2015 (5) TMI 404 - HC - Companies Law

Proposed scheme of Amalgamation - Dispensation of convening the meetings of their equity shareholders, secured and unsecured creditors - All the secured creditors give their consent in writing - The Unsecured creditors of the transferor company are running creditors - Company produce Chartered Accountant certificate to show liquidity position of the companies - Held that - The transferor company has 07 equity shareholders and 01 secured creditor. All the equity shareholders and the only secured creditor have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and secured creditor of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. The unsecured creditors of the transferor company are running creditors who are paid-off in the normal course of the business of the company. A perusal of the audited balance sheet of the transferor company, as on 31st March, 2014, reveals that the company has reserves and surplus of ₹ 10,88,10,171/-. As per the certificate issued by M/s. Pawan Shubham & Co., Chartered Accountants, the post-amalgamation net worth of the transferee company will enhance to ₹ 22,19,15,399/- as compared to its pre-amalgamation net worth of ₹ 11,31,05,228/-. In addition, the applicants have placed on record the certificate issued by M/s. Pawan Shubham & Co., Chartered Accountant, determining the liquidity position of the companies, which shows that the liquid assets (including cash and bank balance) of the transferor company, pre-amalgamation, are to the tune of ₹ 37,18,61,504/- whereas the liquid assets (including cash and bank balance) of the transferee company, post-amalgamation, are to the tune of ₹ 41,31,76,317/-. Therefore, the rights of the unsecured creditors of the transferor company are not likely to be affected and the transferee company will be in a position to discharge all its liabilities, upon sanction of the Scheme of Amalgamation. In view of the above and the settled law on the subject, the requirement of convening and holding the meeting of the unsecured creditors of the transferor company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. The transferee company has 08 equity shareholders and 03 unsecured creditors. All the equity shareholders and all the unsecured creditors have given their consents/no objections in writing to the proposed Scheme of Amalgamation. Their consents/no objections have been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meetings of the equity shareholders and unsecured creditors of the transferee company to consider and, if thought fit, approve, with or without modification, the proposed Scheme of Amalgamation is dispensed with. There is no secured creditor of the transferee company, as on 15th December, 2014. - Requirement to call meeting of shareholders, secured & unsecured creditors dispensed with.

Summary

Issues:
Application under Sections 391 and 394 of the Companies Act, 1956 seeking directions to dispense with meetings of equity shareholders, secured and unsecured creditors for Scheme of Amalgamation.

Analysis:
1. Background and Jurisdiction:
The joint application under Sections 391 and 394 of the Companies Act, 1956 was filed by the applicant companies for the proposed Scheme of Amalgamation. Both the transferor and transferee companies are located in New Delhi, within the jurisdiction of the Delhi High Court.

2. Company Details:
The transferor company was incorporated in December 2006, while the transferee company was originally incorporated in March 2003 and later changed its name. Details of their authorized share capital and issued share capital were provided.

3. Submission of Documents:
Memorandum, Articles of Association, audited balance sheets, and Scheme of Amalgamation were submitted. The Scheme aimed at enhancing integration, administration, financial strength, and operational efficiency of the amalgamated entity.

4. Share Exchange Ratio:
The Scheme proposed the cancellation of equity shares held by the transferee company in the transferor company, with no issuance of new shares to transferor company members. No pending proceedings under Sections 235 to 251 of the Companies Act, 1956 were reported.

5. Approval and Consents:
Board of Directors of both companies approved the Scheme. Equity shareholders and secured creditor of the transferor company provided consents, dispensing with the need for their meetings. Unsecured creditors' rights were safeguarded, with details of payments and post-amalgamation net worth presented.

6. Dispensation of Creditor Meetings:
The judgment cited previous cases where creditor meetings were dispensed with under similar circumstances. The financial positions of the companies pre and post-amalgamation were analyzed to ensure creditors' rights were unaffected.

7. Consents of Equity Shareholders and Creditors:
All equity shareholders and unsecured creditors of the transferee company gave consents, eliminating the necessity for their meetings. No secured creditor was reported for the transferee company.

8. Decision:
The application was allowed, dispensing with the requirement of convening meetings of equity shareholders, secured, and unsecured creditors of both the transferor and transferee companies for the proposed Scheme of Amalgamation.