invested with very wide powers to approve or sanction any scheme of amalgamation, arrangement, compromise or reconstruction. The court has power to sanction all matters, which for their effectuation require a special procedure to be followed under the Companies Act. The only exception to this is the special procedure to be followed under section 101 for reduction of capital since rule 85 of the Companies (Court) Rules, 1959, specifically enjoins the following of a special procedure prescribed for reduction of share capital. In Maneckchowk and Ahmedabad Manufacturing Co. Ltd., In re [1970] 40 Comp Cas 819 (Guj), D. A. Desai J. held that section 391 of the Companies Act is a complete code. However, in view of rule 85 of the Companies (Court) Rules, 1959, whenever a scheme of arrangement proposed under section 391 involves a reduction in the share capital of the company, the procedure prescribed under sections 100 to 102 of the Companies Act and the Rules relating to the reduction of the capital shall have to be complied with. He went on to hold that reduction of capital can be sanctioned as part of a scheme of compromise and arrangement by a common order under section 391 subject to the requirements of sections 100 to 102 being complied with. The decision in Maneckchowk and Ahmedabad Manufacturing Co. Ltd.'s case [1970] 40 Comp Cas 819 (Guj) was followed by this court in Vasant Investment Corporation Ltd. v. Official Liquidator, Colaba Land and Mill Co. Ltd. [1981] 51 Comp Cas 20 and PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289. The Bombay high Court in Securities and Exchange Board of India v Sterlite Industries Limited {2003-(113)-Comp Cas- 0273 – Bom} held that the opening words of section 77A viz., "Notwithstanding anything contained in this Act, but subject to the provisions of sub-section (2) of this section and section 77B, a company may purchase its own shares or other specified securities ..." shows that section 77A is a facilitating provision which enables companies to buy back their shares without having to approach the court under section 391 and sections 100 to 104 subject to compliance with the provisions of sub-sections (2), (3) and (4). Prior to the introduction of section 77A, the only manner in which a company could buy back its shares was by following the procedure set out under sections 100 to 104 and section 391 which required the calling of separate meetings of each class of shareholders and creditors as well as (if required by the court) the drawing up of a list of creditors of the company and obtaining of their consent to the scheme for reduction. The legislative intention behind the introduction of section 77A is to provide an alternative method by which a company may buy back up to 25 per cent. of its total paid up equity capital in any financial year subject to compliance with sub-sections (2), (3) and (4). It does not supplant or take away any part of the pre-existing jurisdiction of the company court to sanction a scheme for such reduction under sections 100 to 104 and section 391. The non obstante clause in section 77A namely "notwithstanding anything contained in this Act ..." only means that notwithstanding the provisions of section 77 and sections 100 to 104, the company can buy back its shares subject to compliance with the conditions mentioned in that section without approaching the court under sections 100 to 104 or section 391. There is nothing in the provision of section 77A to indicate that the jurisdiction of the court under section 391 or 394 has been taken away or substituted. It is well settled that the exclusion of the jurisdiction of the court should not readily be inferred; such exclusion should be explicitly or clearly implied. There is nothing in the language of section 77 that gives rise to such an inference. We are, therefore, inclined to hold that section 77A is merely an enabling provision and the court's powers under sections 100 to 104 and section 391 are not in any way affected. The conditions provided in section 77A are applicable only to buy-back of shares under section 77A. The conditions applicable to sections 100 to 104 and section 391 cannot be imported into or made applicable to a buy-back under section 77A. Similarly the conditions for a buy-back under section 77A cannot be applied to a scheme under sections 100 to 104 and section 391. The two operate in independent fields. A similar view was taken by AP High Court in TCI Industries Limited (2004) 60 CLA 382 (AP) The Companies (Amendment) Bill,2003 inserted a new clause In section 391 of the principal Act, after sub-section (6), the following sub-section shall be inserted, namely: (7) Notwithstanding anything contained in this section, the compromise or arrangement under this section shall not include buy back of securities other than under section 77A The Bill was withdrawn and referred back to the department to rectify anomalies but it did reflect the intent of the framers of the bill to rectify this flaw. With utmost humility and due respect I beg to differ with the views expressed by honourable high courts as the examination of the aforesaid relevant provisions of the Act clearly reflect the intention of the legislature. It has to be admitted that the provisions of the Act as are drafted in section 77A, 77AA and 77B read with the guidelines/rules framed by SEBI /DCA give a very comprehensive and elaborate procedure for buying back the shares by a Company. The two modes prescribed under section 391 and 77A will be in direct conflict where for example a listed company although complying with the requirements of a majority vote and approval of the court in terms of section 391(2) of the Act fails to comply with the SEBI guidelines and requirements of section 77A. The non-obstante clause shall lose its shine if a similar act can be performed through a scheme of arrangement. Section 55A of the companies Act empowers SEBI to regulate the provisions of section 77A in case of listed and those public companies, which intend to get their securities listed. The legislature having conferred powers on the regulator to administer provisions relating to buy back. Will it be treated as compliance if a company circumvents the regulations and section 77A by filing a scheme of arrangement to buy back the shares? A company can of course by complying with the regulations and the requirement of section 77A and 77B have the scheme approved under section 391 of the Act.
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