2016 (3) TMI 334 - HC - Companies Law

Composite Scheme of Arrangement - Held that - The observations made by the Regional Director having been addressed and the Official Liquidator having opined that the affairs of the Petitioner Transferor Companies have not been conducted in a manner prejudicial to the interest of its members or to the public interest, in the opinion of this Court, there does not appear to be any impediment to the grant of sanction to the Composite Scheme of Arrangement. From the material on record and on a perusal of the Scheme, the Scheme appears to be fair and reasonable and is not violative of any provisions of law, nor is it contrary to public policy. The Arrangement under the proposed Scheme appears to be in the interest of the companies and their members and creditors and, therefore, deserves to be sanctioned. Accordingly, the Scheme as proposed by the petitioner companies along with the newlyproposed clause 9.1 A, is hereby sanctioned. It is however, clarified that the sanctioning of this Scheme would not absolve anyone, who is otherwise liable for any responsibility or liability, only on account of this sanctioning.

Summary

Issues:
Sanction of Composite Scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956.

Analysis:
The petitions were filed for the sanction of a Composite Scheme of Arrangement involving multiple companies under Sections 391 to 394 of the Companies Act, 1956. The purpose of the arrangement was to merge several companies to enhance business operations, reduce administrative costs, and provide a more efficient framework for conducting activities. Specific orders were passed for each transferor company dispensing with the need for certain meetings as per the court's directions. The petitions were admitted, and public notices were duly advertised in newspapers. The Regional Director and Official Liquidator were involved in the process.

The Regional Director raised several observations regarding the scheme, including issues related to share exchange ratios, share capital, accounting treatment, and compliance with tax regulations. Responses were provided by the petitioners' advocate addressing each observation in detail. The petitioners clarified the shareholding structure, equity shares classification, proposed share cancellations, accounting deviations, and compliance with tax obligations. The Regional Director's concerns were adequately addressed by the petitioners.

The Official Liquidator conducted an investigation and submitted a report stating that the affairs of the transferor companies were not conducted in a prejudicial manner. The Official Liquidator recommended the dissolution of the transferor companies without winding up. The Official Liquidator also directed the preservation of books of accounts as per legal requirements. The court considered all observations, reports, and recommendations, concluding that there were no impediments to granting sanction to the Composite Scheme of Arrangement.

The court found the proposed scheme fair, reasonable, not violative of any laws, and in the interest of the companies, members, and creditors. The scheme was sanctioned with a directive for payment of charges and costs to relevant parties. Instructions were provided for stamp duty adjudication, filing with authorities, and issuance of necessary orders. The court dispensed with the filing and issuance of drawn-up orders and instructed all concerned authorities to act promptly on the sanctioned scheme.

In conclusion, the court approved the Composite Scheme of Arrangement, ensuring compliance with legal procedures, addressing regulatory concerns, and safeguarding the interests of all stakeholders involved.