2003 (10) TMI 412 - HC - Companies Law

Summary

Issues Involved:

1. Sanctioning of the Scheme of Restructuring and Arrangement under sections 391 to 394 of the Companies Act, 1956.
2. Compliance with statutory procedures and requirements.
3. Approval by requisite majority of shareholders and creditors.
4. Objections raised and their resolution.
5. Legal principles guiding the Company Court's discretion.

Issue-Wise Detailed Analysis:

1. Sanctioning of the Scheme of Restructuring and Arrangement:
The company petition, CP No. 247 of 2000, was filed by the transferor company, DCM Ltd., under sections 391 to 394 of the Companies Act, 1956, seeking the court's sanction for a Scheme of Restructuring and Arrangement with the transferee company, DCM Precision Engineering Ltd. The scheme aimed to restructure and revive DCM Ltd. and repay its creditors by restructuring their debts. The scheme included the development of real estate projects, divestment of the engineering business, and the merger of DCM Data Systems Limited into DCM Limited.

2. Compliance with Statutory Procedures and Requirements:
The court directed the convening of meetings of secured creditors, unsecured creditors, and shareholders of both companies, which were held on 17th, 18th, and 19th May 2000. The scheme was approved by more than the requisite majority in all meetings. Notices of the meetings were duly published as prescribed under the Act. The Regional Director, Department of Company Affairs, and the Official Liquidator did not raise any objections to the proposed scheme.

3. Approval by Requisite Majority of Shareholders and Creditors:
In the meetings, the scheme was overwhelmingly approved by the shareholders and creditors:
- 99.97% of shareholders of DCM supported the scheme.
- 99.59% of unsecured creditors of DCM supported the scheme.
- 91.63% of secured creditors of DCM supported the scheme.
- 100% of shareholders and creditors of DCM Precision Engineering supported the scheme.

4. Objections Raised and Their Resolution:
Several objections were filed against the proposed scheme but were subsequently withdrawn or settled:
- Objections by Binani & Bells Controls, P.C. Mathur & Swaroop Rani Mathur were withdrawn.
- Objections by Rakesh Gupta and V.K. Gupta were disposed of.
- Objections by DCM Technoplaza and Green Acres Flatbuyers Association were settled through a settlement agreement.
- Other objections by Mohan Lakhani, Mohini Dayal, Nitin Dayal, Shashi Kala Jain, Pushpa Mittal, G.D. Sharma, Deepa Garg, Prashant Garg, Harish Garg, Swati Aggarwal, B.K. Garg, R.C. Garg were either settled or not pressed.

5. Legal Principles Guiding the Company Court's Discretion:
The court referred to several precedents to outline its powers and obligations under sections 391 to 394 of the Act:
- The court must honor the collective wisdom of the shareholders and not analyze the scheme clause-wise.
- If the scheme is approved by the requisite majority and no objections are filed, the court should consider it fair.
- The court should not act as a fault-finder if financial institutions approve the scheme by an overwhelming majority.
- A unanimous decision of shareholders should not be lightly interfered with.
- The court must ensure that the scheme is fair, reasonable, and not contrary to public policy.

Conclusion:
The court found that all statutory procedures were complied with, the scheme was approved by the requisite majority, and there were no objections from the Official Liquidator or the Regional Director. The scheme was deemed fair, reasonable, and in the interest of justice. Consequently, the court granted sanction under section 394 of the Companies Act to the proposed Scheme of Restructuring and Arrangement, and both company petitions were disposed of accordingly.