2017 (2) TMI 40 - HC - Companies Law

Companies Act Scheme of Arrangement Sanctioned for Merger and Demerger

The Court sanctioned the Composite Scheme of Arrangement under sections 391 and 394 of the Companies Act, 1956. The Scheme involves merging and demerging ... Scheme of arrangement - Held that:- Upon considering the approval accorded by the members and creditors of the Petitioners to the proposed Scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs and the Official Liquidator attached to this High Court, whereby no objections have been raised to the proposed Scheme, there appears to be no impediment to the grant of sanction to the Scheme. Consequently, sanction is hereby granted to the Scheme under section 391 and 394 of the Companies Act, 1956. The Petitioners will however, comply with the statutory requirements in accordance with law. A certified copy of the order, sanctioning the scheme, be filed with the ROC, within thirty (30) days of its receipt. Resultantly, it is hereby directed that the petitioners will comply with all provisions of the scheme and, in particular, those which are referred to hereinabove. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this court to the scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the petitioners. The transferor company shall stand dissolved without being wound up. Issues Involved:1. Jurisdiction and Incorporation Details2. Share Capital and Financial Details3. Pending Proceedings4. Approval of the Scheme by Board of Directors5. Salient Features and Benefits of the Scheme6. Share Exchange Ratio7. Notice and Publication Compliance8. Official Liquidator’s Report9. Regional Director’s Report10. Objections and Compliance11. Sanction of the Scheme12. Costs and ComplianceIssue-wise Detailed Analysis:1. Jurisdiction and Incorporation Details:The registered offices of the Petitioners are situated in the National Capital Territory of Delhi, granting the Court necessary jurisdiction to adjudicate the petition. The details of the incorporation dates for the Petitioners are provided, with ECPL incorporated on 25th April 2008, CMDCL on 4th November 1965, UPPL on 2nd December 2009, and TCPL on 9th August 2012.2. Share Capital and Financial Details:The authorized and paid-up share capital for each company is detailed. ECPL has an authorized share capital of Rs. 25,00,000 and a paid-up share capital of Rs. 16,00,000. CMDCL’s authorized share capital is Rs. 1,00,00,000 with a paid-up share capital of Rs. 8,09,400. UPPL and TCPL both have an authorized and paid-up share capital of Rs. 1,00,000 each.3. Pending Proceedings:It is averred that there are no proceedings pending against the Petitioners under Sections 235 to 251 of the Companies Act, 1956.4. Approval of the Scheme by Board of Directors:The Scheme has been approved by the respective Board of Directors of the Petitioners, with resolutions dated 28.01.2016, 27.01.2016, 29.01.2016, and 29.01.2016 for Petitioner No.1, 2, 3, and 4 respectively.5. Salient Features and Benefits of the Scheme:The Scheme involves ECPL merging with CMDCL, followed by CMDCL demerging its Industrial Undertaking into UPPL and its Investment Undertaking into TCPL. The benefits include focused management, removal of unnecessary layers of shareholding, and attraction of strategic investors and collaborators.6. Share Exchange Ratio:Clause 1.2(c) of Part-B and Clause 1.1 of Part-E of the Scheme provide that CMDCL will issue 100 equity shares of Rs. 100 each to shareholders of ECPL, and both UPPL and TCPL will issue 100 fully paid-up equity shares of Rs. 10 each to the ultimate beneficial shareholders of CMDCL in the same proportion as their shareholding in ECPL.7. Notice and Publication Compliance:Notice was issued by the Court on 19.04.2016, and citations were published on 3rd September 2016 in ‘Business Standard’ and ‘Jansatta’. An affidavit dated 09.09.2016 demonstrated service of the petition on the Official Liquidator, Registrar of Companies, and the Regional Director.8. Official Liquidator’s Report:The Official Liquidator filed a report stating no complaints were received against the proposed Scheme, and the affairs of the Transferor Company do not appear to have been conducted in a manner prejudicial to the interest of its members or public interest.9. Regional Director’s Report:The Regional Director’s report noted a pending Income Tax liability of Rs. 12,331,179 for CMDCL for the A.Y. 2006-07 & 2007-08. The discrepancy in the appointed date was clarified, with the Chartered Accountants stating it was inadvertently typed as 01.04.2015 instead of 01.04.2016.10. Objections and Compliance:No objections were received to the Scheme from any party. An affidavit confirmed no objections were received pursuant to the citations published.11. Sanction of the Scheme:The Court granted sanction to the Scheme under sections 391 and 394 of the Companies Act, 1956, subject to compliance with statutory requirements. The transferor company shall stand dissolved without being wound up.12. Costs and Compliance:The petitioners are directed to deposit a sum of Rs. 50,000 by way of costs with the Official Liquidator, Delhi. The petition is allowed and disposed of in the aforesaid terms.Conclusion:The Court sanctioned the Composite Scheme of Arrangement, subject to compliance with statutory requirements and payment of costs. The transferor company will be dissolved without being wound up, and the Scheme will proceed as detailed in the judgment.