2016 (3) TMI 1259 - HC - Companies Law

Scheme of Arrangement in the nature of Demerger - Held that - Chairman appointed for the aforesaid meetings shall issue advertisements and send out notices of the said meetings referred to above. It is further directed, that the Chairman of the meetings shall have all powers under the Articles of Association of the applicant Company and under the Companies (Court) Rules, 1959 in relation to conduct of meetings, including an adjournment of the meetings, and/or an amendment to the Scheme or resolution, if any, proposed at the meetings by any person(s) and to ascertain the decision of the meetings on a poll. That the quorum for the said meetings shall be 10(Ten) for the meeting of the Equity Shareholders, 3 (Three) for the meeting of the Secured Creditors, and 10(Ten) for the meeting of Unsecured Creditors present in person or through authorized representative or through proxy. That voting by proxy is permitted provided that the proxy in the prescribed form and duly signed by the person entitled to attend and vote at the aforesaid meetings, or by his authorised representative, is filed with the applicant Company at its registered office at Dalpur, not later than 48 hours before the said meeting. That the value of the vote of each Equity Shareholder of the Company shall be as per the entries in the Registers of the Company and that of the creditors as per the entries in the books of accounts of the applicant Company and where the entries in the records or registers are disputed, the Chairman of the meetings shall determine the value or number for the purposes of the meetings and his decision in that behalf would be final. That the Chairman shall report to this Court, the result of the said meetings within 14 (fourteen) days of the conclusion of the meetings and the said Report shall be verified by his affidavit.

Summary

Issues:
1. Composite Scheme of Arrangement involving Demerger and Transfer of Ceramic Division
2. Directions for convening separate meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors
3. Dispensation of procedure under Sections 100 to 103 of the Companies Act, 1956

Analysis:
1. The judgment pertains to a Composite Scheme of Arrangement for the Demerger and Transfer of the Ceramic Division of a company to another entity, along with the consequential restructure of the share capital. The application was filed under Sections 391 to 394 of the Companies Act, 1956, and Section 52 of the Companies Act, 2013. The proposed scheme involves the utilization of the Securities Premium Account of the Demerged Company, leading to a reduction of capital, which is integral to the arrangement. The court noted that the proposed reduction does not impact unpaid share capital or payment to shareholders, and the approval by Equity Shareholders will serve as a Special Resolution as required by the Companies Act.

2. The advocate representing the applicant company sought directions for convening separate meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors. The court ordered that these meetings be held at the registered office of the company to consider and approve, with or without modifications, the proposed Scheme of Arrangement. Notices with relevant documents and forms of proxy were to be sent to shareholders and creditors at least 21 days before the meetings. Additionally, public notices were to be published in newspapers to inform stakeholders about the meetings.

3. The court dispensed with the procedure under Section 101(2) of the Companies Act, 1956, and the relevant rules, based on the submissions made and the circumstances of the case. The order specified the details of the meetings, including the quorum requirements, provisions for voting by proxy, and the role and powers of the Chairman appointed for the meetings. The Chairman was tasked with reporting the meeting results to the Court within 14 days of their conclusion, as verified by an affidavit. The judgment concluded by disposing of the application in accordance with the orders issued.