High Court approves demerger Scheme transferring company assets, deems compliant with laws.

The High Court sanctioned a Scheme of demerger transferring a company's non-foundary undertaking to another entity. Compliance with various laws and guidelines, including the Income Tax Act, FEMA, RBI regulations, and accounting standards, was emphasized. Despite concerns raised by the Regional Director, the Court found the Scheme to be in the company's interest and not prejudicial to the public. The Scheme was declared binding on the petitionerCompany, its members, creditors, and all concerned parties, with specific orders for registration and compliance with the Companies Act. The petition was disposed of with approval of the Scheme and implementation ordered, along with a cost award of Rs. 10,000.

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Issues:
1. Sanction of a Scheme of demerger by the High Court.
2. Compliance with provisions of the Income Tax Act, FEMA, and RBI guidelines.
3. Benefit of Clause 6 of the Scheme for all employees of the transferor company.
4. Disclosure of assets and liabilities to be demerged.
5. Compliance with AS14 for accounting purposes.
6. Approval and binding nature of the Scheme of Demerger.

Analysis:
The petition before the High Court sought sanction for a Scheme of demerger transferring the non-foundary undertaking of a company to another entity. The Court noted that previous orders had dispensed with the need for shareholder and unsecured creditor meetings, as there were no secured creditors. The petition was admitted, and public notices inviting objections were published, but none were received. An affidavit from the Regional Director highlighted the need for compliance with various laws and guidelines, including the Income Tax Act, FEMA, RBI regulations, and accounting standards. The Director also emphasized the need for the benefit of Clause 6 of the Scheme to extend to all employees of the transferor company. The petitioner responded, affirming compliance with the mentioned laws and guidelines, clarifying the benefit provision, and stating the transfer of all assets and liabilities as per the Scheme.

Upon hearing arguments and reviewing the affidavits, the Court found that the concerns raised by the Regional Director did not impede sanctioning the Scheme. The petitioner's affidavit addressed the Director's observations, and no other objections were raised. The Court concluded that the proposed Scheme of Demerger was in the company's interest, not prejudicial to public interest, and therefore sanctioned it. The Court declared the Scheme binding on the petitionerCompany, its members, creditors, and all concerned parties, with effect from the appointed date of April 1, 2016. Specific orders were issued for registration, compliance with provisions of the Companies Act, and directions for any necessary applications related to the Scheme. Additionally, a cost of Rs. 10,000 was awarded. The petition was disposed of accordingly, with the Scheme approved and ordered to be implemented.

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