2010 (3) TMI 670 - HC - Companies Law

Compromise and arrangement - Held that - If any illegality is caused by calling upon the meeting of all the creditors to which the MTM creditors might have difficulty in placing their cases, they are at liberty to raise their objection in the meeting itself as well as before the Court at the time of confirmation of the amalgamation. We are not in a position to say, in what way the Company will hold the meeting either in a meeting on a single day or in different meetings because the shareholders meeting is going to be held after a period of 15 days of holding of the meeting of the creditors, as pointed out by Mr. Sinha himself. Therefore, it can be sincere desire of the Court that when it finds the Scheme purposeful, it is inappropriate for the Company to take into account this aspect and solve the practical difficulty at the time of holding the meeting so that there should not be any grievance amongst themselves otherwise also it is open for them to raise such dispute at the time of confirmation the scheme of compromise.

Summary

Issues:
Challenge to order passed by Single Judge in company jurisdiction under sections 391 and 394 of the Companies Act, 1956 regarding amalgamation. Appellant, a Bank (MTM Creditor), objects to the direction to issue notices to all creditors without separate meetings for different categories. Legal arguments based on judgments of different High Courts and Supreme Court regarding the necessity of different meetings for different categories of creditors. Examination of the Scheme of Compromise to determine its validity and appropriateness. Interpretation of rules and provisions under the Companies Act and Companies (Court) Rules, 1959. Dispute over the procedural aspect of convening meetings for creditors and shareholders. Practical difficulties in implementing the order and suggestions for resolving them.

Analysis:
The High Court of Allahabad heard a special appeal challenging an order passed by a Single Judge in company jurisdiction under sections 391 and 394 of the Companies Act, 1956, regarding amalgamation. The appeal was filed by a Bank, a MTM Creditor, who objected to the direction of issuing notices to all creditors without separate meetings for different categories. The appellant argued that different categories of creditors should have separate meetings, citing various judgments from different High Courts and the Supreme Court to support this contention.

The Court examined the Scheme of Compromise presented in the case and found that it contained specific details regarding the debt position of the Company and other relevant financial aspects. The Court concluded that the Scheme was not deficient to the extent that it would prevent the Court from directing the Company to proceed with the compromise or amalgamation. The Court emphasized that it had thoroughly reviewed the Scheme and understood its implications before passing any orders.

Legal arguments were presented concerning the interpretation of rules and provisions under the Companies Act and Companies (Court) Rules, 1959. The Court discussed the necessity of different meetings for different categories of creditors as per the requirements of the law. The judges analyzed the practical difficulties that could arise in convening meetings for creditors and shareholders and suggested that any objections could be raised during the meetings or at the time of confirmation of the amalgamation.

Ultimately, the Court disposed of the special appeal without imposing any costs. The judges agreed on the order, and leave was granted to obtain an extract of the operative part of the order before the scheduled meeting. The judgment highlighted the importance of following legal procedures and ensuring fairness and reasonableness in schemes of compromise or arrangement under the Companies Act.