A petition under section 14(1) of Companies Act can only be entertained after expiry of three months from the date of passing of Special Resolution

The National Company Law Appellate Tribunal, New Delhi in the case of M/s. Medeor Hospitals Limited (formerly known as Rockland Hospital Ltd) vs Registrar of Companies, Delhi (Company Appeal (AT) No. 394 of 2018) on 29.01.2020 opined that the conditions laid down in Section 101 of Companies Act, 2013 and Rule no. 68(1) of NCLT Rules 2016 are mandatory for filing a petition for conversion of Public Company to a Private Company.

Facts :
Appellant company was incorporated in 2004 and is wholly owned by subsidiary company i.e. M/s VPS Healthcare Pvt. Ltd. (holding almost 100% issued share capital), 7 other shareholders are holding one share each on behalf of M/s. VPS (it does not raise any funds from the public).
The Board of Directors on 14.08.2017 decided to convert the company from Public to Private Ltd. company and on the same day by holding an Extra Ordinary General Meeting (EOGM) passed the special resolution regarding the same. The shareholders had given their written consent for holding EOGM at short notice and decided the conversion of company from public to private ltd. company.

The company further sent intimation to Registrar of Companies on 25.08.2017 and filed petition u/s 14(1) of Companies Act before NCLT, Delhi on 30.10.2017. However, it was withdrawn on 06.12.2017 when NCLT indicated that the petition for conversion can be filed only after expiry of three months from the date of passing of special resolution. Thereafter, the petition was filed again on 19.12.2017. In 2018, the objectors filed objections before Arbitral Tribunal, due to which petition of the appellant company got rejected by the NCLT. Hence, the petition is before the present court.

Issue: Whether the conversion of appellant company from public company to private company was proper?

Ratio:
The tribunal on the issue of limitation, held that the Rule 68(1) of NCLT Rules 2016 which provides a petition to be filed only after expiry of three months from the date of special resolution is well within limitation.
And further observed that the EOGM was also held within the ambit of Section 101 of the Companies Act which talks about “Notice of Meeting” as all the shareholders have given their written consent for calling EOGM after giving short notice. Thus, the appellant company had fulfilled the conditions for conversion and shortcomings pointed out by the NCLT. Therefore, the order of NCLT was set aside and the special resolution dated 14.08.2017 passed by the board of directors for conversion of appellant company from public company to private company was approved.