2004 (2) TMI 384 - HC - Companies Law

Summary

Issues Involved:
1. Approval of the scheme of arrangement under sections 391 to 394 of the Companies Act, 1956.
2. Objections by the Central Government regarding the "No Objection" letters from the Stock Exchanges.
3. Consent of the secured and unsecured creditors of the Transferee Company.

Issue-wise Detailed Analysis:

1. Approval of the Scheme of Arrangement:
The petitions were filed by M/s. Compact Power Sources Private Limited (Transferor Company) and M/s. HBL Nife Power Systems Limited (Transferee Company) seeking approval of the scheme of arrangement under sections 391 to 394 of the Companies Act, 1956. The Transferor Company, initially incorporated in Tamil Nadu in 1997 and later transferred to Andhra Pradesh in 2003, aimed to amalgamate with the Transferee Company, which was incorporated in 1986. Both companies had their Board of Directors approve the scheme on 29-5-2003. The Court dispensed with the meeting of the shareholders for the Transferor Company and directed the Transferee Company to conduct a shareholders' meeting, which unanimously approved the scheme.

2. Objections by the Central Government:
The Central Government, through the Registrar of Companies, raised two objections:
- The Transferee Company, being a listed entity, had not received "No Objection" letters from the Stock Exchanges of Hyderabad and Mumbai as required under clause 24 of the Listing Agreement.
- The consent of the secured creditors of the Transferee Company had not been obtained.

The Transferee Company addressed these objections by submitting a letter from the Hyderabad Stock Exchange dated 23-6-2003, indicating their no objection. The consent from the Mumbai Stock Exchange was awaited, but it was argued that the consent was formal and not mandatory. The company had complied with sub-clause (f) of clause 24 by filing the scheme/petition with the Stock Exchange a month before presenting it to the Court. Moreover, a certificate from a Practising Company Secretary confirmed that the scheme did not violate any securities laws or regulations.

3. Consent of Secured and Unsecured Creditors:
Regarding the second objection, the Transferee Company had four secured creditors, with IDBI being the lead financial institution. IDBI provided a no objection letter dated 19-1-2004. The company argued that the consent of the lead bank sufficed, and the consent of other secured creditors was not necessary. For unsecured creditors, the company submitted no objection letters from M/s. Beaver Engineering Limited and M/s. M.S.S. Srinath.

Court's Decision:
The Court found that the Transferee Company had complied with the requirements of clause 24 of the Listing Agreement by filing the scheme/petition with the Stock Exchange a month before presenting it to the Court. The Court held that obtaining a "No Objection" letter from the Stock Exchange was not mandatory. Additionally, the Court acknowledged the consent letters from the lead bank and unsecured creditors, which addressed the Central Government's objections.

The Official Liquidator's report indicated that the companies were not conducting their affairs prejudicially to the interests of their members or the general public. Consequently, the Court approved the scheme of arrangement as proposed by the Board of Directors and shareholders of both companies.

Conclusion:
The Company Petitions were allowed, resulting in the dissolution of the Transferor Company and its amalgamation with the Transferee Company without the process of winding up. The petitioners were directed to file a copy of the order with the Registrar of Companies, Andhra Pradesh, Hyderabad, within 30 days. No costs were awarded.