2022 (1) TMI 716

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.....09.2021, passed by the NCLT (National Company Law Tribunal, New Delhi, Court-II) in C.A.(CAA)-84/ND/2021, the Appellants "M/s. Ericsson India Private Limited" (the 'Transferor Company') and "M/s. Ericsson India Global Services Limited" (the 'Transferee Company') preferred this Appeal. By the Impugned Order, the NCLT has dismissed the Application C.A.(CAA)-84/ND/2021, filed under Sections 230 to 232 of the Companies Act, 2013, (hereinafter referred to as the 'Act') praying to dispense with convening and holding of the Meeting of Shareholders and Creditors in relation to the 'Transferor and Transferee Companies' for approval of the Scheme of Amalgamation which shall take effect from the appointed date on 01.04.2021. The NCLT while dismissing....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ressly decided by the Creditors of the Transferee. Therefore, in our view approval of the unsecured creditors of both the Applicant Companies is needed and cannot be evaded. Hence, it would be wrong to say that no prejudice can ever be caused to any of the creditors if the Scheme is approved without obtaining their explicit consent. 29. That the legislature under Section 230(9) of the Companies Act, 2013 has not made any exception in case of an amalgamation between a holding and a subsidiary company from filing the consent Affidavits of Creditors, nor has it given any explicit power to this Tribunal to dispense with the meeting of the creditors in absence of their consent affidavits in any circumstance. The contents of Section 230(....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Counsel appearing for the Appellants strenuously argued that the Tribunal erred in construing the Scheme to be entered pursuant to Section 230(1)(a) and Section 230(2)(b) of the Act, that is the Scheme of Amalgamation between the Appellant Companies and its respective Shareholders and Creditors, though the Appellant Companies have not made Creditors parties to the Scheme, as the Scheme is pursuant to Section 230(1)(b) of the Act. Dispensation has been granted by this Tribunal in several cases where the case is of a merger of a Wholly Owned Subsidiary and Parent Company as is in the present case, where net worth of both Companies was highly positive; 'Unsecured Creditors' are paid of in the ordinary course of business; the Scheme is not pre-....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....tting aside of the Impugned Order passed by the NCLT. 3. We find it relevant to reproduce the following Sections for better understanding of the case on hand. Sections 230(1) and 230(2)(a) of the Act read as hereunder: "230. Power to compromise or make arrangements with creditors and members.- (1) Where a compromise or arrangement is proposed- (a) between a company and its creditors or any class of them; or (b) between a company and its members or any class of them, the Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, appointed under this Act or under the Insolvency and bankruptcy Code, 2....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... Act read with Rule 6(3)(viii) of the Rules shows that the scope and intent is to require Companies to disclose all investigations/proceedings which are 'material' and relating to the Company. We are of the considered view that the wording of Section 230(2)(a) should be interpreted as "all material facts relating to the Companies, such as, pendency of any investigation of any proceeding against the Company". The Affidavit filed by the Appellant Companies discloses all the duly Audited Financial Statements along with the investigations and enquiries which are material to the implementation of the Scheme. In any event, as per Clause 6 of the Scheme upon this implementation, all proceedings in the name of the 'Transferor Company' shall be cont....