2013 (1) TMI 173 - HC - Companies Law

Companies Act Scheme of Arrangement Approval: Shareholders & Creditors Meetings Process

The court approved the joint Application under Sections 391 and 394 of the Companies Act, 1956 for a Scheme of Arrangement involving two companies. ... Scheme of Arrangement - Demerger - Held that:- No proceedings under sections 235 to 251 of the Companies Act, 1956 are pending against any of the Applicant Companies as on the date of the present Application. The proposed Scheme has been approved by the Board of Directors of both the Applicant Companies - Consent accorded from Shareholders, Secured and Un-secured Creditors of the Applicant Companies. In view of the written consents/ NOC given by 99.97% of the Equity Shareholders of Applicant Company –I representing majority in number and more than 3/4th in value of the total Equity Shareholders, the requirement of convening meeting of Equity Shareholders has been dispensed with - Copy of the certificate confirming the pre and post demerger net worth of HCLSS/Applicant Company-I and HCLT/Applicant Company-II, duly certified by PRYD Associates, Chartered Accountants, have also been enclosed with the Application for convening the meeting of the Unsecured Creditors of the Applicant Company. On becoming the unsecured creditors of Applicant Company-II, the unsecured creditors of Applicant Company –I shall be benefitted with a better liquidity position in comparison to the liquidity position they were previously enjoying as the unsecured creditors of HCLSS/Applicant Company –I - the proposed Scheme will not affect the rights of the unsecured creditors of Applicant Company-II as no sacrifice or waiver is called from them. Separate meetings of Secured Creditors of the Applicant Company –I and Equity Shareholders, Secured Creditors of Applicant Company –II are proposed to be held under the supervision of this Court on 19th day of January 2013 at 10:30 A.M. to headed by appointed Chairperson and Alternate Chairperson - advertisements & Individual notices shall be published/send minimum 21 days in advance - Voting by proxy is permitted - Qrom fixed - Chairman/Alternate Chairman shall file their reports within 2 weeks of the conclusion of the respective meetings. Issues:1. Application under Sections 391 and 394 of the Companies Act, 1956 for Scheme of Arrangement.2. Dispensation of requirement for convening meetings of shareholders and creditors.3. Approval of proposed Scheme by the Board of Directors.4. Consent obtained from shareholders and creditors.5. Appointment of Chairpersons for meetings.6. Quorum requirements for different categories of creditors and shareholders.7. Voting by proxy and filing of reports by Chairpersons.Analysis:1. The judgment pertains to a joint Application under Sections 391 and 394 of the Companies Act, 1956 for a Scheme of Arrangement involving two companies. The Scheme has been approved by the Board of Directors of both companies, and details regarding their capital structure and incorporation have been provided.2. The Application seeks dispensation of the requirement for convening meetings of Equity Shareholders and Unsecured Creditors of one company based on written consents obtained from a significant majority. The reasons for dispensation include the financial positions post-demerger and the benefits to creditors.3. The judgment outlines the consents obtained from different categories of shareholders and creditors, along with the proposed meetings to be supervised by the Court for Secured Creditors and Equity Shareholders of the involved companies.4. Chairpersons and Alternate Chairpersons are appointed for the proposed meetings, with specific fees allocated for their services. Secretarial assistance is also arranged for the smooth conduct of the meetings.5. Quorum requirements for different categories of creditors and shareholders are specified, along with provisions for adjournment if quorum is not met, and the treatment of present persons as proper quorum in such cases.6. The judgment allows voting by proxy subject to prescribed form and filing requirements, with a timeline for submission. The Chairpersons are directed to file their reports within two weeks of the conclusion of the respective meetings.7. The Application is allowed in the specified terms, with an order for Dasti. The judgment ensures compliance with legal procedures and safeguards the interests of shareholders and creditors involved in the Scheme of Arrangement.