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2018 (2) TMI 1684 - AT - Companies LawScheme of merger - commencing of meetings - discretion to the NCLT with regard to calling of meetings - Held that - When it is a question of merger and the provisions require and give discretion to the NCLT with regard to calling of meetings, it is a discretion to be exercised judiciously by NCLT. NCLT is duty bound to follow procedure laid down by law. The NCLT recorded reasons why it finds that calling of the meetings is necessary and we do not find that the reasons recorded are arbitrary. The Law provides and the NCLT has exercised discretion that the meetings are required to be called. We do not wish to substitute our discretion over the discretion exercised by the NCLT. We do not find any substance in the appeal. The appeal is rejected.
Issues:
Application for dispensation of meetings of shareholders and unsecured creditors in a scheme of amalgamation under Companies Act, 2013. Analysis: The appeal was filed against the orders passed by the National Company Law Tribunal (NCLT) in a scheme of amalgamation application. The applicants sought dispensation of meetings of shareholders and unsecured creditors of both the transferor and transferee companies. The NCLT considered the application, noting that the transferee company was a widely held public company with 4752 shareholders and 18 unsecured creditors. The NCLT, after analyzing the provisions of Section 230-232 of the Companies Act, 2013, decided that meetings were essential for effective corporate governance, even in the case of a holding company and its wholly owned subsidiary. The NCLT directed the meetings to be convened, emphasizing the importance of information exchange among stakeholders. The appellant challenged this decision, citing a judgment related to protecting the rights of members/creditors in mergers and amalgamations. However, the NCLAT upheld the NCLT's decision, stating that while Section 233 provides a speedier process, the choice of proceeding under Section 232 required adherence to the prescribed procedure, including the calling of meetings. The NCLAT affirmed that the NCLT's discretion in calling meetings in merger cases should be exercised judiciously and in accordance with the law. The NCLT's decision to require meetings was based on valid reasons, and the NCLAT declined to interfere with this discretion. The NCLAT emphasized that the law grants NCLT the authority to determine the necessity of meetings in such cases. The appeal was dismissed, and the appellant was granted liberty to approach the NCLT for resetting the specified schedule and dates mentioned in the operative order, considering the passage of certain deadlines. In conclusion, the judgment highlighted the importance of shareholder and creditor meetings in schemes of amalgamation for ensuring effective corporate governance and stakeholder communication. The NCLT's decision to mandate meetings in the case of a widely held public company was upheld by the NCLAT, emphasizing the judicious exercise of discretion by the tribunals in merger cases. The appeal challenging the NCLT's decision was rejected, affirming the necessity of following the prescribed procedures under the Companies Act, 2013.
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