2009 (11) TMI 505 - HC - Companies Law

Summary

Issues:
Petition under sections 391 and 394 of the Companies Act, 1956 seeking amalgamation of multiple companies and conversion of debt into equity.

Analysis:
The petition filed under sections 391 and 394 of the Companies Act, 1956 seeks the amalgamation of several companies, including Ganesh Synthetics Private Limited, Abhinav Investments Private Limited, Ginni Power Limited, and Goodworth Merchants Private Limited, with Ginni Filaments Limited. The scheme of arrangement also includes the conversion of debt owed by the Transferor Companies into equity in the Transferee Company. This conversion aims to maintain a debt equity ratio of 1.85, as decided by the term lenders of the transferee company. The Corporate Debt Re-structuring Cell, established by the Reserve Bank of India, has approved the conversion of unsecured loans into equity, as per communications submitted by the applicant company.

The scheme of amalgamation was initially approved by the Board of Directors of the involved companies. Following approvals, a court order was issued for the convening of meetings with shareholders, secured creditors of Transferor Companies, and unsecured creditors of the Transferee Company. Compliance with court orders included publishing notices in newspapers and holding meetings as directed. Reports from chairpersons overseeing these meetings were submitted to the court.

The Regional Director of Company Affairs filed a report with minimal objections, primarily emphasizing compliance with accounting standards. The Official Liquidator raised objections specifically regarding the conversion of debts into equity, which were countered by the applicant company. The applicant highlighted that the conversion process was monitored by the Corporate Debt Re-structuring Cell, ensuring transparency and compliance with financial regulations.

Acknowledging the monitoring by the Corporate Debt Re-structuring Cell and the compliance with accounting standards, the court found the objections raised by the Official Liquidator adequately addressed. The court approved the petition for confirmation, subject to the conditions of restructuring under the monitoring of the Corporate Debt Re-structuring Cell and compliance with relevant accounting standards and legal requirements under the Companies Act and Company Rules.