2010 (8) TMI 921 - HC - Companies Law

Sanction of scheme of Amalgamation Held that - Resulting Company-1 by affidavit have cleared all objections raised by Regional Director and companies undertaking was also accepted Demerged Company have received No Objection Letters from all creditors Scheme appears to be fair and reasonable and was not violative of any provisions of law Since all requisite statutory compliances were fulfilled, Scheme sanctioned Decided in favour of Petitioner.

Summary

Issues involved:
Sanction under Sections 391 to 394 read with sections 78, 100 to 103 of the Companies Act, 1956 to the Scheme of Arrangement between two companies and their shareholders and creditors. Compliance with statutory requirements. Objections raised by the Regional Director regarding the scheme. No objections from parties except certain creditors. Fairness and reasonableness of the scheme. Statutory compliances fulfilled.

Analysis:

The judgment pertains to the sanction sought under Sections 391 to 394 of the Companies Act, 1956 for a Scheme of Arrangement between two companies and their respective shareholders and creditors. The Counsel for the Petitioner Companies presented that the Scheme involves the demerger of specific undertakings of the Demerged Company into two Resulting Companies, along with other related matters. It was highlighted that all requirements as per the Court's directions have been met, and necessary affidavits of compliance have been filed. The Regional Director expressed concerns in their Affidavit, primarily related to the authorized share capital, listing of new shares, past violations by the Demerged Company, and interconnection with another scheme. The Petitioner Companies responded to each objection raised by the Regional Director in their respective affidavits dated August 16, 2010.

Regarding the objections raised by the Regional Director, the Resulting Company No. 1 provided undertakings to comply with the necessary provisions of the Companies Act, including increasing the authorized share capital and listing new shares on the stock exchanges. The Court accepted these undertakings. Additionally, liberty was granted to initiate penal action against the Demerged Company and its Directors for past violations. The Demerged Company and the Resulting Companies assured that the current scheme would only be executed after the completion of another scheme in which the Demerged Company is involved.

Furthermore, it was noted that certain creditors of the Demerged Company had initially expressed objections to the scheme but later provided "No Objection Letters." The Court found the Scheme to be fair, reasonable, compliant with the law, and not against public policy. As no other parties opposed the Scheme, and all statutory compliances were fulfilled, the Court sanctioned the Scheme, subject to the conditions and undertakings provided by the Petitioner Companies. The Petitioner Companies were directed to lodge a copy of the order and the Scheme for stamp duty adjudication within 60 days, and to pay costs to the Regional Director. The filing and issuance of the drawn-up order were dispensed with, and all relevant authorities were instructed to act upon the order and authenticated Scheme.

In conclusion, the judgment reflects a detailed analysis of the Scheme of Arrangement, addressing objections, ensuring compliance with statutory requirements, and ultimately sanctioning the Scheme based on its fairness, reasonableness, and legal adherence.