Transferor Company is Prashant Commercial Holdings Ltd. and Transferee company
name is Threads India Ltd. Former is the holding company of latter. Latter is
the wholly owned subsidiary of former company.
Board of Directors of both held their respective meetings and have reached to an
agreement pertaining to the Scheme of Amalgamation.
Transferor Company has 7 equity shareholders and no preference shareholders.
Transferee being wholly owner subsidiary company of transferor has 7 equity
shareholders, 4 secured creditors and 493 unsecured creditors.
Approval of same scheme is required by various stakeholders for which meetings
need to be convened as per provisions of Companies Act read with Companies
(Compromises, Arrangements and Amalgamations) Rules, 2016(hereinafter referred
as 'Rules of 2016'). For this purpose of completion of procedural formalities
and certain other prayers, interference of tribunal was required like for
convening meetings of creditors etc. and for seeking other directions etc..
That's why these companies being applicants approached the tribunal having
jurisdiction in such regards.
Citation: Company Application No. CA (CAA)No. 04/ALD of 2021
Coram: Hon'ble Justice (Retd.) Rajesh Dayal Khare, Member (Judicial)
The case relates to amalgamation of two companies and also with dispensing with
conducting meeting of shareholders on account of them having consented to scheme
of amalgamation by way of an affidavit. Earlier in a case1, Tribunal's New Delhi
bench ruled out that NCLT's power to grant dispensation of meeting is limited to
creditors only and cannot be extended to shareholders even when the consent for
same has been obtained by the company. But different position has been taken in
the present case by NCLT.
Companies (Compromises, Arrangements and Amalgamations) Rules, 2016
- S. 103(a)(i): It provides that in regards of a public company, quorum
for meetings is five members personally present in case of overall members
on fixed date of meeting when are not more than 1000.
- S. 105: It provides that any person entitled to attend and vote at a
meeting may appoint some other person as a proxy to attend and vote on his
behalf but the same shall not be entitled to speak at that meeting and also
not entitled to vote except on a poll.
- S. 230(3): When a meeting has been proposed via an order passed by
Tribunal, notice of same has to be sent to creditors along with an
accompanying statement which discloses details as to the compromise or
arrangement in addition to copy of valuation report plus explaining other
things such as ill effects of same on creditors etc. This has to be done
amongst other things prescribed in this provision.
- S. 230(4): When the above mentioned notice is served to the respective
persons, they must also be made aware as to the voting right they can
exercise by different modes like ballot paper, proxy etc.
- S. 230(5): Such notice shall also be sent to Central Govt., Income Tax
Authorities, RBI amongst other such agencies along with those which are
likely to be affected by such compromise or arrangement in order for them to
- S. 230(6): When meeting on direction of tribunal is held and voting
exercise by valid ways when reach to consensus as to compromise or
arrangement and the same gets sanctioned by tribunal subsequently, it
becomes binding on company, its creditors etc.
- S. 232: Where application u/S 230 is made to Tribunal for sanctioning of
compromise that two companies have arrived at or an arrangement that has
been proposed with connection to scheme of amalgamation of those companies
and whereby the same scheme lays down aspects such as transfer of
liabilities etc. from one company to other, then Tribunal enjoys power to
order meeting of creditors or their class and as per the manner directed by
it. Provisions of S. 230 Subsection 3 to 6 will apply in those scenarios.
- Rule 7: The notice of meeting to be held as per S. 230(3) of Companies
Act has to be advertised in one English and one Vernacular Language
newspaper post directions in relation to same are issued by tribunal and
must also be placed on company website if any atleast 30 days prior in a
form prescribed in Form No. CAA.2.
- Rule 8: The notice sent as per above mentioned S. 230(5) of Companies
Act shall be in form CAA.3 and it should also accompany a copy of scheme of
compromise or arrangement while being sent to IT Authorities, RBI,
Securities and Exchange Boards etc. This notice has to be sent post notice
to members and creditors has been sent already and one month time from date
of receiving of such notice, authorities can make representations before the
tribunal regarding same.
- Rule 9: This concerns voting by shareholder or creditor who has received
notice to that effect and mentions that it can be done via ballot paper,
proxy or electronic form in a prescribed form pertaining to adoption of some
compromise or arrangement and with rules applicable as regards to proxy of
- Rule 10: It lays down rules pertaining to proxy as to how the form
should be and that it should be duly signed etc. and the time span before
which it shall be sent to concerned authorities etc.
- Rule 11: Talks about copy of compromise or arrangement to be sent to
each member or creditor on their requisition within 1 day of same and that
too free of charge. This has to be read in conjunction with S. 230 of Act.
- Rule 12: It provides for an affidavit to be annexed by Chairperson and
further sent to tribunal reporting that directions regarding issuance of
notice and other formalities like advertisement has been complied with and
has to be filed before not less than 7 days of meeting.
- Rule 13: This talks about recording of votes and concerned meta info of
same and that result of meeting has to be decided by voting only and report
has to be generated for same.
- Rule 14: Once decision is arrived upon, it has to sanctioned by tribunal
within 7 days once chairperson files report before it by way of petition.
- Whether the need of convening of meeting amongst shareholders of both
transferor and transferee company respectively can be dispensed with?
- Whether the formalities of convening meeting amongst secured and
unsecured creditors of transferee company like issuing of notice to
unsecured creditors constituting less than 1 percent of debt owed to them by
transferee company can be dispensed with?
- What are other procedural formalities to be followed and taken into
consideration while convening the above mentioned or similar like meetings
and what will be other formalities post these meetings as per applicable
rules and provisions?
It was contended by applicant companies that since all equity shareholders of
transfer company have consented to the scheme of amalgamation by way of
affidavit, need of convening of meeting shall be done away with. The same
reasoning was accepted by the Tribunal.
From the perspective of need of holding meeting of creditors both secured as
well as unsecured is concerned of the transferor company, in absence of both
kinds of creditors, the need did not arise.
As far as holding meeting of shareholders of transferee company is concerned,
owing to the fact that they are wholly owned subsidiary company of transferor
company and the latter having 7 equity shareholders, their consent along with
the consent of the nominees by way of affidavit in favor of the proposed scheme
of amalgamation was considered to be enough for not needing to convene meeting
and tribunal accordingly dispensed with it.
There were 4 secured creditors of Transferee company having debt value of around
39 crores and the transferee company had sought as a prayer to convene meeting
of those creditors from the tribunal. This prayer was accepted by tribunal and a
date was fixed for holding the same with objective of considering the proposed
scheme of amalgamation of both companies and accordingly approve it with or
without modifications if thought fit.
Similar was the scenario pertaining to the unsecured creditors of transferee
company. Date was set for meeting in order to consider the said scheme and
approve either with or without modifications if thought fit. It was contended by
the applicants that since there form many unsecured creditors having minimal
amount of debt of total value of debt owed to creditors, on account of their
interest being very unlikely to be affected by the said scheme, permission was
sought to dispense away with issuing notice to them for simplification of
process and avoid overcrowding in pandemic. The same reasoning was accepted by
tribunal and need of issuing notice to them was dispensed with from regards of
those unsecured creditors having value of debt upto Rs. 20,000/-.
Quorum for secured creditors meeting was prescribed as 2 persons and it was said
that for unsecured creditors, it shall be as per S. 103 of Companies Act as
stipulated in Rules Section. In case of absence of quorum for both kinds of
creditors, it was held that meeting shall stand adjourned for half hour in such
case. And in order to compute quorum, proxies were also said to be considered.
Valid proxy is the one where a person authorised to attend and vote at meeting
duly signs the form in prescribed form and files it before transferee company
before 48 hrs. of commencement of meeting. It was asked of Chairperson to ensure
that such registers of proxy are maintained properly.
All the creditors both secured as well as unsecured listed in application of
applicants were held entitled to cast their vote by way of postal ballot at the
meeting venue at that time or by way of same postal ballot before meeting. Vote
casted by any means was asked to be subject to scrutinizing for each meeting.
Tribunal asked for notices to be furnished to all creditors by authorised
representatives of transferee company comprising of date, time, venue, voting
mode etc. by way of either speed post, registered post or email whereby its
available and must be sent atleast 30 days prior to fixed meeting date. A copy
of scheme was also asked to be sent alongside such notices as per the 2016
Notices were asked to be published in two newspaper whereby 1 is in English mode
and other is Hindi medium in a prescribed form and other things to adhere to as
envisaged under Rule 7 above.
In other words, Tribunal delved into other things to be kept in mind and rules
to be followed laid down in Rules of 2016 and the Act while conducting those
Convening of meetings for transferor and transferee company's shareholders was
dispensed with by Tribunal as they consented in support of scheme of
amalgamation by way of affidavit.
Date of meeting of secured as well as unsecured creditors of transferee company
was fixed by the tribunal in order for them to delve into the scheme of
amalgamation and then approve the scheme with or without modification if they
thought fit. Other directions were issued to be followed for conducting those
meetings which are mostly based on Rules of 2016 in addition to some others
2 advocates were made chairperson and alternate chairperson for these meetings
and practicing company secretary as scrutinizer. A particular amount was asked
to be paid to each as honorarium in addition to arrangement of travel, stay and
other such expenses.
The above mentioned chairperson was assigned task of sending the notices
pertaining to meeting and was conferred powers related to conduct of meeting,
determination of procedural questions which may arise or pertaining to any
adjournment that may be there or related to amendment prescribed to scheme or
resolution by any member of meeting.
The designated chairperson was also asked to file affidavit before tribunal
atleast 7 days prior to meeting date thereby reporting tribunal that rules such
as notice issuing and those pertaining to advertisement etc. have been complied
The results of the held meetings were also asked by tribunal to be sent to them
by chairperson within 30 days as per Rule 13 and 14.
- JVA Trading Pvt. Ltd. and C&S Electric Limited in Company Application
No.A.1/PB/2017 dated 13.01.2017.
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