TaxTMI 
TaxTMI 
2010 (3) TMI 682
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....mplementation of turn key solutions both in hardware and software for infocom markets. (b)To manufacture, produce, work, distribute, buy and sell, import and export or otherwise to deal in all kinds of electronic hardware and soft ware for computer systems and allied products. 3. The annual report 2007-08 containing the audited profit and loss account and the balance-sheet of the petitioner-company is at annexure C. 4. The board of directors of the petitioner-company in their meeting held on January 17, 2009, passed a resolution approving the draft scheme of arrangement as per annexure D. Under the draft scheme of arrangement the petitioner-company proposes to create a business restructuring reserve from out of the securities premium account to an extent of 50 per cent, and to use the said reserve for restructuring expenses. The salient features of the draft scheme of arrangement are as follows : (A)The scheme of arrangement is between the petitioner-company and its equity shareholders, wherein the petitioner-company shall set off the restructuring expenses incurred/to be incurred in the process of busi ness restructuring of the petitioner-company, against the business ....
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....e as may be determined by the board and consequently such expenses shall not be charged to the debit of the profit and loss account of the petitioner-company. (vi)After the adjustment is made, in the manner as set out in clause (ii) and clause (iii ) above and at such time as the board of directors of the petitioner-company may decide to freeze the business restructuring reserve account, the residuary balance, if any, lying to the credit of the business restructuring reserve account may be credited to the general reserves of the petitioner-company. (vii)Before any expense is charged to the business restructuring reserve account, the treatment thereof shall have first been approved by the audit committee of the board of the petitioner-company based on the certificate to be obtained in that behalf by the petitioner-company from an independent firm of chartered accountants. (viii)To the extent the amount is transferred to the business restructuring reserve account as mentioned in (i) above, there shall be reduction of the securities premium account which shall be effected as an integral part of the scheme itself. (ix)Notwithstanding the charging of the restructuring expens....
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....cheme of arrangement. It is submitted that in terms of the above undertaking the defined term 'restructuring expenses' at clause 1.5 of the scheme of arrangement shall stand amended and be read as follows : 1.5.'Restructuring expenses' means the following expenses incurred/to be incurred from the appointed date and certified by an independent firm of chartered accountants appointed by the board for this purpose : 1.5.1.Mark to market adjustments on foreign exchange forward contracts and on any other derivative instruments ; 1.5.2.Impairment of investments and consequentially any impairment on goodwill, if any, arising on consolidation or otherwise ; 1.5.3.Tangible and intangible assets, the values of which have been eroded or impaired ; 1.5.4.All extraordinary costs (that cannot be capitalised) associated with the company's future organic projects in India ; 1.5.5.Costs associated with expansion plans for international acquisitions ; 1.5.6.Costs from existing projects under company's current portfolio allocation, including rationalisation of manpower, costs, facilities costs ; 1.5.7.Such other expenses of the nature covered in the above clauses as may be ide....
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....f meetings of creditors or class of creditors or members or class of members who are concerned with such a scheme and once the majority in number representing three-fourths in value of creditors or class of creditors or members or class of members, as the case may be, present or voting either in person or by proxy at such a meeting accord their approval to any compromise or arrangement thus put to vote, and once such compromise is sanctioned by the court, it would be binding on all creditors or class of creditors or members or class of members, as the case may be, which would also necessarily mean that even to dissenting creditors or class of creditors or dissenting members or class of members such sanctioned scheme would remain binding. Before sanctioning such a scheme even though approved by a majority of the concerned creditors or members the court has to be satisfied that the company or any other person moving such an application for sanction under sub-section (2) of section 391 has disclosed all the relevant matters mentioned in the proviso to sub-section (2) of that section. So far as the meetings of the creditors or members, or their respective classes for whom the scheme is....
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....g minority of creditors or members, as the case may be, even though they have not consented to such a scheme and to that extent absence of their consent will have no effect on the scheme. It can be postulated that even in the case of such a scheme of compromise and arrangement put up for sanction of a company court it will have to be seen whether the proposed scheme is lawful and just and fair to the whole class of creditors or members including the dissenting minority to whom it is offered for approval and which has been approved by such class of persons with requisite majority vote. However, the further question remains whether the court has jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved the scheme as required by section 391(2). On this aspect, the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usef....
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....n this objection, as has been held in the case of Hindalco Industries Ltd., In re [2009] 151 Comp Cas 446 (Bom.), the possibility of violation of accounting standard, per se, cannot be the basis to straightaway disapprove the scheme. Inasmuch as, observance of accounting standard is a norm, but violation thereof is not completely impermissible. It is regulated by the provisions of section 211 of the Act. The companies, through counsel assure to abide by the said regime to be followed as per section 211 of the Act even in the present case. In other words, so long as necessary disclosures are made, the company cannot be faulted even if there were to be deviation from the accounting standards, more so, to be made a ground to disapprove the scheme." 13. Further the Bombay High Court in Hindalco Industries Ltd., In re [2009] 151 Comp Cas 446, held as under (page 463) : "A priori, it is not as if deviation of the Accounting Standards per se can be a ground to reject the scheme propounded by the petitioner-company. In the present case, it is noticed that the scheme is the product of conscious act of the shareholders. It is their commercial wisdom or business decision. In their wisdo....