2014 (4) TMI 1185 - HC - Companies Law

Scheme of Amalgamation - requirement of convening the meetings - Held that - In view of the written consents/NOC obtained and averments made in the Application, the requirement of convening meetings of Equity Shareholders and Un-secured Creditors of the Applicant Transferor Company and Equity Shareholders and Preference Shareholders of the Transferee Company is dispensed with. The Applicant Transferor Company does not have any Secured Creditors. In the present case, the Transferor Company is a wholly owned subsidiary of the Transferee Company. No new shares are proposed to be issued on amalgamation. The Transferor and Transferee Companies are not proposing any arrangement with shareholders and creditors. The present Scheme of Amalgamation will not affect rights of shareholders and creditors of the Transferor and Transferee Companies. In view of the above, the requirement of convening the meetings of the Secured and Un-secured Creditors of the Transferee Company is also dispensed with.

Summary

Issues:
1. Application under sections 391 & 394 of the Companies Act, 1956 for the Scheme of Amalgamation.
2. Dispensation of the requirement of convening meetings of Shareholders, secured and unsecured Creditors.
3. Dispensation of requirement of convening and holding meetings for Secured and Un-secured Creditors of the Transferee Company.
4. Dispensing with the requirement of convening meetings of the Transferee Company.

Analysis:
Issue 1: The judgment pertains to a joint Application under sections 391 & 394 of the Companies Act, 1956 for the Scheme of Amalgamation between two companies. The proposed Scheme has been approved by the Board of Directors of both companies, and details regarding their capital structure and incorporation have been provided.

Issue 2: The Application seeks dispensation of the requirement of convening meetings of Shareholders, secured, and unsecured Creditors of the Transferor and Transferee Companies. The Court, based on consents obtained and submissions made, dispenses with the need for such meetings for Equity Shareholders and Un-secured Creditors of both companies, as well as for Secured Creditors of the Transferor Company.

Issue 3: Regarding the Secured and Un-secured Creditors of the Transferee Company, the Court is asked to dispense with the requirement of convening and holding meetings due to the Transferor Company being a wholly owned subsidiary of the Transferee Company. The legal counsel argues that as no new shares will be issued and the Scheme will not affect the rights of shareholders and creditors of the Transferee Company, their consents are not necessary.

Issue 4: The Application further requests dispensing with the requirement of convening meetings of the Transferee Company. Citing precedents, the counsel argues that when the transferor company is a wholly owned subsidiary of the transferee company and no new shares are to be issued, convening such meetings is unnecessary. The Court agrees, noting that the proposed Scheme will not impact the rights of shareholders and creditors of both companies, thus allowing for dispensation of these meetings.

In conclusion, the Court allows the Application in the terms discussed, highlighting the dispensation of various meetings based on the specific circumstances and legal precedents cited during the proceedings.