2021 (4) TMI 491 - AT - Insolvency and Bankruptcy

Appellate Tribunal Overturns NCLT Decision on Meeting Dispensation

In Re : Ambuja Cements Limited

The Appellate Tribunal set aside the NCLT Ahmedabad Bench's order that rejected the plea for dispensing with meetings of Equity Shareholders and Creditors ... Dispensation of the meeting of the Equity Shareholders and Creditors of the Appellant Company - whether filing of separate Petition by the transferee company is necessary? - HELD THAT:- From the perusal of the pleadings it is amply clear that the Appellant Company is a 100% holding of its Subsidiary i.e. the transferor Company. Therefore, there is no issuance of any new shares, there is no reorganisation of share capital of the Appellant Company and no arrangement wherein shareholders have to compromise with creditors of the Transferor Company. Further, it is also seen that the net worth of the Appellant Company is highly positive in compare to the net worth of the Transferor Company. Hon’ble High Court of Bombay in the matter of ‘Mahaamba Investments Ltd.’vs ‘IDI Ltd.’, [2001 (1) TMI 904 - HIGH COURT OF BOMBAY] whereby it is clear that an Application filed by the Transferor Company or Transferee Company, a separate Application is not necessary by the Transferee/Transferor Company. Further, this Tribunal in the matter of ‘DLF Phase –IV Commercial Developers Ltd. & Ors.’ [2019 (8) TMI 829 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL NEW DELHI] dispensed with the meetings of the Creditors and shareholders. However, the facts of the DLF matter are little different i.e. in the DLF matter the written consent was obtained by way of an ‘Affidavit’. This Tribunal allowed the Appeal by setting aside the order of the Tribunal where the Learned Tribunal rejected the approval seeking the dispensation of the meetings of creditors and shareholders. In the present case the Learned Tribunal ought to have dispensed with the meetings of the Equity shareholders and Creditors of the Appellant Company. The only objection taken by the Learned NCLT that no written consent by way of an Affidavit’ of the Shareholders and Creditors, were filed. The meetings of the Equity shareholder, Secured and Unsecured Creditors of the Appellant Company is dispensed with - matter is remanded back to the NCLT for further Consideration - appeal allowed. Issues Involved:1. Rejection of plea for dispensation of meetings of Equity Shareholders and Creditors.2. Merger and amalgamation scheme approval.3. Compliance with judicial precedents and principles of judicial discipline.Detailed Analysis:1. Rejection of Plea for Dispensation of Meetings of Equity Shareholders and Creditors:The appeal arose from an order by the NCLT Ahmedabad Bench, which did not allow the dispensation of meetings of the Equity Shareholders and Creditors of the Appellant Company. The Appellant argued that the NCLT wrongfully rejected their plea for dispensing with these meetings. The Appellant Company, a public limited company with its equity shares listed on multiple stock exchanges, sought to amalgamate with DIRK India Pvt. Ltd., a wholly owned subsidiary. The Appellant contended that since the Transferor Company is a 100% subsidiary, no new shares would be issued, and there would be no reorganization of share capital or debt position, thus meetings were unnecessary.2. Merger and Amalgamation Scheme Approval:The scheme of merger was approved by the Board of Directors of both companies, envisaging that all debts, liabilities, and employees of the Transferor Company would be transferred to the Appellant Company. The rationale behind the scheme included business complementarities, simplification of management structure, pooling of resources, and strengthening financial positions. The Transferor Company had already obtained an order from the NCLT Mumbai Bench dispensing with the meetings of its shareholders and creditors. The Appellant argued that the scheme did not involve any compromise or arrangement with creditors or shareholders and would not prejudicially affect them.3. Compliance with Judicial Precedents and Principles of Judicial Discipline:The Appellant cited the judgment of the Bombay High Court in 'Mahaamba Investment Ltd. vs. IDI Ltd.' which held that no separate petition by the transferee company was necessary when no new shares were issued, and the financial position of the transferee company was strong. The Appellant also referred to the NCLT's own previous order in 'Vodafone Idea Ltd.' where meetings were dispensed with under similar circumstances. The Appellant argued that the NCLT Ahmedabad Bench erred by not following its own precedent and other judicial precedents, thereby violating principles of judicial discipline.Conclusion:The Appellate Tribunal concluded that the NCLT Ahmedabad Bench should have considered its own order in 'Vodafone Idea Ltd.' and the judgment in 'Mahaamba Investments Ltd. vs. IDI Ltd.' The Tribunal found that the NCLT erred in not dispensing with the meetings of the Equity Shareholders and Creditors of the Appellant Company, especially given the similar facts in both cases. The order of the NCLT dated 10.12.2020 was set aside, and the meetings of the Equity Shareholders, Secured, and Unsecured Creditors of the Appellant Company were dispensed with. The matter was remanded back to the NCLT for further consideration, and the appeal was allowed with no orders as to costs.