Allowed

M/s Transport Corporation of India Limited v. -

Telangana HC14 Jun 2016CP/119/2016

Case brief

AI extract

What is this about?

The court sanctioned a scheme of arrangement between the petitioner, Transport Corporation of India Limited, and the resulting company, TCI Express Limited, under Sections 391 and 394 of the Companies Act. The court found the scheme just, fair, and compliant with statutory procedures, ordering the dissolution of the demerged company.

What did the court decide?

Scheme of arrangement approved with effect from 31.03.2016; demerged company ordered to be dissolved without winding up.

M/s Transport Corporation of India Limited Vs - — Specific Performance | Telangana HC (2016)

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HON’BLE SRI JUSTICE S.V.BHATT COMPANY PETITION No.119 OF 2016

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ORDER:

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Heard learned counsel for the petitioner.

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Transport Corporation of India Limited (demerged company) filed this petition under Sections 391 and 394 of the Companies Act, 1956 (for short ‘the Act’) praying for sanction of scheme of arrangement between petitioner company i.e. Transport Corporation of India Limited and TCI Express Limited (resulting company).

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These corporate entities are called, for convenience, demerged company and resulting company respectively.

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Learned counsel for the petitioner has placed reliance upon MIHEER H.MAFATLAL V. MAFATLAL INDUSTRIES LIMITED^[1] , NEBULA MOTORS LIMITED^[2] and ANDHRA BANK HOUSING FINANCE LIMITED V. M/S ANDHRA BANK^[3] to explain the jurisdiction of this Court under Sections 391 and 394 of the Act.

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The gist of the case is as follows:

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The demerged company was incorporated for carrying on the business of public carriers, transporters and carriers of goods, passengers, merchandise, documents, parcels, services of pickup and delivery of documents, parcels, door to door/desk service of small, medium, bulk; odd or any size or type of consignments of all types of goods and merchandise including parcels, documents, refrigerated and frozen all types of goods and merchandise including parcels, documents, public printed materials and household articles by company owned aircrafts and/or by leased or hired aircrafts and acquire permits for operating company owned or leased or hired aircrafts or any other airborne vehicle on any route in India or in any

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part of the world or in space etc.

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The resulting company has substantially same and similar business objectivities and activities. The Memorandum and Articles of Association of the demerged company is filed as annexure A1. The audited balance sheet of demerged company as on 31.03.2015 is filed as annexure A2. Annexure A3 is the Memorandum and Articles of Association, and the audited balance sheet as on 31.03.2015 of resulting company is annexure A4. On 08.10.2015, the Board of Directors of demerged company approved the scheme of arrangement. The Board of Directors of resulting company, having regard to the advantages perceived with the demerged company, approved the scheme of arrangement. The demerged company has set out the salient features of the scheme of arrangement and with the assistance of learned counsel appearing for the petitioner, I have perused the annexures.

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The demerged company filed C.A. No.117 of 2016 under Sections 391 and 394 of the Act to dispense with the requirement of convening the meeting of secured creditors and direct to convene the meetings of equity shareholders and unsecured creditors of the demerged company. On 10.02.2016, the application was allowed and the requirement of convening the meeting of secured creditors was dispensed with and Chairpersons were appointed to conduct the meetings of unsecured creditors and shareholders and after conducting meetings, Chairpersons filed their reports. On 06.04.2016, this Court, in the instant company petition, ordered notice to the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad. The petitioner was directed to cause publication of notice of scheme of arrangement in ‘Business Standard’ (English Daily) and ‘Andhra Bhoomi’ (Telugu Dailiy), Hyderabad editions. The petitioner submits that notice on the statutory authority was served and the

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advertisement was published in the newspapers on 18.04.2016. On 06.06.2016, the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad filed his report.

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Learned counsel for the petitioner submits that the demerged and resulting companies are wholly subsidiary and holding companies respectively. Secured creditors/unsecured creditors of the demerged company have given their consent for the proposed scheme of arrangement. The jurisdiction of this Court, while approving the scheme of arrangement, according to Miheer H.Mafatlal’s (1 supra) case, is as follows:

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"(1) The sanctioning Court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held.

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(2) That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391(2).

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(3) That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of the class.

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(4) That all necessary material indicated by Section 393(1)(a) is placed before the voters at the concerned meetings as contemplated by Section 391(1).

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(5) That all the requisite material contemplated by the proviso to sub-section (2) of Section 391 of the Act is placed before the Court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same.

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(6) That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For

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ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x- ray the same.

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(7) That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter compromising the same class whom they purported to represent.

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(8) That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant.

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(9) Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there could be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction."

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Learned counsel appearing for the statutory authority has reported no objection for the proposed scheme of arrangement.

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I have considered the material available on record, the principles of law enunciated by the Apex Court in Miheer H.Mafatlal's case (1 supra) and the conclusions/ recommendations of the statutory authority through his report dated

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27.05.2016.

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Having regard to the above material/report, this Court is of the opinion that the proposed scheme of arrangement is in conformity with the provisions of the Act. The scheme does not affect the interest of stakeholders and the public or public interest and is intended to further the business interests of demerged and resulting companies for more profit and maximum utilization

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of available resources. Therefore, the scheme of arrangement approved in the meeting of Board of Directors of demerged company on 08.10.2015 is sanctioned with effect from the date appointed i.e., 31.03.2016. The demerged company viz., Transport Corporation of India Limited is ordered to be dissolved without going through the process of winding up. The demerged and the resulting companies are directed to communicate certified copy of this order to the Registrar of Companies for the State of Telangana and the State of Andhra Pradesh, Hyderabad within 30 days from the date of receipt of a copy of this order. They are further directed to take all consequential and statutory steps required in pursuance of the approved scheme of arrangement and the Act.

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Company petition is ordered accordingly.

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S.V.BHATT, J

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Date:14.06.2016 Stp

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[1] 1996(87) Company Cases 792,

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[2] 2003(5) ALD 327

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[3] 2002(3) ALD 654

M/s Transport Corporation of India Limited v. -

Case brief

What is this about?

What did the court decide?

M/s Transport Corporation of India Limited v. -

Case brief

What is this about?

What did the court decide?

What the court decided

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