2022 (1) TMI 323 - Tri - Companies Law

Tribunal Approves Scheme of Arrangement Without Shareholder Meetings, Emphasizes Corporate Democracy and Employee Protection

Ibibo Group Private Limited Versus MakeMyTrip (India) Private Limited

The Tribunal allowed the First Motion Application, dispensing with the meetings of Equity Shareholders, Secured and Unsecured Creditors, and Preference ... Sanction of Scheme of Arrangement - Section 230-232 of Companies Act. 2013 and other applicable provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- This Bench holds that depending on the facts and circumstances of each case, the NCLT has the powers to dispense with the meetings of shareholders and others by using judicial discretion. Various directions with regard to holding, convening and dispensing with various meetings issued - directions regarding issuance of various notices also issued - the scheme is approved. Application allowed. Issues Involved:1. Scheme of Arrangement between IGPL and MMT under Sections 230-232 of the Companies Act, 2013.2. Dispensation of meetings of Equity Shareholders, Secured and Unsecured Creditors, and Preference Shareholders.3. Compliance with statutory requirements and regulatory approvals.4. Approval of the Scheme by the Board of Directors and shareholders.5. Valuation and Share Exchange Ratio.6. Protection of employees' interests.7. Jurisdiction of the Tribunal.8. Judicial discretion in dispensing meetings.Issue-wise Detailed Analysis:1. Scheme of Arrangement between IGPL and MMT:The joint application was filed under Sections 230-232 of the Companies Act, 2013, for a Scheme of Arrangement between Ibibo Group Private Limited (IGPL) and MakeMyTrip (India) Private Limited (MMT). The Scheme aims to streamline business operations, pool resources, reduce costs, focus management, and improve efficiency in fundraising. The Scheme was unanimously approved by the Board of Directors of both companies on 30.12.2020.2. Dispensation of Meetings:The Tribunal considered the dispensation of meetings of Equity Shareholders, Secured and Unsecured Creditors, and Preference Shareholders. The Tribunal noted precedents where High Courts and NCLT benches have dispensed with such meetings based on consents received. In this case, 100% of Equity Shareholders and the sole Preference Shareholder of IGPL consented to the Scheme. Similarly, 100% of Equity Shareholders of MMT consented. The sole secured creditor of IGPL and 96.36% of its unsecured creditors by value consented. For MMT, all three secured creditors and 90.2% of its unsecured creditors by value consented.3. Compliance with Statutory Requirements and Regulatory Approvals:The Scheme was certified by statutory auditors as compliant with Accounting Standards under Section 133 of the Act. No prosecution or investigation was pending against the companies. The Tribunal directed that notices be sent to the Central Government, Registrar of Companies, Official Liquidator, and Income Tax Authorities in the Second Motion Petition.4. Approval of the Scheme by the Board of Directors and Shareholders:The Scheme was approved by the Board of Directors of both IGPL and MMT. Consents from shareholders and creditors were obtained through affidavits. The Tribunal emphasized the importance of corporate democracy and participation in decision-making.5. Valuation and Share Exchange Ratio:The Valuation Report dated 30.12.2020 by Mr. Nikhil Gupta, Registered Valuer, provided the Share Exchange Ratio:- 8,827 equity shares of MMT for every 100,000 equity shares of IGPL.- 8,827 equity shares of MMT for every 100,000 preference shares of IGPL.6. Protection of Employees' Interests:Clause 11.1 of the Scheme ensures that all employees of the Demerged Undertaking of IGPL will become employees of MMT without any break or interruption of service and with continuity of service on terms not less favorable than before.7. Jurisdiction of the Tribunal:The registered offices of both IGPL and MMT are in Gurugram, Haryana, falling under the territorial jurisdiction of the Chandigarh Bench of the NCLT.8. Judicial Discretion in Dispensing Meetings:The Tribunal acknowledged conflicting decisions by coordinate benches on the issue of dispensing meetings. It referred to various judicial precedents and concluded that the NCLT has the power to dispense with meetings of shareholders and creditors based on the facts and circumstances of each case. The Tribunal exercised its discretion to dispense with the meetings in this case, given the consents received and the financial structure of the companies.Conclusion:The Tribunal allowed the First Motion Application, dispensing with the meetings of Equity Shareholders, Secured and Unsecured Creditors, and Preference Shareholders of both IGPL and MMT. The Applicant Companies were granted liberty to file the Second Motion Petition with specific directions for sending notices to regulatory authorities. The judgment emphasized judicial discretion and adherence to statutory requirements in approving the Scheme of Arrangement.