Scheme of arrangement demerger: tribunal dispenses with secured creditors' meetings and directs shareholder and unsecured creditor meetings

A joint application for a scheme of arrangement in the nature of demerger was allowed, with directions to convene meetings of equity shareholders and unsecured creditors of both applicant companies. The Tribunal dispensed with the meeting of secured creditors of the first applicant company because its sole secured creditor had given written consent to the scheme and waiver, and no meeting of secured creditors was required for the second applicant company because it had none. The application was supported by board approvals, valuation and accounting disclosures, absence of pending investigation or proceedings, and relevant no-objection communications. The directions also covered notice publication, service of explanatory statements, quorum, appointment of a chairperson and scrutinizer, and filing of the meeting report.

---

---

Issues: Whether the joint application for a scheme of arrangement in the nature of demerger should be allowed with directions for convening meetings of equity shareholders and unsecured creditors, while dispensing with the meeting of secured creditors where consent was obtained or no secured creditors existed.

Analysis: The application was supported by board approvals, valuation and accounting disclosures, no pending investigation or proceedings, and the requisite no-objection communications from relevant market and depository entities where applicable. The sole secured creditor of the first applicant company had given written consent to the scheme and to waiver of the meeting, while the second applicant company had no secured creditors. The statutory framework under Sections 230 to 232 of the Companies Act, 2013, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, permitted the Tribunal to dispense with unnecessary creditor meetings and to issue directions for convening the remaining meetings, publication of notices, service of explanatory statements, fixation of quorum, appointment of chairperson and scrutinizer, and filing of the meeting report.

Conclusion: The meeting of secured creditors of the first applicant company was dispensed with, no meeting of secured creditors of the second applicant company was required, and directions were issued for convening the meetings of equity shareholders and unsecured creditors of both applicant companies. The application was allowed.

---