2015 (9) TMI 1597 - HC - Companies Law

Scheme of arrangement for reconstruction and compromise - Held that - The observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. As come to the conclusion that the present scheme of arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. Prayers in terms of paragraph 27(a),(b) and (c) of the Company Petition No.287 of 2015 are hereby granted. The Restructure of share capital in form of Reorganization of Issued, Subscribed and Paid up Reference Share capital as well as utilization of Securities Premium Account as envisaged under clause 5 and 6 of the Scheme is granted and minutes drawn under Section 103(1) as referred in para 23 is hereby approved. The petition is disposed of accordingly.

Summary

Issues:
Petition for Scheme of Arrangement under Companies Act, 1956 and 2013.

Analysis:
1. Background and Need for Scheme: The petitioner, a listed public limited company, sought approval for a Scheme of arrangement due to financial difficulties faced since 2000-01, including falling prices, increased costs, and intense competition. Efforts were made to resolve issues, including debt restructuring proposals.

2. Proposed Scheme: The company proposed a composite scheme for Financial Reconstruction, involving restructuring of Preference share capital, utilizing Security Premium Account, and compromising with Secured Creditors. Board resolutions were passed in December 2014 and March 2015 to implement the scheme efficiently.

3. SEBI Approvals: Requisite approvals were obtained from SEBI through stock exchanges, and no new shares were issued, exempting the company from certain SEBI circular compliance. Meetings were convened for Equity Shareholders, Preference Shareholders, and Secured Creditors, with unanimous approval received.

4. Central Government Observations: The Central Government raised observations through the Regional Director, Ministry of Corporate Affairs, regarding SEBI approvals, NRI shareholding, and Income Tax Department objections. The company responded to each observation, clarifying compliance with relevant laws and regulations.

5. Court Decision: After considering all contentions and submissions, the court found the scheme to be in the interest of shareholders, creditors, and the public. The scheme was sanctioned, and prayers in the petition were granted, including restructuring of share capital and utilization of Securities Premium Account.

6. Disposal of Petition: The petition was disposed of, with costs quantified for the Central Government standing counsel. The company was directed to file the order and scheme with the Registrar of Companies, electronically and physically, as per legal provisions.

7. Final Directions: Filing and issuance of the drawn-up order were dispensed with, and all authorities were instructed to act on the authenticated copy of the order along with the scheme. The Registrar of the High Court of Gujarat was tasked with issuing the authenticated copy promptly.