2020 (11) TMI 390 - Tri - Companies Law

Tribunal approves Scheme of Amalgamation without shareholder meetings, prioritizing operational efficiencies and shareholder value.

Geojit Investment Services Limited Versus Geojit Financial Services Limited

The Tribunal dispensed with the meetings of equity shareholders and creditors of the Transferor and Transferee Companies for the approval of the Scheme of ... Approval of Amalgamation scheme - Section 230 to 232 of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules,2016 and National Company Law Tribunal Rules 2016 - dispensation with the convening, holding and conducting of various meetings - issuance of notices as per the provisions of Section 230(5) of the Companies Act 2013 and Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - whether the Tribunal has power to dispense with the meetings of the shareholders/secured/unsecured creditors of both the Companies? - HELD THAT:- In the present applications, it is stated that the Transferor Company is a direct wholly-owned subsidiary of the Transferee Company and in the proposed Scheme of Amalgamation, the entire assets and liabilities of the Transferor Company will be taken over by the Transferee Company. The Net worth of the Transferor Company and the Transferee Company are ₹ 13,14,33,968 and ₹ 4,08,86,87,025 respectively and the creditors of the demerged Company will become the creditors of the Transferee Company. The Transferee Company have 69,649 unsecured creditors with total unsecured debt amounting to ₹ 211,07,67,223.03 and does not have any Secured Creditors as on 31.12.2019. The proposed Scheme of Amalgamation will not restructure or vary the debt obligations of the Transferor and Transferee Companies towards their respective Creditors. The prayers of the Applicant Companies deserve to be allowed and that the meetings of the members of the Transferor Company and Transferee Company as envisaged under Section 230(1) of the Companies Act, 2013 is not necessary and will not serve any purpose, if called, be dispensed with subject to strict compliance of the conditions imposed. Issues Involved:1. Dispensation of meetings of equity shareholders.2. Dispensation of meetings of creditors.3. Compliance with statutory authorities.4. Approval and rationale of the Scheme of Amalgamation.5. Financial positions and obligations of the Transferor and Transferee Companies.Detailed Analysis:1. Dispensation of Meetings of Equity Shareholders:The applicants sought to dispense with the convening, holding, and conducting of meetings of equity shareholders of both M/s. Geojit Investment Services Limited (Transferor Company) and M/s. Geojit Financial Services Limited (Transferee Company). The Transferor Company has nine equity shareholders who have submitted individual affidavits expressing their consent to the Scheme of Amalgamation. The Transferee Company, being a public listed company, has 37,890 equity shareholders, and it was deemed impractical to convene a meeting for such a large number of shareholders. The Tribunal, relying on precedents such as Jupiter Alloys & Steel (India) Ltd. v. Jupiter Wagons Limited, found that the dispensation of meetings was justified given the consents provided and the impracticality of convening a meeting for the Transferee Company's shareholders.2. Dispensation of Meetings of Creditors:The applicants also sought to dispense with the meetings of creditors. The Transferor Company has secured/unsecured creditors amounting to Rs. 48,88,009, and the Transferee Company has secured/unsecured creditors amounting to Rs. 2,93,20,69,078. It was stated that the Scheme of Amalgamation does not restructure or vary the debt obligations of either company towards their respective creditors. The Tribunal found that the assets of both companies were sufficient to meet their liabilities and that the Scheme would not adversely affect the rights of any creditors. Therefore, the dispensation of meetings of creditors was allowed.3. Compliance with Statutory Authorities:The Tribunal directed that notices be served upon relevant statutory authorities, including the Regional Director, Ministry of Corporate Affairs, Registrar of Companies, Income Tax Department, Official Liquidator, BSE, NSE, and SEBI, as per Section 230(5) of the Companies Act, 2013. If no objections were received within 30 days, it would be presumed that these authorities had no objections to the Scheme.4. Approval and Rationale of the Scheme of Amalgamation:The Scheme of Amalgamation was proposed to consolidate the business under one entity, resulting in benefits such as synergy, economies of scale, and operational efficiencies. The Scheme was intended to transfer the assets and liabilities of the Transferor Company to the Transferee Company. The Tribunal found that the Scheme would lead to greater efficiency, better utilization of resources, reduction in legal and regulatory compliances, and enhanced shareholder value. The 'Appointed date' for the Scheme was set as 1st April 2016.5. Financial Positions and Obligations:The financial positions of both companies were examined. The Transferor Company had a net worth of Rs. 13,14,33,968 and the Transferee Company had a net worth of Rs. 4,08,86,87,025. The liabilities of both companies were found to be manageable, and the Scheme did not involve any waiver of loans, interest, or restructuring of corporate debt. The Tribunal concluded that the financial health of both companies was sufficient to support the Scheme without adversely affecting creditors or shareholders.Order:1. Meetings of Members/shareholders, secured and unsecured creditors of both companies for approval of the Scheme are dispensed with.2. Both companies must file their respective lists of creditors and equity shareholders with the Registry within specified timeframes.3. Notices must be served to current creditors and equity shareholders holding significant debt or share capital.4. Notices must contain all disclosures as per Rule 6(3) of the Companies (Compromise, Arrangements, and Amalgamations) Rules, 2016.5. Notices must be published in accordance with Rule 7 of the Companies (Compromise, Arrangements, and Amalgamations) Rules, 2016.6. Notices must be hosted on the companies' websites or provided free of charge upon request.7. Compliance reports must be filed with the Registry.8. Failure to comply with the order will result in automatic cancellation of the dispensation of meetings.9. The Applicant Companies are directed to present a Petition in Form No.CAA-5 for the sanction of the Scheme.The applications CA(CAA)/17(KOB)/2019 and CA(CAA)/18(KOB)/2019 are disposed of accordingly.