2017 (1) TMI 1302 - HC - Companies Law

Scheme of Arrangement (hereinafter referred to as proposed scheme ) between the Demerged Company and the Resulting Company - Held that - Considering the approval accorded by the shareholders and creditors of the Petitioner Companies to the proposed scheme; and the circumstance that the objections/observations raised by the Regional Director having been satisfied, by way of said affidavit dated 04.10.2016, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioner Companies will comply with the statutory requirements in accordance with law. Upon the sanction to the proposed scheme being effective from the appointed date of the proposed scheme, i.e. 1st January, 2015, the Demerged Undertaking (as defined in the proposed scheme) of the Demerged Company shall stand merged in the Resulting Company. In any event, notwithstanding what has been stated on behalf of the Petitioner Companies hereinabove, the Resulting Company shall file an undertaking with this Court, within two weeks from today, stating therein, that it will take over and defray all the liabilities of the Demerged Undertaking (as defined in the proposed scheme) of the Demerged Company. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Court to the proposed scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the Petitioner Companies.

Issues Involved:
1. Jurisdiction of the Court
2. Background and Incorporation Details of the Companies
3. Share Capital and Financial Statements
4. Justification for the Proposed Scheme
5. Share Exchange Ratio
6. Pending Proceedings
7. Approval by the Board of Directors
8. Meetings of Creditors and Shareholders
9. Liabilities of the Companies
10. Transfer of Assets and Liabilities
11. Observations by the Regional Director
12. Objections and Approvals
13. Compliance with Statutory Requirements
14. Undertaking by the Resulting Company
15. Sanction and Compliance with Laws

Detailed Analysis:

1. Jurisdiction of the Court:
The registered offices of the Petitioner Companies are situated in the National Capital Territory of Delhi, granting this Court the necessary jurisdiction to adjudicate the present petition.

2. Background and Incorporation Details of the Companies:
The Demerged Company was originally incorporated on 25.03.2009 and later changed its name on 13.04.2015. The Resulting Company was incorporated on 31.10.1990.

3. Share Capital and Financial Statements:
The authorized share capital of the Demerged Company as of 31.12.2014 is ?1,00,00,000, and the Resulting Company as of 31.03.2015 is ?1,00,00,000. The financial statements and auditor’s reports have been duly filed.

4. Justification for the Proposed Scheme:
The Demerged Company is engaged in over-the-counter healthcare and lifestyle products. The distinct nature of domestic and export segments necessitates separate management focus.

5. Share Exchange Ratio:
The proposed scheme provides that the Resulting Company shall not issue and allot any shares as the Demerged Company is a wholly owned subsidiary of the Resulting Company.

6. Pending Proceedings:
There are no proceedings pending against the Petitioner Companies under Sections 235 to 251 of the Companies Act.

7. Approval by the Board of Directors:
The Board of Directors of the Petitioner Companies approved the proposed scheme in their separate meetings held on 21.10.2015.

8. Meetings of Creditors and Shareholders:
This Court dispensed with the requirement of convening meetings of the shareholders and secured creditors of the Resulting Company. Separate meetings of the unsecured creditors were held on 21.03.2016, and the proposed scheme was unanimously approved.

9. Liabilities of the Companies:
The liabilities concerning LTA, gratuity, and leave encashment were noted to be examined at the sanction/confirmation petition stage.

10. Transfer of Assets and Liabilities:
Clause 6 of the proposed scheme details the transfer of the Demerged Undertaking’s assets and liabilities to the Resulting Company. All debts, liabilities, contingent liabilities, duties, and obligations of the Demerged Undertaking shall stand transferred to the Resulting Company.

11. Observations by the Regional Director:
The Regional Director raised observations regarding the valuation report and the impact on the post-demerger balance sheet. The Resulting Company clarified these points, stating that the consideration for the cancellation of shares was determined due to accumulated losses and that all shareholders had consented to the scheme.

12. Objections and Approvals:
No objections were received from any other party. The Regional Director’s observations were satisfied by the Resulting Company’s affidavit.

13. Compliance with Statutory Requirements:
The Petitioner Companies will comply with statutory requirements in accordance with the law. The Demerged Undertaking shall stand merged with the Resulting Company from the appointed date of the proposed scheme, i.e., 1st January 2015.

14. Undertaking by the Resulting Company:
The Resulting Company shall file an undertaking with the Court, within two weeks, stating that it will take over and defray all liabilities of the Demerged Undertaking.

15. Sanction and Compliance with Laws:
The Court granted sanction to the proposed scheme, directing compliance with all relevant laws, including the payment of any applicable stamp duty, taxes, or charges. A certified copy of the order must be filed with the ROC within thirty days. The Petitioner Companies are also directed to deposit ?50,000 with the Delhi High Court Bar Association Lawyers Social Security and Welfare Fund within two weeks.

Conclusion:
The petition is allowed, and the proposed scheme is sanctioned, subject to compliance with statutory requirements and the filing of an undertaking by the Resulting Company.

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