Dispensing with requirement for convening meeting of Equity Shareholders not possible: NCLT

This is an application which is jointly filed by the applicant companies herein, namely TVA Trading Private Limited (for brevity “Transferor Company”) and C & S Electric Limited (for brevity “Transferee Company”) under Section 230 to 232 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 in relation to the Scheme of Amalgamation proposed between the applicants and the said Scheme also annexed as Annexure “A” to the application with the following prayers:-

I. Dispensing with requirement for convening the meeting of the Equity Shareholders of the Transferor Company and also to dispense with the requirement of issue and publication of notices for the same;

II. Issuing/passing necessary Directions/Order as it may deem fit for the purpose of convening the meeting of the Secured and Unsecured Creditors and members or any class thereof of the Transferor Company including the requirement of issue and publication of notices for the same;

III. Issuing/passing necessary Directions/Order in respect of Applicant Company 2 as it may deem fit for the purpose of convening the meeting of the Equity Shareholders, Secured and Unsecured Creditors and members or any class thereof of the Transferee Company including the requirement of issue and publication of notices for the same;

IV. Issuing necessary direction for appointment of Chairperson and scrutinizer for the meeting or meetings to be held and terms of appointment and remuneration for the Chairperson;

V. Issuing necessary directions fixing the time period within which the chairperson shall report the result of the meeting to this Hon’ble Tribunal;

VI. Issuing direction for permitting the filing of application, petition, other documents as may be required for the purpose of sanctioning the proposed Scheme of Amalgamation between JVA Trading Private Limited and C&S Electric Limited and their respective Shareholders and Creditors;

VII. Passing such other and further orders as are deemed necessary in the facts and circumstances of the case.

An Affidavit in support of the above joint application sworn to by one Mr Lalit Krishan Khanna, being the Company Secretary and Senior Vice President – Corporate & Legal of the applicant companies has also been filed along with the application. Mr Arun Kathpalia, Senior Counsel along with the Mr Krishanendu Dattta, Counsel for the joint applicants took us through the averments made in the application as well as the typed set of documents annexed there with. Learned Counsel represents that the Scheme does not contemplate any corporate debt restructuring exercise as contemplated under Section 230(2) of the Act and to this effect the applicants have also filed an additional affidavit dated 03.01.2017 sworn to by the above named Mr Lalit Krishan Khanna. It is further represented that a joint application as filed by the applicants are maintainable in view of Rule 3(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules 2016 and it is also represented that the registered office of both the applicant companies are situated within the territorial jurisdiction of this Tribunal. In relation to JVA Trading Private Limited being the Transferor Company in the Scheme marked as Annexure – A, Learned Counsel maintains that the said company is having only 4 shareholders all of whom have given their consent to the Scheme of Amalgamation constituting 100% in value and number;, A prayer has thus been made for dispensing with the meeting of the Equity Shareholders and also to dispense with the requirement of issue and publication of notices for the same.

Further in respect to the Transferee Company in relation to unsecured creditors to whom the Transferee company owes less than Rs.2,00,000/- and who constitute less than 3% in value of the total amount owed to unsecured creditors, it is represented that they are basically creditors for supplies and will not be prejudiced in any way by the Scheme, as under the Scheme their liabilities are not in any way sought to be extinguished and hence individual notices to the unsecured creditors to whom the Transferee Company owes less than Rs.2,00,000/- may be dispensed. Their total number is claimed to be 373.

Before venturing into the merits of the application it is incumbent on this Tribunal to be certain about its jurisdiction to entertain the present application. The provisions of Sections 230 to 233 and Section 235 to 240 of Companies Act, 2013 vest this Tribunal with the jurisdiction to entertain applications of the above nature. These provisions were notified on 07.12.2016 vide S.O.3677(E) with effect from 15^th December, 2016 and the relevant rules titled as Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 were notified on 14^ffi December,2016 vide Notification No. GSR 1134(E)[F.No.2/31/CAA/2013/-CL-V] effective from 15.12.2016. The above joint application seems to have been filed, as evident from the endorsement made by the Registry of this Tribunal on 21.12.2016 and in light of the notification of the provisions as well as Rules framed there under this Tribunal is clothed with the jurisdiction to entertain the above joint application under the 2013 Act and hence we proceed on the said basis. Since the registered office of both the applicants is situated New Delhi, this Tribunal also has the territorial jurisdiction to entertain the above application filed jointly by both the companies involved in the Scheme of Amalgamation. The applicability of provisions of Section 233 of the Companies Act, 2013 is also not attracted in view of the position that the Scheme of Amalgamation being the fulcrum of this application is not contemplated between two small companies or between a holding and its wholly subsidiary. In light of the above position of law this Tribunal proceeds to entertain this application seeking directions for convening a meeting of its members and creditors for the consideration of Scheme of Amalgamation by way of merger between the applicant companies under the new dispensation.

A perusal of the application discloses that both the applicant companies have disclosed the objects for which the companies have been incorporated and in support thereof they have filed their respective Memorandum and Articles of Association along with their respective Certificate of Incorporation. The capital structure of the respective companies have also been disclosed in the joint application filed as on 31.10.2016 for the Transferor Company and as on 31.03.2016 for the Transferee Company and averred that as on the date of filing this application there has been no subsequent change to the capital structure of the respective companies. In relation to the Transferor Company since the company has been incorporated on 13.07.2016 provisional financial statement as at 31^st October 2016 certified by one of its director has been filed, while in relation to the Transferee Company audited financial statements for the year ended 31.03.2016 as well as the provisional financial statements as at 31.10.2016 has been filed.

From a perusal of the joint application, the affidavit and typed set filed along with the application, it is evident that both the companies are engaged in electric and electronic goods. The Transferor Company is in trading and the Transferee Company is engaged in manufacturing. In relation to the Scheme of Amalgamation per se it is averred in the application that since the businesses of both the Transferor and Transferee companies are complementary to each other and in order to achieve benefits as set out in ‘Rationale of the Scheme of Amalgamation” as figuring in Annexure – ‘A’ to the application, the Board of Directors of the respective companies vide Board Meeting held on 16.12.2016 in relation to the Transferor Company and 05.12.2016 in relation to the Transferee Company as well as 16.12.2016 of the merger committee of the Transferee Company, (certified copies of all of which have been filed) have decided to merge the Transferor Company with the Transferee Company on and from the appointed date specified in the Scheme as 01^st day of December 2016 and all the assets and liabilities of the Transferor Company would be transferred to the Transferee Company. The combined capital structure would stand at Rs.71,00,00,000/- being the aggregate of the present paid up capital of the respective companies. The Share Exchange Ratio under the proposed Scheme has also been disclosed in the additional affidavit dated 03.01.2017 filed on behalf of the joint applicants. List of Equity Shareholders, Secured Creditors and Unsecured Creditors of both the Transferor and Transferee Companies have also been duly filed along with the joint application by the applicants as on 31.10.2016.

In relation to members/equity shareholders, secured creditors and unsecured creditors the following details emerge upon a perusal of the details annexed with the application, namely: