2009 (5) TMI 550 - HC - Companies Law

Demerger - Compromise and arrangement - Held that - The object of the arrangement of demerger is to concentrate and focus on specific areas of mining depending on the nature of the minerals and with a view to consolidate the business of the transferor company and to enable the transferee companies to concentrate on specific minerals and for achieving organizational efficiency and optimal utilization of various resources. Since there are no objections raised by the Regional Director and the petitioners submit that they would comply with the requirements as necessitated and expressed in the affidavit of the Registrar of Companies on behalf of the Regional Director and since the entire arrangement is with a view to enhance the business prospects of the petitioners - companies, on the basis of their economic prudence. No reason to decline the arrangement and, accordingly, sanction the scheme of arrangement as envisaged under Annexure-A by the four petitioners - companies. Scheme of arrangement allowed.

Summary

Issues:
- Sanction of a scheme of arrangement under sections 391 and 394 of the Companies Act involving four companies focusing on mineral exploration and development.

Analysis:
1. Scheme of Arrangement: The judgment involves four company petitions under sections 391 and 394 of the Companies Act seeking sanction of a scheme of arrangement. The scheme aims to assign different minerals to the respective companies for focused development. The transferor company is to concentrate on gold business, while the three wholly-owned subsidiary transferee companies will focus on platinum group minerals, copper, lead, zinc, and iron-ore businesses, respectively.

2. Approval Process: After approval by shareholders, applications were filed to dispense with meetings of shareholders and creditors, which were granted by the court. Notices were issued to the Regional Director and published in newspapers. No objections were received post-advertisements. The Regional Director filed a report with observations but no objections.

3. Arguments: The petitioners argued that the scheme aims to enhance business prospects by focusing on specific mineral categories for organizational efficiency and optimal resource utilization. The Regional Director raised concerns regarding compliance with mining license terms, Foreign Exchange Management Act, and Reserve Bank of India Act for foreign shareholders.

4. Decision: The court found the scheme's objective of consolidating business and enabling focused mineral exploration to be in line with economic prudence. As no objections were raised by the Regional Director, and the petitioners committed to complying with necessary requirements, the scheme was sanctioned. The petitioners were directed to file certified copies of the scheme within thirty days before the Registrar of Companies.

In conclusion, the judgment approved the scheme of arrangement for the four companies involved, allowing them to focus on specific mineral businesses for enhanced operational efficiency and economic viability, subject to compliance with regulatory requirements and submission of necessary documentation to the Registrar of Companies within the specified timeline.