2021 (8) TMI 848 - Tri - Companies Law

Scheme of Demerger - Sections 230 to 232 of the Companies Act, 2013 - HELD THAT - From the material on record, the Scheme of Demerger appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public interest - Since all the statutory compliances have been fulfilled, this bench hereby sanctions this Scheme in its absolute terms. The Scheme, with the Appointed Date fixed as 1st April, 2019 is hereby sanctioned - Application allowed.

Summary

Issues Involved:
1. Sanction of the Tribunal for the demerger under Sections 230 to 232 of the Companies Act, 2013.
2. Rationale for the demerger.
3. Compliance with statutory requirements and observations by the Regional Director.
4. Approval of the Scheme by shareholders and creditors.
5. Issuance of equity shares by the Resulting Company.
6. Filing and compliance requirements post-sanction.

Issue-wise Detailed Analysis:

1. Sanction of the Tribunal for the demerger under Sections 230 to 232 of the Companies Act, 2013:
The Tribunal was convened via video conferencing on July 22, 2021. The Learned Authorised Representative for the parties stated that no objector came forward to oppose the Scheme, nor did any party controvert the averments made in the Petition. The Tribunal's sanction was sought for the demerger of the Industrial Gear Box Division Undertaking of the Demerged Company vesting in the Resulting Company.

2. Rationale for the demerger:
The Board of Directors of the respective Petitioner Companies approved the Scheme on February 21, 2020. The rationale provided includes better management and administration, optimum utilization of resources, independent business expansion, cost savings, and maximizing shareholder value. The Demerged Undertaking is engaged in the business of repairing various industrial gear types and has residual business activities.

3. Compliance with statutory requirements and observations by the Regional Director:
The Regional Director's report dated October 12, 2020, included several observations. The Petitioner Companies responded with necessary clarifications and undertakings, including compliance with applicable Accounting Standards, MCA Circular dated August 21, 2019, protection of creditors' interests, and proper accounting treatment of reserves arising out of the demerger. The Bench was satisfied with the explanations and undertakings given by the Petitioners.

4. Approval of the Scheme by shareholders and creditors:
Meetings of the Equity Shareholders and creditors of the Demerged Company and Resulting Company were held on September 15, 2020. The Scheme of Arrangement was unanimously approved, and the Chairman's report was filed as part of the Petition. The Petitioner Companies confirmed compliance with all requirements as per the Tribunal's directions.

5. Issuance of equity shares by the Resulting Company:
The Resulting Company shall issue 1 (One) Equity Share of ?10/- each for every 1 (One) equity share of ?10/- each held by the shareholders of the Demerged Company.

6. Filing and compliance requirements post-sanction:
The Petitioner Companies are directed to file a certified copy of the Order along with the Scheme with the Registrar of Companies electronically in E-form INC-28 within 30 days from the date of receipt of the Order. They must also lodge a copy of the Order and the Scheme with the Superintendent of Stamps for adjudication of stamp duty, if any, payable. The Petitioner Companies shall comply with all undertakings and take all consequential and statutory steps required under the provisions of the Act in pursuance of the Scheme.

Conclusion:
The Tribunal found the Scheme of Demerger to be fair, reasonable, and not violative of any provisions of law or public interest. All statutory compliances were fulfilled, and the Scheme was sanctioned with the Appointed Date fixed as April 1, 2019. The Order was issued accordingly, with directions for all concerned parties to act on the authenticated copy of the Order and Scheme.