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TMI Blog2023 (7) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... her there is any reorganization of the shareholding structure of the RIL. In Section 232(1) of the Companies Act it is left to the discretion of the Tribunal, as the word used is may , regarding the holding of meeting of the creditors or class of creditors or members or class of members in the manner directed by the Tribunal - this discretion given in section 232(1) to the Tribunal has been interpreted by Hon ble Bombay High Court in the matter of Mahaamba Investments Limited [ 2001 (1) TMI 904 - HIGH COURT OF BOMBAY] and Eurokids India Pvt. Ltd. [ 2014 (12) TMI 1380 - BOMBAY HIGH COURT] and also by this Tribunal in the matter of Patel Hydro Power Private Limited [ 2021 (12) TMI 967 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL , PRINCIPAL BENCH , NEW DELHI] that if the Transferor Company is wholly owned subsidiary of the Transferee Company and there is no reorganization of the share capital of Transferee Company and the creditors and shareholders of the Transferee Company are not affected by the implementation of the Scheme as the assets of the Transferee Company and the Transferor Company far exceed their liabilities, the requirement for holding meetings of the shareholders, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ninety percent of value of total Equity Shareholders or to hold meeting virtually/physically of the Equity Shareholders as per section 230(1) of The Companies Act, 2013 before the final hearing. This order of the NCLT was passed on an application made by the Appellant Company Reliance Industries Limited (in short RIL ) on a proposed Scheme of Arrangement between Reliance Projects Property Management Services Limited (in short RPPMSL ), which is the Demerged Company and its shareholders and creditors, and RIL (which is referred to as the Resulting Company ) and its shareholders and creditors under sections 230 to 232 and other relevant provisions of the Companies Act. 3. The Appellant has stated in the appeal and argued that the above-mentioned Scheme of Arrangement (in short the Scheme ) proposes the demerger/transfer and vesting of the Digital EPC and Infrastructure Business from the Demerged Company RPPMSL into the Applicant company RIL on a going concern basis in accordance with the provisions of section 2(19AA) of the Income-Tax Act, 1961. The Appellant has further stated that the Demerged Company RPPMSL is a wholly-owned subsidiary of the Appellant Company RIL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Scheme of Arrangement was to take place. Hence, by order dated 4.7.2023 of this Bench, the Appellant was directed to implead the ROC as respondent, and the ROC, after being impleaded as respondent, filed his reply after due notice. 7. We heard the arguments advanced by the Learned Senior Counsel of Appellant and the Learned Counsel for ROC and perused the record with their able assistance. 8. The Learned Senior Counsel for the Appellant has submitted that RPPMSL is a wholly-owned subsidiary of RIL and its financial details appear in the balance-sheet of holding company RIL. He has further submitted that the boards of RIL and RPPMSL have approved the proposed Scheme for demerger of the EPC Undertaking on a going concern basis from RPPMSL into RIL under sections 230 to 232 and other applicable provisions of the Companies act, 2013. He has further submitted that no consideration is proposed to be paid by RIL to RPPMSL under the Scheme, and after implementation of the Scheme, RPPMSL will continue to carry on its remaining business. 9. The Learned Senior Counsel for Appellant has further submitted that RIL had filed a Company Application before the Hon ble NCLT, Mumbai seekin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uja Cements Limited in Company Appeal (AT) No. 19 of 2021. 12. The Learned Senior Counsel for Appellant has clarified that in the judgment in the matter of Mahaamba Investments Limited (supra), the Hon ble Bombay High Court has taken note of the fact that where no new shares were sought to be issued to the members of the transferor-company by the transferee-company, the scheme would not affect the members of transferee-company, and when the scheme/company application includes such a condition, and also when the assets are in excess over liabilities in the case of transferee company, there may not be any need for filing of a separate petition by the transferee company. The relevant portion of this judgment is reproduced below:- 5. In the present case, having regard to the relevant clauses of the proposed scheme and particularly the provision whereby no new shares are sought to be issued to the members of the transferor-company by the transferee-company, the scheme will not affect the members of the transferee-company. The creditors of the transferee-company are not likely to be affected by the scheme in view of the financial position of the transferee-company. In paragraphs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hs 9 and 12 of the Impugned Order, wherein after noting that the proposed Scheme does not adversely affect the rights and interests of equity shareholders and the creditors of the Appellant Company RIL and that the assets of the Demerged Company exceed its liabilities, and will be sufficient to meet its liabilities, and also that the assets of the Appellant Company exceed its liabilities and would be sufficient to discharge such liabilities in the ordinary course of business, a direction has been given that the Appellant Company should also obtain consent affidavits of at least ninety percent of the value of secured creditors as required under section 230(9) of the Companies Act, and this direction is not based on any cogent reasoning. He has further argued that, after order of this Hon ble Tribunal impleading the ROC, he has filed a reply affidavit, wherein the judgments in the matter of Mahaamba Investments Limited (supra) and Patel Hydro Power Private Limited (supra) have been noted and no explicit objection has been raised if dispensing with the convening of meetings of equity shareholders, secured and unsecured creditors of RIL is granted. In the light of his detailed argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h hereby directs the Applicant Company to obtain consent affidavits of at least ninety percent of value of total Secured Creditors as per Section 230(9) of the Companies Act, 2013 or to hold meeting of the Secured Creditors as per Section 23016) of the Companies Act, 2013 before the final hearing in view of huge credit exposure. Further this Bench directs to the Applicant Company to serve notice to all their respective Unsecured Creditors, by Registered Post-AD/Speed Post, and email-ids, if available with Applicant Companies and in case the e-mail ids are not available, by way of registered post acknowledge due enclosing a copy of Scheme, with instructions that they may submit their representations, if any, to the Tribunal within a period of 30 days from the date of receipt of such notice and copy of such representations shall simultaneously be served upon the Applicant Companies. It shall be the responsibility of the Applicant Companies to ensure that every Unsecured Creditor is put on notice regarding the Scheme, so that they may take an informed decision thereon and file consent affidavit of all Unsecured Creditors at the time of Filing of Company Petition. 19. For ease of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable, of the company by a registered valuer. (3) Where a meeting is proposed to be called in pursuance of an order of the Tribunal under subsection (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to all the members or class of members and the debenture-holders of the company, individually at the address registered with the company which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed: Provided that such notice and other documents shall also be placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the Securities and Exchange board and stock exchange where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... butories of the company. (7) An order made by the Tribunal under sub-section (6) shall provide for all or any of the following matters, namely:- (a) where the compromise or arrangement provides for conversion of preference shares into equity shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable; (b) the protection of any class of creditors; (c) if the compromise or arrangement results in the variation of the shareholders' rights, it shall be given effect to under the provisions section 48; (d) if the compromise or arrangement is agreed to by the creditors under subsection (6), any proceedings pending before the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) shall abate; (e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the terms of the compromise or arrangement: Provided that no compromise or arrangement shall be sancti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a separate petition by the transferee company is not necessary, in the facts and circumstances of the present case. 22. Also, in the matter of Eurokids India Pvt. Ltd. (C.S.D.No. 911 of 2014), the Hon ble High Court of Bombay has observed as follows:- The Applicant Company is Wholly Owned Subsidiary of the Transferee Company and there is no reorganization of share capital of the Transferee Company and no new shares are being issued by the Transferee Company as all shares will be cancelled as per Clause 5 of the Scheme and rights of creditors of Transferee Company are not affected as mention in para 19 of the Affidavit in support of Summons for Direction and also in view of observations made by this court in Mahaamba Investment Ltd. v. IDI Ltd. (2001) 105 Comp Cas 16 to 18, the filing of separate Company Summons for Direction and Company Scheme Petition under Section 391 and 394 of the Companies Act, 1956 by Eurokids International Private Limited, the Transferee Company is dispensed with. (Emphasis Supplied) 23. We note that in Section 232(1) of the Companies Act it is left to the discretion of the Tribunal, as the word used is may , regarding the holding of m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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