Section 230 of Companies Act, 2013 and Chapter XV-The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 deals with the procedure to be followed in case where any compromise or arrangement is entered into between the company and the members or between the company and the creditors. Section 230(9) of the Companies Act, 2013 deals with the power that the Tribunal has to dispense with calling of meeting of creditor or class of creditor 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.
The question that lies now is can a meeting of shareholders be dispensed by the tribunal under section 230(9) of the Companies Act, 2013?
In the case of DLF phase 4,
There were four companies who are subsidiaries of DLF Ltd. An application of first motion was filed in the tribunal for dispensing the meeting under section 230 (9) what is mentioned in the companies’ act. As the DLF Ltd had received consent by affidavit more than 90% to the scheme of compromise and arrangement from the shareholder’s, unsecured creditors and debenture holders.
As per section to 230(9) the tribunal may dispense with calling of the meeting of creditors, a class of creditors, having at least 90% value in the company by the way of affidavit. No where does this section mention about dispensing a meeting of shareholders.
In the case of Godrej Wadala,
It was mentioned by the court that a meeting of shareholders is mandatory and the same should be done when a meeting is held by the High Court. This is extremely important as the rights of the shareholders play an important role and cannot be neglected.
In the instant case there has been no specific mention of whether the shareholding rights will be any dilution or change in the shareholdings which is why it is necessary to hold a meeting. It is also necessary to issue a notice to all the shareholders before making and consenting a scheme of amalgamation.
If the facts of the case only involved creditors, in that case the meeting can be dispensed with from section 230(9) when there would be at least 90% of confirmation and value via affidavit for the scheme an arrangement which has been proposed by ABC Ltd. However, from the facts of the case it is clear that there is no mention whatsoever of the creditors and the contention here is about dispensing with the meeting of the shareholders. The statute does not provide for such dispensing of meetings of the shareholders which would lead it to be unjust and shall not be fair as it is not in the parallel lines of the companies act which aims in providing protection to the shareholders as well.
The meeting is held so that the shareholders know about the crux of the scheme of amalgamation or arrangement as held in the case of Godrej Wadala and when the same is not done the shareholders will not know about the details. So their consent in such cases would still be unfavorable to them.
Also read- Landmark cases on Reduction of Share Capital- Section 66 Companies Act
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