Delhi High Court Approves Companies Act Scheme of Arrangement

The Delhi High Court granted approval for the Scheme of Arrangement under Sections 391 and 394 of the Companies Act, 1956, involving Madhusudan Auto Limited and Strong Vintrade Private Limited. The Court dispensed with the need for meetings of equity shareholders, secured creditors, and unsecured creditors due to obtained consents and no objection certificates. With the majority of creditors consenting to the Scheme, including the Transferor Company's 42 unsecured creditors and 1 unsecured debenture holder, and the Transferee Company's 1 unsecured creditor, the Court allowed the application as presented, with immediate effect.

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Issues:
Application under Sections 391 and 394 of the Companies Act, 1956 for Scheme of Arrangement of two companies.

Analysis:
The judgment pertains to a joint application filed under Sections 391 and 394 of the Companies Act, 1956 for a Scheme of Arrangement involving a Transferor Company and a Transferee Company. The Applicant Companies, Madhusudan Auto Limited and Strong Vintrade Private Limited, are seeking approval for the proposed Scheme. The registered offices of both companies are within the jurisdiction of the Delhi High Court. The application includes details of the incorporation dates, capital structure, and relationship between the companies, stating that the Transferee Company is a wholly owned subsidiary of the Transferor Company. The application also provides copies of the Memorandum of Association, Articles of Association, and audited annual accounts for the companies.

The Board of Directors of the Applicant Companies has approved the proposed Scheme, and the application confirms that no proceedings under Sections 235 to 251 of the Act are pending against either company. The application includes details of shareholders, secured creditors, unsecured creditors, and unsecured debenture holders of both companies, along with consents obtained for the proposed Scheme. Notably, the application requests dispensation of the requirement to convene meetings of equity shareholders, secured creditors, and unsecured creditors based on the consents received.

The Transferor Company has 42 unsecured creditors and 1 unsecured debenture holder, with a significant majority providing their consent to the Scheme. Similarly, the Transferee Company has 1 unsecured creditor who has given consent. Given the consents obtained and the no objection certificates from relevant parties, the Court dispenses with the requirement to convene meetings of equity shareholders, secured creditors, and unsecured creditors. As there are no secured creditors in the Transferee Company, the judgment allows the application in the terms presented, with orders for immediate action.

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