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2025 (11) TMI 261
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....), Chandigarh Bench (Court-II) in CA (CAA) No.20/CHD/HRY/2025. The said order was passed pursuant to an application filed by the Appellant Nos. 1 to 8 under Section 230 & 232 of the Code, in relation to the Composite Scheme of Arrangement between the Appellant Companies and their respective shareholders and creditors. 2. The Appellants had jointly filed the First Motion in relation to the proposed composite Scheme of Arrangement amongst Mensa Brand Technologies Pte. Ltd., a Singapore entity, the ("Non-Applicant" or "First Transferor Company") and the Appellants, namely, Archernar Brand Technologies Private Limited ("Applicant No. 1" or "Second Transferor Company"), Cephus Brand Technologies Private Limited ("Applicant No. 2" or "Third Transferor Company"), Implexians Eco Solutions Private Limited ("Applicant No. 3 or "Fourth Transferor Company"), Lepus Brand Technologies Private Limited ("Applicant No. 4" or "Fifth Transferor Company"), Villain Lifestyle Private Limited ("Applicant No. 5" or "Sixth Transferor Company"), Pyxis Brand Technologies Private Limited ("Applicant No. 6" or "Seventh Transferor Company"), Helea Technology Private Limited ("Applicant No. 7" or "Eighth Tran....
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.... the objects of the Scheme as stated in the application narrated hereinabove and materials available on record, we are inclined to dispose of this Company Application bearing CA(CAA) No. 20/Chd/Hry/2025 with the following directions: a) The meeting of the Equity Shareholders of the all the Applicant Companies is dispensed herewith, keeping in view that all the Equity Shareholders have given their consents by way of affidavits. b) The meeting of the Preference Shareholders of the Applicant Company No. 8 is dispensed herewith, keeping in view that all the Preference Shareholders have given their consents by way of affidavits. c) Since, there are no Preference Shareholders in rest of the Applicant Companies, the requirement of convening the meeting of their Preference Shareholders does not arise. d) Since, there are no Secured Creditors in the Applicant Company No. 1, Applicant Company No. 2, Applicant Company No. 4, Applicant Company No. 6, Applicant Company No. 7 the requirement of convening the meeting of Secured Creditors does not arise. e) The meeting of the Secured Creditors of the Applicant Company No. 3, Applicant Company No. 5 and ....
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....r the meeting to be called under this order. An amount Rs. 1,50,000/- (Rupees one lac and fifty thousand Only) be paid for his services as the Chairperson. j) Mrs. Krishna Anmol Singh, Advocate, Mobile No. 9818282596, Email ID: [email protected], is appointed as the Alternate Chairperson for the meeting to be called under this order. She will discharge the function of Chairman in the absence of Mr. Rajeshwara Rao Vıttanala. An amount of Rs. 1,00,000/- (Rupees one lac only) be paid for her services as the Alternate Chairperson. k) Mr. Rohit Garg, Chartered Accountant, Mobile No. 9988901370, Email ID: [email protected], is appointed as the Scrutinizer for the above meeting to be called under this order. An amount of Rs. 75,000/- (Rupees seventy five thousand Only) be paid for his services as the Scrutinizer. l) The quorum for the meeting of unsecured creditors will be determined by the Chairman in such a manner that creditors present in the meeting represent at least 50% in value as a whole of the class of creditors respectively as the case may be. m) In case, the quorum is not present within half an hour from the time appointed....
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....reparing and finalizing the report. s) The authorized representative of the Applicant Transferor Companies, shall furnish an affidavit of service of notice of meeting and publication of advertisement and compliance of all directions contained herein at least a week before the proposed date of the meetings. 25. All the aforesaid directions are to be complied with strictly in accordance with the applicable laws including forms and formats contained in the Act and rules by the Applicant Companies." 4. The appellants have impugned the directions of the Hon'ble Tribunal in Paragraph 24 (f) to (s) above, which provides for the meeting of unsecured creditors and lays down the procedure for the same. Brief facts of the case 5. Brief facts of the case are given below: (i) The case of the Appellants was that Mensa Brand Technologies Pte. Ltd., the Non-Applicant/ First Transferor Company, is a Singapore-incorporated investment holding entity. Appellant Nos. 1 to 8 here, including the Transferee Company (Appellant No. 8/ Mensa Brand Technologies Pvt. Ltd.), are subsidiaries of the First Transferor Company and are engaged in diverse business activities, prima....
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....that the NCLT exceeded its jurisdiction by refusing to grant dispensation from convening meetings of unsecured creditors under Section 230(9), despite acknowledging that consent affidavits representing at least 90% in value of the unsecured creditors of each Transferor Company had been obtained. Submissions of the Appellant 6. The Ld. Senior Counsel for the Appellants submitted that the impugned order suffers from jurisdictional overreach and is devoid of any cogent reasoning, rendering it ex facie unsustainable. It was further submitted that the order contravenes the statutory scheme under Section 230 of the Companies Act by arbitrarily disregarding valid consent affidavits, imposing impractical and legally unworkable quorum requirements, and directing meetings solely of the remaining non-consenting unsecured creditors. 7. The Ld. Sr. Counsel further submitted that the NCLT erred in refusing to dispense with the meetings of unsecured creditors, despite the Appellants having complied with the threshold under Section 230(9) of the Companies Act, 2013, by filing consent affidavits from unsecured creditors representing over 90% in value. It was further submitted by him that t....
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....ors based solely on the Transferee Company holding the largest portion of debt. Section 230(9) does not distinguish between related and unrelated creditors, nor permit disregarding valid consents based on the creditor's identity. The Tribunal also failed to provide any rationale or justification for ignoring these valid consents, contrary to the statutory scheme. 13. It is the submission of Ld. Counsel that the NCLT failed to recognize, that the proposed Scheme does not involve any compromise or arrangement with the creditors. The Scheme is an arrangement solely between the Applicants and their shareholders under Section 230(1)(b) of the Companies Act, and not under Section 230(1)(a). It does not affect the rights or interests of the unsecured creditors, and no liability of such creditors is diminished, as all dues will be settled in the ordinary course of business. 14. The Ld. Sr. Counsel, in view of the foregoing facts and contentions, prayed for the following reliefs: (i) Allow the present Appeal; (ii) Set aside the directions contained in Paragraphs 24(f) to 24(s) of the Impugned Order dated 10.06.2025 passed by the Hon'ble NCLT in CA(CAA) No. 20/Chd/Hry....
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....en 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, 1[appointed under this Act or under the Insolvency and Bankruptcy Code, 2016 (31 of 2016), as the case may be,] order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs. Explanation. -- For the purposes of this sub-section, arrangement includes a reorganisation of the company's share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods. (2) The company or any other person, by whom an application is made under subsection (1), shall disclose to the Tribunal by affidavit-- (a) all material facts relating to the company, such as the latest financial position of the company, the latest auditors report on the accounts of the company and....
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....ompromise or arrangement shall be made available to the concerned persons free of charge from the registered office of the company. (4) A notice under sub-section (3) shall provide that the persons to whom the notice is sent may vote in the meeting either themselves or through proxies or by postal ballot to the adoption of the compromise or arrangement within one month from the date of receipt of such notice: Provided that any objection to the compromise or arrangement shall be made only by persons holding not less than ten per cent. of the shareholding or having outstanding debt amounting to not less than five per cent. of the total outstanding debt as per the latest audited financial statement. (5) A notice under sub-section (3) along with all the documents in such form as may be prescribed shall also be sent to the Central Government, the income-tax authorities, the Reserve Bank of India, the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition Commission of India established under sub-section (1) of section 7 of the Competition Act, 2002 (12 of 2003), if necessary, and such other sector....
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....t the accounting treatment, if any, proposed in the scheme of compromise or arrangement is in conformity with the accounting standards prescribed under section 133. (8) The order of the Tribunal shall be filed with the Registrar by the company within a period of thirty days of the receipt of the order. (9) The Tribunal may dispense with calling of a meeting of creditor or class of creditors where such creditors or class of creditors, having at least ninety per cent. value, agree and confirm, by way of affidavit, to the scheme of compromise or arrangement. (Emphasis Supplied) 19. The Section 230 of the Companies Act deals with matters related to power to compromise or make arrangements with creditors and Members The three important subsections here are Section 230 (1)(b); 230(6); and 230(9). 20. The first contention of the Appellants is that the arrangement proposed herein is under Section 230(1)(b) which relates to arrangement with members of the company. There is no arrangement vis a vis the creditors as envisaged under Section 230(1)(a) of the Act. The interests of the creditors are not affected adversely in any manner by the said agreement. The rights ....
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....hat "the highest percentage of unsecured debt is of the Transferee Company itself whose consent has been pivotal in crossing the necessary threshold." This purported rationale is ex facie untenable and directly contrary to the express mandate of Section 230(9) of the Companies Act, which does not draw any distinction among creditors or classes of creditors for the purpose of computing the 90% threshold. 25. It is further submitted that the order requiring the convening of a meeting of only the 'remaining' unsecured creditors of the Transferor Companies, whose consent to the Scheme have not been obtained, is contrary to the plain language and object of Section 230(9) and Section 230(6) of the Companies Act 2013. Section 230(6) expressly states that, where a meeting of creditors is held, approval of "majority of persons representing three-fourths in value of the creditors" is adequate to bind the entire class of creditors. 26. Further Section 230(9) does not contemplate that the consent of creditors or a class of creditors, holding at least 90% in value, can be excluded or disregarded, while computing the threshold for dispensing with meetings of creditors or a class of....
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....made before the tribunal under section 230 relating to arrangement for merger or amalgamation of companies, the Tribunal may order a meeting of the creditors or class of creditors etc to be called and such meeting shall be conducted in the manner laid down by the sub sections (3) to (6) of section 230. It is clear from the language of the section that Tribunal has powers to call the meeting of creditors, but such a meeting has to be conducted in accordance with Section 230(6) in this case. 30. We further note that under Section 230(6) of the Companies Act, even in a scenario, where the meeting of unsecured creditors is held; approval of creditors representing only 75% in value is required and such decision is binding on the company, all creditors or class of creditors. In this case, if such meeting would have been held in accordance with Section 230(6), the result of the of such meeting would have been the same, as more than 90% of unsecured creditors by value had already submitted their consent affidavit to the scheme of arrangement. In essence such a meeting would have been infructuous, leading only to delays in approval and unnecessary and infructuous expenditure. The object ....
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....he requirement of convening the meeting of the unsecured creditors of the Applicant companies is concerned, it is submitted that the unsecured trade/sundry creditors of the Applicant companies are cyclic in nature and the Applicant companies are meeting such obligations in the ordinary course of business. It is further submitted that in terms of the Scheme, there is no variation in the rights of the unsecured trade/sundry creditors and there is no variation in the amounts owed to such unsecured trade/sundry creditors. The Applicant/Transferee company in terms of the Scheme shall be taking over all the liabilities of the Applicant/Transferor company No. 1 and undertakes to meet and discharge the same in terms of Clause 3.2.2 (iii) of the Scheme. The Applicant companies also undertake that upon notice being issued by this Court on the second motion petition for sanction of the Scheme, the Applicant companies shall issue individual notice to all its unsecured creditors as per list annexed at Annexure M and Annexure-P seeking their objections if any to the Scheme." 13. In view of the aforesaid facts, the terms of the Scheme, and the judgments as referred to by the learned Seni....
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....ed creditors of the applicant companies will not be affected adversely. He further submitted that the Scheme does not contemplate any variation of the rights of the unsecured creditors, nor does it contemplate extinction or reduction of liability to any creditor. Learned counsel has also submitted that on amalgamation of the transferor company with the transferee company, the post amalgamation net worth of the transferee company will be Rs. 22,19,15,399/- as compared to its pre-amalgamation net worth of Rs. 11,31,05,228/-. He has placed on record a certificate issued by M/s. Pawan Shubham & Co., Chartered Accountants, showing the pre and post amalgamation net worth of the transferor and transferee companies. He, therefore, prays that the requirement of convening and holding the meeting of the unsecured creditors of the transferor company may kindly be dispensed with. 15. The unsecured creditors of the transferor company are running creditors who are paid-off in the normal course of the business of the company. A perusal of the audited balance sheet of the transferor company, as on 31st March, 2014, reveals that the company has reserves and surplus of Rs. 10,88,10,171/-. As....
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....ee company would be better placed to discharge all its liabilities upon the sanction of the scheme of amalgamation. Keeping this in mind the Hon'ble High Court dispensed with the requirement of convening the meeting of unsecured creditors. The ratio laid down in the Almondz Re-Insurance Brokers (supra) would squarely cover the present case. 37. We also take note of Judgment of this Appellate Tribunal in the matter of 'Mohit Agro Commodities Processing Pvt. Ltd. and Anr... Appellant/ Transferor [2021 SCC OnLine NCLAT 1139]'. In its Judgement in paragraph 18 to 21 the Tribunal held the following: "18. The material on record establishes that the 'Transferee Company' is a Wholly Owned Subsidiary of the 'Transferor Company' and there is no issuance of any new shares and therefore there is no reorganization of share capital and consequently no arrangement wherein Shareholders have to compromise with Creditors ''Transferor Company'. The documentary evidence substantiates that the net worth of the 'Transferee Company' is definitely positive.' 19. We find force in the contention of the Learned Counsel appearing for the Appellants that the....
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....on the agreed terms and conditions set out in the scheme in accordance with Sections 230 to 232 of the Companies Act, 2013. The 'Transferor Company' was wholly owned subsidiary of the 'Transferee Company' and both the companies were incorporated in similar nature of activities. There were no Creditors in subsidiary company in this case but there were creditors in 'Transferee Company'. This Tribunal vide the Judgment supra held that the merger does not involve any compromise/ arrangement with any creditor of the company and that there would be a positive net worth and creditors would not be compromised. In such a case the Tribunal ought to have exercise its discretion in dispensing with the requirement of convening the meeting which would have facilitated the ease of doing business and save time and resources. The Tribunal further observed that the right and liabilities of secured and unsecured creditors were not getting effected in any manner by the proposed scheme as no compromise was being offered to any secured or unsecured creditor. In such a situation this Appellate Tribunal set aside the directions of the NCLT to convene the meetings of Equity Shareholders, Secured Creditors ....