2008 (8) TMI 564 - HC - Companies Law

Compromise and arrangement - Held that - Meetings of 14 members of applicant transferor company and 7 members of transferee company are dispensed with, it is further ordered that the meetings of secured creditors and unsecured creditors of the applicant transferor company for the purpose of considering and if thought fit, approving with or without modifications, the scheme of arrangement aforesaid shall be convened.

Summary

Issues:
Application under section 391 of the Companies Act, 1956 for necessary directions regarding the scheme of arrangement and meetings of creditors and members.

Detailed Analysis:
The application was filed by Balaji Industrial Products Limited (Transferor Company) and Balaji Industrial Engineering Limited (Transferee Company) under section 391 of the Companies Act, 1956. The application sought directions for the issue and publication of notices, convening meetings of secured and unsecured creditors of the Transferor Company, and dispensing with the meetings of members of both the Transferor and Transferee Companies. The proposed scheme involved the demerger of a division to the Transferee Company. The share exchange ratio was determined by the Board of Directors after considering an independent chartered accountant's report. All shareholders of the Transferor Company and members of the Transferee Company had consented to the scheme. The demerger was expected to enhance collaboration, improve operational efficiencies, and benefit shareholders, creditors, employees, and stakeholders of both companies.

The court, after hearing the counsel for the applicant companies, dispensed with the meetings of members of both companies. However, it ordered separate meetings of secured and unsecured creditors of the Transferor Company to be convened and held on specified dates. The court directed the advertisement of the meetings in newspapers and the sending of notices to creditors. The Chairman of the meetings was appointed, and the applicant Transferor Company was required to deposit an amount towards the Chairman's remuneration. Provisions for proxy voting, determination of creditors' value, quorum, and reporting of meeting results were also specified by the court.

In conclusion, the court disposed of the application with the aforementioned directions, ensuring compliance with the Companies Act, 1956, and safeguarding the interests of creditors and stakeholders involved in the demerger scheme.