2016 (12) TMI 187 - HC - Companies Law

Scheme of demerger - Held that - Considering the entire facts and circumstances of the case and on perusal of the Scheme and the proceedings, it appears that the requirements of the provisions of sections 391 to 394 of the Companies Act, 1956 are satisfied. The Scheme appears to be genuine and bonafide and in the interest of the shareholders and creditors. This Court, therefore, accordingly allows the Company Petitions and approves the Scheme, which includes reductions of the paid up equity share capital and paid up preference share capital of the Demerged Company. The Scheme is hereby sanctioned. Thee prayers made in the respective Company Petitions are granted. The petitions are allowed accordingly.

Summary

Issues:
1. Sanctioning of the Scheme of Arrangement of two companies.
2. Dispensing with the convening and holding of meetings for shareholders and creditors.
3. Compliance with RBI guidelines, submission of assets and liabilities details, and Income Tax Act.

Analysis:

Issue 1 - Sanctioning of the Scheme:
The petitions were filed for the sanctioning of the Scheme of Arrangement between two companies. The Court admitted the Company Petitions and directed the issuance of notices to the Regional Director. The notices were published in newspapers as directed. The Court found that the requirements of the Companies Act were satisfied, and the Scheme was deemed genuine and in the interest of shareholders and creditors. Therefore, the Court approved and sanctioned the Scheme, including the reductions of the paid-up capital.

Issue 2 - Dispensing with Meetings:
The Court dispensed with the convening and holding of meetings for Equity Shareholders, Sole Preference Shareholder, Secured Creditors, and Unsecured Creditors of the companies based on consent affidavits received. The Court noted that no separate procedure was required for reductions in share capital as it was part of the Scheme itself.

Issue 3 - Compliance with Regulations:
The Regional Director raised concerns regarding compliance with RBI guidelines, submission of assets and liabilities details, and Income Tax Act. The companies addressed these concerns by providing necessary documents and clarifications. The Resulting Company demonstrated compliance with RBI circulars, submitted certified statements of assets and liabilities, and assured that contingent liabilities would not adversely affect the financial position. The Scheme was confirmed to be in compliance with the Income Tax Act.

In conclusion, the Court allowed the petitions, approved the Scheme, and sanctioned the reductions of share capital. The fees of the Assistant Solicitor General were quantified and to be paid by the Resulting Company. The filing and issuance of orders were dispensed with, and all relevant authorities were directed to act on the order along with the authenticated Scheme.