2016 (9) TMI 406 - HC - Companies Law

Sanction of the Composite Scheme of Arrangement in the nature of Merger and Demerger - Held that - 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 Composite 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.

Summary

Issues:
Sanction of Composite Scheme of Arrangement involving Merger and Demerger under Companies Act, 1956 and Companies Act, 2013.

Detailed Analysis:

1. Common Scheme of Arrangement:
- The petitions were filed for the sanction of a Composite Scheme of Arrangement involving Merger and Demerger between three companies.
- The scheme aimed at enhancing shareholder value, operational efficiencies, and pursuing revenue growth opportunities by combining resources.

2. Meetings and Consents:
- Meetings of shareholders and creditors of the Transferor, Demerged, and Transferee Companies were dispensed with based on written consent letters.
- Secured creditors' meeting of Transferor and Transferee Companies was not held as there were no secured creditors.

3. Publication and Objections:
- Company petitions were admitted, and public notices were duly advertised in newspapers.
- No objections were raised post-publication, and no complaints were reported against the Petitioner Companies.

4. Observations by Regional Director:
- Regional Director raised concerns regarding compliance with Accounting Standards, RBI guidelines, and Income Tax Act, among others.
- Petitioner Companies addressed the observations in an affidavit, ensuring compliance with necessary regulations.

5. Official Liquidator's Opinion:
- The Official Liquidator opined that the affairs of the Petitioner Companies were not conducted prejudicially, suggesting dissolution without winding up.

6. Court's Decision:
- After addressing the Regional Director's observations and considering the Official Liquidator's opinion, the court found the scheme fair, reasonable, and in the interest of stakeholders.
- The Composite Scheme of Arrangement was sanctioned, binding on all stakeholders and authorities.

7. Additional Orders:
- Directions were given regarding the preservation of books of accounts, payment of costs, lodging of order copies, and filing with concerned authorities.
- Filing and issuance of drawn-up order were dispensed with for expeditious action by concerned authorities.

8. Conclusion:
- The court approved the Composite Scheme of Arrangement, ensuring compliance with legal requirements and stakeholders' interests, leading to the disposal of the petitions with necessary directions for implementation.