2015 (7) TMI 57 - HC - Companies Law

Proposed scheme of amalgamation - Dispensation of meetings - Sections 391 to 394 of the Companies Act, 1956 - Share exchange ratio not mentioned in scheme - Improper Board resolution - Held that - It is pertinent to mention here that in the affidavits filed by the transferor and transferee companies in support of summons, there is no mention of share exchange ratio. The only reference in para 14 of the affidavit is that the transferee company shall issue and allot shares to the shareholders of the transferor company. Also there is a contradiction of the share exchange ratio as mentioned in the valuation report and in the Scheme of Amalgamation. It is further noticed from the list of shareholders of the transferor and transferee companies that IVM Intersurer B.V. is the holding company of the said companies, which are proposed to be amalgamated. The consents given on behalf of IVM Intersurer B.V. approving the Scheme of Amalgamation and seeking dispensation of the meeting of the shareholders of the transferor and transferee companies are not supported by any Board Resolution of IVM Intersurer B.V. authorizing the persons who have given the aforesaid consents. - Applicants are directed to file an affidavit clarifying the aforesaid discrepancies.

Issues:
1. Application under Sections 391 to 394 of the Companies Act, 1956 for dispensing with the requirement of convening meetings of equity shareholders, secured and unsecured creditors for Scheme of Amalgamation.
2. Discrepancy in the share exchange ratio between the Valuation Report and the Scheme of Amalgamation.
3. Lack of clarity on the basis of the share exchange ratio in the Scheme.
4. Absence of Board Resolution supporting consents for the Scheme of Amalgamation from the holding company.

Analysis:

1. The judgment pertains to a joint application seeking directions under Sections 391 to 394 of the Companies Act, 1956 to dispense with the need for convening meetings of equity shareholders, secured, and unsecured creditors for the proposed Scheme of Amalgamation between two companies. The matter was heard and reserved for further examination.

2. A crucial issue highlighted in the judgment is the discrepancy in the share exchange ratio. The Valuation Report prepared by one firm states a different ratio compared to what is mentioned in the Scheme of Amalgamation. This discrepancy raises concerns about the accuracy and consistency of the information provided to the court for approval of the scheme.

3. The lack of clarity regarding the basis of the share exchange ratio in the Scheme is another significant point of contention. The court noted that the affidavits filed by the companies in support of the summons did not clearly specify the share exchange ratio, leading to confusion about the valuation basis used for determining the ratio in the Scheme.

4. Additionally, the judgment highlights the absence of a Board Resolution supporting consents provided by the holding company for the Scheme of Amalgamation. The consents from the holding company approving the scheme and dispensing with shareholder meetings lack the necessary authorization through a Board Resolution, casting doubt on the validity of the consents.

In response to these issues, the court directed the counsel for the applicants to file an affidavit clarifying the discrepancies within two weeks. The matter was scheduled for further review on a specified date to address the concerns raised regarding the share exchange ratio, clarity on valuation basis, and the absence of a supporting Board Resolution from the holding company.

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