Shareholder & Creditor Meetings Directions for Scheme Approval: Compliance & Procedures

The Court issued directions for convening separate meetings of shareholders and creditors of the applicant companies to consider and approve the proposed scheme of arrangement. Notices were to be published in specified newspapers, and compliance with SEBI guidelines and listing agreements was required. Meetings of certain applicant companies were dispensed with, and a Chairman was appointed for the scheduled meetings. Quorum and proxy voting rules were established, and the Chairman was tasked with reporting the meeting results to the Court. The application was disposed of with the outlined directions to ensure a compliant approval process for the scheme of arrangement.

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Issues Involved:
1. Method of convening, holding, and conducting meetings of shareholders and creditors.
2. Notices and advertisements for the meetings.
3. Approval and modification of the scheme of arrangement.
4. Dispensation of meetings for certain applicant companies.
5. Compliance with SEBI guidelines and listing agreements.
6. Appointment of a Chairman for the meetings.
7. Quorum and proxy voting for the meetings.
8. Reporting the results of the meetings to the Court.

Issue-wise Detailed Analysis:

1. Method of Convening, Holding, and Conducting Meetings:
The applicants filed an application under sections 391 and 394 of the Companies Act, 1956, seeking directions on the method of convening, holding, and conducting meetings of shareholders and creditors of the applicant companies. The Court ordered separate meetings for the shareholders and unsecured creditors of applicant-company No. 1 and the secured and unsecured creditors of applicant-company No. 2 to consider and approve the proposed scheme of arrangement.

2. Notices and Advertisements for the Meetings:
The Court directed that at least 21 clear days before the scheduled meetings, an advertisement convening the meetings should be published in the Hindi newspaper 'Rajasthan Patrika' (Jaipur Edition) and the English newspaper 'Times of India' (Jaipur Edition). Additionally, a notice convening the meetings, along with the scheme of arrangement, the statement required under section 393 of the Act, and the prescribed form of proxy, should be sent by prepaid post to each shareholder and creditor.

3. Approval and Modification of the Scheme of Arrangement:
The composite scheme of arrangement, pursuant to sections 391 to 394 of the Act, 1956, was proposed to address the divergence in operations and growth avenues of the manufacturing and telephony services. The scheme aimed to reduce duplicity in costs, provide flexibility and liquidity to shareholders, and reflect the benefits of subsidiary operations directly in the performance of applicant-company No. 1. The scheme was divided into four parts and included various consequential matters.

4. Dispensation of Meetings for Certain Applicant Companies:
Considering that applicant-company Nos. 2 and 3 are wholly owned subsidiaries of applicant-company No. 1, the Court dispensed with the meetings of their shareholders. The creditors of applicant-company No. 3 were not affected by the scheme, so their meeting was also dispensed with. Applicant-company No. 4's shareholders and five unsecured creditors had already given their consent in writing, so their meetings were dispensed with as well.

5. Compliance with SEBI Guidelines and Listing Agreements:
Applicant-company No. 1, being a listed company, submitted the scheme to the National Stock Exchange and the Bombay Stock Exchange. The Bombay Stock Exchange conveyed its no objection, subject to compliance with SEBI (DIP) Guidelines and the listing agreement. Applicant-company No. 1 undertook to meet the requirement of keeping the non-promoter holding as required under SEBI guidelines by issuing further shares to prospective investors.

6. Appointment of a Chairman for the Meetings:
The Court appointed Shri Manoj Pareek, Advocate, Rajasthan High Court Bench, Jaipur, as the Chairman for the meetings scheduled on 30th September 2005. The applicant companies were directed to deposit Rs. 44,000 towards the Chairman's remuneration and bear his conveyance expenses.

7. Quorum and Proxy Voting for the Meetings:
The quorum for the meetings was to be as per the provisions of the Act, 1956. Voting by proxy was permitted, provided that a duly signed proxy form was filed with the applicant companies not later than forty-eight hours before the meetings.

8. Reporting the Results of the Meetings to the Court:
The Chairman was ordered to report the results of the meetings to the Court within seven days of their conclusion, and the reports were to be verified by his affidavit.

Conclusion:
The application was disposed of with the above directions, ensuring that the proposed scheme of arrangement could be considered and approved in an orderly and compliant manner, with opportunities for objections from shareholders and creditors during the approval process.

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