2016 (5) TMI 1400 - HC - Companies Law

Dispensation of meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Company - dispensation of the procedure as envisaged under Sections100 to 103 of the Companies Act, 1956 - Held that - all the Equity Shareholders, Secured Creditors as well as the Unsecured Creditors of the Applicant Company have approved the Scheme in the form of the written consent letters - dispensation of meetings granted. Since the reduction results due to cancellation of shares by operation of law, it does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paidup share capital and the order of the Court sanctioning the Scheme shall be deemed to be an order under Section 102 of the Companies Act confirming the reduction - the procedure prescribed under Section 101(2) of the Companies Act, 1956 and under rule 48 to 65 of the Companies (Court) Rules 1959 is not necessary to be followed and the same is hereby dispensed with. Application allowed.

Summary

Issues:
1. Composite Scheme of Arrangement involving Amalgamation, Demerger, and Restructure of Share Capital under Companies Act, 1956.

Analysis:
The judgment delivered by Justice Abhilasha Kumari of the Gujarat High Court pertains to a Composite Scheme of Arrangement involving Amalgamation, Demerger, and Restructure of Share Capital under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956. The Applicant, Saumya Construction Private Limited, filed the application seeking dispensation of meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors, along with the procedure as envisaged under the Companies Act, 1956. The Applicant provided written consent letters from all the concerned parties, including Equity Shareholders, Secured Creditors, and Unsecured Creditors, which were annexed with the application. The certificates confirming the status of the Shareholders and Creditors, as well as the receipt of consent letters, were also provided. Based on the submissions and documents presented, the Court granted dispensation from convening the meetings of the mentioned parties.

Regarding the proposed Restructure of the Capital in the form of the Reduction of Issued, Subscribed, and Paid-up Equity Share Capital of the Applicant Company, it was clarified that the reduction of capital is consequential and an integral part of the proposed Scheme of Arrangement. The issuance of new shares by the Applicant Company to the shareholders of the Transferor Company would not result in a Net Reduction of Capital of the Applicant Company. The reduction, resulting from the cancellation of shares by operation of law, does not involve diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid-up share capital. The Court held that the procedure prescribed under Section 101(2) of the Companies Act, 1956, and under rule 48 to 65 of the Companies (Court) Rules 1959, is not necessary to be followed and hence dispensed with. Finally, the application was disposed of by the Court, concluding the legal proceedings related to the Composite Scheme of Arrangement.