Dispensation of Meetings under Section 230-232: Analysing the Overall Picture


Sections 391 to 394 of the Companies Act, 1956 have bestowed upon the High Courts, to sanction the scheme of arrangements. Sections 230 to 240 in the Companies Act, 2013 gives similar power to the National Company Law Tribunal (NCLT). Section 391(1) granted the High Court with the power to order a meeting of creditors/members when a scheme of arrangement or compromise was proposed. The mirror provision empowering the tribunal in the 2013 Act is Section 230(1).

The issue which this post seeks to review is whether this power given to the courts and tribunals to convene meetings also includes power to dispense with such meetings. Since the Section 391(1) and Section 230(1) are largely similar and the High Court cases are referred by the NCLTs, some of the major judgments by the High Courts and the NCLTs shall be discussed on the issues which bring out various conflicting positions on the matter.

Position as per to the previous Act

In Mazda Theatres Pvt. Ltd. v. New Bank of India Ltd (hereinafter “Mazda Theatres”), the Delhi High Court held it is a general principle that there has to be a meeting summoned by the order of Court under Section 391, in which members meet to pass the resolution unanimously or with a minimum of three-fourth majority. However, three exceptions were pointed out to this general principle. Firstly, if all the shareholders give consent to the scheme outside the meeting, then the requirement of the meeting need not be necessarily be complied with. Secondly, by lifting the veil of the corporation, if courts are able to conclude that an overwhelming majority of the shareholders support the resolution, then courts can dispense with the requirement of the general meeting. Thirdly, when “all the shareholders acquiesce in a certain arrangement” then the requirement of a meeting does not arise. The court followed the famous “Duomatic Principle” laid down by the English court which talks about “informal unanimous consent” which can do away the formal requirements. The same court in the case of In re: Adobe Properties Private Limited, said that that the use of the expression ‘may’ in Section 391, confers discretion to the court. The same comes as a general principle of interpretation. Thus, it should be given a wide interpretation, so as to allow for approval of schemes without taxing procedural formalities.

In the matter of In re: Bharat Explosives Ltd, around ninety percent of the shareholders, who were promoter groups, had given their consent to the scheme of amalgamation and to the dispensation with the shareholders’ meeting. However, Allahabad HC dismissed the plea to waiver the meeting of shareholders as it held that the minority group of shareholders (holding about 10% shares) who had not given their consent to the scheme of arrangements or to waiver of shareholders’ meeting has the right to voice their objections in a shareholders meeting. Thus, in order to safeguard their interests, it is necessary for a shareholders’ meeting to be convened. 

The Calcutta High Court in In Re:Singhal Enterprises P. Ltd, even after discussing Mazda Theatres, held that on careful reading of the section 391 of the Companies Act, 1956, the wording “meeting may be held and conducted in such manner as court directs” does give the court certain power to dispense with certain procedural requirements, but does not give the court the power to dispense with the shareholders/creditors meetings itself. The court observed that the language and intent of the Act specifies that the requirement to conduct meetings under Section 391(1) is a statutory requirement and cannot be dispensed with by the Court.

Position after the new Act

In the case of JVA Trading Pvt. Ltd. and C&S Electric Ltd, all the four equity shareholders had given their consent to the scheme. Delhi’s Bench of the NCLT, rejecting the relief held that the Companies Act, 2013 does not give the power of dispensation of the meeting of shareholders to the tribunal, held that the Act only empowers the tribunal to dispense with meeting of creditors if they are having at least ninety percent of the total credit value and consent to the scheme as per Section 230(9). However, in absence of similar provision for members, the NCLT cannot, within its powers, dispense of the requirement of meeting of the members.

The full bench of NCLT Kolkata in the case of In re: Jupiter Alloys and Steel (India) Limited and Jupiter Wagons Limited held that the tribunal does have the power to dispense with such meetings. In its judgement, it drew similarities between the language and wordings of Section 391(1) of Companies Act 1956 and Section 230(1) of the new Companies Act, 2013 and held that both the sections are pari materia to each other. Hence, the tribunal held that the use of word “may” grants the tribunal power of discretion vesting inherent power to dispense with the meeting of members. It emphasized that numerous High Courts had previously exercised discretion under the old act to dispense of the meetings and these precedents cannot be ignored.

In the case of In re: DLF Phase-IV Commercial Developers Limited and Ors., the transferor company sought relief by citing the previous NCLT Kolkata’s decision as a precedent. However, the NCLT Chandigarh bench denied relief as it held that the tribunal does not have the power to dispense with the meetings of shareholders as per the Companies Act, 2013 which only allowed for dispensation of meetings for creditors. On appeal the NCLAT reversed the NCLT’s order as it took note of the fact that the proposed scheme of amalgamation does not dilute the shareholding of the members and reprimanded Chandigarh NCLT for ignoring the full bench decision of the Kolkata NCLT’s decision. The NCLAT opined that NCLTs are to adhere to the decisions made by full benches of other NCLTs on the matter in order to maintain consistency in legal reasoning.


The issue that arises is whether High Courts as per Section 391 of the old act and NCLT as per Section 230 of the new act has the power to dispense with the requirement of meetings of shareholders when consent has already been obtained of the majority with respect to the scheme of arrangements. While High Courts in Mazda and Adobe cases held that High Courts was given the discretion which can be inferred from the wordings of Section 391, Calcutta HC in Singhal Enterprises held that High Courts do not have that amount of discretion in order to dispense with meetings of members. Although as a common practice as observed in numerous High Court decisions, the trend showed that the courts generally granted dispensation of meetings with few exceptions. However, with the coming of the new Companies Act, 2013 and NCLTs, this question again arose. NCLT Delhi and Mumbai initially held that the tribunal did not have the power to do away with the meetings of shareholders, however, after the full bench decision Jupiter Alloys and subsequent NCLAT’s decision in DLF developers, the position has more or less been clarified that the tribunals do have the discretion to dispense with the meetings so as to do away with procedural formalities when the consent is obtained from the majority.

Secondly, the issue was how much majority consent was required to do away with the meetings. Mazda had mentioned “overwhelming majority” but didn’t specify how much share of votes exactly that are required to do away with the meetings. This was the reason why in the Bharath explosives the relief of dispensation of shareholders’ meeting requirement was denied as it was held that it would be unfair to the minority shareholders who held about 10% of equity shareholdings. Even though, there is not much discussion about this matter by the tribunals and courts even now, it can be assumed that consent of shareholders holding at least 90% of the shares should be the requirement for dispensing the meeting as the same amount is required for creditors to waive of the meetings as per Section 230(9) of Companies Act, 2013.

Lastly, we live in an era of globalization where ease of doing business becomes a major factor for businesses while considering investing their money. Time becomes a very crucial consideration when it comes to assessing healthy business conditions which investors look into as part of their strategies for returns in an investment. A business investment depends highly on particular market conditions at a particular point of time. Therefore, the effectiveness of a merger or amalgamation is directly proportional to the time factor, thus diminishing the goal of a merger if the scheme of merger is delayed. Convening a meeting of shareholders and creditors is necessary to obtain the relevant consent, however it becomes a redundant measure if all the members concerned have already given their consent. Non-dispensation of such kinds of meetings only leads to inefficiencies in the application of a scheme of merger along with additional costs, and thus becoming a hindrance for investors and businesses.


Consistency in legal decisions is one of the most important functions of the courts, especially in common law-based countries such as ours where there is a heavy reliance placed on precedents. This is a vital aspect in company law as legal certainty or lack of it affects the ease of doing business in the country which has great impact on its economy. The Report of the Standing Council on International Competitiveness of the Indian Financial Sector had illustrated the difficulties faced by the financial firms face due to lack of legal certainty. It is evident that the policy makers have a very important duty to clarify technicalities associated with the legislations. This shortcoming leads to the questions to be taken up by the court which can interpret the law in numerous ways leading to inconsistencies. In the present scenario, NCLT Kolkata bench and NCLAT had finally sought to put the question on dispensation at rest, by doing away with procedural requirements.

(This post has been authored by Rutwik Rao and Roopam Dadhich. Rutwik and Roppam are Fourth Year Law Students at NALSAR University of Law, Hyderabad)

Cite as: Rutwik Rao and Roopam Dadhich, ‘Dispensation of Meetings under Section 230-232: Analysing the Overall Picture’ (The Contemporary Law Forum, 02 January 2021) <https://tclf.in/2021/01/03/dispensation-of-meetings-under-section-230-232-analysing-the-overall-picture> date of access. 






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