2016 (4) TMI 1413 - HC - Companies Law

High Court directs Company to convene shareholder meeting for Scheme of Arrangement

The Bombay High Court ordered the Applicant Company to convene a meeting for equity shareholders to consider and approve a Scheme of Arrangement, ... Convening of court convened meeting of equity shareholders - statutory notice period of 21 clear days for meeting and dispatch requirements - remote e voting facility in compliance with Regulation 44 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 - compliance with Companies (Management and Administration) Rules, 2014 as amended and Secretarial Standard on General Meetings (SS2) - dispensation of publication in the Maharashtra Government Gazette - dispensation of settling and approving forms and advertisements by the Company Registrar of the Court - appointment and powers of the chairman to conduct the meeting and ascertain voting including poll - quorum and proxy filing requirements for court convened shareholder meeting - obligation of chairman to file affidavit before meeting and to report results to the Court - non existence of secured creditors and dispensation of meeting of unsecured creditors with undertakings to notify major unsecured creditorsConvening of court convened meeting of equity shareholders - statutory notice period of 21 clear days for meeting and dispatch requirements - Directions for convening and conduct of the court convened meeting of equity shareholders and service of notices - HELD THAT: - The Court directed that a meeting of the equity shareholders be convened at the registered office on 30 June 2016 and stipulated that at least 21 clear days before the meeting the notice indicating day, date, place, time, instructions regarding e voting, together with the Scheme of Arrangement, the Explanatory Statement required under Section 393 of the Companies Act, 1956 and the prescribed form of proxy, shall be sent by Registered Post/Speed Post/Airmail to each equity shareholder at their registered or last known address. The Applicant Company undertook to issue the notice, Explanatory Statement and form of proxy in the respective prescribed Forms under the Companies (Court) Rules, 1959, and the Court accepted those undertakings.The Court ordered the convening of the meeting and directed compliance with the 21 clear days notice and dispatch requirements, accepting the Applicant Company's undertakings as to the form and content of notices and related documents.Remote e voting facility in compliance with Regulation 44 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 - compliance with Companies (Management and Administration) Rules, 2014 as amended and Secretarial Standard on General Meetings (SS2) - Provision and conduct of e voting for the shareholder meeting - HELD THAT: - Recognising Regulation 44(1) of the Listing Regulations, the Court allowed equity shareholders to avail e voting (including remote e voting and e voting at the venue via tablet/computer). The e voting facility was directed to be provided in compliance with the conditions specified under the Companies (Management and Administration) Rules, 2014 as substituted by the 2015 Amendment Rules, Regulation 44 of the Listing Regulations and SS2 issued by the Institute of Company Secretaries of India.The Applicant Company was permitted and directed to provide e voting in conformity with the cited regulatory and procedural standards.Dispensation of publication in the Maharashtra Government Gazette - dispensation of settling and approving forms and advertisements by the Company Registrar of the Court - Dispensation of certain publication and administrative formalities - HELD THAT: - The Court dispensed with the requirement to publish the notice in the Maharashtra Government Gazette. It also dispensed with the formal settlement and approval by the Company Registrar of this Court of the advertisement, form of proxy, notice and the Statement required under Section 393, on the basis of the undertakings given by the Applicant Company to issue the notice and related documents in the prescribed Forms under the Companies (Court) Rules, 1959.Publication in the Government Gazette and settlement/approval by the Company Registrar were dispensed with; the Applicant Company's undertakings were accepted in lieu.Appointment and powers of the chairman to conduct the meeting and ascertain voting including poll - quorum and proxy filing requirements for court convened shareholder meeting - Chairman, quorum, proxy rules and powers to decide procedural questions and disputed entries - HELD THAT: - The Court appointed a succession of officers as Chairman for the meeting and directed that the Chairman have all powers under the Articles and the Companies (Court) Rules, 1959 to conduct the meeting, including deciding procedural questions, dealing with amendments to the Scheme or resolutions proposed at the meeting, and ascertaining the sense of the meeting by a poll. The quorum was fixed at 30 equity shareholders present in person. Voting by proxy or authorised representative was permitted provided the proxy/authorization in prescribed form, duly signed, is filed at the registered office not later than 48 hours before the meeting. Where entries in the Company's records as to number and value of shares are disputed, the Chairman shall determine the number/value for meeting purposes and his decision shall be final.The Court fixed the quorum and proxy filing timeline, vested the Chairman with broad powers including to determine disputed share entries and to ascertain voting by poll.Obligation of chairman to file affidavit before meeting and to report results to the Court - Pre meeting and post meeting reporting duties of the Chairman to the Court - HELD THAT: - The Court directed the Chairman to file an affidavit not less than seven days before the meeting reporting compliance with directions regarding the issue of notice and advertisement. The Chairman was also directed to report the result of the meeting to the Court within thirty days of conclusion of the meeting and to verify that report by affidavit.The Chairman was ordered to file the pre meeting affidavit seven days prior and to report meeting results within thirty days, both verified by affidavit.Non existence of secured creditors and dispensation of meeting of unsecured creditors with undertakings to notify major unsecured creditors - Dispensation of meetings of secured and unsecured creditors and undertakings regarding unsecured creditors - HELD THAT: - On the Applicant Company's affidavit stating there are no secured creditors, the Court held that convening a meeting of secured creditors did not arise. Further, on the averments that the Scheme is not prejudicial to unsecured creditors and does not compromise or extinguish their liabilities, the Court dispensed with convening a meeting of unsecured creditors. The Applicant Company undertook to give individual notice of the date of hearing of the Company Scheme Petition to unsecured creditors whose outstanding amounts exceed INR 2,50,00,000 and to publish notice of the date of hearing once each in the Free Press Journal (Mumbai edition) in English and Navshakti (Mumbai edition) in Marathi; those undertakings were accepted.Meetings of secured and unsecured creditors were dispensed with; the Applicant Company's undertakings to notify major unsecured creditors individually and to publish the hearing date were accepted.Final Conclusion: The Court ordered convening of the equity shareholders meeting on 30 June 2016 with directions on notice, e voting, quorum, proxy, chairman's powers and reporting obligations, dispensed with specified publication and creditor meetings on the stated grounds, and accepted the Applicant Company's undertakings in respect of notices, documents and creditor notifications. Issues:Convening and holding a meeting of equity shareholders to approve the Scheme of Arrangement. Providing e-voting facility for shareholders. Sending notices and instructions for the meeting. Appointment of Chairman for the meeting. Determining quorum and allowing voting by proxy. Handling disputes regarding equity shares. Filing of Affidavit and reporting to the Court. Exemption from convening meetings of secured and unsecured creditors.Analysis:The judgment by the Bombay High Court involves various issues related to the convening and conduct of a meeting of equity shareholders to approve a Scheme of Arrangement. The Court ordered the Applicant Company to convene a meeting at its registered office for shareholders to consider and approve the proposed scheme. The Company was directed to provide e-voting facilities in compliance with SEBI regulations, allowing shareholders to vote remotely. Notices with all relevant details, including e-voting instructions, were to be sent to shareholders well in advance.The Court dispensed with the requirement to publish notices in the Maharashtra Government Gazette. The Company was exempted from certain administrative formalities like settling the form of advertisement, proxy, and notice, with the Applicant Company undertaking to fulfill these requirements. The judgment specified the Chairman for the shareholders' meeting and granted them powers in line with the Articles of Association and relevant rules.Regarding the meeting itself, the judgment set the quorum at 30 equity shareholders and allowed voting by proxy if the necessary forms were filed within the stipulated time frame. Disputes over the number and value of equity shares were to be resolved by the Chairman of the meeting, whose decision would be final. The Chairman was required to file an Affidavit before the meeting and report the meeting's outcome to the Court within thirty days.The judgment also addressed the absence of secured creditors and the dispensation of the meeting for unsecured creditors due to the Scheme not affecting their interests. The Company undertook to notify unsecured creditors individually and publish notices as required. Overall, the judgment outlined detailed procedures and requirements for convening and conducting the shareholders' meeting, ensuring compliance with legal and regulatory obligations while safeguarding the interests of all stakeholders involved.