2000 (11) TMI 1139 - HC - Companies Law

Approval of Scheme of Arrangement between Companies by High Court

The High Court of Allahabad approved the Scheme of Arrangement between a transferor-company and a transferee-company. The court declared the Scheme ... Scheme of arrangement - sanction of scheme - transfer of assets and liabilities - vesting under section 394(2) of the Companies Act, 1956 - dissolution without winding up - continuance of proceedings - condition of approval by another High CourtScheme of arrangement - sanction of scheme - Sanction of the proposed Scheme of Arrangement between the transferor-company and the transferee-company. - HELD THAT: - The Court considered the petition, the order convening a shareholders' meeting, the chairman's report showing unanimous approval by members present and voting, publication of notices, the official liquidator's report that the transferor's affairs were not conducted prejudicially to members or public interest, and the regional director's affidavit recording no objection by the Central Government. No person opposed the petition. In view of these materials and the statutory framework for sanctioning arrangements, the Court concluded that the Scheme annexed to the petition should be sanctioned and declared binding on the members and the transferor-company.The Scheme of arrangement annexed to the petition is sanctioned and declared binding on all members of the transferor-company and on the transferor-company itself.Transfer of assets and liabilities - vesting under section 394(2) of the Companies Act, 1956 - Effect of the sanctioned Scheme on transfer and vesting of property, rights, powers, liabilities and duties of the transferor-company in the transferee-company. - HELD THAT: - The Court ordered that, as provided in the sanctioned Scheme, all property, rights and powers of the transferor-company shall be transferred to and vest in the transferee-company, and all liabilities and duties shall be transferred to and become the liabilities and duties of the transferee-company, pursuant to the operation envisaged under section 394(2) of the Companies Act, 1956. The vesting is subject to existing charges that do not affect such property.All assets, rights and powers of the transferor-company shall vest in the transferee-company and all liabilities and duties shall become those of the transferee-company.Continuance of proceedings - Treatment of pending proceedings between or against the transferor-company after sanction of the Scheme. - HELD THAT: - The Court directed that all proceedings then pending by or against the transferor-company shall be continued by or against the transferee-company, thereby ensuring continuity of litigation and enforcement of rights and obligations following the sanction and vesting.Pending proceedings by or against the transferor-company shall continue by or against the transferee-company.Dissolution without winding up - Dissolution of the transferor-company without a formal winding up upon registration of the sanctioned order with the Registrar of Companies. - HELD THAT: - The Court ordered that upon delivery of a certified copy of the sanctioned order to the Registrar of Companies within 30 days, the transferor-company shall stand dissolved without winding up, in accordance with the terms of the sanctioned Scheme and consequent statutory procedure. The order also preserved liberty for interested persons to apply for further directions.On filing a certified copy of this order with the Registrar of Companies within the specified period, the transferor-company shall stand dissolved without winding up.Condition of approval by another High Court - Condition attaching to the effectiveness of the sanction insofar as it relates to the transferee-company. - HELD THAT: - The Court made the sanction subject to the approval of the same Scheme by the Hon'ble Calcutta High Court in respect of the transferee-company, thereby conditioning full effectiveness of the arrangement on the counterpart sanction required for the transferee-company in its jurisdiction.The order sanctioning the Scheme is made subject to the approval of the Scheme by the Hon'ble Calcutta High Court in the matter of the transferee-company.Final Conclusion: The High Court sanctioned the Scheme of Arrangement and declared it binding; directed vesting of assets and transfer of liabilities to the transferee-company under section 394(2) of the Companies Act, 1956; provided for continuation of pending proceedings by or against the transferee-company; ordered dissolution of the transferor-company upon filing the certified copy with the Registrar of Companies; and made the sanction subject to the Calcutta High Court's approval in respect of the transferee-company. Issues:Approval of Scheme of Arrangement between transferor-company and transferee-company.Analysis:The High Court of Allahabad, in this judgment delivered by Justice Sushil Harkauli, considered the petition for the approval of a Scheme of Arrangement between the transferor-company and the transferee-company. The court reviewed various documents, including the order for convening a meeting of equity shareholders, the reports of the Chairman of the meeting, and the official liquidator's report stating that the affairs of the transferor-company were not conducted prejudicially. Additionally, the regional director of the Department of Company Affairs confirmed no objection to the proposed Scheme. Notably, the Scheme had been unanimously approved by the members present and voting at the meeting.The court sanctioned the Scheme of arrangement, declaring it binding on all members of the petitioner-company and the transferee-company. The court ordered the transfer of property, rights, powers, liabilities, and duties from the transferor-company to the transferee-company without the need for further action. It directed that all proceedings pending by or against the transferor-company be continued by or against the transferee-company. Moreover, the transferee-company was instructed to allot shares to the entitled members of the transferor-company as per the Scheme. The transferor-company was given 30 days to deliver a certified copy of the order to the Registrar of Companies for registration, after which it would stand dissolved without winding up.The court emphasized that any interested person could apply for necessary directions in the matter. The order was made subject to the approval of the Scheme by the Hon'ble Calcutta High Court concerning the transferee-company. The court directed the office to prepare a formal order with necessary modifications, including the schedule of properties, and issue certified copies to the petitioner-company within 45 days. This comprehensive judgment addressed the legal aspects of the Scheme of Arrangement, ensuring a smooth transfer of assets and liabilities between the involved companies in compliance with the Companies Act, 1956.