2016 (10) TMI 466 - HC - Companies Law

Scheme of Arrangement in the nature of Demerger - Held that - Considering all the facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits, as satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. As come to the conclusion that the present scheme of arrangement is in the interest of the shareholders and creditors of both the companies as well as in the public interest and the same deserves to be sanctioned and the same is hereby sanctioned. Prayers in terms of paragraph 20(a) and (b) of the Company Petition No. 365 of 2016 and in terms of paragraph 16(a) of the Company Petition No. 366 of 2016 are hereby granted. The petitions are disposed of accordingly. So far as the costs to be paid to the Central Govt. Standing Counsel is concerned, quantify the same at ₹ 10,500/per petition. The same may be paid to the learned Standing Counsel appearing for the Central Govt.The petitioner company is further directed to lodge a copy of this order alongwith the schedule of immovable assets of the Demerged Undertaking of the Demerged company as on the date of this order and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order. The Petitioner company is directed to file a copy of this order alongwith a copy of the scheme with the concerned Registrar of Companies, electronically, along with INC28 in addition to physical copy as per relevant provisions of the Act.

Summary

Issues:
Petitions for sanction of Scheme of Arrangement involving Demerger and Transfer of Undertaking, Restructure of Share Capital under Companies Act, 1956.

Analysis:
1. The petitioner companies sought approval for a Scheme of Arrangement involving the Demerger and Transfer of the Trading Undertaking from the Demerged Company to the Resulting Company, along with the Restructure of Share Capital under sections 391 to 394 of the Companies Act, 1956. The Demerged Company's activities were segregated into two distinct undertakings, with a focus on the SEZ Undertaking and a proposal to transfer other activities to the Resulting Company for future growth strategies.

2. The Demerged Company also proposed the Restructure of Capital by utilizing the Securities Premium Account to adjust the value of net assets, which was considered an integral part of the Scheme of Arrangement. Meetings with shareholders and creditors were conducted, and approvals were obtained as required by law.

3. The Regional Director raised observations regarding the compliance with Accounting Standard 14, the utilization of Securities Premium Account, disclosure of assets and liabilities, communication with the Income Tax Department, and public interest. The petitioner companies provided clarifications and justifications for each observation, including legal references and past judgments supporting their positions.

4. After considering all facts, submissions, and legal precedents, the court concluded that the Scheme of Arrangement was in the interest of shareholders, creditors, and public interest. The court sanctioned the scheme, granting the prayers in the petitions and directing the necessary actions for compliance, stamp duty adjudication, and filing with relevant authorities.

5. The court also quantified the costs to be paid to the Central Govt. Standing Counsel, directed the lodging of the order and assets schedule, and dispensed with the filing and issuance of drawn-up orders. All concerned authorities were instructed to act promptly on the sanctioned scheme, emphasizing the expeditious authentication and distribution of the order and scheme copies.