2015 (10) TMI 91 - HC - Companies Law

Sanction of Scheme of Arrangement - In the nature of arrangement or Slump Sale - Requires sanction under Section 391 to 394 or falling within the purview of Section 293 and Section 180 and requires no sanction Appointed date be shifted to 1St April, 2014 from April 1, 2013 or the date of sanction of scheme Held That - even in a case of a slump sale, the provisions of sections 391 to 394 stand attracted requiring the approval of the company court. - the same would stand attracted by sections 391 to 394 of the Act requiring the approval of the court. The Circular narrates that the objections raised by the Regional Director for filing of the accounts for the subsequent year being mandatory in terms of section 211 does not imply that the appointed date requires to be shifted to the date on which the scheme is approved. Under these circumstances, in view of the clarification by the Department of Company Affairs, the said objection cannot be sustained. The transferor company has already filed a petition before the High Court of Madras wherein by the order dated July 31, 2014, in Company Petition No. 2 of 2014, the scheme was sanctioned. It cannot be said that the affairs of the petitioner s-company were conducted in a manner that is prejudicial to the interest of the public. The Competition Commission of India has approved the scheme. The scheme proposes the hive off the transferred undertaking of the petitioner-company into Enrica, the transferee company, by way of a slump sale on a going concern basis. The same would be in the interest of the creditors of the petitioner-company and its shareholders. The scheme requires to be sanctioned. Hence, the petition is allowed. - Decided in favour of the Petitioner.

Summary

Issues Involved:
1. Applicability of Sections 391 to 394 versus Section 180 of the Companies Act.
2. Nature of the scheme as a slump sale versus amalgamation or reconstruction.
3. Appropriateness of the appointed date for the scheme.

Issue-wise Detailed Analysis:

1. Applicability of Sections 391 to 394 versus Section 180 of the Companies Act:
The petitioner sought sanction for a scheme of arrangement under Sections 391 to 394 of the Companies Act. The Regional Director objected, arguing that the scheme should fall under Section 180 of the Companies Act, 2013, which deals with the powers of the board of directors to sell, lease, or otherwise dispose of the whole or substantially the whole of the undertaking. The court held that Sections 391 to 394 form a complete code by themselves and take precedence over other provisions of the Act, including Section 180. This was supported by judicial precedents such as PMP Auto Industries Ltd., In re, and S.S. Minnda Ltd., In re, which affirmed that schemes falling under Sections 391 to 394 could be sanctioned even if they involve actions requiring special procedures under other sections of the Companies Act.

2. Nature of the Scheme as a Slump Sale versus Amalgamation or Reconstruction:
The Regional Director contended that the scheme was a slump sale and not an amalgamation or reconstruction, and thus should not fall under Sections 391 to 394. The court examined multiple judgments, including Health Products Ltd. vs. Unknown and Nirma Limited, which established that even slump sales could be sanctioned under Sections 391 to 394. The court concluded that the scheme, despite being a slump sale, required the approval of the company court under Sections 391 to 394.

3. Appropriateness of the Appointed Date for the Scheme:
The Regional Director objected to the appointed date of April 1, 2013, arguing it should be shifted to April 1, 2014, due to the preparation of the balance sheet for the year ending March 31, 2014. The petitioner cited Circular No. 12, dated February 21, 1977, from the Department of Company Affairs, which clarified that companies undergoing amalgamation must continue complying with the provisions of the Act, including the preparation of annual accounts, until the amalgamation order is made by the court. The court found that the appointed date did not need to be shifted as per the clarification provided by the Department of Company Affairs.

Conclusion:
The court overruled the objections of the Regional Director and sanctioned the scheme. It concluded that the scheme was beneficial to both the transferor and transferee companies, their shareholders, and creditors. The scheme had already received no objections from the Bombay Stock Exchange, National Stock Exchange, Bangalore Stock Exchange, SEBI, and the Competition Commission of India. The court ordered that the scheme be sanctioned as per annexure F and directed the petitioner to send a copy of the order to the Registrar of Companies within 30 days.