FACTS OF THE CASE

1. In February this year, Godrej Industries announced that it would merge Wadala Commodities, which is in the business of bulk trading of vegetable oil, with itself.
2. The scheme of amalgamation of Wadala Commodities with Godrej was approved in the third quarter in FY 13-14, when Godrej Industries boosted top line by 16.6 per cent in the vegetable oil sector year-on-year.
3. Godrej decided to issue 1 fully paid share for every 108 shares of Wadala, thinking that the amalgamation would boost revenue and help in strengthening market share in the vegetable oil segment.
4. Company Summons for Direction, viz., whether in view of the provisions of Section 110 of the Companies Act, 2013 (“the 2013 Act”) and SEBI Circular dated 21st May 2013, a resolution for approval of a Scheme of Amalgamation can be passed by a majority of the equity shareholders casting their votes by postal ballot, which includes voting by electronic means, in complete substitution of an actual meeting. In other words, whether the 2013 Act, read with various circulars and notifications, has the effect of altogether eliminating the need for an actual meeting being convened.
5. Both parties later requested the High Court to dispense with the requirement of holding a physical meeting of shareholders, and instead let them conduct the meeting by way of an electronic voting and postal ballot, as purportedly mandated under the new provisions of the Companies Act 2013.

JUDGEMENT

1. Hon’ble Bombay high court declined the request and reiterated the importance of physical meetings in corporate democracy, and the right of shareholders to discuss and deliberate actions proposed to be undertaken by the company.
2. Bombay High Court recommended that until the issues raised by the High Court on the exclusion of physical shareholder meetings are finally settled, no company should insist upon a postal-ballot-only-meeting.
3. The High Court also held that all provisions for compulsory voting by postal ballot and by electronic voting to the exclusion of a physical meeting do not apply to court-convened shareholder meetings. At such meetings, provision must be made for shareholders to allow them to vote through postal ballots or electronic voting, in addition to the voting right at the physical meeting.
4. The High Court has directed the Additional Solicitor General, Registrar of Companies and SEBI to make further submissions before it on this issue”
5. The court has also taken steps to elevate the issue to a larger bench.
6. The order says: “…….till such time as these rules are gazette, or there is some provision made for the dispensation of official gazette notification, none of the rules in the Ministry of Corporate Affairs PDF document that are not yet gazette can be said to be in force.”

Conclusion

This order of High Court treats the doctrine of indoor management and the right of shareholders to be heard in a meeting as sacrosanct. The decision reinforces the shareholders’ ability to take an informed decision and raised questions with regards to the implementation of the Companies Act 2013, and highlighted some key gaps such as the notification of the rules. “Such matters require urgent regulatory attention.”

Filed Under: Case law, Company Law, News & Updates

Corporate Updates 17 May 2014

May 17, 2014 Leave a Comment

Case Law: Where company’s name was struck off and petitioner sued company in Trial Court and if company’s name was not restored, there would be no effective remedy available for loss caused to petitioner, can name of company be restored to register ??? 

The Hon’ble High Court of Delhi in the matter of M.A. Panjwani V/s. Registrar of Companies & others, directs restoration of company’s name as no other remedy was available to make good losses of petitioner as it appeared to the Court to be “otherwise just”. The word “just” would mean that it is fair and prudent from a commercial point of view to restore the company and that the Court has to examine the concept of “justness” not exclusively from the perspective of a creditor or a member or a debtor, but from the perspective of the society as a whole. The special facts of the present case attract this principle.

This is a petition filed by the petitioner i.e. under Section 560(6) of the Companies Act, 1956 read with Rules 9 & 92 of the Company Court Rules, 1959.

Facts about the Case

  • The petitioner was residing in the United Kingdom. He wanted to settle down in India. With this end in view, he engaged the services of respondent No.3 for searching a suitable house in Delhi. Singhania identified a property known as “Jodhpur Gardens” in village Gadaipur, Tehsil Mehrauli. The petitioner remitted money from England in favour of Respondents 3 in this regard.
  • Respondent 3, who, under some pretext or the other kept deferring the issue and giving evasive answers did not handed over the original Deeds of the property to Petitioner.
  • The petitioner made inquiries in Delhi through persons who informed him that the property was registered in the name of the company and was in the possession and personal use of Respondent 3 since January, 1980.
  • On being so informed, the petitioner filed a suit for declaration, mandatory injunction and damages in the Civil Court. The suit was taken up on 07.05.2012, where the respondent No.2 informed the trial court that the name of the company has been struck off the records by the Registrar of Companies and therefore the suit cannot proceed.
  • The present petition was then filed by the petitioner, under sub-section (6) of Section 560 of the Companies Act. The prayer in the petition was for directions to the Registrar of Companies, who is the respondent No.1, for restoring the name of respondent No.2 i.e. M/s. Alfa Impex Pvt. Ltd. (hereinafter referred to as “Company”) to the register of companies maintained by respondent No.1. on the ground that it is “just” to do so having regard to the facts narrated above.
  • Counsel appearing for the Registrar of Companies took up a preliminary objection to the effect that a petition for restoration of the name of the company can be filed only by the company, member or creditor in terms of Section 560(6) of the Act and that the petitioner does not fall under any categories.
  • As regards the petitioner argued that it was “just” that the company be restored to the register having regard to the events narrated earlier, counsel for the Registrar of Companies submitted that the word “just” appearing in sub-section (6) of Section 560 has to be given a limited or restricted meaning having regard to the context and construed ejusdem generis with the requirement that the company should be carrying on business and should be in operation, and the said word cannot be given any broader meaning.

Judgement

High Court passed decision under sub-section (6) of Section 560 of the Companies Act, 1956 :

  • The court said that the power to order restoration of the company’s name to the register of companies on the application made by the company itself or its member or creditor. Such an application can be made at any time before the expiry of 20 years from the publication of the notice for striking off the name published in the official gazette.
  • The court enumerated the two circumstances in which the company court can exercise the power. The first is when it is satisfied that the company was, at the time of the striking off of its name from the register, carrying on business or was in operation and second is when it appears to the company court that it is “otherwise just” that the name of the company be restored to the register.
  • Court found from the proceeding of the trial that the petitioner was neither a member nor a creditor of the company. Even if the petitioner cannot be considered as a “member” of the company, he was certainly a “creditor” who can file the petition quite apart from the above position, the sub-section recognises that if the Court is of opinion that it is “otherwise just” that the company be restored to the register, restoration can be ordered.
  • It was submitted on behalf of the Registrar of Companies that in striking off the name of the company, the procedure prescribed in Section 560 of the Act was followed. That may be so. Sub-section (6) of Section 560 gives power to the company court to order restoration of the name of the company if it finds that such a course was “just”. The fact that the ROC did follow the due procedure prescribed by law while striking off the name cannot, therefore, be an answer to a petition filed on the ground that it would be “just” to restore the name of the company.
  • On the facts of this case there is every reason to hold that it would be “just” to restore the name of the company to the register of companies. The Registrar of Companies was directed to do so.
  • The company petition is allowed.
Filed Under: Case law, Company Law, News & Updates

Corporate Updates 10 May 2014

May 10, 2014 Leave a Comment

Case law: 

Whether a woman employee of the Central Government can ask for uninterrupted 730 days of Child Care Leave (hereinafter referred to as, – ‘the CCL’) under Rule 43-C of the Central Civil Services (Leave) Rules, 1972 (hereinafter referred to as, ‘the Rules’).

The Supreme Court in the matter of Kakali Ghosh Vs. Chief Secretary, Andaman & Nicobar Administration and Ors. in Civil Appeal No. 4506 of 2014 arising out of SLP (C) No. 33244 of 2012 held that a woman employee of the central government can get uninterrupted leave for two years for childcare, which also includes needs like examination and sickness. A bench of justices At SC set aside an order of the Calcutta HC which had held that the central civil services (leave) rules did not permit uninterrupted CCL (childcare leave) for 730 days. It said “On perusal of circulars and Rule 43-C , it is apparent that a woman government employee having minor children can avail CCL for a maximum period of 730 days i.e. during the entire service period for taking care of upto two children”

FACTS OF THE CASE

· The appellant initially applied for CCL for six months commencing from 5th July, 2011 by her letter dated 16th May, 2011 to take care of her son who was in 10th standard
· Appellant intimated that she is the only person to look after her minor son and her mother is a heart patient and has not recovered from the shock due to the sudden demise of her father; her father-in-law is almost bed ridden and in such circumstances, she was not in a position to perform her duties effectively.
· While Appellant’s application was pending, she was transferred to Campbell Bay in Nicobar District (Andaman and Nicobar) where she joined on 06th July, 2011. By her subsequent letter dated 14th February, 2012 she requested the competent authority to allow her to avail CCL for two years commencing from 21st May, 2012. However, the authorities allowed only 45 days of CCL by their Office Order No. 254 dated 16th March, 2012.
· Appellant had first approached Central Administrative Tribunal Calcutta for getting leave. The tribunal had ordered dated 30th April, 2012 in her favour but the High Court reversed the order.
· The High court passed the order dated 18th September, 2012 on a petition filed by appellant a woman government employee Kakali Ghosh challenging government’s decision not to grant her leave of 730 days for preparing her son for secondary/senior examinations. It said that CCL can be granted only according to the conditions mentioned in the sub r.(3) of r.43-C and that one of the conditions is that CCL shall not be granted for more than three spells in a calendar year. It means that CCL is not to be granted for a continuous period, but only in spells
· Appellant aggrieved by the judgment moved the apex court.

JUDGEMENT

The Supreme Court passed the order on a petition filed by Appellant Kakali Ghosh challenging the government’s decision not to grant her leave of 730 days for helping her son prepare for examinations

· The apex court set aside the High Court’s order. It said “We set aside the impugned judgment dated September 18, 2012 passed by the Division Bench of Calcutta High Court, Circuit Bench at Port Blair and affirm the judgment and order dated April 30, 2012 passed by the Tribunal with a direction to the respondents to comply with the directions issued by the Tribunal within three months from the date of receipt/ production of this judgment,”
· Also in the present case, the appellant claimed for 730 days of CCL at a stretch to ensure success of her son in the forthcoming secondary/senior examinations (10th/11th standard). It is not in dispute that son was minor below 18 years of age when she applied for CCL. This is apparent from the fact that the competent authority allowed 45 days of CCL in favour of the appellant. However, no reason has been s\own by the competent authority for disallowing rest of the period of leave.
· Also in the present case the respondents have not shown any reason to refuse 730 days continuous leave. The grounds taken by them and as held by High Court cannot be accepted for the reasons mentioned above.
· For the reasons aforesaid, the supreme Court set aside the impugned judgment dated 18th September, 2012 passed by the Division Bench of Calcutta High Court, Circuit Bench at Port Blair and affirm the judgment and order dated 30th April, 2012 passed by the Tribunal with a direction to the respondents to comply with the directions issued by the Tribunal within three months from the date of receipt/production of this judgment.
· The appeal is allowed with aforesaid directions. No costs.

Filed Under: Case law, News & Updates