2016 (4) TMI 1258 - HC - Companies Law

Scheme of Arrangement in the nature of Demerger - Held that - The Applicant has sought dispensation from the holding of such meetings of creditors. Considering the above facts and the submissions advanced, the dispensation of the meetings of the creditors of the Applicant Resulting Company, is granted.

Summary

Issues:
1. Scheme of Arrangement for Demerger and Transfer of Investment Business
2. Dispensation of Meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors
3. Protection of Creditors' Rights and Interests

Analysis:
1. The judgment pertains to a Scheme of Arrangement for the Demerger and Transfer of the Investment Business from one company to another under Sections 391 to 394 of the Companies Act, 1956. The Demerged Company, with its registered office in Mumbai, initiated proceedings before the High Court of Judicature, Bombay. The Applicant Resulting Company filed the application seeking approval for the scheme, as per the Judges' Summons dated 16th April 2016.

2. The Applicant Company, through its advocate, requested dispensation of meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors. All Equity Shareholders had approved the scheme through written consent letters, which were submitted as Exhibit 'D'. A certificate confirming shareholder status and receipt of consent letters was annexed as Exhibit 'E'. The Court, after considering the submissions, granted dispensation for convening meetings of Equity Shareholders.

3. The Affidavit highlighted that the proposed scheme would not affect the rights and interests of the Creditors of the Applicant Resulting Company. The scheme did not involve any arrangement or compromise with the creditors, and the company committed to fulfilling all liabilities towards creditors in the normal course of business. A Chartered Accountant's certificate confirmed the company's Net worth, ensuring an increase post-scheme. While approval from Secured Creditors was necessary due to loan agreements, the Applicant Company had approached the Secured Creditor for approval. Consequently, dispensation from holding meetings of creditors was granted by the Court to the Applicant Resulting Company.

4. In conclusion, the Court disposed of the application in favor of the Applicant Company, approving the Scheme of Arrangement for the Demerger and Transfer of the Investment Business, and granting dispensation from convening meetings of Equity Shareholders and Creditors based on the submissions and compliance with legal requirements.