2020 (11) TMI 60 - Tri - Companies Law

Approval of Scheme of Arrangement - Sections 230-232 read with other applicable provisions of the Companies Act, 2013 and Rules framed thereunder - HELD THAT - From the material on record, the Scheme appears to be fair and reasonable and does not violate any provisions of law, nor contrary to the public policy, nor prejudicial to the interest of shareholders or detrimental to public interest at large - Since all statutory compliances have been fulfilled or further undertaken to be fulfilled, the Company Scheme Petition No. 1263/2019 filed by the Petitioner Company is made absolute in terms of prayer clause (a) of the said Petition and the Scheme of Arrangement annexed to the said Petition is duly approved and sanctioned. The scheme is sanctioned.

Issues Involved:
1. Sanction of the Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013.
2. Jurisdiction and compliance with statutory requirements.
3. Benefits and implications of the demerger.
4. Compliance with accounting standards.
5. Observations and objections raised by the Regional Director.
6. Compliance with SEBI regulations and FEMA guidelines.
7. Approval and sanction of the Scheme by the Tribunal.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013:
The Tribunal convened via videoconferencing and heard the counsel for the Petitioner Company. The Scheme of Arrangement between Hind Lamps Limited (Demerged Company) and Bajaj Electricals Limited (Resulting Company) was unopposed. The Scheme sought sanction under Sections 230-232 of the Companies Act, 2013, involving the demerger of the Manufacturing Business of the Demerged Company into the Resulting Company. The necessary board resolutions approving the Scheme were annexed to the Company Scheme Petition.

2. Jurisdiction and compliance with statutory requirements:
The Scheme was filed in consonance with the order passed in CA (CAA) No. 1027/2018. The National Stock Exchange of India Limited and BSE Limited granted their 'No objection' to the Scheme. The Demerged Company falls under the jurisdiction of the National Company Law Tribunal, Allahabad Bench, which sanctioned the Scheme without modifications. The Petitioner Company complied with all requirements as per the Tribunal's directions, including approval by the requisite majority of shareholders and creditors and filing necessary affidavits of compliance.

3. Benefits and implications of the demerger:
The demerger was stated to bring various benefits, including synergies in administration, marketing, and business operations. It would enable both companies to achieve their objectives more efficiently and economically, facilitate the revival of the Manufacturing Business, lead to greater administrative efficiency, and increase the ability to leverage financial and operational resources. The Scheme did not involve any compromise with creditors and did not adversely affect their interests.

4. Compliance with accounting standards:
The valuation for the Scheme was undertaken by M/s. Katre Barwe & Associates, Chartered Accountants, specifying the consideration for the Scheme. The share entitlement ratio was 97 equity shares of the Resulting Company for every 1000 equity shares of the Demerged Company. The Petitioner Company undertook to comply with applicable accounting standards, including IND AS-103 and IND AS-8, and provided detailed accounting treatment in its books.

5. Observations and objections raised by the Regional Director:
The Regional Director raised several observations, including compliance with accounting standards, the appointed date, discrepancies in paid-up share capital, and the need for similar approval from the Allahabad Bench. The Petitioner Company provided detailed explanations and undertakings for each observation, including compliance with IND AS-103, reasons for the delay in filing, and clarification on paid-up share capital discrepancies.

6. Compliance with SEBI regulations and FEMA guidelines:
The Petitioner Company complied with SEBI regulations and obtained 'No-objection' letters from the Stock Exchanges. The Scheme was amended to meet SEBI's requirements, and the Petitioner Company confirmed compliance with FEMA guidelines regarding foreign resident shareholders.

7. Approval and sanction of the Scheme by the Tribunal:
The Tribunal found the Scheme to be fair, reasonable, and not in violation of any law or public policy. Since all statutory compliances were fulfilled, the Tribunal approved and sanctioned the Scheme. The Petitioner Company was directed to lodge a copy of the Order with the Registrar of Companies within 60 days. The Scheme was sanctioned from the Appointed Date, 31 March 2014, and was binding on all stakeholders.

Conclusion:
The Tribunal concluded that the Scheme of Arrangement was fair and reasonable, complied with all statutory requirements, and was beneficial for both companies and their stakeholders. The Scheme was duly approved and sanctioned, with directions for necessary filings and compliance with regulatory authorities.

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