THE HON’BLE MS.JUSTICE G.ROHINI COMPANY PETITION Nos. 108 and 109 of 2010 Date: 24.11.2010 C.P.No.108 of 2010 Between: Nitya Laboratories Limited, A.49, Madhuranagar, Vengalarao Nagar, Hyderabad. … Petitioner. C.P.No.109 of 2010 Between: Anu’s Laboratories Limited, A.49, Madhuranagar, Vengalarao Nagar, Hyderabad. … Petitioner. THE HON’BLE MS.JUSTICE G.ROHINI COMPANY PETITION Nos. 108 and 109 of 2010 COMMON ORDER: The petitioners namely Nitya Laboratories Limited (herein after referred to transferee company) and Anu’s Laboratories Limited (hereinafter referred to transferor company) filed these company petitions under Sections 394 read with 391 to 393 of the Companies Act, 1956 praying to sanction Scheme of Arrangement as approved by their respective shareholders. The transferor company was incorporated under the Companies Act, 1956 on 09.11.1994. Its registered Office is situated at A-49, Madhura Nagar, Vengalrao Nagar, Hyderabad and its main objects are to carry on the business to manufacture, develop pharmaceuticals and etc., (more fully described in para 5 of the affidavit filed in C.P.108 of 2010). It is stated that the transferee company was incorporated on 20.02.1996 and its objects have been set out in para 10 of the affidavit filed in support of C.P.No.108 of 2010. It is further stated that as the transferee company is in the related company as that of the transferor company and it is financially and technically sound, it is intended to acquire the business of the transferor company through the Scheme of Arrangement. The proposed Scheme of Arrangement between the transferor and transferee company and its salient features have been mentioned in paras 12 and 13 of the affidavit in support of C.P.No.108 of 2010. The Board of Directors of the transferor company passed a resolution dated 10.03.2010 approving the Scheme of Arrangement. Similarly, the Board of Directors of the transferee company had also approved the Scheme of Arrangement on 10.03.2010. It is further stated that the State Bank of India, which has advanced a term loan to the transferor company is the only secured creditor and that the scheme neither proposes any arrangement with secured creditors nor unsecured creditors. It is pleaded that the financial position of the transferor-company would not be adversely affected by the Scheme of Arrangement and the transferee company being a profitable company would be able to meet the liabilities as they arise in the course of business. It is also stated that whereas the transferor company is of unlisted closely held public company, the transferee company is a listed company at Bombay Stock Exchange Limited and the Scheme of Arrangement has been drawn out inconsonance with the provisions of Security Laws and the provisions of the SEBI Act, 1992 and other statues. The Bombay Stock Exchange Limited had conveyed its no objections vide letter dated 05.04.2010 for filing the Scheme of Arrangement before this Court. Pursuant to the order passed by this Court in C.A.No.326 of 2010 dated 27.04.2010 the meeting of the shareholders of the transferor company was held on 29.05.2010. Similarly, in C.A.No.327 of 2010 filed by the transferee company, this Court by order dated 27.04.2010 directed to convene meeting of the equity shareholders of the transferee company on 29.05.2010. Accordingly, a meeting was held on 29.05.2010 and the equity shareholders of the transferor company had passed an unanimous resolution in favour the Scheme of Arrangement. So far as the transferee company is concerned, the meeting was held on 29.05.2010 and the equity shareholders passed a similar resolution unanimously. Thereafter, the present petitions have been filed with a prayer to sanction the Scheme of Arrangement. By order dated 05.07.2010, this Court while admitting the company petitions, issued notice to the Central Government and to the Official Liquidator and also ordered publication of notice of admission in “Business Standard”, English daily and “Andhra Jyothi, Telugu daily. In pursuance of the said notices, the Registrar of Companies filed a common affidavit dated 30.07.2010 stating as under: “The transferee company should pay the Stamp Duty wherever applicable as per the Regulations of Andhra Pradesh Stamp Act.” The Official Liquidator filed a report dated 28.07.2010 stating that though as per the audited balance sheet as on 31.03.2009 there is secured loan liability of the transferor company to the tune of Rs.1,39,69,847/- and unsecured loan liability towards the sales tax department to the tune of Rs.3,70,56,760/-, the transferor company has not furnished the consent letters for the secured and unsecured creditors for the proposed scheme. Thereupon the transferor company vide memorandum dated 15.11.2010 while producing the certificate from M/s. J.B.Reddy and company, Charted Accountant and Auditors dated 22.09.2010 stated that the transferor company had repaid in full the outstanding secured loans and there are no secured creditors to the transferor company. So far as transferee company is concerned, by a separate memo dated 15.11.2010 the consent letters from the secured creditors together with a certificate dated 22.10.2010 from the statutory auditors certifying the outstanding creditors has been filed. The Official Liquidator filed a further report dated 22.11.2010 admitting the fact that the transferor company had repaid in full all the secured loans taken from the Banks and Financial Institutions and there was no secured loan outstanding as on22.09.2010. However, as regards the unsecured loan amount of Rs.3,70,56,760/- due to the sales tax Department, it is contended that the transferor company failed to furnish the consent letter nor any explanation was filed for the unsecured loan. I have heard Sri L.V.V.Iyer, learned counsel appearing for the petitioners as well as Sri M.Anil Kumar, the learned counsel for the Official Liquidator and perused the material available on record. As could be seen from the facts noticed above, the only objection raised by the Official Liquidator is that the transferor company failed to produce any material to show the consent of the unsecured creditor. However, the learned counsel for the petitioners contended that as there is no arrangement with the unsecured creditors, the consent is not necessary. On a careful reading of Section 391 (1) and (2) of the Companies Act, 1956, particularly, the phrase “as the case may be” employed in both the said sections, I find force in the submission of the learned counsel for the petitioner that the consent of the unsecured creditors is not necessary for sanctioning the proposed Scheme of Arrangement. Accordingly, the objection raised by the Official Liquidator is hereby rejected. So far as the objection raised by the Registrar of Companies with regard to payment of stamp duty is concerned, the law is well settled that the same can be paid upon the sanction of the arrangement so as to make the arrangement effective. Having regard to the facts and circumstances noticed above and in view of the fact that the scheme apart from being in the best interest of the companies is not opposed to any provision of law or public interest, I am of the considered opinion that this is fit case where the Scheme of Arrangement can be sanctioned. Accordingly, the proposed Scheme of Arrangement is hereby sanctioned and the same shall be binding on all the shareholders. The parties to the Scheme of Arrangement or other persons interested shall be at liberty to apply to this Court for any directions that may be necessary in regard to the working of the Scheme of Arrangement. The certified copy of this order shall be filed before the Registrar of Companies within 30 days from the date of this order. _____________ G.ROHINI,J Date: 24.11.2010 KLP