2016 (11) TMI 28 - HC - Companies Law

Scheme of arrangement between Composite Scheme of Arrangement in the nature of Amalgamation - it does not appear to be any impediment to the grant of sanction to the Scheme of Arrangement, in as much as from the material on record and on perusal of the Scheme, the scheme appears to be fair and reasonable and is not violative of any of public policy. The arrangement under the proposed scheme appears to be in the interest of the companies and its members and creditors and, therefore deserves to be sanctioned.

Summary

Issues:
Sanction of scheme of arrangement between two companies under Sections 391 to 394 of the Companies Act, 1956 and Companies Act, 2013.

Analysis:
The petition was filed for the sanction of a composite scheme of arrangement and amalgamation between two companies. The purpose of the scheme was to achieve consolidated management focus over similar business operations conducted by both companies. It was believed that the arrangement would create enhanced value for the shareholders and stakeholders of both entities. The scheme aimed at facilitating integration and vertical extension of business activities. The court heard and disposed of two related petitions concerning the common scheme in a single judgment.

Regarding the Transferor Company, it was noted that the meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors were dispensed with as per the court order, as there were no objections or compromise arrangements affecting these parties. Similarly, for the Transferee Company, meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors were dispensed with based on court directives, ensuring no adverse impact on their rights and interests due to the scheme of arrangement.

The court admitted the Company Petitions and public notices were duly advertised in newspapers. No objections were raised against the petitions post-publication. The Central Government was served notice through the Regional Director, who made observations regarding compliance with Accounting Standards, FEMA, RBI guidelines, and disclosure of contingent liabilities. The companies undertook to comply with these requirements in their affidavits.

The net worth and contingent liabilities of both companies were presented to show their financial positions. The Regional Director confirmed no complaints against the companies and opined that the proposed scheme was not prejudicial to shareholders or the public. The Official Liquidator also stated that the companies' affairs were not conducted in a prejudicial manner, suggesting dissolution without winding up.

After addressing all observations and opinions, the court found no impediment to granting sanction to the scheme of arrangement. It was deemed fair, reasonable, not violative of public policy, and in the interest of the companies, members, and creditors. The scheme was sanctioned, binding all relevant parties and authorities. Various directions were issued regarding compliance with Companies Act provisions, preservation of documents, payment of costs, and filing of necessary documents with authorities.

In conclusion, the court approved the scheme of arrangement between the companies, ensuring compliance with legal requirements and protecting the interests of stakeholders.