2016 (4) TMI 1277 - HC - Companies Law

Scheme of Arrangement - Held that - As submitted that the proposed reduction of the Preference Share Capital of the Applicant Company is consequential by operation of law and is proposed as an integral part of the proposed Scheme of Arrangement. Further, the proposed reduction 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 1956, confirming the reduction. In view of the same, dispensation is sought from the procedure prescribed under Section 101(2) of the Companies Act and under Rules 48 to 65 is sought and Considering the facts and circumstances, the same is hereby granted.

Summary

Issues:
1. Scheme of Arrangement for Amalgamation and Restructure of Share Capital under Companies Act, 1956.
2. Dispensation of meeting of Equity Shareholders, Preference Shareholders, and Unsecured Creditors.
3. Reduction of Preference Share Capital as part of the proposed Scheme of Arrangement.

Analysis:
1. The judgment pertains to a Scheme of Arrangement involving the Amalgamation of two companies and the Restructure of Share Capital, as per Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956.
2. The Applicant Transferee Company filed an application seeking dispensation of meetings of Equity Shareholders, Preference Shareholders, and Unsecured Creditors, along with the procedure under Section 101(2) of the Act and Rules 48 to 65 of the Companies (Court) Rules, 1959. All shareholders and creditors approved the Scheme through written consent letters, leading to the dispensation being granted by the Court.
3. The proposed reduction of the Preference Share Capital is considered integral to the Scheme of Arrangement, with no impact on creditors. The Court noted that the reduction does not involve diminishing liability or payment to shareholders, and the approval by shareholders through consent letters is deemed as a Special Resolution under Section 100 of the Companies Act, 1956. Dispensation from the prescribed procedure under Section 101(2) and Rules 48 to 65 was granted based on the submissions and circumstances presented.
4. The judgment concludes with the disposal of the application, signifying the completion of the legal proceedings related to the Scheme of Arrangement and the proposed reduction of Preference Share Capital within the specified legal framework.