Scheme of Arrangement and Amalgamation approved for company consolidation

The Court sanctioned the Scheme of Arrangement and Amalgamation, involving the consolidation of five Transferor Companies with the Transferee Company, Deep Industries Limited. The Scheme aimed to streamline the holding structure efficiently. The Court found the explanations and compliance by the petitioner companies satisfactory, in the interest of shareholders, creditors, and public interest. Costs were quantified, and directions were provided for filing and lodging the order with the relevant authorities. The petitions were disposed of accordingly.

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Issues Involved:
1. Sanction of the Scheme of Arrangement and Amalgamation.
2. Compliance with SEBI Circulars and approvals.
3. Restructure of share capital.
4. Meetings and approvals from shareholders and creditors.
5. Preservation of books and records.
6. Observations by the Regional Director, Ministry of Corporate Affairs.
7. Compliance with FEMA and RBI Guidelines.
8. Valuation Report and share exchange ratio.
9. Treatment of Preference Shareholders.
10. Capital Reserve and Securities Premium Reserve.
11. Promoters holding in the Post Scheme scenario.
12. Requisite licenses and approvals for business transfer.
13. Compliance with Income Tax Act and rules.
14. No complaints or objections from Registrar of Companies.

Detailed Analysis:

1. Sanction of the Scheme of Arrangement and Amalgamation:
The petitions were filed for the sanction of a Scheme of Arrangement, in the nature of Amalgamation of five Transferor Companies with the Transferee Company, Deep Industries Limited, under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956. The Scheme aimed to streamline the current holding structure and make it more efficient.

2. Compliance with SEBI Circulars and approvals:
Deep Industries Limited, being a listed public limited company, sought requisite approvals from SEBI through the Stock Exchanges. Observation letters from BSE and NSE were placed on record. The Transferee Company complied with the applicable SEBI Circulars, obtaining approvals from shareholders through e-voting and postal ballots.

3. Restructure of share capital:
Clause 11 of the Scheme proposed a restructure of share capital involving the reduction of share capital by canceling shares held by the Transferor Companies. This reduction was consequential and integral to the Scheme, not involving diminution of liability or payment to shareholders. The approval granted by the Equity Shareholders was treated as a Special Resolution under Section 100 of the Companies Act, 1956.

4. Meetings and approvals from shareholders and creditors:
Meetings of Equity Shareholders and Secured Creditors were convened and held on 20th January 2016, where the Scheme was approved unanimously. The Transferee Company also obtained approval from Public Shareholders by the requisite majority. The results were confirmed by the affidavit dated 1st February 2016.

5. Preservation of books and records:
The Official Liquidator requested the Transferee Company to preserve the books of accounts and records of the Transferor Companies for 8 years from the date of sanctioning the Scheme. The petitioner companies were directed to comply with this request and not dispose of the records without prior permission from the Central Government.

6. Observations by the Regional Director, Ministry of Corporate Affairs:
The Regional Director made several observations, which were addressed by the petitioner companies through a Common Additional Affidavit. The Court found the explanations satisfactory and did not issue further directions.

7. Compliance with FEMA and RBI Guidelines:
The Transferee Company confirmed that no prior approval was required from FEMA and RBI authorities, as no shares were being issued to FIIs/NRIs under the Scheme. The company undertook to ensure compliance with applicable guidelines.

8. Valuation Report and share exchange ratio:
The Regional Director noted the absence of working sheets for the share exchange ratio. The petitioner companies clarified that SEBI and Stock Exchanges had reviewed the Valuation Report without objections. The shareholders approved the Scheme, and no further documents were deemed necessary.

9. Treatment of Preference Shareholders:
The Scheme did not separately disclose the exchange ratio for preference shareholders. The petitioner companies explained that equity shares would be issued collectively to all shareholders, including preference shareholders, maintaining the same proportion of shares held by the Transferor Companies.

10. Capital Reserve and Securities Premium Reserve:
The Regional Director sought reasons for substantial amounts in Capital Reserve and Securities Premium Reserve. The petitioner companies stated that this review was beyond the Regional Director's purview and that no further directions were necessary.

11. Promoters holding in the Post Scheme scenario:
Details of promoters holding post-Scheme were disclosed to SEBI, Stock Exchanges, and shareholders. The Scheme stated that there would be no increase in total promoter holding in Deep Industries Limited.

12. Requisite licenses and approvals for business transfer:
The Transferee Company confirmed that requisite permissions and licenses for oil and gas exploration were obtained. The company would transfer or obtain fresh licenses as required upon sanction of the Scheme.

13. Compliance with Income Tax Act and rules:
The Income Tax Department raised no objections for two companies, while pending demands for the Transferee Company were acknowledged. The petitioner companies agreed to comply with applicable provisions of the Income Tax Act.

14. No complaints or objections from Registrar of Companies:
The Regional Director confirmed no complaints were received against the petitioner companies, and there were no objections to the Scheme.

Conclusion:
The Court, satisfied with the explanations and compliance by the petitioner companies, sanctioned the Scheme of Arrangement, finding it in the interest of shareholders, creditors, and public interest. Costs were quantified, and directions were given for filing and lodging the order with the concerned authorities. The petitions were disposed of accordingly.

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