2007 (12) TMI 294 - HC - Companies Law

Compromise and arrangement - Held that - The scheme of arrangement/reconstruction/reorganisation of the companies is also in order and is for larger public interest as also for the interest of shareholders of the transferor/demerged and transferee-companies who are the members of the same clan. The scheme is in accordance with the family settlement and memorandum of understanding duly executed by the members of the family. The scheme is for better economic growth of the companies and also aims at creating harmony amongst the members of the family, besides providing opportunities to the respective shareholders of the transferee-companies to take independent decision and to exploit their individual potential for the better and effective growth of the companies fallen to their shares. It has also been stated that there are no proceedings or investigations pending against the companies under sections 235 to 251 of the Companies Act 1956. No person has objected to the sanction of the scheme after notice of the petition was published in two newspapers and Official Gazette of Punjab Government. Thus allow this petition and sanction the scheme of agreement/reconstruction/reorganisation.

Issues Involved:
1. Sanction of the scheme of arrangement/reconstruction/reorganization under section 394, read with section 100, of the Companies Act, 1956.
2. Compliance with procedural requirements including valuation reports and notices to stakeholders.
3. Consideration of objections raised by the Regional Director.

Issue-Wise Detailed Analysis:

1. Sanction of the Scheme of Arrangement/Reconstruction/Reorganization:
The petition filed under section 394, read with section 100, of the Companies Act, 1956, and rule 79 of the Companies (Court) Rules, 1959, seeks the sanction of a scheme involving the transferor-company, M/s. Niranjan Singh Kartar Singh Forgings (P.) Ltd., and seven transferee-companies. The scheme aims to implement a family settlement for the distribution of assets and segregation of business among the family members, thereby resolving disputes and ensuring independent business operations. The transferor-company's board and shareholders had previously authorized the scheme, and all shareholders and the sole unsecured creditor provided no objections through affidavits.

2. Compliance with Procedural Requirements:
The transferor-company and each transferee-company provided details of their incorporation, share capital, and resolutions passed by their boards and shareholders to accept the scheme. The transferor-company's units are to be taken over by the transferee-companies as per the scheme. Notices were published in The Tribune (English), Punjab Kesri (Hindi), and the Punjab Government Official Gazette, and reports were received from the Official Liquidator and the Regional Director. The Regional Director initially raised an objection regarding the valuation report, but a subsequent valuation report by a licensed chartered accountant was accepted, ensuring compliance with the legal requirements.

3. Consideration of Objections Raised by the Regional Director:
The Regional Director's objection pertained to the valuation report, which was initially prepared by M/s. V.V. Bhalla & Co. and later by M/s. K.K. Bector & Co. The court considered the additional affidavit and found that the valuation report prepared by the authorized chartered accountant was in order. Therefore, no formal rectification was deemed necessary, and the valuation report was accepted.

Conclusion:
The court concluded that the scheme of arrangement/reconstruction/reorganization was in the larger public interest and beneficial for the shareholders of the transferor and transferee-companies. The scheme aligns with the family settlement and memorandum of understanding, aiming for better economic growth and harmony among family members. No objections were raised after the publication of notices, and there were no pending proceedings or investigations against the companies under sections 235 to 251 of the Companies Act, 1956. Consequently, the court sanctioned the scheme and ordered its implementation from the effective date, with a notice of the order to be published in The Indian Express (English), Dainik Bhaskar (Hindi), and the Official Gazette of the Government of Punjab within 30 days. The court also allowed any interested person to approach for necessary directions and ordered the drawing of a formal sanction order in accordance with the law.

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