Scheme of arrangement for demerger and capital reduction sanctioned after shareholder, creditor and regulatory compliance review.

A scheme of arrangement for demerger, coupled with reduction of preference share capital, was sanctioned after the companies, shareholders and unsecured creditors approved it, and the Regional Director raised no objection on employee protection or regulatory compliance. The Court accepted that the statutory requirements under the Companies Act, 1956 were satisfied, found no detriment to employees, creditors, shareholders or the public, and noted that no proceedings were pending under sections 235 to 251. The scheme and the related capital reduction were therefore approved.

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Issues: Whether the proposed scheme of arrangement for demerger, including reduction of preference share capital, deserved sanction under the Companies Act, 1956.

Analysis: The petitions disclosed that the transferor and transferee companies had approved the scheme, the shareholders and unsecured creditors had consented, and the Regional Director raised no objection on employee protection or regulatory compliance. The Court found that the scheme was not detrimental to the interests of employees, creditors, shareholders, or the public, and that the statutory requirements for sanction of the arrangement had been complied with. No proceedings were pending under sections 235 to 251 of the Companies Act, 1956.

Conclusion: The scheme of arrangement for demerger and the related reduction of preference share capital were sanctioned.

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