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2022 (10) TMI 744 - AT - Companies LawScheme of arrangement - Direction to Appellant Company to convene its Shareholders meeting in the matter of scheme of arrangement - Sections 230 to 232 of the Companies Act, 2013. Whether in a case where there is a scheme of arrangement between the wholly owned subsidiary and the holding company, and whether the meeting of the shareholders / creditors of the holding company or Transferee Company can be dispensed with, since in case there is no dilution in the shareholding of the shareholders of the Transferee Company and even post amalgamation the net-worth of the Transferee Company remain highly positive? HELD THAT - It is an admitted fact that the Appellant is a Transferee Company and the Transferor Companies are wholly-owned subsidiary of the Appellant Company. The total shareholding i.e. (100% shares) of Transferor Companies are held by the Transferee Company. In the affidavit, the Appellant categorically mentioned that post amalgamation the net-worth of the Transferee Company will remain highly positive and the proposed scheme of arrangement will not result in any dilution in the shareholding of the shareholders of the Transferee Company. The rights of the shareholders of the Transferee Company are not affected as the proposed scheme does not involve any reorganisation in either the shareholding or debt position of the Transferee Company. This Tribunal considering the submissions of the Appellant that the Appellant Company is a holding company and no new shares are being issued, the rights of the shareholders of the Appellant Company are not affected, the scheme does not involve reorganisation of the share capital and the net-worth of the Appellant Company post amalgamation would remain highly positive - this Tribunal is of the view that the NCLT erred in not considering the decisions of this Tribunal which forms judicial precedents. We are of the view that rejecting the prayer of the of the Appellant is non-est and without application of mind. Appeal allowed.
Issues Involved:
1. Dispensation of the meeting of shareholders of the Transferor Companies. 2. Dispensation of the meeting of secured and unsecured creditors of the Transferor Companies. 3. Dispensation of the meeting of shareholders of the Transferee Company. 4. Consideration of judicial precedents in similar cases. Detailed Analysis: 1. Dispensation of the meeting of shareholders of the Transferor Companies: The NCLT dispensed with the convening of the meeting of shareholders of the Transferor Companies. It was observed that the consent affidavits of the shareholders had been obtained and placed on record, thus eliminating the necessity for convening and holding the meetings. 2. Dispensation of the meeting of secured and unsecured creditors of the Transferor Companies: The NCLT noted that there were no secured creditors for the Transferor Companies, hence, the requirement for convening and holding a meeting did not arise. For unsecured creditors, the consent affidavits were already placed on record, and thus, the necessity of convening and holding a meeting was also dispensed with. 3. Dispensation of the meeting of shareholders of the Transferee Company: The NCLT directed the Transferee Company to convene the meeting of its shareholders, despite the fact that 5 out of 6 shareholders had given their consent. The Tribunal did not accept the prayer to dispense with the meeting as not all shareholders had consented. The Appellant argued that since the Transferor Companies are wholly owned subsidiaries of the Transferee Company, and 100% of the share capital of the Transferor Companies is held by the Transferee Company, no new shares are required to be issued or allotted as consideration from the proposed amalgamation. The proposed scheme of arrangement would not result in any dilution in the shareholding of the shareholders of the Transferee Company, and the financial position of the Transferee Company would remain highly positive post-amalgamation. 4. Consideration of judicial precedents in similar cases: The Tribunal referred to several judicial precedents, including decisions from the Hon'ble High Courts and this Tribunal, which held that in cases of merger/amalgamation of a wholly owned subsidiary and its parent company, the meetings of the creditors/shareholders can be dispensed with. These precedents include: - *In re-Ambuja Cements Ltd.*: The Tribunal dispensed with the meetings of equity shareholders, secured and unsecured creditors. - *Mohit Agro Commodities Processing Pvt. Ltd.*: The Tribunal allowed the appeal by dispensing with the convening of the meetings. - *Mahaamba Investment Ltd. Vs. IDI Limited*: The Hon'ble High Court of Bombay held that filing a separate petition by the Transferee Company is not necessary. - *MASTERJI METALLOYS PVT. LTD. with GOODLUCK STEEL TUBES LTD.*: The Hon'ble High Court of Delhi dispensed with the requirement to convene meetings of shareholders and creditors. - *SHILPI CABLETRONICS LTD. & ORS.*: The Hon'ble High Court of Delhi dispensed with the convening of meetings of shareholders and creditors. The Tribunal emphasized that the NCLT failed to consider these judicial precedents and the decisions of this Tribunal, which form judicial precedents. The Tribunal cited the Hon'ble Supreme Court's observation that precedent law must be followed by all concerned, and deviation from the same should only be on a procedure known to law. Conclusion: The Tribunal concluded that the NCLT erred in not considering the decisions of this Tribunal and judicial precedents. The Tribunal held that the Appellant had made out a prima facie case for interference with the order passed by the NCLT. Consequently, the order passed by the NCLT dated 08.06.2022 was set aside, and the convening meeting of shareholders of the Transferee Company was dispensed with. The Company Appeal (AT) No. 147 of 2022 was allowed, with no order as to costs, and any pending applications were closed.
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