2011 (7) TMI 1303 - HC - Companies Law

Summary

Issues Involved:
1. Whether the meeting of the shareholders of the Applicant Transferee Company is required to be convened for considering the proposed Scheme of Amalgamation.
2. Whether the rights and interests of the shareholders of the Transferee Company are affected by the proposed Scheme.
3. Compliance with legal procedures and requirements for sanctioning the Scheme of Amalgamation.

Summary:

Issue 1: Meeting of Shareholders
The applicant, United Phosphorus Limited, sought a dispensation of the meeting of shareholders for considering the proposed Scheme of Amalgamation u/s 391(2) of the Companies Act, 1956. The applicant argued that convening the meeting would be an empty formality resulting in delay and unnecessary expenses since the capital structure of the Transferee Company would not change, and the rights and interests of the shareholders would not be affected.

Issue 2: Rights and Interests of Shareholders
It was submitted that the entire share capital of the Transferor Company (United Phosphorus Limited, Mauritius) would be extinguished without any issue and allotment of shares by the Transferee Company. Therefore, the rights and interests of the shareholders of the Transferee Company would not be affected. The court noted that the scheme postulates no shares of the transferee company are to be issued to the transferor company, and the share capital of the transferor company is to be fully canceled.

Issue 3: Compliance with Legal Procedures
The court considered the submissions and legal precedents, noting that when the rights and interests of shareholders and creditors are not affected, and the capital structure remains unchanged, separate proceedings for the Transferee Company may not be necessary. However, since the Transferor Company is based in Mauritius, proceedings are required before the jurisdictional High Court in India. The court directed the petitioner to comply with specific conditions, including issuing advertisements in specified newspapers, forwarding the order to the Regional Director and Registrar of Companies, and filing a declaration of compliance with applicable laws.

Conclusion:
The court found the meeting of the shareholders of the applicant Transferee Company dispensable and permitted the same, subject to compliance with specified conditions. The application was disposed of with the necessary clarifications and directions.