Scheme of arrangement and demerger sanctioned after stakeholder approval and compliance with capital restructuring requirements.

Shareholders and creditors unanimously approved the modified scheme of arrangement and demerger after notice and publication, and the statutory authorities raised no surviving objection; the scheme was therefore fit for sanction. Objections relating to reduction of paid-up share capital and insufficiency of authorised capital were also complied with: the capital reduction issue was addressed through a separate application allowed under the applicable company rules, and the enhanced authorised capital of the transferee companies was reported under section 97 of the Companies Act, 1956. With these compliances on record, no procedural or statutory impediment remained, and the modified scheme was sanctioned.

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Issues: (i) Whether the modified scheme of arrangement and demerger deserved sanction on the basis of the approvals obtained from shareholders and creditors and the reports of the statutory authorities. (ii) Whether the objections regarding reduction of share capital and enhancement of authorised capital were duly complied with so as to remove any legal impediment to sanction of the scheme.

Issue (i): Whether the modified scheme of arrangement and demerger deserved sanction on the basis of the approvals obtained from shareholders and creditors and the reports of the statutory authorities.

Analysis: The shareholders and creditors of the transferor-company approved the modified scheme unanimously, after notice and publication as directed by the Court. The Central Government raised no objection, and the Official Liquidator ultimately reported that the proposed demerger met the necessary requirements and that there was no objection to sanction. No adverse material remained against approval of the scheme.

Conclusion: The modified scheme of arrangement and demerger was fit to be sanctioned.

Issue (ii): Whether the objections regarding reduction of share capital and enhancement of authorised capital were duly complied with so as to remove any legal impediment to sanction of the scheme.

Analysis: The Official Liquidator's objection as to reduction of paid-up capital was met by a separate application under the relevant company rules, which was allowed. The objection regarding insufficiency of authorised capital in the transferee companies was also complied with by reporting the increase of authorised capital under section 97 of the Companies Act, 1956, and that compliance was taken on record. With these requirements satisfied, no procedural or statutory bar survived.

Conclusion: The objections stood complied with and did not prevent sanction of the scheme.

Final Conclusion: The petition was allowed and the modified scheme of arrangement and demerger was sanctioned, with the requisite corporate compliances directed to be completed by filing the certified copy of the order.

Ratio Decidendi: A scheme of arrangement or demerger may be sanctioned where the requisite stakeholder approvals are obtained and statutory objections concerning share capital and authorised capital are lawfully complied with.

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