Merger Procedural Compliance for Applicant Companies under Tribunal Directive

The Tribunal directed the Applicant Companies to comply with procedural requirements for the Scheme of Merger, including convening meetings, issuing notices, and reporting compliance. The merger aims to streamline operations and reduce costs without affecting the rights of shareholders or creditors. No issuance of shares or change in equity share capital post-merger is allowed, and no meetings of shareholders or creditors of the Transferee Company are required.

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Issues Involved:
1. Scheme of Merger (by absorption) of wholly owned subsidiaries with the holding company.
2. Rationale for the Scheme of Merger.
3. Separate application by Transferor Company 4 in NCLT, Ahmedabad.
4. Convening meetings of Equity Shareholders of Applicant Companies.
5. Issuance of notices and advertisement for meetings.
6. Appointment of Chairpersons and Scrutinizers for meetings.
7. Quorum and voting by proxy.
8. Reporting compliance to the Tribunal.
9. Service of notice to regulatory authorities and creditors.
10. No issuance of shares or change in equity share capital post-merger.
11. No requirement for meetings of shareholders and creditors of the Transferee Company.

Issue-wise Detailed Analysis:

1. Scheme of Merger (by absorption) of wholly owned subsidiaries with the holding company:
The judgment addresses the Scheme of Merger (by absorption) involving Dolvi Minerals & Metals Private Limited, Dolvi Coke Projects Limited, JSW Steel Processing Centres Limited, and JSW Steel (Salav) Limited with JSW Steel Limited under Sections 230 to 232 of the Companies Act, 2013. The Counsel for the Applicants stated that the Transferor Companies are wholly owned subsidiaries of the Transferee Company.

2. Rationale for the Scheme of Merger:
The rationale for the merger includes operational synergies, a streamlined group structure, reduced legal and regulatory compliances, elimination of duplicative communication efforts, rationalization of costs, and reduced time for financial consolidation at the group level.

3. Separate application by Transferor Company 4 in NCLT, Ahmedabad:
The registered office of Transferor Company 4, JSW Steel (Salav) Limited, is in Ahmedabad, Gujarat, and has filed a separate Company Application before NCLT, Ahmedabad Bench for sanction of the Scheme of Merger.

4. Convening meetings of Equity Shareholders of Applicant Companies:
The Tribunal ordered the convening of meetings of the Equity Shareholders of the First, Second, and Third Applicant Companies on 15th February 2019 at specified times and locations for the purpose of considering and approving the proposed Scheme of Merger.

5. Issuance of notices and advertisement for meetings:
Notices convening the meetings, along with a copy of the Scheme and required disclosures, should be sent to each Equity Shareholder at least one month before the meeting. Additionally, notices should be published in two local newspapers, "Free Press Journal" in English and "Navshakti" in Marathi, circulated in Mumbai.

6. Appointment of Chairpersons and Scrutinizers for meetings:
The Tribunal appointed specific individuals as Chairpersons and Mr. Sunil Agarwal as the Scrutinizer for the meetings of the First, Second, and Third Applicant Companies.

7. Quorum and voting by proxy:
The quorum for the meetings shall be as prescribed under Section 103 of the Companies Act, 2013. Voting by proxy or authorized representative is permitted, provided the proxy form is filed 48 hours before the meeting.

8. Reporting compliance to the Tribunal:
The Chairpersons are required to file an affidavit at least seven days before the meetings, reporting compliance with the issuance of notices and advertisements. They must also report the results of the meetings to the Tribunal within thirty days of the meetings' conclusion.

9. Service of notice to regulatory authorities and creditors:
The Applicant Companies are directed to serve notices along with the Scheme to the Official Liquidator, concerned Income Tax Authority, Central Government, and Registrar of Companies. If no response is received within thirty days, it will be presumed that there are no objections. Individual notices must also be sent to all creditors with amounts due as of specified dates.

10. No issuance of shares or change in equity share capital post-merger:
As the merger involves wholly owned subsidiaries, no shares will be issued or allotted as consideration. Hence, there will be no change in the equity share capital of the Transferee Company, and the rights of the members and creditors will not be affected.

11. No requirement for meetings of shareholders and creditors of the Transferee Company:
The Counsel for the Transferee Company argued that no meetings of shareholders or creditors are required for the Transferee Company, as there is no reconstruction or arrangement with its shareholders or creditors. The Tribunal accepted this argument based on precedents and directed the Transferee Company to serve notices to regulatory authorities.

Conclusion:
The Tribunal directed the Applicant Companies to comply with the procedural requirements for the Scheme of Merger, including convening meetings, issuing notices, and reporting compliance. The merger aims to streamline operations and reduce costs without affecting the rights of shareholders or creditors.

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