NCLAT Ruling: Section 231 of Companies Act and Scheme Modifications (2024)

Case Law: November 06, 2024 CMS Info Systems Ltd (Appellant)
Vs Bharatiya Kamgar Karamchari Mahasangh & Ors (Respondents)

National Company Law Appellate Tribunal Principal Bench, New Delhi Company Appeal (AT) No.27/2024

Section 231 of the Companies Act, 2013 does not permit the Tribunal to make substantial modifications to a Scheme which has been approved by its Members.

Judgement
Hon’ble NCLAT observed that Section 231 of the Companies Act, 2013 does not permit the Tribunal to make substantial modifications to a Scheme which has been approved by its Members. The Ld. NCLT could not have interpreted the Scheme contrary to the intention of the Transferor and Appellant. The intention of the Transferor and the Appellant was clear from the unambiguous wording of the Scheme under Clause 7.1 and also coupled with the fact the workmen not so identified by the Board continued in the service of the transferor company, none of such persons were abandoned/retrenched when the said Scheme was put into operation.

Rather the Transferor company and the Transferee company executed Manpower Supply Agreements whereunder the Transferee company utilised the services provided by the workmen of the Transferor company. The purpose of the Scheme was not to retrench any of the staff, employees of the Transferor company and the record would show such persons continued to be in service of the Transferor company on terms which were not in any manner less favourable to those available to the employees of the Appellant.

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Empowering Investors through Updated Investor Charter of SEBI

SEBI has updated its “Investor Charter” to enhance investor protection, market transparency, and trust and confidence among investors. Key updates include ensuring confidentiality of investor information and providing the right to exit at fair and reasonable terms from the securities market related products or services (copy of updated Investor Charter of SEBI enclosed). Further, SEBI has strengthened the grievance redressal mechanism and alternative dispute resolution mechanism with the launch of SCORES 2.0 and SMART Online Dispute Resolution. In SCORES 2.0, investor complaints are taken up directly with

SEBI registered Intermediaries/regulated entities and the designated bodies for First Level review, with SEBI taking up all complaints at the stage of Second Level Review. SMART ODR Portal facilitates online conciliation and online arbitration for resolution of disputes arising in the Indian Securities Market.

For details: https://lnkd.in/gJPrJv8J

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SEBI Capital Market and Securities Laws Update:

SMS and E-mail alerts to investors by stock exchanges (December 03, 2024)

Stock Brokers shall ensure that separate mobile number/email address is uploaded for each client. Based on the representation received from Brokers’ Industry Standards Forum (ISF), SEBI vide this circular has clarified that, under exceptional circumstances, the stock broker may, at the specific written request of a client, upload the same mobile number/Email address for more than one client provided such client belong to one family (in case of individual clients) or such client is the authorised person of an HUF, Corporate, Partnership or Trust (in case of non-individual clients).

For details: https://lnkd.in/g2vnfnwB

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SEBI Case Law 29.11.2024 RELIANCE SECURITIES LIMITED

Facts of the Case: SEBI and exchanges viz, National Stock Exchange (“NSE”) and Bombay Stock Exchange(“BSE”) had conducted a thematic onsite inspection of the books of accounts, records and other documents of Authorized Persons (APs) of Reliance Securities Limited (“Noticee/ RSL”), registered with SEBI as a Stock Broker since September 09, 2005. The inspection was conducted for the period beginning from April 01, 2022 to December 31, 2023.

The inspection findings were communicated to the Noticee and after examining the reply submitted by the Noticee, it had been alleged that the Noticee contravened provisions of the SEBI Act, 1992, SEBI (Stock Brokers) Regulations, 1992 and applicable Circulars issued thereunder, in respect of the activities carried out by it. The summary of the violations alleged to have been committed by Reliance Securities Limited are given below:-

Alleged Violations (Summarized)
1. Non-maintenance of adequate systems for recording of order placement by clients.
2. Discrepancy w.r.t existence of terminal at inspection location Vis a Vis information reported to exchange by the Noticee.
3. No proper segregation and demarcation maintained at the AP office.
4. Failure of the Noticee in ensuring that its Authorized Persons are engaged only in permitted activities. 5. Failure of the Noticee to inspect the books of active registered Authorised Person as per the applicable guidelines.
6. Non-reporting of details of active clients mapped to Authorized Persons.
7. Entrusting the CTCL/dealer terminals to its clients other than Approved Persons.
8. Inadequate supervision of AP’s by the Noticee.

SEBI Order: Having considered the facts and circumstances of the case, the material available on record, the factors mentioned in 15J of SEBI Act and also taking into account judgment of the Hon’ble Supreme Court in SEBI vs. Bhavesh Pabari (2019) 5 SCC 90 and in exercise of power conferred under Section 15I of the SEBI Act read with Rule 5 of the SEBI Adjudication Rules, the following penalty is imposed under Sections 15HB and 15A(b) of the SEBI Act, as applicable on the Noticee:

Name of the Entity Reliance Securities Limited (Noticee)
1.     Under Section 15HB of the SEBI Act Penalty Provisions Penalty (Rs.) of Rs 7,00,000/- (Rupees Seven Lakhs Only)

2.     Under Section 15A(b) of the SEBI Act Penalty Provisions Penalty (Rs.) of Rs 2,00,000/- (Rupees Two Lakhs Only)

3.     Total Rs 9,00,000/- (Rupees Nine Lakhs Only)

For details: https://lnkd.in/g_uUn3js

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IBC Update:

IBC Update: The Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees (Recommendation) (Second) Guidelines, 2024 (December 02, 2024)

Insolvency and Bankruptcy Board of India has issued guidelines as the need was felt to prepare the panel of IPs in advance and share with the Adjudicating Authority (AA) to avoid administrative delays in appointment of the IP. These guidelines provide the procedure for preparing panel of Insolvency Professionals to act as Interim Resolution Professionals, Liquidators, Resolution Professionals and Bankruptcy Trustees. The panel of IPs prepared as per these guidelines will be effective from 1 January 2025 to 30 June 2025.

For details: https://lnkd.in/gu3f_AR2

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IBC Update:

Extension of time for filing Forms to monitor liquidation and voluntary liquidation processes under the Insolvency and Bankruptcy Code, 2016, and the regulations made thereunder (December 02, 2024)

Insolvency and Bankruptcy Board of India, considering representations and difficulties faced by the liquidators, has decided to extend the last date of submission of the liquidation and voluntary liquidation forms till 31.12.2024 vide issuing a circular dated December 02, 2024.

For details: https://lnkd.in/gzirz97R

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Case Law : Telecom Regulatory Authority of India (Appellant) Versus Reliance Telecom Ltd. & Ors. (Respondents) ; National Company Law Appellate Tribunal (NCLAT) Principal Bench New Delhi Company Appeal (AT) (Insolvency) Nos. 273 & 355 of 2024.

IBC Prevails over TRAI Act?

Judgement:
One of the submission advanced by learned Counsel for the Appellant is that TRAI Act is a special law governing all aspects of the provisions of telecommunications service in the country, whereas the IBC is a general law governing insolvency, hence the provisions of TRAI Act would prevail in respect of matters dealing with the Regulations of the telecom companies. The IBC is a special law and latter enactment than to the TRAI Act, which was enacted in 1997, whereas IBC has been enacted in 2016. Section 238 of the IBC gives overriding effect to the provisions of the IBC to all other laws. Section 238 of the IBC is as follows:

“238. Provisions of this Code to override other laws – The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.”

Learned Counsel for the Respondent has relied on the judgment of the Hon’ble Supreme Court in A. Navinchandra Steels Pvt. Ltd. vs. SREI Equipment Finance Ltd. & ors. – Civil Appeal Nos.4230-4234 of 2020 decided on 01.03.2020. The Hon’ble Supreme Court in paragraph 14 of the judgment has held that IBC is a special statute, which must prevail in the event of conflict, but has a non-obstante clause contained in Section 238. Paragraph 14 of the judgment of the Hon’ble Supreme Court is as follows:

“14. Having heard learned counsel for all the parties, it is important to restate a few fundamentals. Given the object of the IBC as delineated in paragraphs 25 to 28 of Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17 [“Swiss Ribbons”], it is clear that the IBC is a special statute dealing with revival of companies that are in the red, winding up only being resorted to in case all attempts of revival fail. Vis-à-vis the Companies Act, which is a general statute dealing with companies, including companies that are in the red, the IBC is not only a special statute which must prevail in the event of conflict, but has a non-obstante clause contained in Section 238, which makes it even clearer that in case of conflict, the provisions of the IBC will prevail.”

Hon’ble NCLAT held that in view of the clear pronouncement of the above law, submission of the Appellant that TRAI Act is a special statute and would prevail over the IBC, has to be rejected.

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Central Information Commission vs. D.D.A. & Anr ; Supreme Court of India 2024 INSC 513

The principle of purposive interpretation supports the view that the CIC’s powers under Section 12(4) of the RTI Act include all necessary measures to manage and direct the Commission’s affairs effectively.

Facts of the Case/Background: The present appeal challenges the judgment and order, passed by the High Court of Delhi. The High Court, by the impugned order, quashed the Central Information Commission (Management) Regulations, 2007 framed by the Chief Information Commissioner and held that the CIC has no power to constitute Benches of the Commission. This appeal is confined to the issue of the validity of the Regulations and the powers of the CIC under Section 12(4) of the Right to Information Act, 2005.

Legal Issue :Whether the CIC, under the provisions of Section 12(4) of the Right to Information Act, 2005 has the authority to constitute benches of the CIC and frame Regulations for the effective management and allocation of work within the Commission, including the issuance of orders and the formation of committees?

Observations, Findings and Decision
In the present case, the RTI Act should be interpreted purposively, taking into account the broader objectives of the legislation. The purpose of the RTI Act is to promote transparency and accountability in the functioning of public authorities, ensuring citizens’ right to information. To achieve these objectives effectively, it is essential that the Central Information Commission operates efficiently and without undue procedural constraints. The principle of purposive interpretation supports the view that the CIC’s powers under Section 12(4) of the RTI Act include all necessary measures to manage and direct the Commission’s affairs effectively. This includes the ability to form benches to handle the increasing volume of cases. The formation of Benches allows for the efficient allocation of work and ensures the timely disposal of cases, which is crucial for upholding the right to information.

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SEBI Case Law November 22, 2024 Jagsonpal Pharmaceuticals Limited

Facts of the Case: A detailed investigation was undertaken by SEBI to ascertain whether the suspected entity/ies traded in the scrip of M/s Jagsonpal Pharmaceuticals Limited (“JPL/Company”) when in possession of the UPSI and if there were any violations of the provisions of the SEBI Act, 1992 and the SEBI (Prohibition of Insider Trading) Regulation 2015 (“PIT Regulations”). Based on the analysis of trading pattern, one Mr. Maneesh Kumar Jain (“Noticee no.1”) was shortlisted by SEBI as a suspected entity.

It was, inter alia, observed that JPL had made an announcement to NSE of the press release dated February 21, 2022 titled ‘Intimation for Public Announcement under Regulations 3(1) and 4 read with Regulations 13(1), 14 And 15(1) of SEBI (SAST) Regulations, 2011’. Thereafter, the Open Offer was made at a price of Rs. 235/- per Offer Share making the total consideration payable by the acquirer under the Open Offer at the Offer Price of Rs.1,60,06,97,800/- payable in cash through normal banking channels. The news of substantial acquisition of shares was announced pre-market hours on February 22, 2022 (i.e. at 07:09:27 am). It was observed that the said news had impacted the price of the scrip of JPL as it registered a rise of around 20% on a close-to-close basis and rise of 5.96% on open-to-close basis. Further, it was also observed that the scrip hit a new 52 week high price of Rs. 246.45/- on February 22, 2022. Thus, the announcement dated February 22, 2022 made by JPL to NSE as regards substantial acquisition of shares under Regulations 3(1) and 4 read with Regulation 13(1), 14 and 15(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 was observed to be an UPSI under the provisions of Regulation 2(1)(n) of the PIT Regulations. On examining the trading pattern of Noticee No.1 during the relevant period on NSE and BSE, it was observed that Noticee No. 1 had traded in the scrip of JPL during the UPSI period.

SEBI Order: In exercise of the powers conferred upon SEBI under Sections 11(1), 11(4), 11(4A), 11B(1) and 11B(2) of SEBI Act, 1992 read with Section 19 of the SEBI Act, 1992 and SEBI (Procedure for Holding Inquiry and Imposing Penalties) Rules, 1995, SEBI restrained JPL and Mr. Maneesh Kumar Jain from accessing the securities market for a period of one (1) year and further Mr. Maneesh Kumar Jain is directed to disgorge a sum of Rs. 31,39,000 within 45 days from the date of receipt of this order. Also, SEBI imposed a total penalty of Rs. 25,00,000/- on JPL and Mr. Maneesh Kumar Jain for violating Regulation 4(1) and Regulation 3(1) of the PIT Regulations and Section 12A(d) and 12A(e) of the SEBI Act, 1992.

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Here are the compliances for October 2024:

– LLP Act: E Form LLP 8 (Statement of Account & Solvency): This form should be filed annually with the Registrar of Companies (ROC) by 30th October, 2024.

– Company’s Act: E Form AOC-4 (Filing of Annual Accounts): This form should be filed with the ROC within 30 days from AGM.

– Company’s Act: E Form MGT-7 (Filing of Annual Return): This form should be filed within 60 days from the date on which the annual general meeting is held or where no annual general meeting is held in any year within sixty days from the date on which the annual general meeting should have been held together with the statement specifying the reasons for not holding the annual general meeting.

– Company’s Act: E Form PAS-6 (Reconciliation of Share Capital Audit Report): This form should be filed half-yearly within 60 days from end of half year.

– Company’s Act: E Form MSME (Outstanding Payments to MSMEs): The due date for this form is October 31, 2024, for the period of April to September 2024.