2007 (3) TMI 394 - HC - Companies Law

Summary

Issues:
Challenge to order rejecting application for setting aside order sanctioning scheme of arrangement.

Analysis:
1. The appellant, a shareholder of two companies, challenged the order dated 10-5-2000 sanctioning a scheme of arrangement. The appellant alleged that the companies filed the scheme with mala fide intentions to reduce share capital and avoid rent control legislation amendments in Maharashtra.
2. The appellant contended that the companies deliberately reduced share capital to benefit from rent control legislation amendments. The appellant, as the landlord of the property, accused the companies of fraudulent practices to obtain the order sanctioning the scheme.
3. The appellant's counsel argued that the provisions of sections 100-103 of the Companies Act were not complied with during the reduction of share capital process. The appellant sought to set aside the order on grounds of fraud and non-compliance with statutory provisions.
4. The respondents, represented by their counsel, opposed the appellant's contentions. They maintained that all relevant provisions, including sections 100-103 of the Companies Act, were duly followed before framing the scheme and reducing share capital.
5. The High Court examined the facts and documents on record, finding that the appellant was aware of the shareholders' meeting, amalgamation, and reduction of share capital but did not object. The court noted that the appellant even encashed dividend warrants on reduced share capital, indicating awareness and acceptance of the scheme.
6. The court rejected the appellant's argument of non-compliance with statutory provisions, stating that all requirements for reducing share capital were met, as evidenced by the case facts and supporting documents. The court concluded that the scheme was not tainted by mala fide intentions.
7. Citing the case of Bengal Bank Ltd. v. Suresh Chakravarthy, the court emphasized the importance of strict compliance with statutory provisions in schemes involving share capital reduction. However, in this case, the court found that all relevant provisions were duly followed, dismissing the appellant's challenge.
8. The High Court upheld the order of the learned Single Judge, stating that there was no reason to interfere with the decision. The court found the appeal devoid of substance and dismissed it, with no order as to costs.

This detailed analysis of the judgment highlights the key arguments, findings, and conclusions reached by the High Court in the case involving a challenge to an order sanctioning a scheme of arrangement and reduction of share capital.