2010 (10) TMI 918 - HC - Companies Law

Petitions filed by the petitioner-companies for sanction of a composite scheme of arrangement in nature of demerger and transfer of treasury segment of Paras Pharmaceuticals Ltd., the demerged company to Sterling Addlife India Ltd., the resulting company and reduction of capital of Paras Pharmaceuticals Ltd., under sections 391 and 394 read with sections 78 and 100 to 104 of the Companies Act, 1956 Held that - Considering the petitions and other relevant documents on record and considering the submissions made at the time of hearing the court is satisfied that the observations made by the Regional Director do not survive and the scheme of arrangement would be in the interest of the companies and their members and creditors. Prayers in terms of paragraph 20(a) in the case of Company Petition No. 87 of 2010 and paragraphs 16(a) and (b) in the case of Company Petition No. 88 of 2010 are hereby granted.

Summary

Issues:
Petitions for sanction of a composite scheme of arrangement involving demerger and transfer of treasury segment, reduction of capital under Companies Act, 1956.

Analysis:
1. Dispensation of Meetings and Procedures:
The court noted that meetings of equity shareholders, secured, and unsecured creditors of the demerged company were dispensed with due to the substantial excess of assets over liabilities, ensuring no adverse impact on creditors. The required procedures under relevant sections and rules were also waived based on specific averments in the application.

2. Approval of Scheme by Equity Shareholders:
The resulting company's application for the scheme was approved unanimously by all equity shareholders present at the convened meeting, as confirmed by the chairman's report and affidavit.

3. Public Notices and Lack of Objections:
After admission of the petitions, public notices were advertised in newspapers, and no objections were raised by any party even after publication, as confirmed by affidavits.

4. Central Government's Observations:
The Central Government was served notice, and the Regional Director's observation focused on the issue of reduction of share capital of the resulting company. However, it was clarified that no net reduction of share capital occurred, thus no separate compliance with section 100 was necessary.

5. Court's Decision and Sanction of Scheme:
After considering submissions and relevant documents, the court found the scheme to be in the interest of the companies, members, and creditors. The objections raised by the Regional Director were overruled, and the scheme was sanctioned as it was deemed beneficial.

6. Costs and Disposal of Petitions:
The court disposed of the petitions, granting the prayers as per the respective company petitions. Costs to be paid to the Central Government's standing counsel were quantified, with instructions to pay the same to the respective advocate.

Overall, the judgment detailed the process of dispensation of meetings, approval by stakeholders, lack of objections, clarification on share capital reduction, and the court's decision to sanction the scheme based on its benefits to the involved parties.