2017 (3) TMI 1750 - HC - Companies Law

Sanction of Scheme of Arrangement under sections 391 and 394 of the Companies Act, 1956 - rejection on the ground that the proceedings are liable to be transferred to the National Company Law Tribunal, Chandigarh Bench, Chandigarh, (NCLT) - HELD THAT - The rights of third parties are not effected by the scheme of arrangement. Nor are they affected by this order. If for any reason they are affected by this order, we have reserved to them the right to seek a modification or a review/recall of this order. The Regional Director in paragraph-7 of his affidavit requires the appellant to comply with the provisions of the Foreign Exchange Management Act, 1999 (FEMA)and the Reserve Bank of India (RBI). Needless to state that the appellants are bound and liable to comply with all the requirements of law including of the FEMA and RBI. The scheme of arrangement (Annexure P-1) is sanctioned.

Summary

Issues Involved:
1. Transfer of proceedings to the National Company Law Tribunal (NCLT).
2. Sanctioning of the Scheme of Arrangement.
3. Compliance with statutory and procedural requirements.
4. Objections raised by the Regional Director.

Issue-wise Detailed Analysis:

1. Transfer of Proceedings to the National Company Law Tribunal (NCLT):
The appeal challenges the learned single Judge's decision to transfer the proceedings for sanctioning a Scheme of Arrangement under sections 391 and 394 of the Companies Act, 1956, to the NCLT, Chandigarh Bench. The transfer was based on Notification No.GSR 1119(E) dated 07.12.2016 by the Ministry of Corporate Affairs. The appellants contended urgency due to potential loss of benefits under Double Taxation Avoidance Agreements with Singapore and Mauritius if the scheme was not sanctioned by 31.03.2017.

The Court noted the composite nature of the petition, which included both the dispensation of meetings and the sanctioning of the scheme. The learned Judge had reserved the judgment on 25.10.2016 regarding the dispensation of meetings, which was pronounced on 19.01.2017. The Court held that the petition fell under the exceptions provided by the notification, as the judgment on a part of the composite petition was reserved before the rules came into force on 15.12.2016. Therefore, the petition was not liable to be transferred to the NCLT.

2. Sanctioning of the Scheme of Arrangement:
The scheme involved demerging a mall owned by Alpha Corp Development Private Limited and transferring it to Euthoria Developers Private Limited. The scheme also included transferring shares held by Alpha Corp in Ruchi Malls Private Limited to Euthoria Developers. The Court found that all equity shareholders and secured creditors had consented to the scheme, and 15 out of 16 unsecured creditors had also given their consent. The scheme was sanctioned, with necessary safeguards for the rights of the parties involved.

3. Compliance with Statutory and Procedural Requirements:
The Court noted that all statutory and procedural requirements had been complied with, including the publication of notices in newspapers and the government gazette. The appellants were directed to file a copy of the order along with the scheme with the concerned Registrar of Companies and to publish the sanction of the scheme in specified newspapers and the Official Gazette of the Government of Punjab.

4. Objections Raised by the Regional Director:
The Regional Director raised objections regarding compliance with the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India (RBI) regulations. The Court ordered the appellants to comply with all legal requirements, including those under FEMA and RBI. The Regional Director also required adherence to accounting standards issued by the Institute of Chartered Accountants of India (ICAI). The Court directed the appellants to comply with relevant accounting standards, even for demergers.

The Court addressed the concerns of a caveator, Alpha Pacific Engineers Private Limited, by accepting an undertaking from the appellants to be jointly and severally responsible for any claims. The Court also granted liberty to the caveator and the unsecured creditors to seek a review or modification of the order if necessary.

Final Order:
The Court sanctioned the scheme of arrangement and directed the appellants to comply with all statutory and procedural requirements. The appellants were also instructed to pay costs to the Regional Director and to publish the sanction in specified newspapers and the Official Gazette. The Court clarified that any aggrieved party could file an application for modification, review, or recall of the order. Additionally, the appellants were restricted from disposing of or creating third-party rights in their immovable properties for 12 weeks from the service of the order upon the caveator.