2016 (5) TMI 1390 - HC - Companies Law

Scheme of Amalgamation - dispense with the requirement of convening the meetings of their equity 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 meetings of the equity shareholders, secured and 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 dispensation of meetings of equity shareholders, secured and unsecured creditors for Scheme of Amalgamation.

Detailed Analysis:

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

2. Background of Companies:
The transferor company was incorporated in 2010, while the transferee company was originally incorporated in 1995 and later changed its name. Both companies' registered offices are located in New Delhi.

3. Share Capital Details:
Detailed share capital information of both companies was provided, including authorized, issued, subscribed, and paid-up share capital figures.

4. Submission of Documents:
Memorandum, Articles of Association, audited balance sheets, and auditor reports of both companies were submitted along with the Scheme of Amalgamation. The Scheme aimed at pooling resources, creating synergies, and achieving economies of scale.

5. Share Exchange Ratio and Proceedings:
The Scheme specified no consideration payable by the transferee company for equity shares of the transferor company. It was confirmed that no proceedings under relevant sections of the Companies Act were pending against the applicant companies.

6. Approval and Consents:
Board of Directors of both companies unanimously approved the Scheme. Majority of equity shareholders and creditors of the transferor company provided consents/no objections in writing for the proposed Scheme, justifying the dispensation of their meetings.

7. Treatment of Transferee Company's Shareholders and Creditors:
Since the transferee company is a wholly owned subsidiary of the transferor, no arrangement was proposed with its shareholders and creditors. Financial details and a certificate ensuring the net worth post-amalgamation were presented to support the dispensation of their meetings.

8. Legal Precedents and Judgment:
Counsel referenced various High Court judgments to support the dispensation of meetings for the transferee company. The Court considered the case law, submissions, and the Scheme, ultimately dispensing with the requirement of meetings and the second motion petition for the transferee company.

9. Judgment:
After considering the submissions, legal precedents, and the Scheme of Amalgamation, the Court allowed the application, dispensing with the meetings of equity shareholders, secured and unsecured creditors of the transferee company, and the need for a second motion petition for sanctioning the Scheme.

This detailed analysis covers the key aspects of the judgment, including the application, company details, share capital, consents, legal references, and the final decision of the Court.