2015 (8) TMI 188 - HC - Companies Law

Scheme of Amalgamation Approved, Shareholder Meetings Dispensed Except for Unsecured Creditors

The court allowed the application, dispensing with meetings for equity shareholders and certain creditors of the transferor companies except for unsecured ... Dispensing with meeting requirement - consent of shareholders and creditors - convening creditors' meeting - quorum for creditors' meeting - proxy rules for creditors' meeting - notice and publication requirements - appointment and duties of chairperson - fee and report of chairperson - board approval of scheme - no share allotment where transferor is wholly owned - territorial jurisdictionDispensing with meeting requirement - consent of shareholders and creditors - Requirement to convene meetings of equity shareholders and secured/unsecured creditors of transferor companies nos.1 to 7 dispensed with where written consents/no objections on record - HELD THAT: - The court examined the written consents/no objections placed on record from the equity shareholders and the secured/unsecured creditors of transferor companies nos.1 to 7, and found them in order. In respect of each transferor company where all requisite classes (equity shareholders and relevant secured or unsecured creditors) had given their written consent or no objection, the court dispensed with the statutory requirement to convene meetings to consider and approve the proposed Scheme of Amalgamation. The court also recorded absence of secured creditors for those transferor companies where so stated as on 31st March, 2015. [Paras 24, 25, 26, 27, 28]Requirement of convening meetings of equity shareholders and secured/unsecured creditors of transferor companies nos.1 to 7 dispensed with as detailed in the order.Convening creditors' meeting - quorum for creditors' meeting - proxy rules for creditors' meeting - notice and publication requirements - appointment and duties of chairperson - fee and report of chairperson - Direction to convene meeting of unsecured creditors of transferor company no.2 on specified date with prescribed quorum, proxy, notice, publication, chairperson appointment, fee and reporting obligations - HELD THAT: - Noting that transferor company no.2 has 366 unsecured creditors, the court directed that a meeting of those unsecured creditors be held on the specified date at the company's registered office. The court prescribed the quorum (50 persons and more than 25% in value of total unsecured debt, with adjournment rules if quorum absent), authorised counting of valid proxies filed at least 48 hours before the meeting for quorum computation, and required service of notices along with the Scheme and the statement under Section 393 at least 21 days prior to the meeting by post and publication in the specified newspapers. The court appointed a Chairperson and Alternate Chairperson to conduct the meeting, empowered them to give directions to ensure the meeting is conducted fairly, fixed the fee for each at the stated amount in addition to incidental expenses, and directed the Chairperson to file his report within two weeks of the meeting. [Paras 29, 30, 31, 32, 33]Meeting of unsecured creditors of transferor company no.2 to be convened and conducted in accordance with the directions recorded, including quorum, proxy, notice, publication, appointment and remuneration of Chairperson and reporting.Board approval of scheme - no share allotment where transferor is wholly owned - Board approvals recorded and share exchange ratio entailing no allotment where transferor companies are wholly owned upheld for purposes of the Scheme - HELD THAT: - The court noted that the Boards of Directors of the transferor companies and the transferee company had unanimously approved the proposed Scheme in their respective meetings and that copies of such resolutions are on record. The Scheme provides that no shares are to be allotted by the transferee where the transferor companies are wholly owned by the transferee or by a transferor that is itself being merged; the court recorded these aspects as placed on record for the purposes of sanction proceedings. [Paras 19, 21]Board approvals and the share-exchange position (no allotment where transferors are wholly owned) recorded and accepted for the purpose of the petition.Territorial jurisdiction - High Court's territorial jurisdiction to entertain petition in respect of transferor companies having registered offices within its jurisdiction noted; transferee's separate application in competent forum to be filed - HELD THAT: - The court observed that the registered offices of the transferor companies are situated in New Delhi and therefore within the jurisdiction of this Court, while the registered office of the transferee company is situated in Telangana outside this Court's jurisdiction. The applicants' counsel stated that a separate application will be filed by the transferee company in the court of competent jurisdiction for sanction of the Scheme in respect of that company. The court proceeded to deal with and allow the application insofar as it concerned the transferor companies within its territorial jurisdiction. [Paras 2]Petition entertained and allowed in respect of transferor companies within this Court's territorial jurisdiction; transferee to apply in competent forum for its part.Final Conclusion: The joint application under Sections 391 and 394 read with the Companies (Court) Rules is allowed: meetings of members and creditors of the transferor companies nos.1 to 7 are dispensed with where written consents/no objections are on record; a meeting of unsecured creditors of transferor company no.2 is directed to be convened and conducted in the terms recorded; and ancillary matters (board approvals, share exchange position, and territorial jurisdiction observations) are noted as set out in the order. Issues Involved:1. Dispensation of meetings for equity shareholders, secured, and unsecured creditors.2. Approval of the Scheme of Amalgamation.3. Jurisdictional considerations.4. Share capital details of transferor companies.5. Consent from shareholders and creditors.6. Convening a meeting for unsecured creditors of transferor company no. 2.Issue-wise Detailed Analysis:1. Dispensation of Meetings for Equity Shareholders, Secured, and Unsecured Creditors:The applicant/transferor companies sought directions to dispense with the requirement of convening meetings of their equity shareholders, secured, and unsecured creditors. The court noted that the equity shareholders and creditors of the transferor companies provided their written consents/no objections to the proposed Scheme of Amalgamation. Consequently, the court dispensed with the requirement of convening these meetings for the transferor companies, except for the unsecured creditors of transferor company no. 2.2. Approval of the Scheme of Amalgamation:The Scheme of Amalgamation involves the merger of multiple transferor companies with a transferee company. The court acknowledged the benefits of the amalgamation, such as leveraging consolidated assets, building a stronger business, and achieving operational synergies. The Scheme was unanimously approved by the Board of Directors of the transferor and transferee companies in their respective meetings.3. Jurisdictional Considerations:The registered offices of the transferor companies are situated within the jurisdiction of the Delhi High Court. However, the registered office of the transferee company is situated in Telangana, outside the jurisdiction of this court. The court noted that a separate application would be filed by the transferee company in the court of competent jurisdiction for sanction of the Scheme of Amalgamation.4. Share Capital Details of Transferor Companies:The judgment detailed the authorized, issued, subscribed, and paid-up share capital of each transferor company. For instance, the transferor company no. 1 has an authorized share capital of Rs. 1,00,000/- divided into 10,000 equity shares of Rs. 10/- each. Similar details were provided for transferor companies no. 2 to 7, reflecting their respective share capital structures.5. Consent from Shareholders and Creditors:The court examined the consents/no objections provided by the equity shareholders and creditors of the transferor companies. These consents were found to be in order, leading to the dispensation of meetings for equity shareholders and unsecured creditors of transferor companies no. 1, 3, 4, 5, 6, and 7. The court also noted that no proceedings under Sections 235 to 251 of the Companies Act, 1956, were pending against the applicant companies.6. Convening a Meeting for Unsecured Creditors of Transferor Company No. 2:The court directed the convening of a meeting for the unsecured creditors of transferor company no. 2 on 5th September 2015. The meeting was to be held at the registered office of the company, with specified quorum requirements. Mr. Y. P. Singh and Ms. Nidhi Tewari were appointed as Chairperson and Alternate Chairperson, respectively, to conduct the meeting. The court provided detailed instructions for the notice of the meeting, including publication requirements and proxy considerations. The Chairperson and Alternate Chairperson were tasked with ensuring the meeting's fairness and were to report back within two weeks of the meeting.Conclusion:The application was allowed in terms of the directions provided, including the dispensation of meetings for certain shareholders and creditors, and the convening of a meeting for the unsecured creditors of transferor company no. 2.