2010 (1) TMI 566 - HC - Companies Law

Amalgamation scheme - Held that - The proposed action of the Transferee-Company, in no way, affects the interests of the creditors as well as the shareholders of the Company and that the resolution Annexure- L needs to be confirmed. Approval is hereby accorded pursuant to section 100 of the Companies Act, 1956 to the Special Resolution of the Company dated March 7, 2009, approving the reduction of the issued, subscribed and paid-up equity capital of the Company by ₹ 2,49,34,46,100 from ₹ 2,49,45,80,030, divided into 24,94,58,003 equity shares of ₹ 10 each to ₹ 11,33,930 divided into 1,13,393 equity shares of ₹ 10 each. The Petitioner-Company to lodge a copy of this order and scheme, duly authenticated by the Registrar of Companies in Karnataka with the Inspector General of Stamps in the State of Karnataka for the purpose of adjudication of stamp duty payable if any on the same, within 60 days from the date of the order. The Registry to draw up the decree accordingly. The petitioner to cause publication of the form of minutes of meeting in the Hindu and Vijaya Karnataka , Bangalore edition, within 30 days of intimation of this order to the Registrar of Companies.

Issues:
1. Reduction of share capital by the petitioner-company through a scheme of arrangement and amalgamation.
2. Approval and confirmation of the reduction of share capital by the High Court of Karnataka.
3. Compliance with legal provisions, including Companies Act, 1956, and Articles of Association.
4. Protection of interests of creditors, shareholders, and other stakeholders in the scheme.

Detailed Analysis:
1. The petitioner-company, previously known by different names, proposed a reduction of its share capital through a scheme of arrangement and amalgamation with another company. The scheme aimed to simplify the shareholding structure, eliminate accumulated losses, and enhance the financial position of the petitioner-company. The scheme involved the cancellation of a significant number of equity and preference shares held by the transferor-company, resulting in the issuance of new equity shares to the shareholders of the transferor-company.

2. The Board of Directors of both the transferee and transferor companies approved the scheme, which was further sanctioned by the shareholders and unsecured creditors. The High Court of Karnataka was approached for confirmation of the reduction of share capital as per the provisions of the Companies Act, 1956, and the Articles of Association of the petitioner-company. The court examined the scheme, ensuring that it complied with legal requirements and did not prejudice the interests of creditors, shareholders, or any other stakeholders.

3. The court reviewed the details of the scheme, including the resolutions passed by the shareholders and the board, as well as the specific provisions of the Companies Act, 1956, and the Articles of Association empowering the company to reduce its share capital. The court noted that the reduction of share capital was proposed in accordance with the applicable laws and regulations, with due consideration given to the protection of the rights of creditors, shareholders, and other parties involved.

4. After thorough examination and considering the submissions made by the petitioner and the Regional Director, the court concluded that the proposed reduction of share capital was just and equitable. The court found that the interests of creditors and shareholders were adequately safeguarded in the scheme of arrangement and amalgamation. Consequently, the court confirmed the resolution for the reduction of share capital and issued specific directions for compliance, including lodging the order with the relevant authorities and publishing the minutes of the meeting in specified newspapers within the stipulated timelines.

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