2016 (6) TMI 705 - HC - Companies Law

Scheme of Demerger - Held that - Having heard Mr.Navin K. Pahwa, learned Counsel for the petitioner companies, Mr.Kshitij Amin, Learned Central Government Standing Counsel on behalf of Mr.Devang Vyas, Learned Assistant Solicitor General of India for the Regional Director and upon perusal of the report of the Regional Director, the reply filed on behalf of the petitioner Demerged Company and having considered the Scheme of Arrangement together with relevant documents on record, the Court finds it appropriate to grant sanction to the present Scheme of Arrangement. The petitioners are permitted to correct the Clauses No.38 to Clause No.28. It is, however, directed that the petitioner Transferor Company shall preserve its books of accounts, papers and record and shall not to dispose of the records without the prior permission of the Central Government under Section 396-A of the Companies Act, 1956. It is further observed that the petitioner Transferor Company shall ensure statutory compliance of all applicable laws. It is also observed that the sanction of the present Scheme would not absolve the company from any of its statutory liability, if applicable.

Issues:
1. Sanction of Composite Scheme of Demerger and Amalgamation under Sections 391 and 394 of the Companies Act, 1956.
2. Directions for convening meetings of Equity Shareholders and Unsecured Creditors.
3. Approval of the Scheme of Arrangement by shareholders and creditors.
4. Observations and responses to the Regional Director's affidavit.
5. Report of the Official Liquidator and preservation of records.
6. Granting sanction to the Scheme of Arrangement and related directions.

Analysis:

Issue 1: Sanction of Composite Scheme of Demerger and Amalgamation
The petitions were filed seeking sanction for the Composite Scheme of Demerger of Infrastructure Business and Amalgamation of two companies. The Court admitted the petitions and directed the issuance of notices to relevant authorities for further proceedings.

Issue 2: Directions for Convening Meetings
Meetings of Equity Shareholders and Unsecured Creditors were convened as per Court orders. Reports were filed with the Court confirming unanimous approval of the Scheme by the shareholders and creditors present, either in person or through proxies.

Issue 3: Approval of Scheme by Shareholders and Creditors
Equity Shareholders and Unsecured Creditors of the companies involved unanimously approved the Scheme of Arrangement during their respective meetings, as reported in the Chairman's Reports filed with the Court.

Issue 4: Observations and Responses to Regional Director
The Regional Director raised observations regarding various aspects of the Scheme, including business activities, typographical errors, SEBI compliance, property schedules, and Income Tax Department comments. The petitioner companies responded to each observation, clarifying compliance and necessary corrections.

Issue 5: Report of Official Liquidator and Preservation of Records
The Official Liquidator confirmed no prejudicial conduct in the affairs of the transferor company. However, preservation of books, records, and compliance with statutory liabilities was emphasized, with specific directions given to the transferor company.

Issue 6: Granting Sanction to the Scheme and Related Directions
After considering all submissions, including the Scheme of Arrangement and relevant documents, the Court granted sanction to the Scheme of Amalgamation. Directions were issued for corrections, preservation of records, statutory compliance, and non-absolution of statutory liabilities post-sanction.

The Court determined costs payable to legal representatives and directed the lodgment of necessary documents with authorities for stamp duty adjudication. Further instructions were given for filing orders with relevant authorities and dispensation of drawn-up orders. The petitions were disposed of accordingly, concluding the legal proceedings related to the Composite Scheme of Demerger and Amalgamation.

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