2016 (2) TMI 354 - HC - Companies Law

Scheme of Arrangement would be in the interest of the shareholders and creditors of all the companies, as well as in the public interest. The same, therefore, deserves to be sanctioned.

Summary

Issues Involved:
1. Sanction of Composite Scheme of Arrangement involving Amalgamation and Demerger.
2. Compliance with SEBI regulations and stock exchange approvals.
3. Dispensation of meetings of shareholders and creditors.
4. Preservation of books and records of Transferor Companies.
5. Observations of the Regional Director, Ministry of Corporate Affairs.
6. Compliance with FEMA and RBI guidelines.
7. Accounting treatment of reserves.
8. Income Tax Department's stance on the Scheme.
9. Cost implications for the petitioners.

Detailed Analysis:

1. Sanction of Composite Scheme of Arrangement involving Amalgamation and Demerger:
The petitions were filed by four companies seeking the court's sanction for a Composite Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956. The scheme involved the amalgamation of three Transferor Companies with Hester Biosciences Limited and the demerger of the trading undertaking of Innoves Animal Health Private Limited into Hester Biosciences Limited. The objective was to consolidate activities and achieve operational synergy.

2. Compliance with SEBI regulations and stock exchange approvals:
Hester Biosciences Limited, being a listed company, complied with Clause 24(f) of the listing agreement and SEBI circulars. The company approached the concerned stock exchanges and obtained necessary approvals, which were placed on record. Since no shares were issued to promoters or related parties, compliance with clause 5.16(a) of the SEBI circular was deemed unnecessary.

3. Dispensation of meetings of shareholders and creditors:
Orders dated 5th August 2015 dispensed with the meetings of shareholders and creditors of the Transferor and Demerged Companies, as all shareholders provided written consent. The Transferee Company convened a meeting of its Equity Shareholders on 15th September 2015, where the scheme was unanimously approved.

4. Preservation of books and records of Transferor Companies:
The court directed the Transferee Company to preserve the books, papers, and records of the Transferor Companies and not to dispose of them without prior permission from the Central Government, as per Section 396(A) of the Companies Act, 1956.

5. Observations of the Regional Director, Ministry of Corporate Affairs:
The Regional Director made several observations, which were addressed in a common additional affidavit by the Transferee Company. The court found that the observations had been sufficiently addressed, and no further directions were necessary.

6. Compliance with FEMA and RBI guidelines:
The scheme involved shares held by foreign nationals and NRIs. The petitioner companies confirmed compliance with FEMA and RBI guidelines. No prior approval was required for the scheme under these regulations.

7. Accounting treatment of reserves:
The Regional Director raised concerns about the accounting treatment of reserves. The court noted that the prevalent Accounting Standards were not applicable to the Scheme of Demerger. The Transferee Company undertook to make necessary disclosures in its financial statements if there was any deviation from the accounting standards.

8. Income Tax Department's stance on the Scheme:
The Regional Director's letter to the Income Tax Department did not elicit any objections within the statutory period. The court presumed no objections from the Income Tax Department and did not consider the request for adjournment by the department's counsel.

9. Cost implications for the petitioners:
The court quantified costs to be paid to the Central Government Standing Counsel and the Office of the Official Liquidator. The Transferee Company was directed to pay Rs. 10,000 per petition, and the Transferor Companies and Demerged Company were directed to pay Rs. 7,500 per petition.

Conclusion:
The court found the Composite Scheme of Arrangement to be in the interest of shareholders, creditors, and public interest. The scheme was sanctioned, and the petitions were disposed of accordingly. The petitioner companies were directed to comply with various procedural requirements, including filing the order and scheme with the Registrar of Companies and the Superintendent of Stamps.