2017 (10) TMI 358 - Tri - Companies Law

Merger exempted from shareholder and creditor meetings under Companies Act, 2013

In Re : Housing Development Finance Corporation Ltd., windermere Properties Pvt. Ltd. Haddock Properties Pvt. Ltd. Grandeur Properties Pvt. Ltd. Winchester Properties Pvt. Ltd. And Pentagram Properties Pvt. Ltd.

In Re : Housing Development Finance Corporation Ltd., windermere Properties Pvt. Ltd. Haddock Properties Pvt. Ltd. Grandeur Properties Pvt. Ltd. ... Issues Involved:1. Whether the holding/transferee company requires undergoing the process laid down in Chapter XV of the Companies Act, 2013.2. The necessity of holding shareholders' and creditors' meetings for the approval of the amalgamation scheme.3. Compliance with the procedural requirements under Sections 230 and 232 of the Companies Act, 2013.4. The applicability of the Mahaamba Ruling to the current case.Detailed Analysis:Issue 1: Whether the holding/transferee company requires undergoing the process laid down in Chapter XV of the Companies Act, 2013.The tribunal examined the necessity for the holding company to undergo the process specified in Chapter XV of the Companies Act, 2013, which deals with compromises, arrangements, and amalgamations. The tribunal noted that the terms 'compromise,' 'arrangement,' and 'amalgamation' have established meanings. Compromise involves mutual concessions to settle differences, while arrangement includes reorganization of share capital. Amalgamation refers to the blending of two or more companies involving merger or reconstruction.The tribunal emphasized that the trigger point for invoking jurisdiction for compromises or arrangements is an application to the Tribunal for ordering a meeting to get approval from the shareholders/creditors. If no change is proposed to any of its members/creditors' rights, then the company does not need to have any compromise or arrangement with its members/creditors.Issue 2: The necessity of holding shareholders' and creditors' meetings for the approval of the amalgamation scheme.The tribunal observed that in the present case, the holding company has 100% shareholding in all the transferor companies, and the net worth of the transferee company is significantly higher than that of the transferor companies. The scheme does not necessitate the issuance of new shares or reorganization of the shareholding or debt position of the holding company. Therefore, there is no need for internal arrangement within the transferee company.The tribunal referred to the Mahaamba Ruling, which exempts holding companies from holding meetings with either members or creditors when 100% subsidiaries merge into their holding company. The tribunal held that since the Board of Directors is empowered to approve the scheme, there is no need for holding shareholders' meetings. Consequently, the question of dispensation of shareholders' meetings does not arise.Issue 3: Compliance with the procedural requirements under Sections 230 and 232 of the Companies Act, 2013.The tribunal analyzed Sections 230 and 232 of the Companies Act, 2013. Section 230 deals with compromises and arrangements within a company, while Section 232 applies to mergers and amalgamations. The tribunal noted that if no compromise or arrangement is proposed, there is no occasion for the company to make such a proposal, and the Tribunal cannot order a meeting.However, Section 232 requires additional essentials for invoking its provisions, including the transfer of the undertaking, property, or liabilities of any company to another company. The tribunal held that the transferee company must comply with the remaining procedures under Section 232, including notifying various regulatory authorities and providing necessary documents.Issue 4: The applicability of the Mahaamba Ruling to the current case.The tribunal acknowledged the relevance of the Mahaamba Ruling, which exempts holding companies from holding meetings with members or creditors when 100% subsidiaries merge into their holding company. The tribunal noted that under the new Companies Act, 2013, the dispensation of shareholders' meetings has been done away with, which was frequently allowed under the 1956 Act regime.The tribunal concluded that since the financial position of the transferee company is highly positive and the merger does not affect the rights of the applicant shareholders or creditors, the transferee company need not hold any meeting with its creditors or members.Conclusion:The tribunal disposed of the application, directing the transferee company to file an application for compliance with the remaining mandates under Section 232 and to file a company petition for the sanction of the scheme. The tribunal held that the transferee company need not hold any meeting with its creditors or members, as the merger does not affect their rights.