2008 (9) TMI 568 - HC - Companies Law

Court approves demerger scheme merging IBN 7 with Global Broadcast News Limited. Shareholder and creditor meetings held.

The Court approved the demerger scheme, involving the merger of IBN 7 with Global Broadcast News Limited. Meetings were held for equity shareholders and ... Scheme of Demerger - Compromise and arrangement - Held that:- It is sufficient to state here that scheme does not violate any of the provisions of law and is not in violation of the public interest or the interest of the shareholders or creditors of the company. With regard to Accounting Standard-14 a statement was given in Delhi High Court that since the Transferor- Company will merge into Transferee-Company, the Accounting Standard-14 will be followed. In the present case there is no amalgamation but demerger of the business of the petitioner company with the Transferee-Company. No objection has been filed to the scheme of demerger. The company petition is allowed. The scheme so far as it provides for demerger of the demerged company within the jurisdiction of this Court, is sanctioned with 1-10-2007 as appointed date. The effective date will be the date on which the order of this Court will be filed in the office of the Registrar of the Companies. The office will draw formal order within four weeks, to be filed with the Registrar of Companies within two weeks, thereafter. List of assets and liabilities of the demerged company will be made part of the scheme. Issues Involved:Approval of Scheme of DemergerDetailed Analysis:Issue 1: Approval of Scheme of DemergerThe confirmation petition sought approval for the 'Scheme of Demerger' of IBN 7 to be merged with Global Broadcast News Limited. The Court called for meetings of equity shareholders, unsecured creditors, and secured creditors of the demerged company. The scheme involved the demerged company, the transferor company, and the transferee company, with their registered offices in different locations. The Court directed the meetings to be held, rejecting the plea to dispense with the meetings of equity shareholders and unsecured creditors. The notice for the meetings was sent out, and the meetings were conducted with the required quorum. The resolutions approving the scheme were passed by the equity shareholders and creditors, with the affidavits of the Chairmen confirming the same.Issue 2: Compliance and Comments on the SchemeThe Regional Director, Ministry of Corporate Affairs, raised concerns regarding the scheme. The Director highlighted the absence of details of individual assets and liabilities in the scheme and the need for compliance with Accounting Standard-14. The petitioner's counsel provided details of the assets to be transferred and clarified that Accounting Standard-14 did not apply as there was no amalgamation involved. The Delhi High Court had already confirmed the same scheme of arrangement, and the scheme aimed to consolidate business operations for enhanced commercial potential, approved by shareholders and creditors.Issue 3: Sanctioning of the SchemeThe scheme was designed to consolidate business operations under a single entity, with provisions for issuing and allotting equity shares to members of the demerged and transferor companies. The scheme had been approved by shareholders and creditors of all relevant companies and had already been sanctioned by the Delhi High Court. The Court found the scheme compliant with legal provisions, not violating public interest or the interests of shareholders or creditors. No objections were filed against the scheme, leading to the Court allowing the company petition and sanctioning the demerger scheme with a specified appointed date and effective date upon filing the order with the Registrar of Companies.This detailed analysis covers the key issues involved in the legal judgment regarding the approval and sanctioning of the demerger scheme, addressing compliance concerns and the procedural aspects of conducting meetings and obtaining approvals from stakeholders.