2022 (8) TMI 372 - Tri - Companies Law

Tribunal approves Scheme enhancing shareholder value, transfers assets to Resulting Company

The Tribunal approved the Scheme of Arrangement between the Demerged Company and the Resulting Company under Sections 230 to 232 of the Companies Act, ... Sanction of Scheme of Arrangement - Section 230 to 232 and other applicable provisions of the Companies Act, 2013(hereinafter 'the Act') read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - HELD THAT:- After analyzing the Scheme in detail, this Tribunal is of the considered view that the scheme as contemplated amongst the petitioner companies seems to be prima facie beneficial to the Company and will not be in any way detrimental to the interest of the shareholders of the Company. In view of absence of any other objections having been placed on record before this Tribunal and since all the requisite statutory compliances having been fulfilled, this Tribunal sanctions the Scheme of Arrangement. The scheme is approved - Application allowed. Issues Involved:1. Approval of the Scheme of Arrangement between the Demerged Company and the Resulting Company.2. Compliance with statutory requirements and directions issued by the Tribunal.3. Observations and objections raised by statutory authorities, including the Regional Director and the Department of Income Tax.4. Valuation Report and Accounting Treatment.5. Final observations and order of the Tribunal.Detailed Analysis:1. Approval of the Scheme of Arrangement:The Tribunal considered the Joint Company Petition filed by the Petitioner Companies for the approval of the Scheme of Arrangement under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013. The Scheme involved MIL Industries Limited (Demerged Company) and MIL Industries & Aerospace Limited (Resulting Company). The Scheme aimed at creating enhanced value for shareholders and creditors, providing a focused strategy in operations, and allowing investors to hold investments in businesses with different characteristics. The Tribunal noted that the Scheme would not adversely affect shareholders, employees, or creditors of both companies.2. Compliance with Statutory Requirements and Directions Issued by the Tribunal:The Demerged Company filed its First Motion Application seeking directions for conducting meetings of Equity Shareholders and Unsecured Creditors, and seeking dispensation of meetings for Secured Creditors. The Tribunal issued directions on 17.11.2021 to convene these meetings on 23.12.2021. The Chairman's Report indicated that the Equity Shareholders and Unsecured Creditors consented to the Scheme. The Tribunal directed the Petitioner Companies to issue notices to statutory/regulatory authorities and make paper publications, which were duly complied with as evidenced by the affidavit of service filed by the Petitioner Companies.3. Observations and Objections Raised by Statutory Authorities:The Regional Director (Southern Region) filed a report stating that clause 6.5 of Part 5 of the Scheme protected the employees of the Demerged Company, who would become permanent employees of the Resulting Company without any break in service. However, the Regional Director raised an objection regarding the Appointed Date being 15.11.2019, which was beyond a year and not in accordance with Section 232(6) of the Companies Act, 2013. The Petitioner Companies revised the Appointed Date to 01.04.2022, addressing this objection. The Department of Income Tax and other statutory authorities did not raise any objections, and the Tribunal presumed no objections in the absence of representation from these authorities.4. Valuation Report and Accounting Treatment:The Tribunal examined the Valuation Report obtained from a Registered Valuer and noted that the Statutory Auditors of the Petitioner Companies certified that the Accounting Treatment in the Scheme complied with the applicable Indian Accounting Standards. The Valuation Report and the Auditor's Certificates were submitted as evidence.5. Final Observations and Order of the Tribunal:The Tribunal concluded that the Scheme was prima facie beneficial to the Company and not detrimental to the shareholders' interests. The Tribunal sanctioned the Scheme of Arrangement and issued several orders, including the transfer of properties, rights, and liabilities of the Demerged Undertaking to the Resulting Company, continuation of pending proceedings by or against the Resulting Company, and the transfer of employees to the Resulting Company without interruption of service. The Tribunal clarified that the order did not grant exemption from payment of stamp duty, taxes, or other charges. The Appointed Date for the Scheme was set as 01.04.2022. The Petitioner Companies were directed to deliver a certified copy of the order to the Registrar of Companies within thirty days for registration, after which the Demerged Undertaking would be deemed transferred. The Company Petition was allowed on these terms.Conclusion:The Tribunal sanctioned the Scheme of Arrangement between the Demerged Company and the Resulting Company, ensuring compliance with statutory requirements and addressing objections raised by the Regional Director. The Scheme was deemed beneficial for the stakeholders and allowed the transfer of assets, liabilities, and employees to the Resulting Company.