Court approves demerger under Companies Act, 1956, addressing compliance, tax issues, and asset transfer

The court sanctioned the Scheme of Arrangement under the Companies Act, 1956, allowing the demerger of the "KPO Business" from one company to another. The court approved compliance with Foreign Direct Investment Policy, confirmed no pending prosecution proceedings, addressed disputed Income Tax dues, and ensured transfer of statutory benefits and liabilities. Despite the absence of a Valuation Report, the court approved the scheme, directing the transfer of assets and liabilities to the resulting company. The scheme was deemed binding on both companies, their shareholders, and creditors, with a formal order of sanction to be published.

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Issues Involved:
1. Sanction of the Scheme of Arrangement under Sections 391 & 394 read with Sections 100 to 104 of the Companies Act, 1956.
2. Compliance with Foreign Direct Investment Policy.
3. Pending prosecution proceedings against the petitioner companies.
4. Disputed Income Tax dues.
5. Applicability of AS-14 on the demerger.
6. Compliance with Companies Act, 2013 for the name change of the resulting company.
7. Absence of Valuation Report and specification of assets and liabilities.
8. Transfer of statutory benefits and liabilities.

Issue-wise Detailed Analysis:

1. Sanction of the Scheme of Arrangement:
The petition sought sanction of the Scheme of Arrangement whereby the "KPO Business" of Quatrro Global Services Private Limited (Petitioner Company No.1) would demerge into Scope e-Knowledge Solutions Private Limited (Petitioner Company No.II). The Scheme was approved by the Board of Directors of both companies on 01.12.2015 and the necessary resolutions were annexed with the petition.

2. Compliance with Foreign Direct Investment Policy:
The Regional Director observed that foreign shareholders held 77.009% stake in QGS India, which would continue post-demerger in Scope Solution India. The petitioner companies confirmed that this investment is under the automatic route as per the Foreign Direct Investment Policy of the Reserve Bank of India.

3. Pending Prosecution Proceedings:
The petitioner companies and their directors confirmed that no prosecution proceedings were instituted or pending against them under any laws such as the Companies Act, FEMA, IPC, SEBI Act, RBI Act, etc.

4. Disputed Income Tax Dues:
The petitioner companies furnished details of Income Tax dues that were not deposited due to disputes with the Tax authorities.

5. Applicability of AS-14 on the Demerger:
The Regional Director noted that AS-14 was not applicable to the demerger as per the Scheme. The petitioner companies provided a certificate from their statutory auditors stating that the accounting treatment proposed was in conformity with Generally Accepted Accounting Principles.

6. Compliance with Companies Act, 2013 for Name Change:
The Scheme stated that the name of the resulting company would automatically change upon sanction. The Regional Director recommended compliance with the relevant provisions of the Companies Act, 2013, and guidelines issued by the Ministry.

7. Absence of Valuation Report and Specification of Assets and Liabilities:
The Regional Director and Registrar of Companies observed the absence of a Valuation Report and clear specification of assets and liabilities to be transferred. The petitioner companies submitted a fairness/valuation report and clarified that the entire share capital of Scope Solution India was indirectly held by QGS India. They provided an indicative list of assets and liabilities related to the QGS KPO Business Undertaking being transferred to Scope Solutions India.

8. Transfer of Statutory Benefits and Liabilities:
The Scheme provided for the transfer of all statutory benefits and liabilities related to the QGS KPO Business from QGS India to Scope Solutions India. The petitioner companies undertook to transfer all such statutory benefits and discharge all statutory liabilities as and when they become due.

Conclusion:
The court, after considering all relevant facts, procedural requirements, and the report of the Regional Director, sanctioned the Scheme of Arrangement. The assets and liabilities of the "KPO Business" of Quatrro Global Services Private Limited would stand vested in Scope e-Knowledge Solutions Private Limited. The Scheme would be binding on both companies, their respective shareholders, creditors, and all concerned. A formal order of sanction was directed to be drawn and published in the specified newspapers and the Official Gazette of the Government of Haryana. The case was disposed of accordingly.

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