Court approves Scheme of Amalgamation, dispensing with shareholder and creditor meetings. Compliance with FEMA and RBI guidelines. The Court approved and sanctioned the Scheme of Amalgamation filed by two companies, dispensing with the need for meetings of Equity Shareholders, Secured ...
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Court approves Scheme of Amalgamation, dispensing with shareholder and creditor meetings. Compliance with FEMA and RBI guidelines.
The Court approved and sanctioned the Scheme of Amalgamation filed by two companies, dispensing with the need for meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors. Compliance with FEMA and RBI guidelines was found satisfactory, and the use of reserves for dividends was permitted based on previous judgments. The Court deemed the Scheme genuine, bonafide, and in the interest of shareholders and creditors, granting the prayers in the Company Petitions. Fees were quantified, and concerned authorities were directed to act on the order within seven days.
Issues: Petitions for sanctioning Scheme of Amalgamation of two companies - Dispensing with meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors - Compliance with FEMA and RBI guidelines - Utilization of reserves for dividend distribution - Official Liquidator's report - Sanctioning of the Scheme.
Analysis: The judgment involves petitions filed by two companies seeking approval for the Scheme of Amalgamation. The Court initially dispensed with the requirement of convening and holding meetings of Equity Shareholders, Secured Creditors, and Unsecured Creditors for both companies due to consent received from all Equity Shareholders. Subsequently, the petitions were filed seeking sanction of the Scheme, and the Court admitted the petitions directing notice issuance to the Regional Director and Official Liquidator. The notice of hearing was published in newspapers as directed.
Regarding compliance with FEMA and RBI guidelines, the Regional Director requested the Petitioner Company to ensure compliance and give an undertaking regarding reserves not being available for dividend distribution. The Petitioner Company responded, stating no Non-Resident Indians or Foreign Body Corporates were shareholders, and compliance with FEMA or RBI was unnecessary. The Court found the Regional Director's observations regarding compliance satisfied.
In terms of utilizing reserves for dividends, the Petitioner relied on previous judgments to argue that deviation from Accounting Standards was permissible. The Court agreed with the Petitioner, stating the Regional Director's observations on this matter were no longer valid. The Official Liquidator's report confirmed that the affairs of one of the companies were not prejudicial, and the company ensured compliance with the observations made.
After considering all facts and the Scheme, the Court found the requirements of relevant sections of the Companies Act, 1956 were met, and the Scheme was genuine, bonafide, and in the interest of shareholders and creditors. Consequently, the Court approved and sanctioned the Scheme, granting the prayers made in the respective Company Petitions.
The judgment allowed the petitions, quantified fees for advocates and the Official Liquidator, and dispensed with the filing and issuance of drawn-up orders. All concerned authorities were directed to act on a copy of the order along with the authenticated Scheme provided by the High Court Registrar within seven days.
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