Mega Corporation Ltd vs Na

Mega Corporation Ltd. ...Appellant 108, First Floor, Taimoor Nagar, Opp. New Friends Colony New Delhi-110025

Vs

Nil. ....Respondent

Present: For Appellant: Mr. Mukesh Sukhija, Advocate. Ms. Pooja Bhatia, Company Secretary in practice. For Respondent: None.

ORDER

31.01.2018: Heard learned counsel for the appellant. The present appeal

has been filed against the orders passed by the National Company Law

Tribunal, Bench III, New Delhi in C.P.CA (CAA)-120/ND/2017. The appellant

along with Mega Airways Limited filed an application u/s 230-232 of the

Companies Act, 2013 (Act-in brief) read with Companies (Compromises,

Arrangements and Amalgamations) Rules, 2016. Mega Airways Limited was

arrayed as the transferor applicant company and the present appellant was

arrayed as transferee Applicant Company. The Scheme of Arrangement by way

of amalgamation was placed before the NCLT. The applicants before NCLT

made following prayers:

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"(i) Dispense with convening the meeting of Shareholders and

unsecured creditors of the Applicant Transferor Company.

(ii) Dispense with convening the meeting of Shareholders and

unsecured creditors of the Applicant Transferee Company.

(iii) Allow the Applicant Companies to make Petition u/s 230, 232 of

the Companies Act, 2013 for approval of the Scheme of

Amalgamation of Mega Airways Limited with Mega Corporation

Limited.

(iv) Direct service of notice of this Application on (a) the Central

Government through the office of the Regional Director, Northern

Region, Ministry of Corporate Affairs, New Delhi; (b) the Registrar of

Companies, Delhi and Haryana, New Delhi; (c) the Official

Liquidator, Ministry of Corporate Affairs, New Delhi; (d) the Income

Tax Department, New Delhi; (e) the Bombay Stock Exchange; and (f)

the Reserve Bank of India."

2. The learned NCLT considered the application which was filed and heard

the counsel for applicants. NCLT considered the shareholders Mega Airways

has. It took note of the fact that the Transferee Company is a listed company in

the Bombay Stock Exchange and there were 4752 Equity Shareholders. It was

claimed before NCLT that order of dispensation of the meetings for the purpose

of obtaining approval of the proposed Scheme of Amalgamation should be

granted on the basis that the Scheme of Amalgamation was between holding

Company Appeal (AT) No. 04 of 2018 3

company and its wholly owned subsidiary. It was stated before NCLT and is

being argued before us also that there is no allotment of shares contemplating

in the Scheme of Amalgamation and that the accounting treatment as

contemplated in the Scheme is by way of pooling of interests method which has

been certified by the statutory auditors. It is being claimed that even though

Transferee Company is listed company in view of the Scheme of Amalgamation

contemplated between holding company and it's subsidiary, the meetings as

contemplated under the provisions of the Companies Act, 2013 can be

dispensed with.

3. The NCLT heard the applicants which included the present appellant and

found that it was not satisfied with the submissions made. It appears that the

NCLT discussed Section 233. The application before NCLT was u/s 230 & 232.

If the applicants in the face of Section 233(14) chose Section 232, NCLT could

rightly ask calling of meeting. The NCLT also considered the provisions of

Section 230-232 under which the applicants had moved the NCLT and

considered the arguments which were raised before it and observed in Para 11

and 12 of its Judgment as under:

"11. However, in the instant case the same is not the position and

the Transferee Company is a widely held Public Company, whose

shares are also listed. The decision cited by the Applicants Counsel,

of the Hon'ble NCLT, Bombay in Re: Housing Development Finance

Corporation Ltd. & Ors. in CSA No. 243 of 2017 can be distinguished

Company Appeal (AT) No. 04 of 2018 4

in view of Section 233 of the Companies Act, 2013 and its

elucidation in relation to scope and amplitude as above.

12. Thus in relation to dispensation of the meetings of shareholders

and unsecured creditors of the Transferee Company the same being

a widely held listed company having 4752 shareholders and with

18 unsecured creditors from whom consents have not been obtained

and produced, this Tribunal is not willing to accede to the request of

the applicant companies for dispensation of the meetings of

shareholders and unsecured creditors of the Transferee Company. It

is required to be noted that only when the meetings, be it the

shareholders or creditors, when called, convened and held, gives

rise to exchange of information, between the company and its

shareholders and other stakeholders of the companies which is sine

quo non for effective Corporate Governance, particularly in relation to

the Scheme as the one contemplated herein even when it is between

a holding and wholly owned subsidiary. It is also to be seen that

even in the simplified procedure prescribed under Section 233 of the

Act the meetings of shareholders have not been dispended with and

this Tribunal, hence is of the view, particularly in relation to

Transferee Company, being a widely held public company sought

for, is not to be granted and hence in relation to Transferee

Company, the meeting of the shareholders and Unsecured Creditors

Company Appeal (AT) No. 04 of 2018 5

is directed to be convened and for this purpose following directions

are issued."

After making observations as above the learned NCLT gave directions regarding

holding of the meetings.

4. The present appeal has been filed against such judgment and order. The

learned counsel for the appellant has reiterated the submissions which was

raised before NCLT and also relied on judgment in the matter of HDFC passed

in Company Scheme Application no. 243 of 2017 by NCLT Mumbai Bench on

24th September, 2017. Copy of the same has been filed at page 475 in the

present appeal. The learned counsel referred to various paragraphs of the

judgment to submit that emphasis is on protecting the rights of

members/creditors of the Companies involved in mergers and amalgamations

and as long as mergers and amalgamations have no bearing internally on

creditors/ members of respective companies calling of meeting of the creditors

or members is not necessary. It is argued that sub-section 14 of Section 233

itself permits the parties to opt for procedure u/s 232 and NCLT cannot insist

that they should have proceeded u/s 233 of the Act.

5. We have perused the judgment in the matter of HDFC being relied on. It

was a judgment of the NCLT having two members. It was cited before NCLT

New Delhi also and in spite of the same, NCLT recorded that meetings would be

necessary in the present matter.

Company Appeal (AT) No. 04 of 2018 6

6. We find that Section 233 referred to initially by NCLT has a speedier

process but if appellant keeping in view sub-section (14), preferred to resort to

Section 232 the applicants cannot be faulted with. Only thing is that, then they

have to go through the procedure as u/s 232 of the Act. Section 232 gives

powers to NCLT to consider & decide calling of meeting of creditors etc.

Appellant cannot claim "dispensing" meetings as a right.

7. When it is a question of merger and the provisions require and give

discretion to the NCLT with regard to calling of meetings, it is a discretion to be

exercised judiciously by NCLT. NCLT is duty bound to follow procedure laid

down by law. The NCLT recorded reasons why it finds that calling of the

meetings is necessary and we do not find that the reasons recorded are

arbitrary. The Law provides and the NCLT has exercised discretion that the

meetings are required to be called. We do not wish to substitute our discretion

over the discretion exercised by the NCLT. We do not find any substance in the

appeal. The appeal is rejected.

8. The appellant is given liberty to move NCLT to request resetting of the

schedule and dates specified in the operative order as it appears that certain

steps were to be taken on 29th January, 2018 and the said date has passed.

(Justice A.I.S. Cheema) Member (Judicial)

(Balvinder Singh) Member (Technical) sh/nn

Company Appeal (AT) No. 04 of 2018