2015 (7) TMI 22 - HC - Companies Law

Application for dispensation of meeting - Sections 391 & 394 of the Companies Act, 1956 - Error in share exchange ration - Held that - On an examination of the application, it is noticed that the share exchange ratio as mentioned in the application is adopted from the Valuation Report dated 16th August, 2014 furnished by M/s. P. K. Katyal & Co., Chartered Accountants (page 209, Annexure II). Unfortunately, the applicants adopted the same without maintaining a common sequence in the Memo of Parties. Furthermore, the fourth share exchange ratio mentioned in the valuation report has wrongly been stated in the Scheme. Even though the transferor companies are wholly owned subsidiaries of the transferee company, which is the ultimate beneficiary of this Scheme, but that does not entitle the applicants to present incorrect facts in the application. The application has been drafted in a very casual manner and needs a thorough relook. - Applicants directed to file an affidavit clarifying the aforesaid discrepancies.

Summary

Issues:
Application under Sections 391 & 394 of the Companies Act, 1956 seeking directions to dispense with the requirement of convening meetings for approval of Scheme of Amalgamation involving multiple companies with a transferee company.

Analysis:
The judgment pertains to a joint application filed under Sections 391 & 394 of the Companies Act, 1956 by several applicant companies. The application sought directions from the court to dispense with the necessity of convening meetings of various stakeholders to consider and approve a proposed Scheme of Amalgamation involving multiple transferor companies and a transferee company. The share exchange ratios mentioned in the application were derived from a Valuation Report dated 16th August, 2014. However, discrepancies were noted in the adoption of these ratios, leading to errors in the application. The second, third, fourth, and fifth share exchange ratios mentioned in the valuation report were incorrectly applied to different transferor companies in the application. Specifically, the fourth share exchange ratio intended for one company was erroneously stated for another in the Scheme. This error resulted in misrepresentation of the entitlement of shareholders in the proposed amalgamation.

The court highlighted that despite the transferor companies being wholly owned subsidiaries of the transferee company, presenting incorrect facts in the application was not justified. The court observed that the application was drafted in a casual manner and required a thorough review to rectify the discrepancies. Consequently, the learned counsel representing the applicants was directed to submit an affidavit clarifying the identified errors within two weeks. The matter was scheduled for re-notification on 26th February, 2015 to address the discrepancies and ensure the accuracy of the application before further proceedings.