2023 (2) TMI 1383 - Tri - Companies Law

Scheme of arrangement application dismissed under Sections 230-232 after shareholders reject proposed amalgamation involving three companies

IN THE MATTER: HT MOBILE SOLUTIONS LIMITED, HT MEDIA LIMITED

The NCLT dismissed a scheme of arrangement application under Sections 230-232 of the Companies Act, 2013. The tribunal found no merit in sanctioning the ... Sanction of Scheme of Arrangement - Sections 230 to 232 of the Companies Act, 2013, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, and the National Company Law Tribunal Rules, 2016 - HELD THAT:- As the shareholders of M/s. Digi content Limited had rejected the proposed scheme, it cannot be comprehended, how the approval can be granted to the Scheme which involves all three companies. There are no merit in sanctioning the proposed scheme of amalgamation between the Petitioner Companies. The present Company Scheme Application being devoid of merits stands dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe judgment primarily revolves around the following core legal questions:a. Whether the proposed Scheme of Amalgamation between HT Mobile Solutions Limited and HT Media Limited complies with the relevant provisions of the Companies Act, 2013, and associated rules.b. Whether the rejection of the Scheme by the shareholders of Digi Content Limited affects the viability and legality of the proposed amalgamation between the remaining petitioner companies.c. Whether the Tribunal can sanction the Scheme of Amalgamation despite the non-approval by one of the involved companies' shareholders.2. ISSUE-WISE DETAILED ANALYSISIssue A: Compliance with Legal FrameworkRelevant Legal Framework and Precedents: The petition was filed under Sections 230 to 232 of the Companies Act, 2013, which govern compromises, arrangements, and amalgamations. The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, and the National Company Law Tribunal Rules, 2016, also apply.Court's Interpretation and Reasoning: The Tribunal examined whether the procedural requirements under the Companies Act and associated rules were met, including the convening of meetings and approval by requisite majorities.Key Evidence and Findings: The petitioner companies provided evidence of compliance with procedural requirements, including the convening of shareholder and creditor meetings and the filing of reports with the Tribunal.Application of Law to Facts: Despite procedural compliance by the petitioner companies, the Tribunal noted that the rejection of the Scheme by Digi Content Limited's shareholders posed a significant legal hurdle.Treatment of Competing Arguments: The petitioners argued that the Scheme was in the best interest of the companies and their stakeholders, while the Tribunal focused on the lack of unanimous shareholder approval.Conclusions: The Tribunal concluded that compliance with procedural requirements alone was insufficient to sanction the Scheme without unanimous approval from all involved companies.Issue B: Impact of Rejection by Digi Content Limited's ShareholdersRelevant Legal Framework and Precedents: The Companies Act, 2013, requires approval from all involved entities for a scheme of amalgamation to be sanctioned.Court's Interpretation and Reasoning: The Tribunal emphasized that the rejection of the Scheme by Digi Content Limited's shareholders rendered the proposed amalgamation incomplete and legally untenable.Key Evidence and Findings: The Tribunal noted the reports filed indicating the rejection by Digi Content Limited's shareholders.Application of Law to Facts: The Tribunal applied the requirement for unanimous approval, concluding that the absence of such approval from Digi Content Limited invalidated the entire Scheme.Treatment of Competing Arguments: The petitioners' argument for proceeding with the remaining companies was outweighed by the legal necessity for complete approval.Conclusions: The Tribunal found that the lack of approval from all companies involved precluded the sanctioning of the Scheme.Issue C: Tribunal's Authority to Sanction the SchemeRelevant Legal Framework and Precedents: The Tribunal's authority to sanction schemes of amalgamation is contingent upon compliance with statutory requirements, including unanimous approval.Court's Interpretation and Reasoning: The Tribunal determined that it lacked the authority to sanction a scheme that did not have the requisite approval from all involved entities.Key Evidence and Findings: The Tribunal relied on the evidence of shareholder meetings and their outcomes.Application of Law to Facts: The Tribunal applied the statutory requirements to the facts, concluding that it could not sanction the Scheme.Treatment of Competing Arguments: The Tribunal's focus on legal compliance overrode the petitioners' arguments for partial approval.Conclusions: The Tribunal concluded that it could not sanction the Scheme without full compliance with statutory requirements.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'We find no merit in sanctioning the proposed scheme of amalgamation between the Petitioner Companies.'Core Principles Established: The necessity for unanimous shareholder approval for a scheme of amalgamation to be sanctioned by the Tribunal.Final Determinations on Each Issue: The Tribunal dismissed the Company Scheme Application due to the lack of approval from all involved companies' shareholders, particularly focusing on the rejection by Digi Content Limited's shareholders.