2016 (7) TMI 1352 - HC - Companies Law

Scheme of Amalgamation - dispense with the requirement of convening the meetings of their equity shareholders, preference shareholders, secured and unsecured creditors - Held that - In view of the submissions made at the bar, the settled law on the subject, and considering the Scheme of Amalgamation, the requirement of convening and holding the meeting of the unsecured creditors of the transferee company, to consider and if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation, is dispensed with. Further, the requirement of the transferee company to file the second motion petition for sanction of the Scheme of Amalgamation is also dispensed with.

Summary

Issues:
Application under Section 391 of the Companies Act, 1956 seeking directions to dispense with convening meetings of equity shareholders, preference shareholders, secured and unsecured creditors for Scheme of Amalgamation.

Analysis:
1. The application filed under Section 391 of the Companies Act, 1956 seeks directions to dispense with the requirement of convening meetings of equity shareholders, preference shareholders, secured, and unsecured creditors to consider and approve the proposed Scheme of Amalgamation between two companies.

2. The transferor company was originally incorporated under the Companies Act, 1956 and shifted its registered office to Delhi, while the transferee company was also incorporated under the same Act and later changed its name. Both companies' registered offices are within the jurisdiction of the Delhi High Court.

3. The Scheme of Amalgamation aims at optimal resource utilization by pooling management skills, resulting in cost reduction and operational efficiencies. The share exchange ratio states that no consideration shall be payable for the equity shares of the transferor company as it is a wholly owned subsidiary of the transferee company.

4. The Board of Directors of both companies have unanimously approved the proposed Scheme. Majority of equity shareholders and unsecured creditors of the transferor company, along with all equity shareholders, preference shareholder, and secured creditors of the transferee company, have given their consents/no objections in writing, dispensing with the need for convening meetings.

5. The application also seeks to dispense with the requirement of filing a second motion petition for sanction of the Scheme by the transferee company. Citing precedents, the court holds that due to the wholly owned subsidiary status of the transferor company, there is no need for a separate application for sanction.

6. Considering the case law cited, settled legal principles, and the details of the Scheme of Amalgamation, the court allows the application, dispensing with the need for convening and holding meetings of unsecured creditors of the transferee company and filing a second motion petition for sanction of the Scheme.

7. The judgment concludes by allowing the application in the terms mentioned, thereby providing directions to dispense with certain requirements for the proposed Scheme of Amalgamation between the two companies.