DCM FINANCIAL SERVICES LTD. Vs. NEMO

JUDGEMENT

(1.) A petition under the provisions of Section 391(2) of the Companies Act, 1956 (for short the Act) would normally have been disposed of without much ado. However, in this case, many depositors voiced their objections to the "Modified Scheme of Arrangement for Re -organization of the Share Capital of DCM Financial Services Limited and for Compromise with its Secured and Unsecured Creditors". This Scheme is hereafter called the 'modified Scheme' and the DCM Financial Services Limited is called the 'Company'.

(2.) THE modified Scheme of the Company was approved by its Board of Directors in a meeting held on 18th December, 2000. Initially, the Company was incorporated on 13th February, 1991 as Tanvi Leasing and Finance Private Limited. The name was subsequently changed to DCM Financial Services Private Limited on 28th February, 1992. Eventually, the word "Private" was dropped with effect from 22nd July, 1993. The Company is said to be a Non -Banking Financial Company (or NBFC) engaged, inter alia, in the business of hire purchase and leasing. It appears that the Company faced a liquidity crunch sometime in 1997 which resulted in a mismatch of its assets and liabilities. Several uncontrollable factors are said to have caused this crisis, but I am not really concerned with them. The consequence, however, of these factors was that the Company began to default in returning the deposits to its creditors.

(3.) TAKING all these aspects into account, the Company proposed to restructure itself. The intention was to "remain a viable entity with substantial accretion to shareholder value over time." The restructuring plan was based on the strategy of: -