2015 (11) TMI 1701 - HC - Companies Law

Scheme of amalgamation - dispense with the requirement of convening the meetings of its equity shareholders, secured and unsecured creditors to consider - Held that - Applicant/transferor company has 02 equity shareholders and 03 unsecured creditors. Both the equity shareholders and all the unsecured creditors have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditors of the applicant/transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured creditor of the applicant/transferor company, as on 31st July, 2015. Also as carefully considered the aforesaid case laws cited at the Bar, wherein the transferee company, being the holding company, has been granted exemption from taking out separate proceedings under Section 391(2) of the Companies Act, 1956. In view of this settled legal position and considering the Scheme of Amalgamation, the requirement of the transferee company having to approach this Court under Section 391(2) of the Companies Act, 1956 for sanction of the Scheme of Amalgamation is dispensed with.

Summary

Issues: Application under Sections 391, 392 & 394 of the Companies Act, 1956 for dispensing with shareholder and creditor meetings and sanction of Scheme of Amalgamation.

The judgment pertains to an application filed under Sections 391, 392 & 394 of the Companies Act, 1956 seeking directions to dispense with the requirement of convening meetings of equity shareholders and creditors to consider and approve a proposed Scheme of Amalgamation. The applicant, a transferor company, aimed to merge with a transferee company without the need for shareholder or creditor meetings. The applicant highlighted that the amalgamation would streamline operations, reduce costs, and enhance efficiency by eliminating managerial overlaps. The share exchange ratio specified in the Scheme indicated that no shares of the transferee company would be allotted in exchange for the transferor company's shares, with the latter's share capital being canceled. The Board of Directors of both companies had approved the amalgamation, and consents from equity shareholders and unsecured creditors were obtained. The application sought to waive the requirement for the transferee company to seek court sanction for the Scheme, as no new shares would be issued, and there would be no change in control or management, ensuring no impact on the rights of the transferee company's shareholders or creditors.

The judgment noted that the applicant met the necessary criteria for dispensing with shareholder and creditor meetings, as all relevant consents were obtained and no secured creditors were involved. The applicant also sought exemption for the transferee company from approaching the court for sanction of the Scheme, citing precedents where holding companies were granted such exemptions. Relying on established legal principles and considering the specifics of the amalgamation Scheme, the court agreed to waive the requirement for the transferee company to seek court approval under Section 391(2) of the Companies Act, 1956. The judgment allowed the application in the terms discussed, granting the requested dispensations and facilitating the amalgamation process without the need for further court proceedings.