2015 (12) TMI 1730 - HC - Companies Law

Scheme of Arrangement in the nature of Amalgamation - Held that - Considering all submissions and in light of the settled legal position confirmed by various judgments referred to in the affidavit in support of the Judges Summons, holding that separate proceedings are not necessary for the Transferee Company, being the Holding Company, it is held that in the present case, as well, separate proceedings are not required to be filed for the Transferee Company. The attention of the Court is drawn to Paragraph 8 of the Affidavit in support of the Judges Summons. It has been pointed out that the applicant, being a listed public limited Company, pursuant to Clause 24(f) of the Listing Agreement, the applicant Company has obtained the requisite approval from the concerned stock exchanges viz. BSE Limited and National Stock Exchange of India Limited. A copy of each of them have been placed on record as Exhibit E . However, in light of the fact that no shares are being issued by the said Company pursuant to the proposed scheme, the compliance of Clause 5.16(a) is not necessary for the applicant Company. The applicant Company has already submitted the requisite Undertaking and the Auditor s Certificate to the SEBI. A copy of which is annexed herewith as Exhibit F for immediate reference. In light of the facts and circumstances, the applicant Company shall not be required to undertake the procedure of Postal Ballot and voting for seeking approval from the Public shareholders. In view of the same, the rights and interests of the creditors of the Transferee Company shall not be prejudicially affected and the Scheme does not envisage any arrangement with the creditors of the Transferee Company. It has been further submitted that notwithstanding the above referred contention, the approval to the Scheme has been obtained from all the Secured Creditors of the Transferee Company in compliance with the contractual terms of the loan agreements. The said consent letters are placed on record as Exhibit H and the same has been substantiated by the Certificate from the Chartered Accountant placed on record as Exhibit I . In light of the same, dispensation is sought for the meetings of the Creditors vide prayer (e) of the Judges Summons.

Summary

Issues:
1. Dispensation of separate proceedings for the applicant Transferee Company under a Scheme of Arrangement involving Amalgamation.
2. Compliance with Listing Agreement requirements for a listed public limited Company.
3. Approval and consent of Secured Creditors for the proposed Scheme.

Issue 1: Dispensation of separate proceedings for the applicant Transferee Company under a Scheme of Arrangement involving Amalgamation:
The judgment deals with a Scheme of Arrangement proposing the Amalgamation of a Transferor Company with a Transferee Company. The Transferee Company, being the sole Holding Company, sought dispensation of separate proceedings as the Equity Shares of the Transferor Company held by it would be automatically cancelled without issuing new shares. The Court referred to past judgments and legal positions to conclude that no separate proceedings were necessary for the Transferee Company. The Capital Structure of the Transferee Company would remain unchanged, ensuring no impact on the rights of existing shareholders. The Court relied on precedents and settled legal positions to support its decision.

Issue 2: Compliance with Listing Agreement requirements for a listed public limited Company:
The judgment addressed the compliance of a listed public limited Company with the Listing Agreement requirements in the context of the proposed Scheme. Despite being a listed Company, no new shares were to be issued under the Scheme, leading to the conclusion that certain procedural requirements, such as Postal Ballot and evoting for seeking approval from Public shareholders, were not necessary. The Court referred to a previous judgment to support this decision, highlighting the submission of Undertaking and Auditor's Certificate to SEBI as sufficient compliance.

Issue 3: Approval and consent of Secured Creditors for the proposed Scheme:
The judgment also discussed the approval and consent of Secured Creditors for the proposed Scheme. It was noted that the Net worth of the Transferee Company pre and post the Scheme remained stable, ensuring no prejudicial impact on the creditors. The Scheme did not involve any arrangement with creditors, and consent letters from all Secured Creditors were obtained in compliance with loan agreements. The Court granted dispensation for creditor meetings based on the submissions made and the facts presented, ultimately disposing of the application accordingly.

In conclusion, the judgment thoroughly analyzed and addressed the issues related to the dispensation of separate proceedings, compliance with Listing Agreement requirements, and approval of Secured Creditors for the proposed Scheme of Amalgamation, providing detailed reasoning and legal references to support the decisions made by the Court.