2012 (3) TMI 593 - HC - Companies Law

Summary

Issues Involved:
1. Sanction of the scheme of arrangement u/s 391 to 394 of the Companies Act, 1956.
2. Compliance with procedural requirements for reduction of share capital and reserves.
3. Protection of interests of shareholders and creditors.
4. Application of the Duomatic Principle.

Summary:

1. Sanction of the Scheme of Arrangement:
Company Petition No. 90 of 2012 was filed by the demerged company and Company Petition No. 91 of 2012 by the resulting company seeking the court's sanction u/s 391 to 394 of the Companies Act, 1956 for a scheme of arrangement. The scheme proposed the transfer of the vaccines and wind energy divisions from the demerged company to the resulting company. The demerged company was incorporated on 01.02.1988 and had undergone several name changes, while the resulting company was incorporated on 11.03.2010.

2. Compliance with Procedural Requirements:
The court directed meetings of shareholders and creditors to consider the scheme. The demerged company's shareholders unanimously approved the scheme in a meeting convened on 02.06.2012. For the resulting company, the court dispensed with the meeting of shareholders as all ten shareholders consented to the scheme. The demerged company's sole secured creditor, the State Bank of Hyderabad, conveyed its 'no objection' to the scheme. Meetings of unsecured creditors were also held, and the requisite majority approved the scheme. The court noted that the Articles of Association of both companies authorized the reduction of share capital and reserves by way of a special resolution.

3. Protection of Interests of Shareholders and Creditors:
The court examined the scheme, which included clauses on demerger, transfer of liabilities, protection of employees' benefits, and issuance of shares by the resulting company to the shareholders of the demerged company. The court ensured that the interests of shareholders and creditors were protected and that they were duly informed of the scheme. The shareholders of the demerged company would receive 374 fully paid-up equity shares of Rs. 10 for every 100 fully paid-up equity shares of Rs. 10 held by them.

4. Application of the Duomatic Principle:
The court applied the Duomatic Principle, which allows for the dispensation of strict adherence to statutory requirements if the substance of such requirements is fulfilled indirectly. The court found that the statutory requirements for reduction of share premium/capital were substantially complied with by both companies. The shareholders were aware of the reduction of the company's share premium reserves, and the requisite majority approved the scheme. The court noted that neither company was listed, and the members and creditors were informed and took an informed decision.

Conclusion:
The court sanctioned the scheme of arrangement involving the reduction of the demerged company's reserves and the reduction and reconstruction of the resulting company's capital. The resulting company was required to issue equity shares to the shareholders of the demerged company, and proof of stamp duty payment was to be enclosed with the certified copy of the sanction order. The court ordered the registration of the order with the Registrar of Companies, Andhra Pradesh, and publication of the notice in specified newspapers.