2011 (4) TMI 1210 - HC - Companies Law

Court approves scheme separating steam turbine business unit, merging it with new company

Triveni Engg. & Industries Ltd., In re

The court rejected objections raised by M/s. A. K. Builders and Suppliers and sanctioned the scheme of arrangement under sections 391/394 of the Companies ... Whether the statutory requirements necessary for the sanction of the scheme have been completed, the wishes of the shareholders/creditors have been ascertained and the scheme has been approved by them by majority in duly convened meetings? Held that:- The petitioners have brought on record the latest financial position of both companies, the latest auditor's report regarding the accounts of both companies and have stated that there is no investigation pending against the companies. There is nothing on record which would suggest that the scheme sought to be sanctioned is otherwise in any way unfair or unreasonable which may amount to defraud either the State exchequer or the members/creditors. The objections are meritless and stand rejected. Thus the scheme of arrangement (annexure 1) to the petition deserves to be sanctioned and is hereby sanctioned. Issues Involved:1. Sanction of the scheme of arrangement under sections 391/394 of the Companies Act, 1956.2. Objections raised by M/s. A. K. Builders and Suppliers.3. Compliance with statutory requirements and procedural aspects.Detailed Analysis:1. Sanction of the Scheme of Arrangement:The petition was jointly moved by the demerged company and the resulting company under sections 391/394 of the Companies Act, 1956, seeking sanction of a scheme of arrangement. The scheme provided for the separation of the steam turbine business unit from the demerged company and its merger with the resulting company. The scheme stipulated that all assets and liabilities of the steam turbine unit would be transferred to the resulting company from the appointed date. The board of directors of both companies approved the scheme.2. Objections Raised by M/s. A. K. Builders and Suppliers:M/s. A. K. Builders and Suppliers opposed the petition, raising several objections:- The objector company claimed that it owed approximately six crores to the demerged company and feared that its claim might be defeated if the scheme was implemented.- The objector argued that the caveat lodged was not reported by the court office, leading to an ex parte order for publication of notices.- The summons issued were not in accordance with prescribed Form No. 33.- The publication of the notice in newspapers from Meerut instead of Saharanpur was contested.- The objector claimed that the scheme was not approved by the majority of shareholders, secured, and unsecured creditors, asserting that only 32% approved it.3. Compliance with Statutory Requirements and Procedural Aspects:The court addressed the objections and compliance with statutory requirements as follows:- The court noted that the objector's fear of its claim being defeated was unfounded as the demerged company would continue to exist with sufficient assets to satisfy its dues.- The court found that the scheme was approved by the majority of shareholders, secured, and unsecured creditors present and voting, as required by section 391(2) of the Act. The reports from the chairmen of the meetings confirmed unanimous approval by those present and voting.- The publication of notices in widely circulated newspapers from Delhi and Meerut was deemed sufficient, and there was no requirement for publication in local newspapers of the district concerned.- The court held that the procedural aspect of issuing summons in Form No. 33 was irrelevant at the stage of sanctioning the scheme, especially since the meetings had already been held.- The court dismissed the objection regarding the caveat not being reported, stating that no prejudice was caused to the objector, as it was given an opportunity to file objections and be heard.The court concluded that the scheme of arrangement was fair, reasonable, and not intended to defraud shareholders or creditors. The petitioners complied with all statutory requirements, including disclosing the latest financial position and auditor's reports, and confirming no pending investigations against the companies.Conclusion:The court rejected the objections raised by M/s. A. K. Builders and Suppliers and sanctioned the scheme of arrangement. The scheme was deemed to come into effect from the date of filing a certified copy of the order with the Registrar. The petition was allowed, and Company Application No. 15 of 2010 was disposed of.