2013 (6) TMI 8 - HC - Companies Law

Court Sanctions Amalgamation Scheme under Companies Act

Astorn Research Ltd., In re

Astorn Research Ltd., In re - TMI Issues Involved:1. Sanction of the scheme of amalgamation under Sections 391 to 394 of the Companies Act, 1956.2. Procedural compliance and meetings of shareholders and creditors.3. Observations and objections by the Regional Director.4. Objections by Unimark Remedies Limited.5. Objections by Shri Mani Swaminathan Iyer.6. Compliance with accounting standards (AS-14).7. Public interest and fairness of the scheme.Summary of Judgment:I. Facts of Procedure Followed:The petitions were filed under Sections 391 to 394 of the Companies Act, 1956, seeking sanction of the scheme of amalgamation between several transferor companies and the transferee company, IPL. The court ordered dispensation of meetings for equity shareholders and secured creditors based on written consent and directed meetings for unsecured creditors. The meetings were held, and the scheme was approved by a significant majority of unsecured creditors.II. Details of the Present Petitions:The petitions were admitted, and notices were issued to the Central Government and the Official Liquidator. The notices were published in newspapers, and affidavits of publication were filed.III. Response of the Central Government, Through Regional Director:The Regional Director raised observations regarding compliance with AS-14, a pending winding-up petition against one transferor company, and termination of the ESOP scheme. The transferee company responded, agreeing to comply with AS-14 and addressing other observations.IV. Response of the Official Liquidator:The Official Liquidator, based on a Chartered Accountant's report, stated that the transferor companies were not sick and their affairs were not conducted prejudicially. The companies were directed to preserve their records.V. Objections Filed by Unimark Remedies Limited:Unimark Remedies Limited initially objected to the scheme, alleging improper conduct in the meeting of unsecured creditors. The objections were later withdrawn.VI. Objections Filed by Shri Mani Swaminathan Iyer:Shri Iyer objected to the scheme, claiming it was against public interest and detrimental to employees. He alleged misuse of corporate shelter and personal enrichment by promoters. IBPL responded, denying the allegations and stating that Iyer was neither a shareholder nor a creditor.VII. Observations of Regional Director:The court noted that Section 211(3B) requires disclosure if accounting practices vary from AS-14. The court referred to previous judgments, concluding that the transferee company should disclose any deviations in its financial statements. The first observation by the Regional Director did not survive, and the other observations were addressed.VIII. Objections Raised by Shri Iyer:The objections were divided into three limbs: as a shareholder, as a creditor, and on public interest grounds. The court found that Iyer was neither a shareholder nor a creditor and that his objections were baseless. The scheme was approved by the majority and found to be fair and reasonable.IX. Conclusions of the Objections:The court concluded that Iyer had no locus standi to object. The scheme was found to be in the interest of shareholders, creditors, and the public. The objections were dismissed, and the scheme was sanctioned.Order:The petitions were allowed, and the scheme of arrangement was sanctioned. The companies were directed to pay fees to the Senior Central Government Counsel and the Official Liquidator.Key Points:- Compliance with Sections 391 to 394 of the Companies Act, 1956.- Approval of the scheme by the majority of creditors and shareholders.- Observations by the Regional Director and responses by the transferee company.- Dismissal of objections by Unimark Remedies Limited and Shri Mani Swaminathan Iyer.- Sanction of the scheme by the court, finding it fair, reasonable, and in public interest.