2008 (7) TMI 1126 - HC - Companies Law

Summary

Issues Involved:

1. Whether the convening, holding, and conducting of meetings of shareholders, secured creditors, and unsecured creditors should be dispensed with for approving the scheme of amalgamation.
2. Whether the objections raised by an unsecured creditor regarding the waiver of meetings and the scheme of amalgamation are valid.
3. Whether the rights and interests of creditors, both secured and unsecured, are adequately protected under the proposed scheme of amalgamation.

Detailed Analysis:

Issue 1: Waiver of Meetings for Approving the Scheme of Amalgamation

The petitioner, Sargon Geosynthetics Limited, filed a petition under Section 391 of the Companies Act, 1956, seeking to dispense with the convening, holding, and conducting of meetings of shareholders, secured creditors, and unsecured creditors for approving the proposed scheme of amalgamation with Maccaferri Environmental Solutions Private Limited. The petitioner argued that the scheme is a compromise or arrangement between the company and its shareholders, and since the transferee company holds 100% of the equity shares of the transferor company, the consolidation of business would be beneficial. The scheme promises commercial and economic viability, leading to organizational efficiencies and optimal resource utilization. The petitioner further submitted that the entire liability of the transferor company would be taken over by the transferee company, ensuring that the rights and interests of the creditors are not adversely affected.

Issue 2: Objections by Unsecured Creditor

An unsecured creditor, Bharat Spun Pipe and Construction Co., objected to the waiver of meetings, arguing that the scheme of amalgamation would adversely affect the rights of unsecured creditors. The objector contended that a meeting of unsecured creditors is mandatory unless all creditors agree to waive it. The objector also raised concerns about the non-filing of the latest audited statement of accounts, alleging that the petitioner company has engaged in unjustified and unlawful practices. The objector claimed that the scheme should not be sanctioned until the petitioner company settles its debts towards the objector.

Issue 3: Protection of Creditors' Rights

The court examined whether the scheme of amalgamation adequately protects the rights of creditors. The scheme stipulates that all secured and unsecured debts, liabilities, and obligations of the transferor company would be transferred to the transferee company, ensuring that creditors' claims remain intact. The court noted that the scheme provides for the transferee company to discharge any liability accrued against the transferor company. The court emphasized that while meetings of shareholders and creditors are generally required, exceptions can be made where there is no factual or legal impediment to waiving such meetings. The court found that the objector failed to demonstrate that the scheme is mala fide, fraudulent, or adversely affects creditors' rights.

Conclusion:

The court concluded that the scheme of amalgamation protects the rights of creditors, both secured and unsecured, and that the objections raised by the unsecured creditor lacked substantial merit. The court held that the interest of creditors would be suitably protected by the scheme, allowing the objector to press its claims against both the transferor and transferee companies. Consequently, the court exercised its discretion to waive the convening, holding, and conducting of meetings of shareholders and creditors, granting liberty to the petitioner to file a second motion in accordance with the law. The objections were rejected, with the court noting that the objector could raise any further objections during the second motion stage.