NCLT Kochi Waives Meetings For Vallabhdas Kanji's Amalgamation With Three Wholly-Owned Subsidiaries

The National Company Law Tribunal, Kochi (NCLT), on 11 August dispensed with the requirement of convening meetings of shareholders and creditors for a composite Scheme of Arrangement involving the amalgamation of three substantially wholly-owned subsidiaries with their holding company, Vallabhdas Kanji Limited.

A Bench comprising Judicial Member Vinay Goel and Technical Member Ravichandran Ramasamy passed the order on a joint application filed under Sections 230 to 232 read with Section 66 of the Companies Act, 2013, seeking directions in relation to the proposed Scheme. They observed:

“Having regard to the shareholding structure of the Applicant Companies, the nature of the proposed Scheme, and the consent affidavits placed on record by the stakeholders, this Tribunal is satisfied that the requirement of convening and holding the meetings of the concerned stakeholders deserves to be dispensed with.”

Under the proposed Scheme, Complete Spice Solutions India Limited, Malabar Spices Company Limited and Red Peppers Limited are to be amalgamated by absorption into Vallabhdas Kanji Limited. The Scheme also contemplated the reduction and cancellation of certain Compulsorily Convertible Preference Shares of Vallabhdas Kanji Limited.

The Applicant Companies submitted that Vallabhdas Kanji Limited was the holding company of all three Transferor Companies and held their entire beneficial interest. Although a marginal number of shares stood in the names of individual shareholders, those shares were held by nominee shareholders for and on behalf of Vallabhdas Kanji Limited.

Therefore, they submitted that no shares were required to be issued by Vallabhdas Kanji Limited as consideration for the amalgamation, as the Transferor Companies were wholly-owned subsidiaries of the Transferee Company in substance and beneficial ownership.

The Tribunal noted that all equity shareholders of the Transferor Companies had furnished consent affidavits representing 100% of their respective paid-up equity share capital. The unsecured creditors of the Transferor Companies had also furnished consent affidavits representing 100% of their respective external unsecured debt.

In respect of Vallabhdas Kanji Limited, all eight equity shareholders and its sole preference shareholder had consented to the Scheme. Unsecured creditors representing 99.97% of the value of the company's total external unsecured debt had also furnished consent affidavits.

The Bench observed that the arrangement was effectively between a holding company and its wholly-owned subsidiary companies. It further noted that the remaining unsecured creditors were sister concerns within the same group and held that their deemed concurrence was sufficient considering the nature of the proposed Scheme.

Accordingly, the NCLT dispensed with the requirement of convening and holding meetings of the equity shareholders and unsecured creditors of the three Transferor Companies, as well as the equity shareholders, preference shareholder and unsecured creditors of Vallabhdas Kanji Limited.

It clarified that its order was confined to examining procedural compliance and should not be construed as an expression of opinion on the merits of the proposed Scheme.