2016 (12) TMI 1361 - HC - Companies Law

Scheme of Amalgamation -directions of this Court to dispense with the requirement of convening the meetings of their equity shareholders and creditors to consider and approve, with or without modification, the proposed Scheme - Held that - The requirement of convening and holding the meetings of the equity shareholders and creditors of the Transferee Company, to consider and if thought fit, approve, with or without modification, the proposed scheme, is dispensed with. Learned counsel for the Applicant Companies does not press prayer clause (iii) of the present application, seeking dispensation with the requirement of filing of the company petition or any further application by the Transferee Company for sanction to the proposed scheme. The said prayer clause (iii) of the present application is therefore dismissed as not pressed.

Summary

Issues:
Application under Section 391 of the Companies Act, 1956 to dispense with the requirement of convening meetings of equity shareholders and creditors for the proposed Scheme of Amalgamation.

Analysis:
The joint application under Section 391 of the Companies Act, 1956 sought directions to dispense with the need for convening meetings of equity shareholders and creditors for the proposed Scheme of Amalgamation involving several Transferor Companies and a Transferee Company. The Applicant Companies, including the Transferor and Transferee Companies, are based in New Delhi within the jurisdiction of the Delhi High Court. The Transferor Companies were incorporated on different dates and had their authorized share capital divided into equity shares of ?10 each. The Transferee Company, a wholly owned subsidiary of the Transferor Companies, also had its authorized share capital divided into equity shares. The proposed scheme aimed at economization, reduction of costs, better management coordination, and optimal resource utilization across the group.

The Share Exchange Ratio clause of the proposed scheme stated that no consideration would be payable by the Transferee Company to the equity shareholders of the Transferor Companies due to their subsidiary relationship. The Board of Directors of the Applicant Companies had unanimously approved the proposed scheme in their respective meetings. All equity shareholders of the Transferor Companies had given their written consents to the scheme, eliminating the need for convening shareholder meetings. No pending proceedings under relevant sections of the Companies Act were reported against the Applicant Companies at the time of the application.

Regarding the Transferee Company's equity shareholders, it was argued that since the Transferor Companies were wholly owned subsidiaries, no shares of the Transferee Company would be issued post-amalgamation, thus not affecting the rights of the equity shareholders. Similarly, the proposed scheme did not impact the rights of the Transferee Company's creditors, as no compromise or arrangement was involved. Citing legal precedents, it was concluded that convening meetings of equity shareholders and creditors of the Transferee Company for approval of the scheme was unnecessary.

The Court, after reviewing the facts and legal arguments presented, dispensed with the requirement of convening and holding meetings of equity shareholders and creditors of the Transferee Company for approval of the proposed scheme. The prayer seeking dispensation of filing a company petition or any further application was not pressed and dismissed accordingly. Ultimately, the application was allowed in the terms mentioned, granting the requested directions for the proposed Scheme of Amalgamation.