2016 (12) TMI 309 - HC - Companies Law

Composite Scheme of Arrangement - Held 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, allows the Petitions and approves the Scheme, which includes reductions of the securities premium account of Montecarlo Limited. The Scheme is hereby sanctioned. The prayers made in the respective Company Petitions are granted.

Issues Involved:
1. Sanctioning of the Composite Scheme of Arrangement.
2. Dispensation of meetings for Equity Shareholders, Secured Creditors, and Unsecured Creditors.
3. Compliance with procedural requirements and statutory provisions.
4. Observations and objections raised by the Regional Director.
5. Reports and observations by the Official Liquidator.

Detailed Analysis:

1. Sanctioning of the Composite Scheme of Arrangement:
The petitions were filed by seven companies seeking the sanctioning of a Composite Scheme of Arrangement among various entities and their shareholders and creditors. The court reviewed the scheme and found it to be genuine, bona fide, and in the interest of shareholders and creditors. Consequently, the court approved the scheme, which included the reduction of the securities premium account of Montecarlo Limited.

2. Dispensation of Meetings for Equity Shareholders, Secured Creditors, and Unsecured Creditors:
The court dispensed with the convening and holding of meetings for Equity Shareholders, Secured Creditors, and Unsecured Creditors of the petitioner companies. This decision was based on consent affidavits received from all Equity Shareholders and the fact that the rights and interests of Secured and Unsecured Creditors were not affected by the scheme. For instance, Montecarlo Limited and other petitioners filed applications to dispense with these meetings, which the court approved in orders dated 30.9.2016.

3. Compliance with Procedural Requirements and Statutory Provisions:
The court directed the issuance of notices to the Regional Director and publication of hearing notices in specified newspapers. The court also addressed a typographical error in the order dated 4.10.2016, correcting it through an order dated 10.10.2016. The petitioners complied with these directives, confirming the publication of notices and service upon the Regional Director and Official Liquidator.

4. Observations and Objections Raised by the Regional Director:
The Regional Director filed a common affidavit raising several observations:
- Share Exchange Ratios (Paragraph 2(c)): The court found the share entitlement ratio approved by the Board of Directors and shareholders sufficient, thus satisfying the Regional Director's observation.
- Typographical Error in Scheme (Paragraph 2(d)): The court directed the correction of the incorporation date of Montecarlo Realty Limited from "June 13, 2009" to "June 30, 2009."
- Licenses and Approvals (Paragraph 2(e)): The court noted that Montecarlo Energy Private Limited was not carrying on business activities and had not obtained any regulatory approvals, rendering the observation moot.
- Contingent Liabilities (Paragraph 2(f)): The court was satisfied with the statement of excess assets over liabilities provided by Montecarlo Limited, addressing concerns about contingent liabilities.
- Income Tax Compliance (Paragraph 2(g)): The court noted that the scheme complied with relevant provisions of the Income Tax Act, 1961.

5. Reports and Observations by the Official Liquidator:
The Official Liquidator filed reports confirming that the affairs of the Transferor Companies were not conducted prejudicially to the interest of members or the public. The petitioner companies filed affidavits ensuring compliance with the observations made in the reports. The court noted that the statutory liabilities of the Transferor Companies would not be absorbed by the scheme.

Conclusion:
The court concluded that the requirements of sections 391 to 394 of the Companies Act, 1956, were satisfied, and the scheme was in the interest of shareholders and creditors. The petitions were allowed, and the scheme was sanctioned. The court also quantified and directed the payment of professional charges to the Assistant Solicitor General of India and the Official Liquidator by Montecarlo Limited. Filing and issuance of drawn-up orders were dispensed with, and all concerned authorities were directed to act on the authenticated copy of the order along with the scheme.

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