2016 (2) TMI 1116 - HC - Companies Law

Scheme of amalgamation - Held that - Having regard to the fact that the transferor company is a wholly owned subsidiary company of the transferee company, inclined to agree with the prayer made in this behalf by the transferor company. As per clause 4.1 of the scheme, in particular, clause 4.1.1, upon the scheme becoming effective, no shares in the transferee company will be allotted in lieu of shares held by it and its nominee in the transferor company. The entire share capital of the transferor company shall stand cancelled and be extinguished without any further act or deed. As also told by the counsel for the transferor company that the interest of the creditors in the transferee company shall remain unaltered. Transferee company need not file a separate or a joint application (which it has not in the present case) for obtaining sanction of the scheme.

Summary

Issues involved:
Application for approval of scheme of amalgamation under sections 391 to 394 of the Companies Act, 1956; Dispensing with the requirement of convening meetings of shareholders and unsecured creditors; Directions to dispense with the requirement of the transferee company to approach the court for sanction of the scheme.

Analysis:

1. Approval of Scheme of Amalgamation:
The judgment pertains to a first motion application filed by a transferor company for approval of a scheme of amalgamation with a transferee company under sections 391 to 394 of the Companies Act, 1956. The application includes details of incorporation, authorized capital, and annual accounts of the transferor company. The scheme has been approved by the Board of Directors of both companies, and it is stated that there are no pending proceedings against the transferor company under specific sections of the Act.

2. Consent of Shareholders and Creditors:
The position regarding equity shareholders and unsecured creditors of the transferor company is outlined, indicating that all shareholders and unsecured creditors have given their consent or 'No Objection' to the scheme. As a result, the court is requested to dispense with the requirement of convening meetings of these stakeholders, and their consent letters have been verified and found to be in order.

3. Dispensation of Court Approval for Transferee Company:
The transferor company seeks directions to dispense with the requirement for the transferee company to approach the court separately for sanction of the scheme, considering that the transferor company is a wholly owned subsidiary of the transferee company. The judgment highlights that upon the scheme becoming effective, shares in the transferee company will not be allotted in lieu of shares held by the transferor company, and the entire share capital of the transferor company will be cancelled without further action. The court, based on the facts and legal position, agrees with this request and decides that the transferee company need not file a separate application for sanction of the scheme.

In conclusion, the application for approval of the scheme of amalgamation is disposed of in favor of the transferor company, with directions provided for dispensing with the requirement of convening meetings of stakeholders and for exempting the transferee company from filing a separate application seeking sanction of the scheme.