2016 (9) TMI 21 - HC - Companies Law

Scheme of demerger - Held that - Scheme of Demerger as proposed is in the interest of the company and its members and is not otherwise prejudicial to public interest. This Court doth hereby sanction the Scheme of Demerger set forth in the petition and this Court does hereby declare the same to be binding on the petitionerCompany and all the members and creditors of the petitionerCompany and all other concerned parties and does hereby approve the said scheme of the demerger with effect from the appointed date i.e. 1st April 2016. This Court doth further order - A. That the scheme of demerger embodied in the petition is hereby sanctioned by this Court so as to be binding with effect from 1st April 2016 which is the appointed date, on the petitionerCompany and all their members and creditors and all other persons concerned pursuant to the provisions of Sections 391 to 394 of the Companies Act, 1956. B. That the petitionerCompany shall within 30 days after the date signing of this order or within such other time as may be permitted by this Honourable Court cause a certified copy of the order to be delivered to the Registrar of Companies, Gujarat at Ahmedabad for registration under Section 391 of the Companies Act, 1956. C. That any parties to the Scheme of Demerger and/or any person or persons interested shall be at liberty to apply to this Court for any directions that may be necessary in regard to the working of the arrangement embodied in the Scheme of Demerger as sanctioned herein; and D. This Court doth further order payment of ₹ 10,000/as costs of this petition awardable to learned Additional Solicitor General of India.

Summary

Issues:
1. Sanction of a Scheme of demerger by the High Court.
2. Compliance with provisions of the Income Tax Act, FEMA, and RBI guidelines.
3. Benefit of Clause 6 of the Scheme for all employees of the transferor company.
4. Disclosure of assets and liabilities to be demerged.
5. Compliance with AS14 for accounting purposes.
6. Approval and binding nature of the Scheme of Demerger.

Analysis:
The petition before the High Court sought sanction for a Scheme of demerger transferring the non-foundary undertaking of a company to another entity. The Court noted that previous orders had dispensed with the need for shareholder and unsecured creditor meetings, as there were no secured creditors. The petition was admitted, and public notices inviting objections were published, but none were received. An affidavit from the Regional Director highlighted the need for compliance with various laws and guidelines, including the Income Tax Act, FEMA, RBI regulations, and accounting standards. The Director also emphasized the need for the benefit of Clause 6 of the Scheme to extend to all employees of the transferor company. The petitioner responded, affirming compliance with the mentioned laws and guidelines, clarifying the benefit provision, and stating the transfer of all assets and liabilities as per the Scheme.

Upon hearing arguments and reviewing the affidavits, the Court found that the concerns raised by the Regional Director did not impede sanctioning the Scheme. The petitioner's affidavit addressed the Director's observations, and no other objections were raised. The Court concluded that the proposed Scheme of Demerger was in the company's interest, not prejudicial to public interest, and therefore sanctioned it. The Court declared the Scheme binding on the petitionerCompany, its members, creditors, and all concerned parties, with effect from the appointed date of April 1, 2016. Specific orders were issued for registration, compliance with provisions of the Companies Act, and directions for any necessary applications related to the Scheme. Additionally, a cost of ?10,000 was awarded. The petition was disposed of accordingly, with the Scheme approved and ordered to be implemented.