2010 (8) TMI 172 - HC - Companies Law

Scheme of arrangement in the nature of Amalgamation - Held that - The observations made by the Regional Director could not come in the way of sanctioning the Scheme by this Court. The Scheme neither violates the provisions of RBI Act nor FEMA Act. It is specifically mentioned in the Scheme that the Scheme is conditional and is subject to (a) the Scheme being approved by the respective requisite majorities of the members from the shareholders and the creditors of each of the amalgamating companies and the amalgamated company under section 391 of the Act and (b) such other provisions if any as may be required under the provisions of the Foreign Exchange Management Act 1999. Thus the Company has undertaken to comply with the provisions of the FEMA Act. The Court therefore is of the view that Scheme is in the interest of shareholders as well as creditors and it is neither prejudicial to their interest nor to public interest. The Court therefore grants its sanction to the Scheme and prayers made in Para 23(a) of the petition are hereby granted.

Summary

Issues:
Petition for sanction of Scheme of arrangement in the nature of Amalgamation involving multiple companies under Companies Act, 1956.

Analysis:
1. The petition filed by the Transferee company seeks approval for the Scheme of arrangement amalgamating seven Transferor Companies with the Transferee Company under sections 391 and 394 of the Companies Act, 1956. All companies belong to the same management group.

2. The Equity Shareholders meeting held on 10-6-2010 approved the proposed scheme with a majority of 92.13% in number and 99.54% in value. The meeting results were duly recorded and submitted along with the Chairman's report and affidavit.

3. The petition was admitted on 25-6-2010, and public notices were published in newspapers. No objections were received post-publication, confirming compliance with procedural requirements.

4. The Central Government raised objections related to technical scrutiny of the Transferee Company's balance, compliance with FEMA/RBI guidelines for foreign companies, promoter shareholding exceeding 75%, and a shareholder complaint. The Court considered these objections.

5. The Transferee Company denied any violations of law and stated that no actions were initiated against them. The Court noted that the Scheme does not prevent any future actions for alleged non-compliance.

6. The Court directed the Transferee Company to comply with FEMA/RBI guidelines for new shares allotment, BSE conditions for promoter holding, and SEBI guidelines for new Equity shares lock-in period.

7. The Court addressed objections related to compliance with applicable laws for amalgamating foreign Transferor Companies with the Indian Transferee Company. Previous judgments supported the amalgamation under specified conditions.

8. The Court reviewed affidavits, submissions, and judgments and found the Scheme to be in the interest of shareholders and creditors, not prejudicial to public interest. Sanction for the Scheme was granted, and the petition was disposed of with costs quantified at Rs. 5,000 to be paid to the Central Government Standing Counsel.

This detailed analysis covers the key aspects of the legal judgment involving the petition for the sanction of a Scheme of arrangement for Amalgamation under the Companies Act, 1956, addressing various objections and compliance requirements.