These applications are filed under sections 391 and 394 of the Companies Act,1956 read with Rules 9, 11(b), 19 and 67 of the Companies (Court) Rules,1959 by the applicant, M/s.Cash & Carry Wholesale Traders Private Ltd., a company registered under the Companies Act on 21.5.2002, having its registered Office at Govind-I, Kannappa Nagar Extn., Thiruvanmiyur, Chennai-41.
2. The object of the company as it is seen in the affidavit filed in support of the applications is to carry on the business of wholesale in all kinds of goods and products including goods manufactured by and/or to trade by way of wholesale in any articles, goods, rights, possessions of any nature and of any use being industrial, commercial, household, technical and in such process to buy, sell, acquire, lease any merchandise, goods or property of any form whatsoever as authorised dealers, stockists, agents, brokers, factors and render all such services. To manufacture, brand market in any articles, goods, rights, possessions of any nature and of any use being industrial, commercial, household, technical and in such process to buy, sell, acquire, lease, any merchandise, goods or property of any form whatsoever as authorised dealers, agents, stockists, brokers, factors and render all such services to carry out the other as stated in its Memorandum of Association.
3. Admittedly, the applicant company is stated to be a shareholder of M/s.Subhiksha Trading Services Limited (hereinafter called as 'the Company'), holding 11 equity shares of Rs.10/- each. At this stage, it is relevant to point out that as against the said Company, which is also a private limited company and whose object is similar to that of the applicant Company, C.P.Nos.26 and 68 of 2009 have been filed for winding up under
section 433(e) of the Companies Act,1956.
4. The applicant is stated to be a Promoter of M/s.Blue Green Constructions and Investments Limited, which has already filed C.P.Nos.239 and 240 of 2008, for sanction of a Scheme of Amalgamation between the Company and M/s.Blue Green Constructions and Investments Limited, which is the transferee company.
5. The present applicant is the Sponsor of a Scheme of Arrangement and these applications are filed for direction to hold the meeting of non-lending creditors of the Company, for considering and approving with or without modification of the Scheme of Arrangement between the Company and lending creditors and non-lending creditors and the consequential orders regarding publication of notices, etc. including the appointment of Chairman. Another application is filed for direction to hold the meeting of lending creditors of the Company for considering the said Arrangement and for other consequential orders.
6. The said Company, as on 31.3.2008, as per the audited balance sheet was having authorised share capital of Rs.50 crores divided into 5 crore equity shares of Rs.10/- each. The issued capital as on the said date was Rs.3,25,70,370 shares of Rs.10/- each and subscribed and paid up capital as on the said date was Rs.31,80,79,470/- and it is stated that a sum of Rs.76,24,230/- is receivable from the employees.
7. There has been a steep change in the financial position of the said company, when there was an increase in authorised capital from Rs.50 crores to Rs.74 crores as per the resolution of the Extra Ordinary General Body Meeting held on 25.7.2008, by creating Rs.240 lakhs equity shares of Rs.10/- each. The General Body Meeting on the said day also approved the issuance of 4,07,08,236 preferential warrants, each carrying right to subscribe one equity share of Re.1/- each, that was issued to the non-promoters, who are:
(1)India Advantage Fund 1,55,79,066;
(2)Emerging Sector Fund 76,73,271;
8. In the said Company, Mr.R.Subramanian, is the main promoter and the present Managing Director and the said company was the country's largest retailer having over 1600 shops and stores in India as on September, 2008 and the second largest in terms of sale. ICICI Venture Limited has invested on five different occasions in the said company. According to the applicant, the valuation of shares of the company taking note of the large block of equity shares sold by ICICI Ventures Limited would be Rs.230 crores. It is stated that the company which was having 150 stores and only Rs.330 Crores of sales in 2005-06 has increased its business around 1600 stores and over Rs.2300 crores of sale by two years namely, during 2006 to 2008.
9. It is stated that till the financial year ending 2008, the company's operation has been continuously profitable and the company has been making substantial contributions towards its taxes. The company has achieved a turnover of Rs.2,305 crores for the fiscal year ending on 31.3.2008 and a post-tax profit of Rs.39 crores. It was at that time, the said company, with the consent of its promoters and directors and major shareholders has decided to take over a listed company viz., M/s.Blue Green Constructions and Investments Limited, for which C.P.Nos.239 and 240 of 2008 were filed for the purpose of merger. Due to the collapse of the stock market after September, 2008 and global recession, there was a complete dearth and liquidity in the financial system between September, 2008 and January, 2009. Meetings of creditors and bank groups were held and the said company sought a finance of Rs.125 crores from the banks to tide over the situation in November, 2008 and the company has virtually collapsed especially taking note of its size of operation in India with 1600 stores and 15000 employees in 13 States and the Union Territories and its operation has come to a standstill.
10. ICICI Bank, being one of the largest lenders of the said company has agreed for a Corporate Debt Restructuring (CDR) created by the Reserve Bank of India. It is relevant to point out at this stage, as submitted by the learned senior counsel for ICICI Bank Mr.AL.Somayaji, the period of CDR has already come to an end by 31.7.2009 and there is no possibility of continuing the CDR proposal. However, Mr.Murari, learned counsel appearing for the transferee company under the proposed amalgamation, would submit that the CDR is still pending.
11. Since the entire operation of the Company has come to a standstill, the concept of restructuring of business was looked into and according to the applicant, most of the lending banks have accepted for revival of operation in spite of its clear impairment in the assets. It is also relevant to point out that the said CDR mechanism is applicable only to bankers who are signatory to the said mechanism. It is stated that out of 13 banking lenders of the said company, only 6 banks viz., ICICI, HDFC, Federal Bank, Yes Bank, Bank of India and Bank of Baroda are parts of CDR proposal and the remaining seven banks viz., HSBC, ABN Amro, Indusind Bank, Barclays Bank, Development Credit Bank, Standard Chartered Bank and Kotak Mahindra Bank, have remained out of CDR proposal. According to the applicant, out of the said seven banks, six banks are likely to accept the proposal. As stated above, it is the submission of the learned senior counsel that CDR proposal has come to an end on 31.7.2009 and there is no possibility for extension of the said scheme.
12. On a petition filed by one of the parties for winding up of the said company, this Court has passed an ex parte order on 31.3.2009, appointing the Official Liquidator as Provisional Liquidator of the company and on appeal by the company, the Division Bench in O.S.A.Nos.84 and 93 of 2009 has stayed the order of the learned Single Judge dated 31.3.2009 with certain conditions and it is stated that the said conditions have been complied with.
13. In any event, since the order of Division Bench is only in respect of appointment of Official Liquidator, the concerned company petitions for winding up have also been heard and orders are being passed separately in C.P.Nos.29 and 68 of 2009.
14. In addition to the 13 banking financial lenders, there are three more non-banking lenders of the company and there are dues to various unsecured creditors who have supplied goods and rendered services and there are non-lending creditors who include suppliers of saleable goods, service providers and employees who continued in service as well as resigned.
15. Since the CDR scheme is binding only on the signatory banks and there are non-signatory banks who are secured creditors and other unsecured creditors who are suppliers as stated above, it was thought that a scheme should be framed to enable the company to revive its operation.
16. Such operation can be done only with the approval of the scheme by the lending and non-lending creditors. It is specifically stated that the present Scheme of Arrangement is based on the Scheme of Amalgamation raised by M/s.Blue Green Constructions Investments Limited pending in C.P.Nos.239 and 240 of 2008. As per the present arrangement which is sought to be discussed in the meeting of lending and non-lending creditors, it was found that the company immediately needs funds to the extent of Rs.300 crores to restart the business and there is no possibility of revival with less than Rs.250 crores. Taking note of the fact that non-promoter shareholders of the company were not able to contribute additionally and left it to others for revival of the company, the applicant in the present applications viz., M/s. Cash & Carry Wholesale Traders Private Limited (hereinafter referred to as 'the Sponsor') has sponsored the present Scheme. Admittedly, the present applicant is holding only 11 equity shares of the company. It is also admitted fact that the applicant in these applications who sponsors the arrangement is also a promoter of M/s.Blue Green Constructions & Investments Ltd., into which the company is proposed to be merged as per the Scheme of Amalgamation and holding almost 40% of the paid up capital of the said company. It is also stated that C.P.Nos.239 and 240 are pending.
17. Under the scheme formulated by the sponsor, it is seen that the proposal is to be placed before the meeting of creditors, both lenders and non-lenders. The lending creditors are to waive (a) the interest chargeable on their respective loans falling between 1.10.2008 and upto 120 days after the effective date of the scheme, the effective date being the last of the dates on which the sanction, consent or approval of the scheme is obtained; and (b) the lending creditors shall also waive 50% of their respective principal amounts due and payable by the company as on the effective date of scheme determined. After the waiver, as per clause (a), the lending creditors shall accept the payment of remaining 50% of the principal amounts in full and final settlement on pro-rata basis as set out in the scheme as follows:
Time of Repayment of the remaining 50% of Principal Quantum
(i) At the end of 3 years from the Effective Date 5.0%
(ii) At the end of 4 years from the Effective Date 5.0%
(iii) At the end of 5 years from the Effective Date 7.5%
(iv) At the end of 6 years from the Effective Date 12.5%
(v) At the end of 7 years from the Effective Date 15.0%
(vi) At the end of 8 years from the Effective Date 15.0%
(vii) At the end of 9 years from the Effective Date 20.0%
(viii) At the end of 10 years from the Effective Date 20.0%
18. Apart from that, the lending creditors are to waive interest on loans, interest on interest, penalties, fines, etc. on their respective loans for the period from 1.10.2008 till the effective date in addition to other provisions in respect of lending creditors.
19. As per the proposed arrangement, the non-lending unsecured creditors shall be repaid as per the books of account of the company as on 31.12.2008 in 12 equal monthly instalments i.e., from 31.1.2011 to 31.12.2011 along with all interests. Penal charge, claims for loss of profits, claims on any other grounds etc. shall be waived permanently in full. The said dates have been fixed on the basis that the effective date of the scheme shall be on or before 30.9.2009. If the effective date is beyond 30.9.2009, the schedule will be readjusted. All dues arising from supplies made or services rendered on or after 01.01.2009 and upto the effective date of the scheme shall stand extinguished in full. Any continuing liability like service being rendered, such as rentals etc., shall recommence only from 120 days from the effective date. As per the said scheme, it is admitted that the amount of Rs.250 crores will be pumped in only after the scheme of amalgamation with M/s.Blue Green Constructions and Investments Ltd. comes into effect.
20. It was in those circumstances, when the above applications were taken up, the learned counsel for the applicant/petitioner in C.P. Nos.239 and 240 of 2008, Mr.Murari was requested to argue the said applications so that a comprehensive order can be passed especially in the circumstance that the source of present scheme of arrangement for which permission is sought for in these applications, viz., Rs.250 crores is to come only after the scheme of amalgamation takes effect, which is the subject matter of C.P.Nos.239 and 240 of 2008, which have been pending even before the present applications. However, Mr.Murari, learned counsel for the applicant in the said applications would submit that the amalgamation applications can be taken up at a later point of time since the amalgamation can be worked out effectively only after the present arrangement is approved by the lending and non-lending creditors of the company. Therefore, the present applications alone have been taken up for hearing.
21. As submitted by Mr.R.Muthukumarasamy, learned senior counsel appearing for the applicant in these applications, normally when an application is taken up under sections 391 and
394 of the Companies Act,1956 filed for arrangement, compromise, etc., the creditors or other persons are not heard for the reason that they can always raise their objections in the meeting of secured and unsecured creditors. The said checks are provided under
section 391 of the Companies Act,1956, which is as follows:
' Section.391.(1) Where a compromise or arrangement is proposed -
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them;
the Court may, on the application of the company or of any creditor or member of the company, or, in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Court directs.
(2) If a majority in number representing three-fourths in value of the creditors, or class of creditors, or members, or class of members, as the case may be, present and voting either in person or, where proxies are allowed under the rules made under
Section 643, by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company:
[Provided that no order sanctioning any compromise or arrangement shall be made by the Court unless the Court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Court by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under
sections 235 to
251 and the like.
(3) An order made by the Court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar.
(4) A copy of every such order shall be annexed to every copy of the memorandum of the company issued after the certified copy of the order has been filed as aforesaid, or in the case of a company not having a memorandum, to every copy so issued of the instrument constitution or defining the constitution of the company.
(5) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default,shall be punishable with fine which may extend to one hundred rupees for each copy in respect of which default is made.
(6) The Court may, at any time after an application has been made to it under this section, stay the commencement or continuation of any suit or proceeding against the company on such terms as the Court thinks fit, until the application is finally disposed of.
(7) .....'
22. It is true that on a reading of the said provision it is clear that when the creditors or members or class of members are present and vote the proposal agreeing for a compromise or arrangement in a meeting wherein 3/4th value of creditors are present and vote, then only the proposal comes into effect and the same will come into operation after it is sanctioned by the Court. It is only due to the said protections available to the creditors both secured and unsecured of the Company, the Court normally grants such permission.
23. The further protection is available under
section 394 of the Companies Act which is as follows:
" 394. Provisions for facilitating reconstruction and amalgamation of companies.
(1) Where an application is made to the Court under
section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Court-
(a) that the compromise or arrangement has been proposed for the purpose of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies; and
(b) that under the scheme the whole or any part of the undertaking, property or liabilities of any company concerned in the scheme (in this section referred to as a "transferor company") is to be transferred to another company (in this section referred to as "the transferee company");
the Court may, either by the order sanctioning the compromise or arrangement or by a subsequent order, make provision for all or any of the following matters:
(i)the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company;
(ii) the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person;
(iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;
(iv)the dissolution, without winding up, of any transferor company;
(v)the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; and
(vi)such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out:
[Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies, shall be sanctioned by the Court unless the Court has received a report from the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest:
Provided further that no order for the dissolution of any transferor company under clause (iv) shall be made by the Court 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.] (2) where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.
(3) Within thirty days after the making of an order under this section, every company in relation to which the order is made shall cause a certified copy thereof to be filed with the Registrar for registration.
If default is made in complying with this sub-section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.
(4) In this section-
(a) "property" includes property, rights and powers of every description; and "liabilities" includes duties of every description; and
(b) "transferee company" does not include any company other than a company within the meaning of this Act; but "transferor company" includes any body corporate, whether a company within the meaning of this Act or not."
Ultimately, when the approval for final sanction is granted by the Court, this Court takes into account the report of the Official Liquidator apart from the report of the Registrar of Companies on the affairs of the company as to whether the affairs are not conducted to the prejudice of the members or public interest and only thereafter, the final sanction is granted.
24. It is the contention of Mr.R.Muthukumarasamy, learned senior counsel that for granting permission to convening meeting under
section 391(1)(a) of the Companies Act between the company and its creditors, it is only the prima facie satisfaction of the Court that is sufficient and it does not require any hearing. However, since the banker creditors including Kotak Mahindra Bank and non-lending creditors have raised doubt about the genuineness of the said arrangement itself, the counsel representing the secured creditor banks and the suppliers were heard.
25. Mr.Karthik Seshadri, learned counsel appearing for the banking creditors would submit that inasmuch as the company is not the applicant, Rule 67 of the Companies (Court) Rules, 1959 would not apply and inasmuch as the applicant is a third party, under Rule 68 notice has to be given to the company before any order is made. It is his submission that even at the time when permission is given for convening the meeting, the Court must be satisfied about the genuineness of the scheme. He would rely upon the judgement of the Bombay High Court in Sakamari Steel & Alloys Ltd., In re [51 Com. Cas. 266]. He would submit that by order dated 31.3.2009 in C.P.No.68 of 2009, this Court having been satisfied with the prima facie case, ordered notice and in the appeal which was filed against the appointment of provisional liquidator, stay was granted by the Division Bench of this Court due to the reason that the said order in the company petition was made ex parte. Therefore, it is his submission that it is the duty of the applicant to show that the proposal made by it by way of sponsorship is genuine and that will be possible only if the source of amount of Rs.250 crores is properly explained.
26. The same is is also the contention of Mr.Arvind P.Pandian, who appears for and on behalf of some other creditors by relying upon the judgments in N.A.P.Alagiri Raja and Company rep. By its Managing Partner Pappu Raja vs. N.Guruswamy and Others [(1987) 1 MLJ 333] and Meridian Global Funds Management Asia Ltd., vs. Securities Commission [1995 (2) BCLC 116]. With reference to single economic unit, he would rely upon the judgments in El Ajou vs. Dollar Land Holdings plc and another [1994 (1) BCLC 464], Re Polly Peck International plc (in administration) (No 3) [1996 (1) BCLC 428], New Horizons Ltd., vs. Union of India [1997 (89) Com. Cas. 849 (SC)], Singer India Ltd., vs. Chander Mohan Chadha and Others [(2004) 7 SCC 1] and contend that either in the arrangement which is proposed in these applications or in the amalgamation which is the subject matter in C.P.Nos.239 and 240 of 2008 it is only Mr.R.Subramanian, who is the Managing Director of the Company, is taking the lead and therefore, it is necessary to prove the genuineness of the arrangement which is being placed before the meeting.
27. Again, it is the contention of Mr.Raghul Balaji, learned counsel appearing for one of the suppliers viz., unsecured creditors that unless the source of fund is explained, which is possible only after giving notice to the company and the financial position is ascertained, it is not possible to obtain permission for convening the meeting.
28. By way of reply, it is the contention of Mr.R.Muthukumarasamy, learned senior counsel that it is true that these applications are to be construed under Rule 68 and in fact, notice has been served on the company on 11.7.2009 itself.
29. I have heard the learned counsel appearing for the applicant and also various creditors of the company.
30. Before adverting to the real issue, it is necessary at the outset to see the financial position of M/s.Cash and Carry Wholesale Traders Private Limited, which is the applicant in these applications and sponsor for the arrangement. As it is seen in the public announcement made on 6.6.2008, the applicant was incorporated on 21.5.2002 and as per the unaudited certified results for the year ending 31.3.2008, its income was reported to be Rs.8.52 lakhs and profit earned after deducting tax was Rs.0.11 lakhs and the net worth of the said company for the year ending on 31.3.2008 was Rs.4001.43 lakhs which was translated into book value of Rs.100.14 per equity share. Therefore, the net worth of the company was Rs.40 crores with total income of Rs.8.52 lakhs, which shows the financial capability of the applicant company which sponsors the arrangement.
31. The applicant company is also having a bare minimum number of shares in the company (M/s.Subhilsha Trading Services Limited). The proposed scheme formulated by the sponsor as stated above contemplates the raising of an amount of Rs.250 crores after merger of the said company with M/s.Blue Green Constructions and Investments Limited. The present applications are filed under Rule 67 of the Companies (Court) Rules, 1959 which is as follows:
" Rule 67. Summons for directions to convene a meeting.-
An application under
section 391(1) for an order convening a meeting of creditors and/or members or any class of them shall be by a Judge's summons supported by an affidavit. A copy of the proposed compromise or arrangement shall be annexed to the affidavit as an exhibit thereto. Save as provided in rule 68 hereunder, the summons shall be moved ex parte. The summons shall be in Form No.33 and the affidavit in support thereof in Form No.34."
32. The application under
section 391 of the Companies Act, filed under Rule 67 of the said Rules along with summons to convene meeting has to be filed in Form 33 and the affidavit in support of summons is to be filed as per Form 34 of the Appendix IX of the Rules. The relevant forms are as follows:
"FORM NO.33 [See Rule 67] [Heading as in Form No.1] Company Application No......... of 19.....
........ Applicant(s) Summons for Directions to Convene a Meeting under
Section 391.Let all parties concerned attend the Judge in Chambers on ...... day, the ...... day of ....19 .... at ..... O'clock in the ..... noon on the hearing of an application of the abovenamed company (or of the applicant(s) abovenamed) for an order (that a meeting (or separate meetings) be held at ...... of (Here enter the creditors or class of creditors, e.g., debenture-holders, other secured creditors, unsecured creditors, etc., or the members or class of members, e.g., preference shareholders, equity shareholders, etc. of which class or classes, the meeting have to be held) of the above company, for the purpose of considering, and if thought fit, approving, with or without modification, a scheme of compromise or arrangement proposed to be made between the company and the said [here mention the creditors or class of creditors or members, or the class of members] of the said company.
And that directions may be given as to the method of convening, holding and conducting the said meeting(s) and as to the notices and advertisements to be issued.
And that a chairman (or chairmen) may be appointed of the said meeting(s), who shall report the result there of to the Court.
Advocate for the Applicant(s) Registrar.
The affidavit of ....... will be used in support of the summons.
[Note:- Where the company is not the applicant, the summons should be served on the company, or, where it is being wound-up on its liquidator.]"
"FORM NO.34 [See Rule 67] [Heading as in Form No.1] Company Application No. ....... of 19 ....
.......... Applicant (s) Affidavit in Support of Summons I,........ of etc., solemenly affirm and say as follows:-
1. I am the managing director/secretary/director/......./of the said company, (or an auditor of the said company authorised by the directors to make this affidavit/or liquidator of the said company in liquidation).
[Where the application is not by the company or its liquidator, but by a member or creditor the above paragraph should be suitably altered.]
2. The company was incorporated on ..... 19.... The document now produced and shown to me is a printed copy of the memorandum, and articles of association of the said company, and also contains copies of all the special resolutions which have been passed and are now in force.
3. The registered office of the company is situated at .........
4. The capital of the company is Rs..... divided into ..... (here set out the classes of shares issued and the amounts paid up on each share).
5. The objects of the company are set out in the memorandum of association annexed hereto. They are briefly (here set out the main objects in brief).
6. The company commenced the business of ......... (e.g., hides and skins, etc.) and has been carrying on the same since .....
7. [Here set out in separate paragraphs the circumstances that have necessitated the proposed compromise or arrangement, the objects sought to be achieved by it, the terms of the compromise or arrangement, and the effect if any, of the compromise or arrangement on the material interests of the directors, managing director, managing agent, secretaries and treasurers or the manager of the company, and where the compromise or arrangement affects the interests of the debenture holders, its effect on the material interests of the trustees of the debenture trust deed. A copy of the proposed compromise or arrangement should be marked as an exhibit and annexed to the affidavit.]
8. [Here set out the class of creditors or members with whom the compromise or arrangement is to be made; where the arrangement is between the company and its members, it should be stated whether any creditors or class of creditors are likely to be affected by its.]
9. It is necessary that a meeting (or meetings) of the creditors/members (if the meeting is to be only of a class of creditors or a class of members, it should be so stated) should be called to consider and approve the proposed compromise or arrangement.
10. It is suggested that the meeting (or meetings) may be held at the premises of the registered office of the company or at such other place as may be determined by the Court, and on such date(s) and at such time(s) as this Court may direct; and that a chairman may be appointed for the meeting (or for each of the meetings) to be held.
11. It is suggested that notice of the proposed compromise or arrangement and of the meeting may be published once in (here set out the newspapers) and in such other manner as the Court may direct.
12. It is prayed that necessary directions may be given as to the issue and publication of notices and the convening, holding and conducting of the meeting(s) proposed above.
Solemnly affirmed, etc. (Sd.) X.Y.
Before me (Sd.)......
Commissioner for Oaths."
33. A reference to the said Forms makes it clear that Rule 67 applies in cases where the company in question files application for compromise or arrangement under
section 391(1) of the Act. On the other hand, it is Rule 68 which applies in cases where the company is not the applicant filing the application for compromise or arrangement under
section 391. Rule 68 is as follows:
"Rule 68. Service on company.-
Where the company is not the applicant, a copy of the summons and of the affidavit 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 the hearing of the summons."
Therefore, when application is filed by a person other than the company, notice has to be given to the company with clear 14 days along with summons and affidavit to be served. It is seen that the notice has been given to the company on 11.7.2009 along with copies of summons and affidavit as required under Rule 68 of the Companies (Court) Rules,1959 and in fact, the said company is also represented by counsel.
34. A reference to the Scheme of Arrangement proposed by the sponsor shows that the required amount of Rs.250 crores arrived at by the company and the banks is to be augmented on the sanction of the scheme of amalgamation. Initially, an amount of Rs.150 crores is to be arranged by subscribing to the equity capital of merged entity by way of fresh issue of equity shares and the remaining amount of Rs.100 crores is to be arranged from lenders to be provided as convertible secured loans to the transferee company. Therefore, the scheme of arrangement which is sponsored by the applicant is solely dependant on the scheme of amalgamation, provided the same is approved by this Court. It is, before materialisation of such scheme of amalgamation, which is the basis for the present proposal itself, the question is as to whether there is any concrete proposal existing as on date at all to enable the creditors of the company to decide about anything. If the sponsor is arranging otherwise pumping in of such amount, the genuineness of the proposal can be presumed and in the absence of such event and also taking note of the financial ability of the applicant company that the same is not possible, it is not known as to what purpose is going to be served by placing the scheme of arrangement before the creditors of the company. It is, in this regard, relevant to note the objection by the creditors that this is one other method to postpone the application filed for winding up. Further, even prima facie, under the scheme of amalgamation, the transferee company viz., M/s.Blue Green Constructions Investments Limited is also controlled by the same Mr.R.Subramanian.
35. Rule 69 which enables the Court to hear the application is as follows:
"Rule 69. Directions at hearing of summons.-
Upon the hearing of the summons or any adjourned hearing thereof, the Judge shall, unless he thinks fit for any reason to dismiss the summons, give such directions as he may think necessary in respect of the following matters:-
(1)determining the class or classes of creditors and/or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement;
(2)fixing the time and place of such meeting or meetings;
(3)appointing a chairman or chairmen for the meeting or meetings to be held, as the case may be;
(4)fixing the quorum and the procedure to be followed at the meeting or meetings, including voting by proxy;
(5)determining the values of the creditors and/or the members, or the creditors or members of any class, as the case may be, whose meetings have to be held;
(6)notice to be given of the meeting or meetings and the advertisement of such notice;
(7)the time within which the chairman of the meeting is to report to the Court the result of the meeting; and such other matters as the Court may deem necessary.
The order made on the summons shall be in Form No.35 with such variations as may be necessary."
36. Further, the Supreme Court in Chembra Orchard Produce Ltd., & Others vs. Regional Director of Company Affairs and Another [(2009) 2 SCC 547] has held that the Court has to apply its mind before passing an order under Rule 69 of the Companies (Court) Rules. The Supreme Court has held as follows:
" A reading of the above judgement would, therefore, show that at the stage of issuance of Summons for Directions to convene a meeting, though the Company Judge has to apply its mind, prima facie, on the genuineness of the Scheme, basically the entire exercise is to verify whether the numerous conditions prescribed in Rule 69 are satisfied read with Form 33 and Form 34."
37. While dealing with such application, this Court is empowered after hearing necessary parties to dismiss the application or to give suitable directions. Even otherwise, under the inherent powers granted under Rule 9 of the Companies (Court) Rules, it is well within the jurisdiction of this Court even not to allow the meeting to be convened in cases where it is decided that convening of such meeting would serve no purpose or the proposal is not genuine. It cannot be said that in the initial stage for granting permission under
section 391(1) of the Companies Act to convene the meeting of the creditors, the Court cannot go into the merit of the proposal as the proposal has to be placed before the creditors or shareholders and it is always possible for the Court, even if the creditors or shareholders approve the proposal, not to sanction the same, if it is opposed to the company's interest or public interest. Even though the application can be moved ex parte, the Court has to satisfy itself about the justness for such a direction to convene the meeting of shareholders to approve the proposal. The order permitting convening of meeting is not an empty formality and it is a judicial power exercised on the prudent principles of law. Therefore, on the facts and circumstances of the case, when the sponsor viz., the applicant is not able to explain the independent inflow of money which is proposed to be pumped in and the entire proposal itself is subject to the scheme of amalgamation, which is yet to be confirmed by the Court, as on date, there is absolutely nothing for the creditors to consider the matter of proposal and therefore, the convening of meeting at this point of time is totally without any justification or reason. That was also the view of the Division Bench of this Court in N.A.P.Alagiri Raja's case [1987 (1) MLJ 333], where by referring to
section 391(1) of the Act, in the light of various rules, this Court has held as follows:
" 8. We are also unable to agree with the Learned Counsel for the first respondent that at the stage of filing of an application under
Section 391(1), the Court is not called upon to consider the feasibility or otherwise of the proposed scheme, or settlement, and that will have to be decided first in the meeting of the creditors or shareholders as the case may be and then only when it comes before the Court for confirmation or sanction of the arrangement under Clause (2) of
Section 391 of the Court will have to be satisfied about the reasonableness of the compromise and the public interest or the creditors interest. Rule 67 of the Companies (Court) Rules, 1959, provides that an application under
Section 391(1) for an Order convening a meeting of the creditors and/or members shall be by a Judge's summons supported by an affidavit and that a copy of the proposed compromise or arrangement shall be annexed to the affidavit as an exhibit thereto. Though the rule provides for summons to be moved ex parte, the affidavit is required to be in Form No.34. The form requires that the affidavit should set out in separate paragraphs the circumstances that have necessitated the proposed compromise or arrangement, the objects sought to be achieved by it, the terms of the compromise or arrangement and the effect, if any, of the compromise or arrangement on the material interest of the directors, managing director or of the debenture-holders, its effect on the material interest of the trustees of the debenture trust deed and that a copy of the proposed compromise or arrangement should be marked as an exhibit and annexed to the affidavit. Rule 68 further provided that where the company is not the applicant, a copy of the summons and of the affidavit 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 the hearing of the summons. These provisions clearly show that if the company or the liquidator are the applicant for an Order under
Section 391(1), the summons can be moved ex parte. However, the facts required to be set out in Form No.34 will have to be clearly stated. But if the application is by a person other than a liquidator or a company, then notice will have to be served on the liquidator or the company and no question of the summons being moved ex parte could arise. Even in such cases the facts will have to be disclosed in the affidavit as stated above. These detailed facts are required to be stated and notice has to be served on the Company or liquidator as stated above only for the purpose of enabling the Court to decide whether there are any bona fides in the application, whether the compromise is prima facie feasible and whether it is necessary to convene a meeting of the creditors or shareholders or members of the company. The Court is not intended to act as a post office with no discretion or power to refuse to call for a meeting. In our opinion, even when considering an application under
Section 391(1), the Court will have to be satisfied as to the prima facie case that the compromise or arrangement is genuine, bona fide and would be in the interest of the creditors and the company. This application under
Section 391(1) cannot also be considered as inconsequential or just a formality without any effect on the liquidator or any other proceedings in relation to the Company. As may be seen from Sub-section (6) of
Section 391, the Court may be called upon at any time after an application has been made to it under this section to stay the commencement or continuation of any suit or proceeding against the company on such a terms as the Court thinks fit, until the application is finally disposed of. There is also an appeal provided under sub-section (7). This and in the light of an application filed by a shareholder is required to be served on the Company or the liquidator there can be no doubt that this application should be considered on merits and the Court will have to be satisfied about the justness for a direction to the shareholders or the creditors to meet together and consider the proposal. It may also be noticed that at the stage of sanctioning of the compromise or arrangement after the meeting of creditors, different considerations arise and different conditions as provided in sub-section(2) will have to be satisfied. The Court will not only have to be satisfied that the meeting was attended by a majority in number of representating threes-fourth value of the creditors or class of creditors or members or class of members as the case may be and they have agreed to the compromise of the proposal, but will also have to be satisfied that all the material facts relating to the company, such as the latest financial position of the Company, latest audited report of the Company, a pendency of any investigating proceedings in relation to the company under
Sections 235 to
251 and the like are placed before the Court. There can be no doubt, therefore, that an order under
Section 391(1) has to be made only after the Court considers the feasibility or otherwise of the proposed scheme or settlement and the bona fides of the applicant and the application.'
38. When a similar contention was raised that the proposed scheme has to be sent to the creditors for ascertaining their reaction and then, the Court should scrutinise the same, the Bombay High Court in Sakamari Steel & Alloys Ltd., In re. [1979 (51) Com.Cas.266] held that even though under Rule 69, an ex parte direction can be given, but the same must be after the Court being prima facie satisfied on the merit of the application. The Bombay High Court further held that even after 3/4th majority have given willingness for a scheme or proposal, the same can be refused to be sanctioned. It was held that if the Court can refuse to grant sanction even after the majority of members have approved the proposal, such power is available to refuse to convene the meeting. It was also held that
section 391(1) is not a sign post but a check post where the Court has a duty to examine the scheme itself and there is no question of casual or mechanical approach in giving direction for convening the meeting under
section 391(1) of the Act. R.L.Aggarwal,J. after clearly analysing the entire rules, held as follows:
' Mr.Khambatta has made a point that the proposed scheme be sent to the creditors for ascertaining their reaction and when the proposed scheme is returned by them with or without modification, then the Court should scrutinise the same. But this is one aspect of the matter. If I were to accept Mr.Khambatts's submission, it would mean that at the stage of giving directions to convene a meeting, the Court's function is merely to grant the prayers on the Judge's summons for directions without taking any trouble to look into the application, except to make sure that there is a Company, it has a class of creditors and they were not paid and the Company desires to wipe of its liability to the offering to pay a certain sum, in a certain manner and over a number of years. In other words, the Court's function would amount to just bringing the Company and a class of its creditors or members together by ordering a meeting between them. It is true that r.67 says that an application for such directions is to be made ex parte. But hearing a motion ex parte, does not mean that the Court has not, to apply its mind or be prima facie satisfied about the merits of the application. The language of
Section 391(1) is manifestly clear about the discretion resting with the court is granting an application. Surely, the court will not pass an order unless it is satisfied that it is a fit case to do so. Rule 69 is equally clear and points out that directions are to be given unless he (the Judge) thinks fit for any reason to dismiss the summons (for directions). Thus, on the basis of the Act and Rules made thereunder, it is not compulsory for the Court to give directions to convene a meeting contemplated under
Section 391(1). The summons can be dismissed at this stage. The question of the duty of the Court to scrutinise a scheme after it has met the approval of the creditors and the circumstance to be considered in approving a scheme has been the subject-matter of many cases. (See (i) In re Alabama, New Orleans, Texas and Pacific Junction Railway Co. [189] 1 Ch D 213 (CA), (ii) Poineer Dyeing House Ltd. v. Dr.Shankar Vishnu Marathe [1967] 37 Comp Cas 546 (Bom), (iii) In re Kril Standard Products P.Ltd. [1976] 46 Comp Cas 203 (Guj); and (iv) Bank of Baroda Ltd., v. Mahendra Ugine Steel Co.Ltd. [1976 (46) Comp Cas 227(Guj). The willingness on the part of a majority in number representating three-fourths in value does not affect the jurisdiction of the Court to refuse sanction. It is not compulsory upon the Court to grant sanction simply because three-fourths in value has accepted the scheme. The Court has still to consider the circumstance before giving its approval, though the fact that three-fourths value have agreed to accept the scheme would be a strong circumstance in favour of sanctioning the scheme by the Court. The scope of enquiry by the Court cannot be laid down by rigid principles or formula or on the basis of judicial decisions. The circumstance to be taken into account would vary from case to case. Some of the outstanding circumstance are:
(a) the proposal for the scheme was made in good faith,
(b) the scheme is fair and reasonable,
(c) the scheme will yield to a smooth and satisfactory working,
(d) the scheme does not offend public or commercial morality,
(e) the scheme is not detrimental to interests of the creditors or members or public interests;
(f) the scheme does not violate the Companies (Acceptance of Deposits) Rules,1975, or nullifies the protection afforded under these Rules.
Thus the trend of the judicial decisions shows that the court must examine the scheme on its own merits and is not bound to treat the scheme as a fait accompli. In doing so, the court would not be substituting its judgement for the commercial judgement, as it is often argued.
I confess that I had left the route of the present case marked under s.391(1), and gone a stage ahead under s.391(2). I have done this to demonstrate that if the court has jurisdiction to refuse to sanction a scheme approved by the company and the creditors concerned, it would have also jurisdiction to refuse to give directions to convene a meeting if the circumstances of the case so demand.
Section 391(1) is not a sign-post but a check-post whereas it is the duty of the court to examine the scheme for itself. The obligation is greater because such application is ex parte and it is not practical to give notice to the numerous creditors or members of a company. A mere casual look is not enough. I think that a studied slowness and caution on the part of the Court is necessary. Various factors can be examined at the threshold, for example, (i) whether the company is qualified to sponsor a scheme, that is, if it is liable to be wound up as defined in s.390(a), (ii) the motive of the company or creditors in sponsoring a scheme, (iii) whether the company is really intending to save itself from liquidation or it wants to eat up a part or whole of the principal amount or interest of a particular class of its creditors, (iv) whether all creditors who are similar in that class are covered under the proposed scheme. Persons whose rights are not so dissimilar should be covered by the same Scheme, as otherwise it would be impossible for them to consult together and protect their common interest. The preferential creditors must receive preference unless they agree to bear with the company and postpone their demand and recovery, otherwise they can always hinder the execution of the scheme. Very often a company comes out with a draft scheme when faced with a large number of winding-up petitions. In order to buy peace with such class of creditors alone, a draft scheme is sponsored to cover them leaving out the other class or classes of creditors. A straight forward scheme would take care of all classes of creditors. (v) Whether the company is ready with the statutory information under the proviso to s.391(2) and s.393(1)(a). Experience shows that companies are not ready with such statutory information. This delays the matters, while the benefit of s.391(6) continues. (vi) Whether the proposed scheme is contrary to the companies (Acceptance of Deposits) Rules, 1975. (vii) Whether the company has made any firm commitment to arrange for payment of instalments or there are reasonable prospects of the company making profits to honour the instalments, otherwise the scheme is bound to fissile.
39. It is well settled that the mind and will of the company are to be construed from the mind and will of the person who has controlled it. The doctrine in the form of alter ego doctrine has been explained by the English Court in El Ajou v Dollar Land Holdings plc and another [1994 (1) BCLC 464], by Lord Justice Nourse LJ. as follows:
Directing mind and will This doctrine, sometimes known as the later ego doctrine, has been developed, with no divergence of approach, in both criminal and civil jurisdictions, the authorities in each being cited indifferently in the other. A company having no mind or will of its own, the need for it arises because the criminal law often requires means rea as a constituent of the crime, and the civil law intention or knowledge as an ingredient of the cause of action or defence. In the oft-quoted words of Viscount Haldane LC in Lennard's Carrying Co Ltd v Asiatic Petroleum [1915] AC 705 to 713:
' My Lords, a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.' The doctrine attributes to the company the mind and will of the natural person or persons who manage and control its actions. At that point, in the words of Millett J ([1993] BCLC 735 to 760):
'Their minds are its mind; their intention its intention; their knowledge its knowledge.' It is important to emphasise that management and control is not something to be considered generally or in the round. It is necessary to identify the natural person or persons having management and control in relation to the act or omission in point. This was well put by Eveleigh J in delivering the judgment of the Criminal Division of this court in R v Andrews Weatherfoil Ltd [1972] I All ER 65 at 70, [1972] I WLR 118 at 125:
'It is necessary to establish whether the natural person or persons in question have the status and authority which in law makes their acts in the matter under consideration the acts of the company so that the natural person is to be treated as the company itself.' Decided cases show that, in regard to the requisite status and authority, the formal position, as regulated by the company's articles of association, service contracts and so forth, though highly relevant, may not be decisive. Here Millett J adopted a pragmatic approach. In my view he was right to do so, although it has led me, with diffidence, to a conclusion different from his own.
40. In a subsequent judgment in Meridian Global Funds Management Asia Ltd. vs. Securities Commission [1995(2) BCLC 116], Lord Hoffmann by explaining the mind and will attributable to the natural persons who are in control of the company beyond the corporate personality, has held as follows:
The phrase 'directing mind and will' comes of course from the celebrated speech of Viscount Haldane LC in Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 at 713, [1914-15] All ER Rep 280 at 283. But their Lordships think that there has been some misunderstanding of the true principle upon which that case was decided. It may be helpful to start by stating the nature of the problem in a case like this and then come back to Lennard's case later.
Any proposition about a company necessarily involves a reference to a set of rules. A company exists because there is a rule (usually in a statute) which says that a persona ficta shall be deemed to exist and to have certain of the powers, rights and duties of a natural person. But there would be little sense in deeming such a person ficta to exist unless there were also rules to tell one what acts were to count as acts of the company. It is therefore a necessary part of corporate personality that there should be rules by which acts are attributed to the company. These may be called 'the rules of attribution'.
The company's primary rules of attribution will generally be found in its constitution, typically the articles of association, and will say things such as 'for the purpose of appointing members of the board, a majority vote of the shareholders shall be a decision of the company' or 'the decisions of the board in managing the company's business shall be the decisions of the board in managing the company's business shall be the decisions of the company'. There are also primary rules of attribution which are not expressly stated in the articles but implied by company law, such as 'the unanimous decision of all the shareholders in a solvent company about anything which the company under its memorandum of association has power to do shall be the decision of the company': see Multinational Gas and Petrochemical Co v. Multinational Gas and Petrochemical Services Ltd., [1983] BCLC 461, [1983] Ch 258.
These primary rules of attribution are obviously not enough to enable a company to go out into the world and do business. Not every act on behalf of the company could be expected to be the subject of a resolution of the board or a unanimous decision of the shareholders. The company therefore builds upon the primary rules of attribution by using general rules of attribution which are equally available to natural persons, namely, the principles of agency. It will appoint servants and agents whose acts, by a combination of the general principles of agency and the company's primary rules of attribution, count as the acts of the company. And having done so, it will also make itself subject to the general rules by which liability for the acts of others can be attributed to natural persons, such as estoppal or ostensible authority in contract and vicarious liability in tort.
41. While referring to the celebrated judgment of the House of Lords in Salomon v. Salomon & Co. Ltd., and its exceptions and the importance of corporate personality and also the circumstances wherein lifting of corporate veil is permitted, the Supreme Court in Singer India Ltd., vs. Chander Mohan Chadha and Others [2004 (7) SCC 1] has held as follows:
15. The question of lifting the corporate veil was examined by a Constitution Bench in Tata Engg. And Locomotive Co. Ltd. v. State of Bihar (AIR 1965 SC 40). The Court observed that the doctrine of lifting of the veil postulates the existence of dualism between the corporation or company on the one hand and its members or shareholders on the other. After review of a number of authorities and standard books, the parameters where the said doctrine could be applied were indicated in consonance with the principles indicated in the preceding paragraph. In Delhi Development Authority v. Skipper Construction Co. (P) Ltd. (1996) 4 SCC 622. Mr.Justice B.P.Jeevan Reddy has examined the question in considerable detail and it will be useful to reproduce the relevant paragraph of the judgement which is as under (SCC pp.637-38, para 24) Lifting the corporate veil
24. In Salomon v. Salomon & Co. Ltd. (1897 AC 22) the House of Lords had observed, the company is at law a different person altogether from the subscribers ...; and though it may be that after incorporation the business is precisely the same as it was before, the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by that Act.' Since then, however, the courts have come to recognise several exceptions to the said rule. While it is not necessary to refer to all of them, the one relevant to us is 'when the corporate personality is being blatantly used as a cloak for fraud or improper conduct'. [Gower:Modern Company Law - 4th Edn. (1979) at p.137.] Pennington (Company Law - 5th Edn., 1985 at p.53) also states that 'where the protection of public interests is of paramount importance or where the company has been formed to evade obligations imposed by the law', the court will disregard the corporate veil. It was held that, broadly, where a fraud is intended to be prevented, or trading with the enemy is sought to be defeated, the veil of corporation is lifted by judicial decisions and the shareholders are held to be persons who actually work for the corporation. The main principle on which such a course of action can be taken was stated in paragraph 28 of the Report and the relevant part thereof is being reproduced below: (SCC p.639) 28. The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned.
16. However, it has nowhere been held that such a course of action is open to the company itself. It is not open to the company to ask for unveiling its own cloak and examine as to who are the directors and shareholders and who are in reality controlling the affairs of the company. This is not the case of the appellant nor could it possibly be that the corporate character is employed for the purpose of committing illegality or defrauding others. It is not open to the appellant to contend that for the purpose of FERA, the American Company has effaced itself and has ceased to exist but for the purpose of the Delhi Rent Control Act, it is still in existence. Therefore, it is not possible to hold that it is the American Company which is still in existence and is in possession of the premise in question. On the contract, the inescapable conclusion is that it is the Indian company which is in occupation and is carrying on business in the premises in question rendering the appellant liable for eviction.
42. Even before the above said judgment, in New Horizons Ltd. vs. Union of India [1997 (89) Com. Cas. 849] the Supreme Court, after elaborately discussing the judgment of House of Lords in Salomon vs. Salomon and Co. Ltd. [1897 AC 22] and the concept of lifting of corporate veil and also referring to four different attitudes in lifting of corporate veil based on judicial pronouncements as found by a learned scholar, has narrated the principles crisply as follows:
After making a special study of this branch of the law, a learned scholar has discerned four different attitudes towards the company in judicial pronouncements. According to him, this categories, in progressive order, are (i) peeping behind the veil; (ii) penetrating the veil; (iii) extending the veil; and (iv) ignoring the veil. The decisions relating to determination of residence or enemy status of a company have been placed by him in the category of peeping behind the veil where the court peeps behind the veil and concludes from the shareholders or from the people in control of the company, something about the nature of the company (See S.Ottolenghi From Peeping Behind the Corporate Veil to Ignoring it Completely [1990] 53 Mod L Rev 338, 340.
This court has adopted a similar approach and in some cases it has seen through the corporate veil. ...
43. Therefore, lifting of corporate veil which is a well known principle of exemption to the corporate personality is not uncommon to decide about the actual conduct of the persons with intention. Applying the same to the facts of the present case and taking note of the fact that Mr.R.Subramanian, who has been the Managing Director of the company is also having control over the transferee company under the Scheme of Amalgamation and he is the person who is responsible for the disastrous consequences to the company, it can be held without any fear of contradiction that the present proposal by the Sponsor prima facie does not show any feasible solution by convening meeting of creditors and I am satisfied that it is not just and proper for this Court to give direction to the creditors to consider the proposal which lacks the basic propriety and genuineness of a Scheme as a whole. In such view of the matter and looking into any angle, I am of the considered view that the applications are not to be entertained in the interest of the company, especially when the Scheme of Amalgamation is still pending before this Court and the parties are not willing to argue the same unless and until these applications are disposed of. Accordingly, the applications stand dismissed.
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