2017 (1) TMI 959 - HC - Companies Law

Scheme of Amalgamation - requirement of convening and holding the meetings - Held that - The requirement of convening and holding the meetings of the unsecured creditors of the applicant/transferee company, to consider and if though fit, approve, with or without modification, the proposed Scheme of Amalgamation, is dispensed with. Further, a prayer has also been made for seeking dispensation with the requirement of the Applicant/Transferee Company, to approach this Hon ble Court, from filing second motion petition seeking sanction of the Scheme of Amalgamation. In support of this prayer, it has been urged that the Transferor Companies are the wholly owned subsidiaries of the Applicant/Transferee Company and upon scheme becoming effective, no new shares in the Applicant/Transferee Company will be allotted in lieu of the shares held by it and its nominee in the Transferor Companies. The entire share capital of the Transferor Companies shall stand cancelled and be extinguished without any further act or deed. It has also been stated that the interest of the creditors of the Applicant/Transferee Company shall remain unaltered. Therefore, there is no arrangement, which is proposed with the Shareholders or the Creditors of the Applicant/Transferee Company. In view of the foregoing and in view of the settled position of law, the requirement of the Applicant/Transferee Company to file a petition seeking sanction of the scheme, is dispensed with.

Issues involved:
1. Application under Sections 391 to 394 of the Companies Act, 1956 for Scheme of Amalgamation.
2. Dispensation of requirement of convening and holding meetings of equity shareholders, secured and unsecured creditors.
3. Approval of proposed Scheme by the Board of Directors.
4. Written consents of equity shareholders and unsecured creditors.
5. Dispensation with the requirement of filing a second motion petition seeking sanction of the Scheme.

Detailed Analysis:
1. The judgment pertains to an application filed under Sections 391 to 394 of the Companies Act, 1956 for a Scheme of Amalgamation between two Transferor Companies and a Transferee Company. The application sought dispensation of the requirement of convening and holding meetings of equity shareholders, secured and unsecured creditors of the Transferor Companies.

2. The Board of Directors of the Applicant Company approved the proposed Scheme in a meeting held on a specified date. Written consents of equity shareholders and unsecured creditors were obtained, and it was highlighted that no proceedings under relevant sections of the Act were pending against the Applicant Companies at the time of filing the application.

3. The judgment detailed the share capital structure of the Transferor Companies and the Transferee Company, along with the incorporation details of each entity. It was noted that the Transferor Companies were wholly owned subsidiaries of the Transferee Company, and upon amalgamation, the share capital of the Transferor Companies would be merged with that of the Transferee Company.

4. The application emphasized that the rights of secured and unsecured creditors of the Transferee Company would not be adversely affected by the amalgamation, as no new shares would be issued, and no arrangements were proposed with the shareholders or creditors. Written consents of the unsecured creditors were obtained, and the requirement of convening their meetings was dispensed with based on precedents and settled legal positions.

5. Lastly, the judgment addressed the prayer for dispensation with the requirement of filing a second motion petition seeking sanction of the Scheme. It was argued that no new shares would be allotted in the Transferee Company, and the interest of creditors would remain unaffected. The application cited legal precedents to support the request, and ultimately, the court allowed the application in the terms presented, disposing of the matter accordingly.

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