2017 (2) TMI 1052 - HC - Companies Law

Approval Without Meetings: Companies Act Scheme Disposal

The Court, applying Sections 391 and 394 of the Companies Act, 1956, and Rule 9 of the Companies (Court) Rules, 1959, dispensed with the need for meetings ... Scheme of Amalgamation - Held that:- It has been stated in the present application that no proceedings, as on date of filing of the present application, under Sections 235 to 251 of the Act or the applicable provisions of the Companies Act, 2013 are pending against the Applicant Companies. The Board of Directors of the Applicant Companies in their separate meetings held on 25.05.2016 and 03.06.2016 have unanimously approved the proposed scheme. Copies of the resolutions passed at the meetings of the Board of Directors of the Applicant Companies have been placed on record. Each of the Applicant Companies has 03 equity shareholders. All the equity shareholders of the Applicant Companies have given their written consent/NOC to the proposed scheme. Their written consent/NOC has been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meeting of the equity shareholders of the Applicant Companies to consider and, if thought fit, approve, with or without modification, the proposed scheme is dispensed with. There are no secured and unsecured creditors of the Transferor Companies; therefore the question of requirement of convening meetings thereof does not arise. The Transferee Company has 05 secured creditors. All the secured creditors of the Transferee Company have given their written consent/NOC to the proposed scheme. Their written consent/NOC has been placed on record. They have been examined and found in order. In view thereof, the requirement of convening the meeting of the secured creditors of the Transferee Company to consider and, if thought fit, approve, with or without modification, the proposed scheme is dispensed with. The Transferee Company has 62 unsecured creditors. 59 out of the 62 unsecured creditors (representing 85% of unsecured debt) of the Transferee Company have given their written consent/NOC to the proposed scheme. Their written consent/NOC has been placed on record. They have been examined and found in order. The requirement of convening the meeting of the unsecured creditors of the Transferee Company to consider and, if thought fit, approve, with or without modification, the proposed scheme is dispensed with. Issues:Application under Sections 391 and 394 of the Companies Act, 1956 for directions to dispense with meetings of shareholders and creditors to consider Scheme of Amalgamation.Analysis:The application sought directions under Sections 391 and 394 of the Companies Act, 1956, along with Rule 9 of the Companies (Court) Rules, 1959, to dispense with the requirement of convening meetings of shareholders and creditors for the proposed Scheme of Amalgamation between three companies. The Applicant Companies, including two Transferor Companies and one Transferee Company, detailed their incorporation dates, authorized share capital, and current shareholding structures. The reasons justifying the proposed amalgamation included enhancing business opportunities, common directorship, increased financial strength, pooling of expertise, and cost reduction. The share exchange ratio for the Transferee Company to issue shares to shareholders of the Transferor Companies was outlined in the scheme. The Board of Directors of the Applicant Companies unanimously approved the scheme, and all equity shareholders provided written consent.The application confirmed the absence of pending proceedings under relevant sections of the Act against the Applicant Companies. Both secured and unsecured creditors of the Transferor Companies and the Transferee Company provided written consent to the proposed scheme, with details of their approval recorded. The application highlighted the discretionary power of the Court under section 391(1) of the Act to dispense with meetings if consent is obtained outside a meeting. Citing a previous decision, the Court dispensed with the requirement of convening meetings of creditors and members, including unsecured creditors, based on their consent to the scheme. Consequently, the Court allowed the application in the terms presented and disposed of the matter accordingly.