Introduction: The article delves into the intriguing question of whether, by applying the principle of casus omissus, an Indian LLP under the Limited Liability Partnership Act, 2008, can be permitted to merge into an Indian Company under the Companies Act, 2013.
A Joint company petition (CP No.123/CAA/2018) under Section 230 to 232 of the Companies Act, 2013 (in brief Act 2013) read with Companies (Compromises, Arrangements and Amalgamation) Rules 2016 and National Company Law Tribunal Rules, 2016 was moved before NCLT, Chennai. Transferor LLP is proposed to be amalgamated and vested with transferee company. The NCLT after considering the scheme found that all the statutory compliances have been made under Section 230 to 232 of the Companies Act, 2013. NCLT further found that as per Section 394(4)(b) of Companies Act, 1956 (in brief Act 1956) LLP can be merged into company but there is no such provision in the Act, 2013. However, explanation of sub section (2) of Section 234 Act 2013 permits a foreign LLP to merge with an Indian Company, then it would be wrong to presume that the Act, 2013 prohibits of a merger of an Indian LLP with an Indian company. Thus there does not appear any express legal bar to allow merger of an Indian LLP with an Indian company. Therefore, NCLT applying the principal of Casus Omissus, by the impugned order allowed the amalgamation of Transferor LLP with transferee company.
Later on the Regional Director has challenged such order of NCTL dated 11.06.2018 before the Hon’ble NCLAT, New Delhi in Company Appeal 352 of 2018 as Regional Director, Southern Region, … vs Real Image LLP, Chennai & Anr. (order dated 4 December, 2019).
The Hon’ble NCLAT stated that it is apparent that as per Section 232 of Act, 2013 a company or companies can be merged or amalgamated into another company or companies. The Act, 2013 has taken care of merger of LLP into company. In this regard Section 366 of the Act, 2013 provides that for the purpose of Part I of Chapter XXI the word company includes any partnership firm, limited liability partnership, cooperative society, society or any other business entity which can apply for registration under this part. It means that under this part LLP will be treated as company and it can apply for registration and once the LLP is registered as company then the company can be merged in another company as per Section 232 of the Act, 2013.
Section 55 to Section 57 of Chapter X of LLP Act, 2008 provides conversion from firms, private company and unlisted public company into limited liability partnership. In such a situation it is implicitly clear that the legislature has enacted provisions in Act, 2013 for conversion from the Indian LLP into Indian company and LLP Act 2008 provides conversion from Firm, Private company and unlisted public company into LLP.
Sub Section (4)(b) of Section 394 Act 1956 read as under:-
“transferee company” does not include any company other than a company within the meaning of this Act, but transferor company includes anybody corporate, whether a company within the meaning of this Act or not.
Sub Section (2) of Section 234 of Act 2013 reads as under:-
“(2) Subject to the provisions of any other law for the time being in force, a foreign company may with the prior approval of the Reserve Bank of India, merge into a company registered under the Act or vice versa and the terms and conditions of the scheme of merger may provide, among other things, for the payment of consideration to the shareholders of the merging company in cash, or in Depository Receipts, or partly in cash and partly in Depository Receipts, as the case may, as per the scheme to be drawn up for the purpose.
Explanation-For the purposes of sub-section (2), the expression “foreign company” means any company or body corporate incorporated outside India whether having a place of business in India or not.
The Hon’ble NCLAT stated that NCLT rightly held that Act 1956 provides that anybody corporate can merge into a company. However, Act 2013 provides that foreign company or body corporate incorporated outside India can be merged into an Indian company.
Hon’ble Supreme Court in the case of Union of India Vs Rajiv Kumar (2003) 6 Supreme Court Cases 516 held that subsidiary rules of interpretation-Casus Omissus when can be supplied by the Court. Para 23 and para 24 of the judgement is as under:-
“23. Two principles of construction-relating to casus omissus and the other in regard to reading the statute/statutory provision as a whole appear to be well settled. Under the first principle a casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself. But, at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the legislature. “An intention to produce an unreasonable result”, said Danckwerts, L.J. in Artemiou V. Procopiou (All ER p. 544 I), “is not to be imputed to a statute if there is some other construction available”. Where to apply words literally would “defeat the obvious intention of the legislation and produce a wholly unreasonable result” we must “do some violence to the words” and so achieve hat obvious intention and produce a rational construction. (Per Lord Reid in Luke V. IRC where AC at p.577 (All ER p. 664 I) he also observed: “This is not a new problem, though our standard of drafting is such that it rarely emerges.”)
24.It is then true that, “when the words, of a law extend not to an inconvenience rarely happening, but do to those which often happen, it is good reason not to strain the words further than they reach, by saying it is cause omissus, and that the law intended quae frequentius accident”.
“But”, on the other hand, “it is no reason, when the words of a law do enough extend to an inconvenience seldom happening, that they should not extend to it as well as it happened more frequently, because it happens but seldom”
A casus omissus ought not to be created by interpretation, save in some case of strong necessity. Where, however, a casus omissus does really occur, either through the inadvertence of the legislature, or on the principle of quod enim semel aut bis exist it practereunt legislatores, the rule is that the particular case, thus left unprovided for, must be disposed of according to the law as it existed before such statute-casus omissus er oblivion dates disposition juris communis relinquitur; “a casus omissus”, observed Buller, J. in Jones V. Smart (ER p.967), “can in no case be supplied by a court of law, for that would be to make laws”
The Hon’ble NCLAT stated that we found on reading of the provisions of Act 2013 as a whole in reference of conversion of Indian LLP into Indian company there is no ambiguity or absurdity or anomalous results which could not have been intended by the legislature. The principal of casus omissus cannot be supplied by the Court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself. As we have discussed above there is no such occasion to apply the principal of casus omissus. Thus we are unable to convince with the interpretation of NCLT.
The legislature has enacted provision in the Companies Act, 2013 for conversion of Indian LLP into Indian Company and vice versa in the Limited Liability Partnership Act, 2008. Thus there is no question infringement of any constitutional right of the Respondent. Hence we find no substance in the arguments of Learned counsel for the respondent.
Conclusion: Under section 366 of the Act, an LLP can apply to register as a company and once the LLP is registered as company then the company can be merged in another company as per Section 232 of the Act, 2013.
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