2013 (10) TMI 1594 - HC - Indian Laws

Summary

Issues:
1. Validity of the scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956.
2. Adequacy of notice to creditors in the scheme of arrangement.
3. Jurisdiction of the Company Court in sanctioning the scheme.
4. Disclosure of necessary particulars in the scheme of arrangement.
5. Applicability of arbitration proceedings on the scheme of arrangement.

Analysis:

The judgment by the High Court of Bombay pertains to an appeal arising from the sanction of a scheme of arrangement under Sections 391 and 394 of the Companies Act, 1956. The scheme involved the transfer of a division of a company to another entity, with shareholders to be allotted shares in the resulting company proportionately. The Court noted the implementation of the demerger and the listing of equity shares on the stock exchange. The appeal challenged the scheme's validity, citing inadequate notice to creditors and lack of disclosure of liabilities.

Regarding the jurisdiction of the Company Court, it was emphasized that the court's role is supervisory, not appellate, when sanctioning a scheme of arrangement. The court must ensure compliance with statutory requirements, support from the majority, and fairness in the scheme. The Court relied on the principle established in Miheer H. Mafatlal Vs. Mafatlal Industries Ltd., emphasizing the need for the scheme to be just, fair, and reasonable.

The appellant contended that the scheme was invalid due to insufficient notice and lack of disclosure of creditor details. However, the Court found no merit in these arguments. It highlighted a previous judgment where claims pending arbitration do not necessarily invalidate a scheme. The Court stressed that the Company Court had provided ample opportunity for the appellant to present necessary particulars, which were not submitted.

Ultimately, the Court dismissed the appeal, stating that no interference was warranted. The appellant's claim was subject to arbitration and secured by a bank guarantee as directed by the Calcutta High Court. The Court concluded that since the scheme had been implemented during the appeal's pendency, there was no basis for interference.