2016 (6) TMI 1059 - HC - Companies Law

Scheme of Arrangement in the nature of Amalgamation - Held that - Considering all the facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits, undertakings provided vide the additional affidavit dated 11th June 2016, we are satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. The present Scheme of Arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned and the same is hereby sanctioned. The Reduction of Preference Share Capital of the Transferee Company as set out in Clause 14 of the Scheme and paragraph 11 of the petition is hereby confirmed. The minutes under Sec. 103(1) as per paragraph 12 of the petition is hereby approved.

Summary

Issues:
Petitions for sanction of Scheme of Arrangement for amalgamation and share capital restructuring under Companies Act, 1956.

Analysis:
The petitions were filed by two companies seeking approval for a Scheme of Arrangement involving the amalgamation of a Transferor Company with a Transferee Company and the restructuring of share capital. Both companies are under the same management group, and the merger is aimed at achieving synergic benefits and enhancing operational efficiency. The Scheme details the anticipated advantages resulting from the proposed arrangement.

The meetings of Equity Shareholders and Unsecured Creditors of both companies were dispensed with as all stakeholders provided written consent approving the scheme. There were no Secured Creditors for either company. The Scheme included the cancellation of the entire Preference Share Capital of the Transferee Company held by the Transferor Company upon amalgamation, which was deemed integral to the arrangement. Procedures under the Companies Act, 1956 and the Companies (Court) Rules 1959 were waived due to the nature of the proposed reduction not involving liability diminution or payment to shareholders.

The petitions for sanction were admitted, and due notice was given through newspaper advertisements and affidavits confirming the absence of objections. The Official Liquidator's report indicated that the Transferor Company's affairs were conducted within legal boundaries, recommending dissolution without winding up but with directions to preserve records. The Central Government was served notice, and observations made by the Regional Director were addressed through additional affidavits and submissions by counsels.

After considering all facts, contentions, and undertakings, the court concluded that the Scheme was in the interest of shareholders, creditors, and the public, sanctioning the arrangement. The Reduction of Preference Share Capital and related minutes were confirmed and approved. The prayers in the petitions were granted, costs were quantified, and directions were given for stamp duty adjudication, filing with authorities, and issuance of authenticated copies of the order and scheme.

In conclusion, the petitions were disposed of, and all relevant parties were directed to comply with the court's orders and procedures for the implementation of the Scheme of Arrangement.