2016 (12) TMI 882 - HC - Companies Law

Reconstruction in nature of Slump Sale and amalgamation of the Residual Undertaking - Held that - Considering the above facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits, and the undertakings provided vide the additional affidavit dated 14th December 2016, and submissions made at the time of hearing, this Court is satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, have been satisfactorily addressed. Hence, they no longer survive. This Court is of the view that the present Scheme of Arrangement appears to be in the interest of its shareholders and creditors as well as in the public interest. It, therefore, deserves to be sanctioned. Considering the above, the Scheme is hereby sanctioned.

Summary

Issues:
Petitions for sanction of a Composite Scheme of Arrangement involving transfer of "Windmill Division" of a company to another by way of 'Slump Sale' and amalgamation of the Residual Undertaking, under sections 391 to 394 of the Companies Act, 1956.

Analysis:
1. Scheme Details and Benefits Envisaged: The petitions were filed by two companies belonging to the same management group for the purpose of obtaining court sanction for a Composite Scheme of Arrangement involving the transfer of the "Windmill Division" from one company to another by way of 'Slump Sale' and amalgamation of the Residual Undertaking. The Board of Directors of both companies aimed to achieve synergic benefits by consolidating their activities, anticipating financial and administrative advantages from the proposed amalgamation.

2. Consent and Financial Standing: Orders were passed dispensing with the meetings of Equity Shareholders and Secured Creditors of the Transferor Company due to written consent letters approving the scheme. The Net Worth of the companies was detailed, with no objections raised post-publication of the hearing notice. The meeting of Unsecured Creditors was also dispensed with, considering no prejudicial impact on their rights due to the high Net Worth of the Transferee Company post-merger.

3. Official Liquidator's Report and Directions: The Official Liquidator reported that the affairs of the Transferor Company were conducted within its object clauses and not prejudicial to members or public interest. The Transferor Company was directed to preserve its books of accounts post-dissolution and comply with statutory liabilities. The Central Government was served notice, and observations by the Regional Director were addressed through affidavits and submissions.

4. Addressing Regional Director's Observations: The Regional Director's observations regarding the nature of the scheme, business activities, name change, tax implications, and objections were clarified by the petitioners. It was confirmed that necessary compliances would be undertaken, and the scheme was not seeking tax exemptions. No complaints were received by the Registrar of Companies, and the Regional Director confirmed the scheme's non-prejudicial nature to shareholders and the public.

5. Sanction of the Scheme: After considering all contentions, undertakings, and submissions, the Court was satisfied that the observations made by the Regional Director were adequately addressed. The Scheme was deemed to be in the interest of shareholders, creditors, and the public, leading to its sanction. The prayers in the petitions were granted, and costs were quantified to be paid to relevant parties.

6. Directions and Compliance: The petitioners were directed to lodge necessary documents with concerned authorities, pay costs, file orders with relevant offices, and ensure compliance with statutory requirements within specified timelines. The filing and issuance of drawn-up orders were dispensed with, and all authorities were instructed to act on the authenticated copy of the order promptly.