2021 (9) TMI 1357 - Tri - Companies Law

Sanction of Scheme of Amalgamation - seeking to dispense with convening and holding of the meeting of Shareholders and Creditors in relation to the Transferor and Transferee Companies - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT - From plain reading of the contents of Section 230(2)(a), it is clear that no criteria for considering a particular event or information as material for declaration under this provision, as the one assumed by the Applicant Companies, has been prescribed under the Companies Act. Hence, it is observed that despite getting an opportunity vide our order dated 09.08.2021, the Applicant Companies have failed to file proper Affidavits disclosing the complete particulars of all the investigations/proceedings pending against each of them including Case No., Court in which pending, amount of debt involved, next date of hearing and the present status of the case etc. Further, while going through the Application and the averments made therein, it is observed that the Applicant Companies have not taken consent of the Creditors (having at least 90 percent value) by way of Affidavit on the proposed Scheme in terms of the provision under Section 230(9) of Companies Act, 2013 and have still sought dispensation of calling their meeting on the ground that there will be no sacrifice made towards the unsecured creditors and the scheme is, in no manner, prejudicial to the interests of the unsecured creditors - the Unsecured Creditors of both the Applicant Companies cannot be kept in dark. If without their consent Affidavits, the meeting of the unsecured creditors is dispensed with, they will be deprived of an opportunity of being heard or oppose the Scheme. The Affidavits filed under Section 230(2)(a) of Companies Act, 2013 are incomplete and defective - the meeting of Unsecured Creditors of any of the Applicant Companies, cannot be dispensed with, in light of the facts of the case and in the absence of their consent Affidavits in terms of Section 230(9) of the Companies Act, 2013 - application dismissed.

Summary

Issues Involved:
1. Dispensation of meetings of shareholders and creditors for approval of the Scheme of Amalgamation.
2. Compliance with Section 230(2) of the Companies Act, 2013.
3. Disclosure of investigations or proceedings pending against the applicant companies.
4. Requirement of consent affidavits from creditors under Section 230(9) of the Companies Act, 2013.

Detailed Analysis:

1. Dispensation of Meetings of Shareholders and Creditors:
The applicant companies sought to dispense with convening and holding meetings of shareholders and creditors for the approval of the Scheme of Amalgamation. The companies argued that both shareholders had given "no objection" to the Scheme through affidavits, and thus, the meetings should be dispensed with. They also sought dispensation for the meeting of unsecured creditors, stating that the unsecured creditors are sundry creditors who would be paid off in the ordinary course of business, and the Scheme was not prejudicial to their interests. Additionally, they claimed that the Scheme did not propose to reduce or extinguish any liability of the unsecured creditors.

2. Compliance with Section 230(2) of the Companies Act, 2013:
The Tribunal noted that the applicant companies had filed affidavits in compliance with Section 230(2) of the Companies Act, 2013. However, upon perusal, it was found that the affidavits did not contain specific averments regarding details of any investigations or proceedings pending against the companies. The Tribunal had previously directed the companies to file additional affidavits to comply with Section 230(2)(a), which they did, stating that there were no investigations or proceedings pending against them.

3. Disclosure of Investigations or Proceedings Pending Against the Applicant Companies:
The Tribunal observed that the applicant companies disclosed pending investigations and proceedings in their joint application but subjected the disclosure to a materiality threshold. The Tribunal emphasized that Section 230(2)(a) requires the disclosure of all material facts, including pending investigations or proceedings, without any materiality threshold. The Tribunal found that the companies had failed to provide complete particulars of all pending investigations and proceedings, including case numbers, courts, amounts involved, next hearing dates, and current statuses.

4. Requirement of Consent Affidavits from Creditors under Section 230(9) of the Companies Act, 2013:
The Tribunal highlighted that the applicant companies had not obtained consent affidavits from creditors holding at least 90% of the value of the debt, as required under Section 230(9) of the Companies Act, 2013. The Tribunal noted that there were significant outstanding unsecured debts against both the transferor and transferee companies. It was emphasized that the unsecured creditors should be well-informed and have an opportunity to be heard or oppose the Scheme. The Tribunal concluded that the consent of the unsecured creditors was necessary and could not be dispensed with.

Conclusion:
The Tribunal dismissed the application, stating that the affidavits filed under Section 230(2)(a) were incomplete and defective. Additionally, the Tribunal was not inclined to dispense with the meeting of unsecured creditors in the absence of their consent affidavits as required under Section 230(9). The Tribunal granted liberty to the applicant companies to file a fresh application in compliance with all applicable provisions of the law.