Re Reliance National Asia Re Pte Ltd

• Judge: Judith Prakash J
• Judgment Date: 30 November 2007
• Neutral Citation: [2007] SGHC 206
• Citation: [2007] SGHC 206
• Defendant Counsel: Ashok Kumar and Margaret Ling (Allen & Gledhill LLP)
• Published date: 10 December 2007
• Plaintiff Counsel: Palaniappan S (Straits Law Practice LLC)
• Date: 30 November 2007
• Docket Number: Originating Summons No 986 of 2006 (Summons No 3905 of 2007)
• Court: High Court (Singapore)
• Subject Matter: Schemes of arrangement,Application by creditor for extension of time to file proof of debt under approved scheme,Nature,Section 210 Companies Act (Cap 50, 2006 Rev Ed),Companies,Whether scheme operating as order of court or as statutory contract,Whether court having jurisdiction to extend time

30 November 2007

Judith Prakash J

1 The Oriental Insurance Co Ltd (“Oriental”) is a state owned insurance company incorporated in India. It is a creditor of Reliance National Asia Re Pte Ltd (“Reliance”), a company incorporated in Singapore. Oriental’s claim, as a creditor, was for a sum of US$19,031,656. In these proceedings, Oriental applied for a three week extension of time to submit its Proof of Debt pursuant to the Scheme of Compromise and Arrangement entered into between Reliance and its creditors.

2 The sole issue to be decided was whether the court has the jurisdiction to extend the time period for a creditor to file its proof of debt after the court has granted its approval for a scheme of arrangement under s 210 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”). At the conclusion of the hearing, I decided that the answer to the question posed was in the negative and, accordingly, dismissed the application. I now give my reasons for doing so.

Facts

3 Reliance was incorporated in July 1996 and was in the business of undertaking general reinsurance. From 2000, however, it had financial difficulties and, as a result, it was no longer feasible for Reliance to continue business. After 2000, existing contracts were not renewed for subsequent years and Reliance ceased writing business altogether. Its management decided that the best option for Reliance would be to enter into a voluntary run-off. This was put in place in April 2001. During the process of run-off, reconciliations were performed for outstanding balances and this led to the collection of outstanding premiums and settlement of claims.

4 Nevertheless, because the costs of run-off constituted a significant expenditure and the run-off was not expected to be completed for many years, Reliance decided that the most efficient and effective method of making full payment to its creditors in the shortest time would be to put into effect a solvent scheme of arrangement under s 210 of the Act (the “Scheme”). The Scheme would have the effect of concluding the run-off of Reliance’s business earlier than would be the case if it were to continue until all claims had materialised and had been agreed and paid in the normal course.

5 On 18 November 2005, Reliance sent a letter to all its creditors (“the Scheme Creditors”), including Oriental, informing them about the Scheme. This letter was sent to Oriental’s general address at A-25/27, Asaf Ali Road, New Delhi 110002, India (“general address”).

6 On 19 May 2006, Reliance applied to the High Court for permission to convene the creditors’ meeting as required under s 210 of the Act.

7 By an Order of Court dated 2 June 2006, a meeting of the Scheme Creditors was ordered to be convened for the purposes of considering whether the Scheme should be approved (“the Court Meeting”). On 16 June 2006, Reliance sent the Notice of Meeting (“the Notice”), the Explanatory Statement of the Scheme, and the Scheme to Oriental at its general address. The Proxy Form, Voting Form and specimen Proof of Debt form were also bound together with the documents. It was not disputed that Oriental received these documents.

8 The Notice stated that the High Court had directed there to be a meeting of the Scheme Creditors on 26 September 2006. Paragraph 2.1.1 of the Explanatory Statement defines a Scheme Creditor as “a person who is or claims to be a creditor of the Company”. It was accepted that Oriental is a Scheme Creditor under the Scheme.

9 The binding effect of a scheme of arrangement that was sanctioned by the court was explained at page 4 of the Explanatory Statement as follows:

Under the Act, the Scheme will become binding and effective when it is approved by the necessary majority of the Scheme Creditors at the Court Meeting convened by the court, sanctioned by the Court and an office copy of the Approval Order is lodged with the Registrar of Companies in Singapore.

Importantly, paragraph 2.2.1 of the Explanatory Statement sets out when and how payments under the Scheme were to be effected:

2.2.1 Payment under the Scheme

(a) The Company shall pay or procure to be paid to each Scheme Creditor, who has delivered a Proof of Debt to the Scheme Manager at the Specified Address on or before 14 May 2007, an amount in the Reference Currency equal to their Approved Scheme Claim. Payment to the Scheme Creditors in respect of their Approved Scheme Claims shall only be made by the Company after all Scheme Claims have been determined by the Scheme Manager and all Disputed Claims have been adjudicated by the Independent Adjudicator…

(b) In the event that any Scheme Creditors fails to submit a Proof of Debt to the Scheme Manager at the Specified Address by the Claims Cut-Off date, that Scheme Creditor shall not be entitled to any payment of his Scheme Claim with effect from the Claims Cut-Off Date, and:

(i) the Company shall be completely, and absolutely released and discharged from all claims, obligations and liabilities (whether actual, contingent or otherwise) and indebtedness (whether as principal debtor or surety) of the Company to that Scheme Creditor whatsoever and howsoever raising out of or in connection with any and all agreements, transactions, dealings and matters effected or entered into or occurring at any time prior to the Court Meeting Date (including but not limited to the Scheme Claims of such Scheme Creditor);

(ii) that Scheme Creditor shall, if called upon so to do, execute and deliver to the Company such forms of release and discharge thereof on such terms as the Company may reasonably require; and

(iii) that Scheme Creditor shall forthwith, and in any event at the request of the Company discontinue and terminate, without any order as to costs, any and all legal proceedings commenced by it against the Company in any jurisdiction for or in this connection.

[emphasis added]

Thus, in order to receive payment under the Scheme, all Scheme Creditors had to file their Proofs of Debt on or before the Claims Cut-off date, ie 14 May 2007.

10 Paragraph 3.3.2 of the Explanatory Statement also explained the effect of lodging a Proof of Debt form after the Claims Cut-Off date:

3.3.2 Lodgement After Claims Cut-Off Date

Any Proofs of Debt received by the Scheme Manager after the Claims Cut-Off Date shall not be admitted by the Scheme Manager for the purpose of the Scheme.

If any Scheme Creditor fails to submit their Proof of Debt by the Claims Cut-Off Date, that Scheme Creditor’s Scheme Claim shall be valued at zero.

[emphasis added]

Similarly, clause 3.2 of the Scheme provides:

3.2 The value of all Scheme Claims of any Scheme Creditor who fails to submit a Proof of Debt on or before the Claims Cut-Off Date shall be deemed to be zero. For the avoidance of doubt, and as an independent stipulation, in such a situation, the relevant Scheme Creditor shall be bound by the terms of the Scheme.

11 On 15 September 2006, Oriental sent the completed Voting Form and Proxy Form to Reliance, and requested Reliance to attend the Court Meeting on Oriental’s behalf. Oriental voted in favour of the Scheme and appointed the Chairman of the Court Meeting as its proxy.

12 On 26 September 2006, the Court Meeting was held. A majority in number and a majority of three fourths in value of the Scheme Creditors, voting in person or by proxy, voted in favour of the Scheme. Reliance applied to the High Court on17 October 2006 for the Scheme to be sanctioned.

13 On 18 October 2006, Reliance sent a letter to Oriental at its general address and addressed the letter to Mr S L Mohan (“Mr Mohan”), who was known to Reliance as a senior executive of Oriental. The letter notified Oriental that Reliance had applied to the High Court for the Scheme to be sanctioned. A copy of the Notice of Hearing, which stated that the matter was to be heard on 7 November 2006 at 10.00 a.m., was enclosed with the letter.

14 On 7 November 2006, the High Court sanctioned the Scheme. On 14 November 2006, Reliance wrote to Oriental and informed Oriental of the same. The letter was sent to Oriental’s general address and was addressed to Mr Mohan. The letter then continued:

Accordingly, the Scheme is now effective and applies to all Scheme Creditors regardless of whether and how they voted at the Court Meeting. Steps will now be taken to implement the terms of the Scheme.

You should note that, under the terms of the Scheme, all Scheme Creditors will have to file their Proofs of Debt to the Scheme Managers, namely Whittington Asia Pacific Pte Ltd at the Specified Address (i.e. 1 George Street, #16-03 One George Street, Singapore 049145) by the Claims Cut-Off Date, ie. by 14 May 2007. A copy of the Proof of Debt form is enclosed for your necessary action.

[emphasis in original]

A Proof of Debt Form was enclosed with the letter. Under the heading “INSTRUCTIONS FOR COMPLETION OF THE PROOF OF DEBT FORM”, it was stated as follows:

The deadline for submitting completed Proof of Debt Forms is the Claims Cut-Off Date, being 12.00 midnight Singapore time on 14 May 2007 the Claims Cut-Off Date. Returned Proof of Debt Forms must reach the Scheme Manager on or before this date. If a Scheme Creditor does not complete and return a Proof of Debt Form to the Scheme Manager by the Claims Cut-Off Date, that Scheme Creditor’s Scheme Claims shall be deemed to be zero.

[all emphasis in original]

15 Oriental alleged that it did not receive both the letters of 18 October 2006 and 14 November 2006. Its position was that the letters: (a) had not been sent to the address provided in the Voting Form and Proxy Form; and (b) were addressed to Mr Mohan, who had retired from the Company in February 2005. Oriental also pointed out that as it had a very large work force of some 16,000 employees and 1,000 offices all over India, letters that were not addressed to the correct individuals might go missing.

16 After November 2006, Reliance sent six e-mail reminders to Oriental to remind the latter to submit its...