2016 (4) TMI 270 - HC - Companies Law

Scheme of Arrangement in the nature of Demerger and Transfer of the demerged Undertaking - Held that - As the contentions raised in the affidavits and reply affidavits, the undertakings provided vide the additional affidavit dated 31st March 2016 and the consent letters of the Secured Lenders placed on record vide the affidavit dated 1st April 2016, this Court is satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, have been suitably addressed and no longer survive. From the material on record, it appears that the present Scheme of Arrangement is in the interest of its shareholders and creditors, as well as in the public interest, therefore, the same deserves to be sanctioned. The prayers in terms of Paragraph 18(a), (b) and (c) of Company Petition No.34 of 2016 for the Demerged Company including the reduction of capital as proposed vide clause 12 of the Scheme are hereby granted. The minutes under Section 103(1) in terms of Paragraph12 are hereby granted. Similarly, the prayers made in terms of Paragraph17(a) of Company Petition No.35 of 2016 for the Resulting Company are also granted. The petitions are disposed of, accordingly. Insofar as the costs to be paid to the Central Government Standing Counsel are concerned, they are quantified at ₹ 7,500/per petition. The same may be paid to Mr.Devang Vyas, learned Assistant Solicitor General of India.

Summary

Issues:
1. Sanction of Scheme of Arrangement for Demerger and Transfer of Undertaking
2. Restructuring of Share Capital
3. Compliance with FEMA and RBI guidelines
4. Observations by Regional Director and other authorities
5. Approval and Disposal of Petitions

Analysis:
1. The petitions were filed by two companies for the sanction of a Scheme of Arrangement involving the Demerger and Transfer of the Hospitality Management Undertaking from one company to another, along with the restructuring of share capital. The purpose was to allow each company to focus on its respective businesses independently. The scheme was proposed under relevant sections of the Companies Act, 1956.

2. The Demerged Company was a wholly owned subsidiary engaged in Hotel Management and Ownership activities, while the Resulting Company was a closely held limited company owning a hotel in Surat. The restructuring aimed to streamline operations and resources for better business focus and growth. Details of the benefits were provided in the petitions.

3. The restructuring of the Demerged Company's capital involved utilizing the Securities Premium Account and reducing Equity Share Capital to adjust the net asset value. This reduction of capital was integral to the scheme and did not affect shareholders' liabilities or payments. Compliance with FEMA and RBI guidelines was confirmed, and undertakings were provided to comply with applicable provisions when necessary.

4. Observations from the Regional Director and other authorities were addressed, including responses from Equity Shareholders, Unsecured Creditors, and Secured Lenders. No objections were raised, and consents were obtained from relevant parties. Compliance with Income Tax Act and Rules was assured, and no complaints were received by the Registrar of Companies.

5. After considering all submissions, affidavits, and undertakings, the Court was satisfied that the Scheme was in the interest of shareholders, creditors, and the public. The prayers in the petitions were granted, costs were quantified, and directions were given for stamp duty adjudication, filing with concerned authorities, and issuance of orders. The petitions were disposed of accordingly, with authorities instructed to act on the sanctioned scheme promptly.