Composite scheme of arrangement: demerger need not require separate proceedings when the scheme clearly integrates both steps.

A composite scheme of arrangement combining amalgamation and demerger was read as an integrated document, with the amalgamation treated as the first step and the demerger of the identified undertaking as the immediate consequential step. On a conjoint reading of the scheme clauses, the demerged company and demerged undertaking were sufficiently specified, so the forum below was not justified in treating the demerger as uncertain or requiring a separate application. The decision reaffirms that scheme sanction is a supervisory exercise and that the adjudicating forum should not sever a commercially approved structure or substitute its own commercial assessment for that of the board, shareholders and creditors.

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Issues: Whether, in a composite scheme of arrangement comprising amalgamation and demerger, the demerger could be treated as requiring a separate application when the scheme itself defined the amalgamated company, demerged company, demerged undertaking, and resulting company with specificity.

Analysis: The scheme was read as a whole, and its clauses showed that the amalgamation was the first step and the demerger of the demarcated demerged undertaking was the immediate consequential second step. On a conjoint reading of the relevant clauses, the Tribunal's view that the demerged company or undertaking was unspecified was held to be contrary to the record. The order under challenge was found to have split a composite scheme that had already been approved by the board, shareholders and creditors in their commercial wisdom. The decision also applied the principle that the court's role in scheme sanction is supervisory and not to alter the commercial structure accepted by the stakeholders.

Conclusion: The direction requiring a separate application for demerger was set aside, and the demerger was held to form part of the sanctioned composite scheme without requiring independent proceedings.

Ratio Decidendi: Where a composite scheme of arrangement clearly identifies the amalgamated company, demerged company and demerged undertaking and treats demerger as an immediate consequential step after amalgamation, the adjudicating forum cannot sever the scheme by insisting on a separate application for demerger merely on the premise of uncertainty or by substituting its own commercial view for that of the approved stakeholders.

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