NCLAT permits Ericsson on shareholders meet

NCLAT permits Ericsson on shareholders meet

The bench of Anant Bijay Singh and Shreesha Meria allowed the petition filed by the two firms

The National Company Law Appellate Tribunal (NCLAT) has set aside the National Company Law Tribunal (NCLT) order, which rejected Ericsson India's plea.

The multinational networking and telecommunications company had sought holding of the meeting of shareholders and creditors. It was for the approval of the scheme of amalgamation with its subsidiary firm Ericsson India Global Services (EIGS).

The NCLAT opined, "As the merger is of a wholly-owned subsidiary company into its holding company, no shares would be allotted as consideration pursuant to the merger. The proposed scheme will not result in any dilution in the shareholding of the shareholders of EGIS, the transferee company, as the net worth of Ericsson India is positive."

NCLT had rejected EIPL's plea in relation to the Ericsson India (transferor) and EIGS (transferee) companies for approval of the scheme that was to come into effect from April 2021.

It held that the unsecured creditors of both companies could not be kept in the dark and if the meeting was not held, the creditors would be deprived of an opportunity of being heard.

The Ericsson companies argued before the NCLAT Bench of judicial member Anant Bijay Singh and technical member Shreesha Merla that dispensation of meetings had been granted by the tribunal in several cases. Also, in this instance, the case was of the merger of a wholly-owned subsidiary and the parent company, where the net worth of both companies was highly positive.

It was contended that the unsecured creditors were paid off the ordinary course of business and the scheme was not prejudicial to their interests, as their liability would not be reduced or extinguished.

The Ericsson companies were represented by senior advocate Krishnendu Datta along with advocates Parag Maini, Abhimanyu Chopra, Raghav Chadha, Bharat Apte and Varun Lamba.