2019 (11) TMI 1654 - Tri - Companies Law

Scheme of arrangement - seeking dispensation of meetings of unsecured creditors of Applicant Company No.4 and equity shareholders, secured and unsecured creditors of Applicant Company - Sections 230-232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT - This Tribunal declined to dispense with the convening of the meetings of the unsecured creditors of Applicant Company No.4 and equity shareholders, secured and unsecured creditors of Applicant Company. Directions regarding holding and convening of various meetings issued - directions regarding issuance of various notices also issued. The scheme is approved - application allowed.

Summary

Issues Involved:
1. Dispensation of convening meetings of unsecured creditors of Applicant Company No. 4.
2. Dispensation of convening meetings of equity shareholders, secured and unsecured creditors of Applicant Company No. 5.
3. Application of judicial precedents and settled legal positions.

Detailed Analysis:

1. Dispensation of Convening Meetings of Unsecured Creditors of Applicant Company No. 4:
The Tribunal initially declined the request to dispense with convening the meetings of unsecured creditors of Applicant Company No. 4. The Appellants argued that the proposed scheme would not result in any dilution in the shareholding of shareholders of the Transferee Company, which has a highly positive net worth. They submitted that the consent affidavits of unsecured creditors of Applicant Nos. 1 to 3 were obtained, and there were no secured creditors for Applicant Nos. 1 to 4. However, the Tribunal held that the consent affidavits of unsecured creditors in respect of Applicant No. 4 were not obtained, and thus, the meetings could not be dispensed with.

The Hon'ble NCLAT, upon appeal, set aside the Tribunal's order, emphasizing that the Tribunal should follow judicial precedents and the views of Coordinate Benches. The NCLAT noted that the proposed scheme is regulated by Chapter XV of the Companies Act, 2013, and Section 230(9) allows the Tribunal to dispense with meetings if creditors holding at least 90% value agree to the scheme by affidavit. The Tribunal was directed to reconsider the first motion application in light of settled legal positions and precedents.

2. Dispensation of Convening Meetings of Equity Shareholders, Secured and Unsecured Creditors of Applicant Company No. 5:
The Tribunal also declined to dispense with convening meetings of equity shareholders and secured and unsecured creditors of Applicant Company No. 5. The Appellants contended that the shareholders of Applicant Nos. 1 to 4 had given written consent by affidavits, and the same applied to unsecured creditors of Applicant Nos. 1 to 3 and secured debenture holders, warrant holders, and CCD holders of Applicant No. 5. The Tribunal, however, noted that the consent affidavits of equity shareholders and secured and unsecured creditors of Applicant Company No. 5 were not obtained, thus necessitating the meetings.

The NCLAT, in its order, highlighted that the Tribunal should have considered judicial precedents where similar meetings were dispensed with. The NCLAT directed the Tribunal to reconsider the matter, emphasizing that the Tribunal should have applied its mind to the judicial precedents and legal positions presented.

3. Application of Judicial Precedents and Settled Legal Positions:
The Tribunal's initial decision was challenged on the grounds that it did not follow judicial precedents and settled legal positions. The NCLAT observed that judicial discipline requires following precedents set by Coordinate Benches or referring the matter to a larger Bench in case of differing views. The NCLAT noted that in similar circumstances, meetings of shareholders and creditors were dispensed with, and the Tribunal should have applied this settled legal position.

The Tribunal, upon reconsideration, acknowledged the majority decision in the case of Jupiter Alloys & Steel (India) Limited, which allowed the dispensation of meetings of shareholders and creditors under specific conditions. The Tribunal noted that the word "may" in Sections 230 and 232 of the Companies Act, 2013, introduces an element of discretion, allowing the Tribunal to dispense with meetings if satisfied with the facts and circumstances of the case.

Conclusion:
The Tribunal, in light of the NCLAT's directions and judicial precedents, allowed the dispensation of meetings of unsecured creditors of Applicant Company No. 4 and equity shareholders, secured and unsecured creditors of Applicant Company No. 5, subject to specific conditions. These include filing lists of creditors and shareholders, serving notices to current creditors and shareholders, and publishing advertisements. The Tribunal emphasized the importance of judicial discipline and following settled legal positions in making its decision.