The attached case concerns a cross-border merger involving Mensa Brand Technologies Pte. Ltd.[1], a Singapore-based parent entity, and several Indian subsidiaries. The appellants sought dispensation from convening meetings of unsecured creditors under the Companies Act, 2013, which was refused by the NCLT, leading to this appeal before the NCLAT.
Facts
The composite scheme proposed merging seven transferor companies into the transferee company, Mensa Brand Technologies Pvt. Ltd. The scheme was approved by the Board of Directors of all entities. The appellants obtained affidavits of consent representing over 90% of unsecured creditors by value. However, the NCLT directed convening meetings of unsecured creditors who had not given consent, citing concerns over related party creditors and quorum requirements.
Arguments
The appellants contended that the scheme falls under Section 230(1)(b) dealing with arrangements with members, not compromises affecting creditor rights under Section 230(1)(a). They argued creditor rights remain unaffected, debts will be settled in the ordinary course, and the transferee company’s increased net worth safeguards obligations. They highlighted that Section 230(9) allows dispensing of meetings where 90% of creditors consent, without excluding related party creditors, and urged that the NCLT’s order was arbitrary and unreasonably burdensome.
Findings
The NCLAT held that the NCLT erred in directing meetings only of minority unsecured creditors and excluding related creditors from the 90% threshold. It emphasized that Section 230(9) does not discriminate between creditors and that the threshold should be computed cumulatively. The tribunal found that the scheme did not compromise creditor rights and meets statutory criteria to dispense with the creditor meetings.
Relying on various precedents, NCLAT stated that NCLT has a discretion to dispense meetings when creditors rights are unaffected and requisite consents exits. The summary of such case laws is as under:
Vodafone Spacetel Ltd[2]
- The Delhi High Court dispensed with the requirement of convening meetings of unsecured creditors based on the facts that the scheme did not vary the rights or liabilities of the unsecured creditors. Further, it was established that the unsecured creditors were mainly trade creditors with cyclical dues regularly paid in the ordinary course of business.
Almondz Re-Insurance Brokers Pvt Ltd[3]
Based on the considerations as mentioned below, the Delhi High Court dispensed with the requirement to convene unsecured creditor meetings:
- The Court noted that a large part of unsecured debts was paid off before the amalgamation.
- The rights of unsecured creditors were not adversely affected by the scheme.
- Financial health of the transferee company was substantially better post-amalgamation.
- No objection from the creditors
Mohit Agro Commodities Processing Pvt Ltd[4]
- NCLAT dispensed with the meeting of creditors based on the following grounds:
- The tribunal noted no reorganization of share capital, no issuance of new shares, and no compromise or arrangement affecting creditors.
- The transferee company had a positive net worth sufficient to discharge liabilities.
- The tribunal emphasized streamlining the process and saving time and resources by dispensing with meetings of creditors, given no creditor rights were compromised.
Reliance Industries Ltd[5]
- The tribunal had discretion under Section 232(1) to dispense with convening meetings of shareholders and creditors where rights and liabilities remain unaffected. It held that where the transferee company’s assets far exceed liabilities and no reorganization of share capital impacts creditors, meetings could be dispensed with. The tribunal even dispensed with the requirement of obtaining 90% consents in some cases to facilitate ease of business.
Conclusion
The appeal was allowed, and the impugned order requiring meetings of unsecured creditors was set aside. The NCLAT dispensed with the meeting requirement, streamlining the merger process, clarifying that where creditor rights remain unaltered and requisite consents are obtained, convening meetings of minority creditors is unnecessary and contrary to the statutory scheme.
This decision reinforces the principles of procedural efficiency and respect for corporate restructuring goals under the Companies Act, 2013 in cross-border mergers.
For detailed discussion, please feel free to contact devadhaantu@devadhaantu.in
_______________________________________________________
[1] Archernar Brand Technologies Private Limited – Appeal No. 171 of 2025 order dated September 04, 2025
[2] Vodafone Spacetel Ltd (Delhi High Court, 2013)
[3] Almondz Re-Insurance Brokers Pvt. Ltd. (Delhi High Court, 2015)
[4] Mohit Agro Commodities Processing Pvt Ltd (NCLAT, 2021)
[5] Reliance Industries Ltd. vs Registrar of Companies (NCLAT, 2023)
