2017 (2) TMI 79 - HC - Companies Law

Scheme of demerger - Held that - No impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioners will comply with the statutory requirements in accordance with law. Upon the sanction becoming effective from the appointed date of the proposed scheme, the Demerged Undertaking (as defined in the proposed scheme) of the Demerged Company shall stand merged in the Resulting Company. A certified copy of the order, sanctioning the proposed scheme, be filed with the ROC within 30 days from the date of receipt of the same.

Summary

Issues:
1. Approval of proposed scheme of Arrangement under Sections 391 to 394 of the Companies Act, 1956.
2. Share exchange ratio determination.
3. Compliance with statutory requirements for sanction of the proposed scheme.
4. Filing of certified copy of the order with the ROC.
5. Clarification on the order not granting exemption from stamp duty, taxes, or other charges.
6. Deposit of costs in the Delhi High Court Bar Association Lawyers Social Security and Welfare Fund.

Analysis:

1. The judgment pertains to a joint petition filed under Sections 391 to 394 of the Companies Act, 1956, by two companies, namely the Demerged Company and the Resulting Company, seeking approval for a proposed scheme of Arrangement. The purpose of the scheme is to merge the Demerged Undertaking of the Demerged Company into the Resulting Company for operational efficiency and value enhancement.

2. The share exchange ratio for the merger is determined as "1.5 equity shares of ?10/- each of the Resulting Company for every 09 equity shares of ?10/- each fully paid up held in the Demerged Company." This ratio has been approved and specified in the proposed scheme.

3. The judgment highlights that all necessary statutory requirements have been met for the sanction of the proposed scheme. The Board of Directors of both companies have unanimously approved the scheme, and no pending proceedings under Sections 235 to 251 of the Act are reported against the Petitioner Companies.

4. It is directed that a certified copy of the order sanctioning the proposed scheme must be filed with the Registrar of Companies (ROC) within 30 days from the date of receipt. This step ensures the formal recording and recognition of the approved scheme with the relevant regulatory authority.

5. The judgment clarifies that the order granting sanction to the scheme does not exempt the parties from compliance with applicable laws, including payment of stamp duty, taxes, or any other charges. It emphasizes that any deficiencies or violations will be subject to legal action in accordance with the law.

6. Additionally, the Petitioner Companies are instructed to deposit a sum of ?1,00,000/- as costs in the Delhi High Court Bar Association Lawyers Social Security and Welfare Fund within two weeks from the date of the judgment. This cost requirement serves as a financial obligation related to the legal proceedings.

In conclusion, the judgment grants sanction to the proposed scheme of Arrangement, subject to compliance with statutory requirements and legal obligations, ensuring a smooth merger process between the Demerged and Resulting Companies.