2013 (5) TMI 1063 - HC - Companies Law

Summary

Issues involved: Petition for sanction of a Scheme of arrangement under section 391 and 394 of the Companies Act, 1956.

Details of the Judgment:

Issue 1: Scheme of arrangement for Spin off and Transfer of Domestic Formulation Undertaking
The petitioner, a leading pharmaceutical company, sought approval for a scheme to spin off its Domestic Formulation Undertaking to its wholly owned subsidiary. The purpose was to focus management attention, resources, and skill sets for sustained growth and profitability. The scheme aimed to bring benefits to both entities.

Issue 2: Approval process and meetings
Equity Shareholders approved the scheme with a majority of 99.07% in number and 99.93% in value. The meeting of creditors was dispensed with due to the strong financial position of the Transferor Company. The petition for sanction was filed and duly advertised, with no objections received.

Issue 3: Observations by Regional Director and responses
The Regional Director raised concerns regarding the Appointed Date, assets transfer details, and a shareholder complaint. The petitioner addressed these issues in an affidavit and submissions. The Regional Director suggested amending the Appointed Date to 1st April 2012, but the petitioner defended the selection of 31st March 2012 for commercial reasons.

Issue 4: Shareholder complaint and Company Law Board order
A shareholder's complaint regarding a director's removal at a previous meeting was deemed irrelevant to the current scheme. The petitioner demonstrated that the shareholder's actions were vexatious and had no bearing on the scheme's approval process.

Final Decision
After considering all contentions and circumstances, the court found the scheme to be in the interest of shareholders, not detrimental to creditors or public interest, and thus sanctioned it. The prayers in the petition were granted, and costs to the Central Government Counsel were quantified at Rs. 7,500.

This judgment approved the scheme of arrangement for the spin off and transfer of the Domestic Formulation Undertaking, highlighting the approval process, responses to observations, and dismissal of irrelevant complaints in the decision-making process.