2002 (10) TMI 727 - HC - Companies Law

Summary

Issues: Application under sections 391 and 394 of the Companies Act, 1956 for sanctioning a scheme of arrangement including purchase of equity shares, delisting, reduction of share capital, and setting off balances.

In this judgment, the petitioner filed an application under sections 391 and 394 of the Companies Act, 1956 seeking various reliefs related to a scheme of arrangement. The reliefs sought included sanctioning the arrangement embodied in the scheme, purchasing equity shares, obtaining necessary approvals for non-resident shareholders, payment for purchased shares, treatment of equity shares on stock exchanges, delisting if public shareholding reduces, and cancellation of issued share capital. The scheme also involved setting off the profit and loss account against Capital Reserve Account and Share Premium Account. The petitioner sought approval for reduction of share capital and submission of minutes for approval. The petitioner was directed to intimate stock exchanges about cancelled equity shares, file necessary documents with the Registrar of Companies, and reserve liberty to apply for further directions. The Court considered the approval of the scheme by the Board of Directors, meetings of equity shareholders and unsecured creditors, and the report of the competent authority. The Registrar of Companies had no objection to the scheme. Consequently, the Court allowed the petitioner's prayer, accepted the scheme of arrangement, and directed strict compliance with the approved directions without deviation.

This judgment highlights the procedural aspects and requirements under sections 391 and 394 of the Companies Act, 1956 for sanctioning a scheme of arrangement. It emphasizes the importance of obtaining necessary approvals, compliance with formalities, and following directions in letter and spirit. The Court's decision to approve the scheme was based on the petitioner's fulfillment of procedural requirements, approval by relevant authorities, and absence of objections. The judgment underscores the significance of adherence to legal procedures and regulatory compliance in corporate restructuring and reduction of share capital.