National Company Law Appellate Tribunal
Mohit Agro Commodities Processing Pvt. ... vs Decided On 06.04.202 on 28 June, 2021
National Company Law Appellate Tribunal, New Delhi
Principal Bench
COMPANY APPEAL (AT) No. 59 of 2021
(Arising out of Order dated 10th March, 2021 passed by National Company Law
Tribunal, Ahmedabad Bench, Ahmedabad, in C.A. (CAA)/6(AHM)2021.)
IN THE MATTER OF:
1. Mohit Agro Commodities
Processing Pvt Ltd.
Survey No. 649 Nani Kadi, Thor Road- Kadi,
Mehsana Mahesana GJ 382715 IN ...Appellant/Transferor
Company
2. Gujarat Ambuja Exports Ltd.
"Ambuja Tower", Opp. Sindhu Bhavan,
Sindhu Bhavan Road, Bodakdev, P.O. Thaltej
Ahmedabad 380059 (Gujarat) ...Appellant/Transferee
Company
Appellant: Mr. P Nagesh, Sr. Advocate alongwith Mr. Nipun
Sangvi, Ms. Honey Satpal and Mr. Jaimin R. Dave,
Advocates.
JUDGEMENT
[Per; Shreesha Merla, Member (T)]
1. Aggrieved by the Order dated 10.03.2021, passed by the NCLT (National Company Law Tribunal, Ahmedabad Bench, Ahmedabad) in C.A. (CAA)/6(AHM)2021. The 'Transferor Company' namely Mohit Agro Commodities Processing Pvt. Ltd. and the 'Transferee Company' namely Gujarat Ambuja Exports Ltd., preferred this Appeal under Section 421 of the Companies Act, 2013 (hereinafter referred to as the 'Act').
2. By the Impugned Order, NCLT has disposed of the Company Application observing as follows:-
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"11. Having considered the entire material on record, this Tribunal passes the following order:
a. The meeting of the Equity Shareholders of Applicant Transferor Company is hereby dispensed with in View of the consent affidavit annexed as Annexure (page no. 404) of the application.
b. The Applicant Transferor Company has no creditors. Hence, convening of meeting of the creditors does not arise at all.
c. Separate meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Gujarat Ambuja Exports Limited, Applicant Transferee Company shall be convened and held on, 22nd day of April, 2021 at 11 a.m. for the purpose of considering and, if thought fit, approving the proposed Scheme of Arrangement, with or without modifications;
d. In view of the current pandemic situation, all the meetings of shareholders, Secured and Unsecured creditors of Gujarat Ambuja Exports Limited, Applicant Transferee Company shall be convened and conducted through video conferencing or other Audio-Visual Means. No physical meetings shall be convened. The Applicant Transferee Company shall appoint a Depository and other required agencies to facilitate the conduct of the meetings".....
3. The facts in brief are that the Appellant Company (hereinafter referred to as the 'Transferor Company' and 'Transferee Company') filed Applications under Sections 230 to 232 and other relevant provisions of the Companies Act, 2013 seeking dispensation of the meeting of the Equity Shareholders, Secured Creditors and Unsecured Creditors in respect of the scheme of Amalgamation of the 'Transferor Company' with the 'Transferee Company' with effect from the appointed date on the aggrieved terms and conditions has Company Appeal (AT) No. 59 of 2021 -3- set out in the scheme in accordance with Sections 230 to 232 of the Companies Act, 2013 and other applicable provisions of the Act.
4. The 'Transferred Company' is a Private Limited Company incorporated on 04.06.1984 with authorized and paid up share capital detailed as hereunder:-
AUTHORISED (IN RUPEES)
16,00,000 Equity Shares of 1,60,00,000/-
Rs. 10/- each
TOTAL 1,60,00,000/-
ISSUED, SUBSCRIBED (IN RUPEES)
AND PAID UP
16,00,000 Equity Shares of 1,60,00,000/-
Rs. 10/- each
TOTAL 1,60,00,000/-
5. It is stated that there is no change in the capital structure of the 'Transferor Company' till the date of approval of the schemes by the Board of Directors.
6. The 'Transferee Company' is a Public Company incorporated on 12.08.1991 with an authorized and paid up share capital detailed as hereunder:-
AUTHORISED (IN RUPEES)
25,00,00,000 Equity Shares 50,00,00,000/-
of Rs. 2/- each
TOTAL 50,00,00,000/-
ISSUED, SUBSCRIBED (IN RUPEES)
AND PAID UP
11,46,67,665 Equity Shares 22,93,35,330/-
of Rs. 2/- each
TOTAL 22,93,35,330/-
Company Appeal (AT) No. 59 of 2021
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7. The face value of the shares of the 'Transferee Company' was subdivided from Rs. 2 to Rs. 1 with effect from 05.10.2020 shown as hereunder:-
AUTHORISED (IN RUPEES)
50,00,00,000 Equity Shares 50,00,00,000/-
of Rs. 1/- each
TOTAL 50,00,00,000/-
ISSUED, SUBSCRIBED (IN RUPEES)
AND PAID UP
22,93,35,330 Equity Shares 22,93,35,330/-
of Rs. 1/- each
TOTAL 22,93,35,330/-
8. It is stated that from 05.10.2020, there has been no change in the share capital of the 'Transferee Company'.
9. It is further stated that the 'Transferor Company' is a Wholly Owned Subsidiary of the 'Transferee Company' and that both the Companies are incorporated in similar type of nature of activities and that the 'Transferee Company' had acquired the 'Transferor Company' as a business supportive mechanism for ease of operations since the 'Transferor Company' owns land and building near Kadi (Gujarat) being used as a godown on payment of lease rent. It is stated that the Amalgamation of the business of the Applications that is the 'Transferor Company' and the 'Transferee Company' would result in simplification of the corporate structure and elimination of duplicate corporate procedure. It would also facilitate a consolidation of resources and expertise, reducing the multiplicity of administrative costs.
10. The rationale of the scheme of Amalgamation is as follows:
Company Appeal (AT) No. 59 of 2021 -5- "It is proposed to amalgamate the Applicant Company No. 1 into the Applicant Company No. 2 by this Scheme, as a result of which the shareholders of the Applicant Company No. 1 viz., the following benefits shall, inter alia, accrue to the Appellant Companies:
i. Maintain simple corporate structure and eliminate duplicate corporate procedures;
ii. Amalgamation shall facilitate combination/consolidation of resources, expertise and energies of Transferor Company with the Transferee Company;
iii. Reduction in multiplicity of legal and regulatory compliances and would create economies in administrative costs;
iv. Incremental operational and administrative synergies accruing to both Transferor Company and Transferee Company; and v. This Scheme does not affect the rights and interests of the shareholders of the creditors of the Transferor Company and the Transferee Company. The shareholding and the rights of the members remain unaffected as no new shares are proposed to be issued by the Transferee Company and there is no change in the capital structure. There is no compromise or arrangement with any of the creditors of the Transferor Company and the Transferee Company since there are NIL creditors for the Transferor Company and accordingly the rights of the creditors are not affected. Also, the net worth of the Transferee Company is and will remain highly positive post the merger."
11. Learned Counsel appearing for the Appellant submitted that the proposed scheme of Amalgamation was approved by the Board of Directors of both the Companies by separate Board resolutions dated 20.10.2020 and prayed for the following reliefs:-
"A. The Hon'ble Tribunal would be pleased to order for dispensation of convening and holding of the meetings of equity shareholders of the Applicant Transferor Company Appeal (AT) No. 59 of 2021 -6- Company for considering and if though fit approving, with or without modification, the scheme of amalgamation at Annexure "E" to the application, pursuant to the receipt of the consents affidavits of the equity shareholders approving and consenting to the scheme and waiving the individual rights to attend the meeting for considering and if thought fit with or without modification the scheme.
B. The Hon'ble Tribunal would be pleased to order for dispensation of convening and holding of the meetings of equity shareholders of the Applicant Transferee Company for considering and if though fit approving, with or without modification, the scheme of amalgamation at Annexure "E" to the application, in view of the fact that theirs rights are not getting affected in any manner whatsoever.
In the alternate The Hon'ble Tribunal would be pleased to direct the Applicant Transferee Company to hold and convene meeting of equity shareholders on such date, place and time as the Hon'ble Tribunal may order and Mr. shall the Chairman/Chairperson of the aforesaid meeting of the equity shareholders. The quorum for meeting of shareholders shall be 100.
C. The Hon'ble Tribunal would be pleased to order for dispensation from convening and holding of the meetings of secured and unsecured creditors of the Applicant Transferee Company for considering and if though fit approve, with or without modification the scheme of amalgamation at Annexure "E" to the application, in view of the fact that their rights and are not getting affected in any manner whatsoever.
In the alternate The Hon'ble Tribunal would be pleased to direct the Applicant Transferee Company to hold and convene meeting of Secured and Unsecured Creditors on such date, place and time as the Hon'ble Tribunal may order and Mr. Kumar Pal, shall be the Chairman/Chairperson of the aforesaid meeting of the Secured and Unsecured Creditors. The quorum for meeting of secured and unsecured creditors shall be decided by this Tribunal respectively.
Company Appeal (AT) No. 59 of 2021 -7- D. The Hon'ble Court would be pleased to dispense with the requirement of holding of meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Transferee Company in view of the fact that the scheme of amalgamation does not affect their rights in any manner;
E. The Hon'ble Court would be pleased to dispense with the publication of notice in the newspapers and Government Gazette in the overall interest of justice.
F. The Hon'ble Court would be pleased to pass such other and further order as it deems fit and proper in the interest of justice."
12. Learned Counsel for the Appellants strenuously argued that the Tribunal has failed to appreciate that the net worth of the 'Transferee Company' is positive and that there would be an excess of assets over the liabilities to the tune of Rs. 1436.62/- Crores in the 'Transferee Company' on the scheme being made effective, and that the present scheme of Amalgamation is not going to affect the rights of the Secured and Unsecured Creditors in any manner; that under Section 230(1) of the Act, the Tribunal may decide not to order a meeting of the Members and Creditors if no prejudice is likely to be caused to the Members of Creditors if the meetings are ordered not to be convened; convening of this meeting would only be an empty formality and waste of time and energy; that the object and purpose of expeditious procedure for amalgamating the Companies would be diluted if the order for the meeting of Equity Shareholders is passed without considering the fact that the 'Transferrer Company' is a Wholly Owned Subsidiary of the 'Transferee Company'; that this is only the first stage of approving the scheme of Amalgamation and pursuant to publication of notice, if any objections are Company Appeal (AT) No. 59 of 2021 -8- raised by any Shareholder, Secured Creditor or Unsecured Creditor of the 'Transferor Company', the Tribunal can always direct the 'Transferee Company' to convene a meeting and that the Tribunal had ignored the ratio laid down in the following cases:-
"I. Jupiter Alloys and Steel (India) Limited and Jupiter Wagons Limited [(T.A. No. 11 of 2017 connected with C.A. No. 896 of 2016) (NCLT Kolkata)] II. DLF Phase - IV Commercial Developers (Transferor
1), DLF Real Estate (Transferor 2), DLF Residential Builders Ltd (Transferor 3), DLF Utilities Ltd.
(Demerged Company) with DLF Limited (Transferee Company) Company Appeal (AT) 180 of 2019 (NCLAT) III. In Re: Adobe Properties Private Limited and Ors. (16.01.2017 - DELHC) : MANU/DE/0097/2017 IV. Housing Development Finance Corporation Ltd, in re [2017] 85 taxmann.com 368 (NCLT - Mum.)"
13. Similar issue has been dealt with by this Tribunal in Company Appeal (AT) No. 19 of 2021, the Appellants being 'Ambuja Cements Limited' Vs. --- decided on 06.04.2021.
14. For better understanding of the case, it is relevant to reproduce the Sections 230 and 232 of the Companies Act, 2013 and also the relevant Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 are hereunder:-
'Sec 230 Companies Act 2013 [(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 Company Appeal (AT) No. 59 of 2021 -9- member of the company, or in the case of a company which is being wound up, of the liquidator 2[appointed under this Act or under the Insolvency and Bankruptcy Code, 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 a manner as the Tribunal directs.
Explanation.--For the purposes of this sub-
section, arrangement includes a reorganization of the company's share capital by the consolidation of shares of different classes or by the division of shares into share 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 auditor's report on the accounts of the company and the pendency of any investigation or proceedings against the company;
(b) reduction of share capital of the company, if any, included in the compromise or arrangement;
(c) any scheme of corporate debt restructuring consented to by not less than seventy-five per cent of the secured creditors in value, including--
(i) a creditor's responsibility statement in the prescribed from;
(ii) safeguards for the protection of other secured and unsecured creditors;
(iii) report by the auditor that the fund requirements of the company after the corporate debt restructuring as approved shall conform to the liquidity test based upon the estimates provided to them by the Board;
(iv) where the company proposes to adopt the corporate debt restructuring guidelines specified by the Reserve Company Appeal (AT) No. 59 of 2021 -10- Bank of India, a statement to that effect; and
(v) a valuation report in respect of the shares and the property and all assets, tangible and intangible, movable and immovable, of the company by a registered valuer.
(3) Where a meeting is proposed to be called in pursuance of an order of the Tribunal under sub- section (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to all the members or class of members and the debenture- holders of the company, individually at the address registered with the company which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed:
Provided that such notice and other documents shall also be placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the Securities and Exchange board and stock exchange where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner as may be prescribed:
Provided further that where the notice for the meeting is also issued by way of an advertisement, it shall indicate the time within which copies of the compromise 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 Company Appeal (AT) No. 59 of 2021 -11- 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 sect oral regulators or authorities which are likely to be affected by the compromise or arrangement and shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that they have no representations to make on the proposals.
(6) Where, at a meeting held in pursuance of sub-
section (1), majority of persons representing three- fourths in value of the creditors, or class of creditors or members or class of members, as the case may be, voting in person or by proxy or by postal ballot, agree to any compromise or arrangement and if such compromise or arrangement is sanctioned by the tribunal by an order, the same shall be binding on the company, all the creditor, or class of creditors or members or class of members, as the case may be, or, in case of a company being wound up, on the liquidator 2[appointed under this Act or under the Insolvency and Bankruptcy Code, 2016, as the case may be,] and the contributories of the company.
(7) An order made by the Tribunal under sub-section (6) shall provide for all or any of the following matters, namely:--
Company Appeal (AT) No. 59 of 2021 -12-
(a) where the compromise or arrangement provides for conversion of preference shares into equity shares, such preference shareholders shall be given an option to either obtain arrears of dividend in cash or accept equity shares equal to the value of the dividend payable;
(b) the protection of any class of creditors;
(c) if the compromise or arrangement results in the variation of the shareholders' rights, it shall be given effect to under the provisions section 48;
(d) if the compromise or arrangement is agreed to by the creditors under sub-section (6), any proceedings pending before the Board for Industrial and Financial Reconstruction established under section 4 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) shall abate;
(e) such other matters including exit offer to dissenting shareholders, if any, as are in the opinion of the Tribunal necessary to effectively implement the terms of the compromise or arrangement:
Provided that no compromise or arrangement shall be sanctioned by the tribunal unless a certificate by the company's auditor has been filed with the Tribunal to the effect that 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.
Company Appeal (AT) No. 59 of 2021 -13- (10) No compromise or arrangement in respect of any buy-back of securities under this section shall be sanctioned by the Tribunal unless such buy-back is in accordance with the provisions of section 68.] (11) Any compromise or arrangement may include takeover offer made in such manner as may be prescribed:
Provided that in case of listed companies, takeover offer shall be as per the regulations framed by the Securities and Exchange Board.
(12) An aggrieved party may make an application to the Tribunal in the event of any grievances with respect ot the takeover offer of companies other than listed companies in such manner as may be prescribed and the Tribunal may, on application, pass such order as it may deem fit.
Explanation.--For the removal of doubts, it is hereby declared that the provisions of section 66 shall not apply to the reduction of share capital effected in pursuance of the order of the Tribunal under this section.' 'Section 232 - Merger and amalgamation of companies 1[(1) Where an application is made to the Tribunal under section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Tribunal--
(a) that the compromise or arrangement has been proposed for the purposes of, or in connection with, a scheme for the reconstruction of the company or companies involving merger or the amalgamation of any two or more companies:
and
(b) that under the scheme, the whole or any part of the undertaking, property or liabilities of any company (hereinafter referred to as the transferor company) is required to be transferred to another company (hereinafter referred to as the transferee company), or is proposed to be divided among and transferred Company Appeal (AT) No. 59 of 2021 -14- to two or more companies, the Tribunal may on such application, order a meeting of the creditors or class of creditors or the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal may direct and the provisions of sub-sections (3) to (6) of section 230 shall apply mutatis mutandis.
(2) Where an order has been made by the Tribunal under sub-section (1), merging companies or the companies in respect of which a division is proposed, shall also be required to circulate the following for the meeting so ordered by the Tribunal, namely:--
(a) the draft of the proposed terms of the scheme drawn up and adopted by the directors of the merging company:
(b) confirmation that a copy of the draft scheme has been filed with the Registrar;
(c) a report adopted by the directors of the merging companies explaining effect of compromise on each class of shareholders, key managerial personnel, promoters and non-
promoter shareholders laying out in particular the share exchange ratio, specifying any special valuation difficulties;
(d) the report of the expert with regard to valuation, if any:
(e) a supplementary accounting statement if the last annual accounts of any of the merging company relate to a financial year ending more than six months before the first meeting of the company summoned for the purposes of approving the scheme.
(3) The Tribunal, after satisfying itself that the procedure specified in sub sections (1) and (2) has been complied with, may, by order, sanction the compromise or arrangement or by a subsequent order.' 'Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 Company Appeal (AT) No. 59 of 2021 -15- G.S.R.1134(E).-- In exercise of the powers conferred by sub-sections (1) and (2) of section 469 read with sections 230 to 233 and sections 235 to 240 of the Companies Act, 2013 (18 of 2013), THE Central Government hereby makes the following rules, namely:-
1. Short Title and Commencement.--
(1) These rules may be called the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
(2) They shall come into force with effect from 15th December, 2016.
3. Application for order of a meeting.--
(1) An application under sub-section (1) of section 230 of the Act may be submitted in Form no.
NCLT-1 (appended in the National Company Law Tribunal Rules, 2016) alongwith:-
(i) a notice of admission in Form No. NCLT-2 (appended in the National Company Law Tribunal Rules, 2016);
(ii) an affidavit in Form No. NCLT-6 (appended in the National Company Law Tribunal Rules, 2016);
(iii) a copy of scheme of compromise or arrangement, which should include disclosures as per sub-section (2) of section 230 of the Act; and
(iv) fee as prescribed in the Schedule of Fees.
(2) Where more than one company is involved in a scheme in relation to which an application under sub- rule (1) is being filed, such application may, at the discretion of such companies, be filed as a joint- application.
(3) Where the company is not the applicant, a copy of the notice of admission and of the affidavit shall be served on the company, or, where the company is being would up, on its liquidator, not less than fourteen days before the date fixed for the hearing of the notice of admission.
(4) The applicant shall also disclose to the Tribunal in the application under sub-rule (10, the basis on which Company Appeal (AT) No. 59 of 2021 -16- each class of members or creditors has been identified for the purposes of approval of the scheme.
4. Disclosure in application made to the Tribunal for compromise or arrangement.--
Creditors Responsibility Statement. For purposes of sub-clause (c) of sub-section (2) of section 230 of the Act, the creditor's responsibility statement in Form No. CAA. I shall be included in the scheme of corporate debt restructuring.
Explanation:- For the purpose of this rule, it is clarified that a scheme of corporate debt restructuring as referred to in clause (c) of sub- section (2) of section 230 of the Act shall mean a scheme that restructures or varies the debt obligations of a company towards its creditors.
5. Directions at hearing of the application.--
Upon hearing the application under sub-section (1) of section 230 of the Act, the Tribunal shall, unless it thinks fit for any reason to dismiss the application, give such directions as it may think necessary in respect of the following matters:-
(a) Determining the class or classes of creditors or of members whose meeting or meetings have to be held for considering the proposed compromise or arrangement; or dispensing with the meeting or meetings for any class or classes of creditors in terms of sub-section (9) of section 230;
(b) fixing the time and place of the meeting or meetings;
(c) appointing a Chairperson and scrutinizer for the meeting or meetings to be held, as the case may be and fixing the terms of his appointment including remuneration;
(d) fixing the quorum and the procedure to be followed at the meeting or meetings, including voting in person or by proxy or by postal ballot or by voting through electronic means;'
15. In 'Mahaamba Investments Ltd.' vs. 'IDI Ltd.'. The Hon'ble High Court of Bombay held as follows:-
Company Appeal (AT) No. 59 of 2021 -17- "5. In the present case, having regard to the relevant clauses of the proposed scheme and particularly the provision whereby no new shares are sought to be issued to the members of the transferor company by the transferee company, the scheme will not affect the members of the transferee company. The creditors of the transferee company are not likely to be affected by the scheme in view of the financial position of the transferee company. In paragraphs 13 and 14 of the affidavit in support of the company application, the financial position of the transferor and transferee companies has been set out and which would show that in so far as the transferor company is concerned, it has an excess of assets over liabilities to the extent of Rs. 508 lakhs whereas in the case of the transferee company, there is an excess of assets over liabilities to the extent of Rs. 6,900 lakhs.
6. In the circumstances, the office objection is accordingly disposed of with the clarification that filing of a separate petition by the transferee company is not necessary, in the facts and circumstances of the present case."
16. In 'Eurokids India Pvt. Ltd.' (C.S.D. No. 911 of 2014) dated 19.12.2014, the Hon'ble High Court of Bombay observed as hereunder:-
"The Applicant Company is Wholly Owned Subsidiary of the Transferee Company and there is no re- organization of share capital of the Transferee Company and no new shares are being issued by the Transferee Company as all shares will be cancelled as per Clause 5 of the Scheme and rights of creditors of Transferee Company are not affected as mention in para 19 of the Affidavit in support of Summons for Direction and also in view of observations made by this court in Mahaamba Investment Ltd vs. IDI Ltd. (2001) 105 Co cases page 16 to 18, the filing of separate Company Summons for Direction and Company Scheme Petition under Section 391 and 394 of the Companies Act, 1956 by Eurokids International Private Limited, the Transferee Company is dispensed with."
(Emphasis Supplied) Company Appeal (AT) No. 59 of 2021 -18-
17. It is seen that Section 232(1) of the Companies Act, 2013 uses the word 'may' which introduces an element of discretion to the Tribunal to be exercised in the interest of justice in appropriate situations. It is evident from the aforesaid citations that the High Courts have exercised this discretion dispensing with the requirement of convening the meetings, if the Bench is satisfied in all respects. Section 232 is a specific provision carved out by the Legislature when both conditions maintained in clauses (a) and (b) of sub- Section (1) of Section 232 are met. In the instant case the amalgamation sought for is between a Wholly Owned Subsidiary and the Holding Company. The point which needs to be noted is whether such an arrangement alters the rights of the Stakeholders of the Company; whether such an amalgamation has any bearing internally on Creditors/Members of both the Companies; whether not holding the subject meeting would amount to violation of any of the provisions of the Companies Act, 2013; whether the Tribunal can exercise their discretion when the 'Transferor Company' is a Wholly Owned Subsidiary of the 'Transferee Company' and financial position of the 'Transferee Company' is positive and the merger is not affecting the rights of the Shareholders or the Creditors.
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 of the 'Transferor Company'. The documentary Company Appeal (AT) No. 59 of 2021 -19- 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 there are no Creditors in the subsidiary Companies and that the 'Transferee Company' is the only Shareholder of the 'Transferor Company'.
20. This Tribunal has placed reliance in 'DLF Phase IV, Commercial Developers Limited and Ors.' in Company Appeal (AT) No. 180 of 2019 and observed that the scheme would not prejudicially affect the Creditors or Shareholders of the Appellant Company when an Application is filed by the 'Transferor Company' or 'Transferee Company', a separate Application is not necessary and dispensed with the meeting of the equity Shareholders and Creditors of the Appellant Company. At the cost of repetition, keeping in view that the financial position of the 'Transferee Company' is highly positive, the merger does not involve any compromise/arrangement with any Creditor of the Company, that there would be a positive net worth and Creditors would not be compromised, the Tribunal ought to have exercised the discretion in dispensing with the requirement of convening the meeting which would facilitate ease of doing business and save time and resources. To reiterate, we observe that the rights and liabilities of Secured and Unsecured Creditors were not getting affected in any manner by way of the proposed scheme as no new shares are being issued by the 'Transferor Company' and no compromise is offered to any Secured and Unsecured Creditors of the 'Transferee Company'. Therefore, we are of the considered view that when the 'Transferor and Transferee Company' involve a parent Company and a Wholly Owned Company Appeal (AT) No. 59 of 2021 -20- Subsidiary the meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors can be dispensed with as the facts of this case substantiate that the rights of the Equity Shareholders of the 'Transferee Company' are not being affected.
21. For all the aforenoted reasons, we allow this Application and set aside the direction in respect of the Transferee Company issued by the NCLT, to convene the meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors on 22.04.2021.
[Justice Anant Bijay Singh] Member (Judicial) [Ms. Shreesha Merla] Member (Technical) NEW DELHI 28th June, 2021 ha Company Appeal (AT) No. 59 of 2021