2016 (7) TMI 623 - HC - Companies Law

Scheme of arrangement - Held that - In response to the notice issued by this Court, the Official Liquidator, in his Affidavit in Reply stated that the affairs of the Petitioner Companies are not conducted in a manner prejudicial to the interest of its members and they may be dissolved without the process of winding up. In view of the above discussion, the observations made by the Regional Director having been addressed and the Official Liquidator having opined that the affairs of the petitioner company have not been conducted in the manner prejudicial to the interest of its members or to the public interest, in the opinion of this court it does not appear to be any impediment to the grant of sanction to the Scheme of Arrangement, in as much as from the material on record and on perusal of the Scheme, the scheme appears to be fair and reasonable and is not violative of any of public policy. The arrangement under the proposed scheme appears to be in the interest of the companies and its members and creditors and, therefore deserves to be sanctioned. Accordingly, the Scheme as proposed by the petitioner companies is hereby sanctioned. The same shall be binding upon all the equity shareholders, preference shareholders, secured creditors, unsecured creditors of the petitioner Companies and all other agencies, departments and authorities of the Central, State and any other local authorities.

Issues Involved:
1. Sanction of the scheme of arrangement between multiple transferor companies and a transferee company.
2. Dispensation of meetings for equity and preference shareholders, secured creditors, and unsecured creditors.
3. Compliance with Accounting Standards, RBI guidelines, FEMA, and Income Tax Act.
4. Observations by the Regional Director and the Official Liquidator.
5. Preservation of books of accounts and other connected papers.
6. Costs to be paid to the Assistant Solicitor General and the Official Liquidator.
7. Lodging of the order and scheme with the Superintendent of Stamps and Registrar of Companies.

Issue-Wise Detailed Analysis:

1. Sanction of the Scheme of Arrangement:
The petitioners sought the sanction of a scheme of arrangement involving eight transferor companies and one transferee company, under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956, and relevant provisions of the Companies Act, 2013. The scheme aimed at consolidation and simplification of the group structure, elimination of multilayered and cross-held entities, reduction in operating and compliance costs, streamlining the group structure, and achieving operational and management efficiency.

2. Dispensation of Meetings:
The court noted that the meetings of equity and preference shareholders, secured creditors, and unsecured creditors for all transferor companies and the transferee company were dispensed with. This was based on written consent letters from all equity and preference shareholders and the absence of secured creditors. The rights and interests of unsecured creditors were not affected by the scheme, and no compromise or arrangement was offered to them.

3. Compliance with Regulatory Standards:
The Regional Director observed that clause 8.5 of the scheme was not in accordance with Accounting Standards-14. Additionally, the petitioner companies were directed to ensure compliance with RBI guidelines, FEMA, and the Income Tax Act. The petitioners provided affidavits undertaking to make necessary disclosures and comply with all relevant provisions and guidelines.

4. Observations by the Regional Director and Official Liquidator:
The Regional Director's affidavit indicated no complaints against the petitioner companies and stated that the scheme was not prejudicial to the interests of shareholders or the public. The Official Liquidator confirmed that the affairs of the petitioner companies were not conducted in a manner prejudicial to their members' interests and recommended dissolution without winding up.

5. Preservation of Books of Accounts:
The court ordered that the transferor companies must not dispose of or destroy their books of accounts and other connected papers without prior consent from the Central Government, ensuring compliance with Section 396A of the Companies Act, 1956.

6. Costs:
The petitioners were directed to pay costs of ?10,000 per petition to the Assistant Solicitor General and the Official Liquidator.

7. Lodging of Order and Scheme:
The petitioner companies were instructed to lodge a copy of the order, schedules of immovable assets, and the scheme with the Superintendent of Stamps within 60 days for stamp duty adjudication. Additionally, they were required to file copies with the Registrar of Companies electronically and physically.

Conclusion:
The court found no impediment to granting sanction to the scheme of arrangement, deeming it fair, reasonable, and not violative of public policy. The scheme was sanctioned and made binding on all stakeholders and authorities. The court ordered all concerned authorities to act on the authenticated copy of the order and scheme, and directed the registry to maintain copies in each company petition.

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