2016 (3) TMI 1265 - HC - Companies Law

Scheme of Arrangement - Held that - The proposed Scheme does not envisage any arrangement or compromise with the creditors of the Applicant Transferee Company. The Applicant Company shall continue its business operations. The Applicant Company undertakes to fulfill all its liabilities towards the Creditors in the normal course of its business. Moreover, a certificate by the Chartered Accountant, confirming that the Net Worth of the Applicant Company as on 31st December 2015, has been placed on record. A perusal of the same indicates that prior to giving effect to the proposed Scheme, the Net Worth of the Applicant Company was ₹ 222.9 crores; Whereas in the Post-Scheme scenario, it shall be approximate ₹ 154.9 crores. The Net Worth being substantially high, and considering the above noted facts and circumstances, and the submissions advanced it is held that the meeting of the Unsecured Creditors, for considering and approving the proposed Scheme, is not necessary and the same is dispensed with.

Summary

Issues:
1. Application under Sections 391 and other applicable provisions of the Companies Act, 1956 for a proposed Scheme of Arrangement in the nature of Buy Back of Equity Shares and Restructure of Share Capital.
2. Dispensation of meetings of Equity Shareholders and Unsecured Creditors.
3. Approval of the Scheme by the Shareholders and the impact on the Net Worth of the Company.

Analysis:
1. The judgment pertains to an application filed under Sections 391 and other relevant provisions of the Companies Act, 1956 for a proposed Scheme of Arrangement involving the Buy Back of Equity Shares of a company and the Restructure of its Share Capital. The Applicant Company sought dispensation of meetings of its Equity Shareholders and Unsecured Creditors in relation to the proposed Scheme.

2. The Applicant Company, being a wholly-owned subsidiary of certain entities, had all its shares held by the parent company and another entity. Both these Shareholders had approved the Scheme through written consent letters. As there were no Secured Creditors of the Applicant Company, dispensation from convening the meeting of Equity Shareholders was requested and granted by the Court.

3. The Court noted that the proposed Scheme did not affect the rights and interests of the Unsecured Creditors of the Applicant Company. It was highlighted that the Scheme did not involve any compromise with the creditors, and the Applicant Company would continue its business operations while fulfilling its liabilities towards the Creditors. A certificate by a Chartered Accountant confirmed the Net Worth of the Applicant Company before and after the Scheme, showing a decrease from &8377; 222.9 crores to approximately &8377; 154.9 crores. Due to the substantial Net Worth and other circumstances, the Court dispensed with the need for a meeting of the Unsecured Creditors to consider and approve the proposed Scheme.

4. In conclusion, the Court disposed of the Application based on the submissions and circumstances presented, granting dispensation from convening meetings of both Equity Shareholders and Unsecured Creditors in light of the approvals received and the financial standing of the Applicant Company before and after the proposed Scheme.