2016 (6) TMI 902 - HC - Companies Law

Scheme of Arrangement in the nature of Demerger and Transfer of Investment Business - Held that - This court is of the view that that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. No directions are required to be issued to the petitioner company. This court is of the view that based on the material on record it can be concluded that the present scheme of arrangement is in the interest of the shareholders and creditors of both the companies as well as in the public interest, therefore, the same deserves to be sanctioned and the same is hereby sanctioned.

Summary

Issues:
Petition for sanction of a Scheme of Arrangement in the nature of Demerger and Transfer of Investment Business under Sections 391 to 394 of the Companies Act, 1956.

Analysis:
The petition involved a request for the sanction of a Scheme of Arrangement for the demerger and transfer of Investment Business from the Demerged Company to the Resulting Company. The Demerged Company was engaged in Share Broking and Investment Business, recognizing the different risk profiles of these activities. The proposed demerger aimed to transfer the Investment Business Division to the Resulting Company to mitigate adverse impacts on the Broking business. The scheme highlighted the anticipated benefits of the demerger.

The petitioner company had obtained consent letters from shareholders and creditors, with the meeting of Equity Shareholders and Unsecured Creditors being dispensed with based on the positive net worth of the Resulting Company. The approval from the sole Secured Creditor was also secured, ensuring compliance with contractual terms. The substantive petition was filed and admitted after due public notices were published, and no objections were raised post-publication.

The Central Government was served notice, and observations by the Regional Director, Ministry of Corporate Affairs, were addressed through additional affidavits. The court considered explanations provided for the observations and found that the scheme was not prejudicial to the interests of shareholders, creditors, or the public. The court concluded that the scheme was in the interest of stakeholders and sanctioned it accordingly.

The court granted the prayers of the Company Petition, directed the filing of the order with the Registrar of Companies, and quantified costs to be paid to the Central Government Standing Counsel. The petitioner company was instructed to file a copy of the order and scheme with the Registrar of Companies electronically and physically. The filing and issuance of the drawn-up order were dispensed with, and concerned authorities were directed to act promptly on the authenticated copy of the order and scheme issued by the Registrar, High Court of Gujarat.