Tribunal sanctions scheme under Sections 230-232 and 66 of Companies Act, 2013 for amalgamation by absorption and share capital reduction, relying on unanimous consent affidavits and regulatory compliance
The National Company Law Tribunal (NCLT), Kochi Bench, on 11 August 2026, passed a significant order approving the scheme of arrangement involving Vallabhdas Kanji Limited (the transferee company) and its three wholly-owned subsidiaries: Complete Spice Solutions India Limited, Malabar Spices Company Limited, and Red Peppers Limited (transferor companies). The scheme envisages the amalgamation of the transferor companies into the transferee company, along with a reduction and cancellation of compulsorily convertible preference shares, under Sections 230 to 232 read with Section 66 of the Companies Act, 2013, and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
The scheme was structured as a holding company absorbing its wholly-owned subsidiaries, with the transferor companies' entire undertakings, assets, liabilities, contracts, and obligations vesting in the transferee company as a going concern from the appointed date of 1 April 2026. Importantly, the scheme did not require issuance of new shares by the transferee company as consideration since the transferor companies were held almost entirely by the transferee company, with the balance shares held by nominees on its behalf.
A notable aspect of the order was the dispensation of meetings of the shareholders and unsecured creditors of all the companies involved. This was based on the submission of 100% consent affidavits by all equity shareholders and unsecured creditors of the transferor companies and the transferee company, demonstrating unanimous approval. Moreover, the unsecured creditors who did not submit explicit consent affidavits were part of the same group or sister concerns, and their deemed concurrence was accepted by the Tribunal as sufficient.
The reduction of share capital related exclusively to the cancellation of fully paid 0.0001% compulsorily convertible preference shares aggregating to approximately Rs. 64.73 crore held solely by one individual shareholder, with the cancelled amount adjusted against the accumulated losses of the transferee company, in accordance with the accounting treatment outlined in the scheme and certified by auditors for compliance with applicable Accounting Standards.
The Tribunal also ensured procedural compliance by mandating the applicant companies to serve notices to various regulatory authorities, including the Regional Director, Registrar of Companies, Income Tax Department, Employees' Provident Fund, Employees State Insurance, Sales Tax Department, Official Liquidator, Reserve Bank of India, and Goods and Services Tax Department, to provide transparency and an opportunity for objections within 30 days. The order clarified that the Tribunal's role was limited to scrutinizing procedural aspects, without expressing any opinion on the merits of the scheme.
The NCLT's approval of this scheme facilitates corporate restructuring and consolidation within the Vallabhdas Kanji group, streamlining operations by merging subsidiaries into the parent company and optimizing capital structure through preference share cancellation. The dispensation of meetings based on unanimous consent affidavits sets a precedent for efficient approvals in group company amalgamations where shareholding structures are closely held.
Bottom Line:
Scheme of Arrangement involving amalgamation and reduction of share capital between a holding company and its wholly-owned subsidiaries - Dispensation of meetings of shareholders and creditors based on consent affidavits and shareholding structure.
Statutory provision(s):
Companies Act, 2013 Sections 230, 232, 66; Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 Rule 3, Rule 6(3), Rule 8
