THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition Nos.43 and 44 of 2011 Date:27th April,2011 Amareswari Cements Limited, H.No.8-2-472/B/2, Road No.1, Banjara Hills, Hyderabad – 500 034, A.P. India, rep. by its Director Mr.M.Mohan Reddy. …Transferor Company/ Petitioner in C.P.No.43 of 2011 *** Sagar Cements Limited, H.No.8-2-472/B/2,Road No.1, Banjara Hills, Hyderabad – 500 034, A.P., India, rep. by its Director Mr.M.Mohan Reddy ….Transferee Company/ Petitioner in C.P.No.44 of 2011 *** THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition Nos.43 and 44 of 2011 COMMON ORDER: These two Company Petitions have been filed by Amareswari Cements Limited (hereinafter referred to as ‘the transferor company”) and Sagar Cements Limited (hereinafter referred to as ‘the transferee company”) respectively under Sections 394 r/w.391 to 393 of the Companies Act, 1956, (for short, ‘the Act’), for sanction of the scheme of amalgamation, whereby the the petitioner company in C.P.No.43 of 2011 would get merged with the petitioner company in C.P.No.44 o 2011, with effect from 01.04.2010. 2. Amareswari Cements Limited-the transferor company was originally incorporated under the Act on 06.09.1983 with Certificate of Incorporation No.4122 of 1983-84. The authorized share capital of the transferor company is Rs.6,75,00,000/- divided into 67,50,000 equity shares of Rs.10/- each. The issued, subscribed and paid up capital is Rs.4,60,00,000/- divided into 46,00,000 equity shares of Rs.10/- each. 3. The main objects of the transferor company as set out in the memorandum of the petition are: to produce, manufacture, refine, prepare, import, export, purchase, sell and generally to deal in all kinds of Portland Cement (Portland Pozolona Cement), Portland Slag Cement, Portland rapid hardening cement, Portland high aluminia, Portland oil well cement, special cement, masonry cement, lime pozzolona cement, white and colour cement etc. products of any description (pipes, poles, asbestos sheets, block tiles, garden wares etc.), lime, limestone, carbonate, carbide, gypsum, kankar etc. more fully described in para.5 of the Company Petition No.43 of 2011. 4. Sagar Cements Limited-the transferee company was incorporated under the Act on 15.01.1981 with Certificate of Incorporation No.2887 of 1980-81. As on 31.03.2010, the authorized share capital of the transferee company is Rs.20,00,00,000/- divided into 2,00,00,000 equity shares of Rs.10/- each and Rs.2,00,00,000/- divided into 20,00,000 preference shares of Rs.10/- each. The issued, subscribed and paid up capital is Rs.15,00,23,000/- divided into 1,50,02,300 equity shares of Rs.10/- each. 5. The objects of the transferee company are: to produce, manufacture, refine, prepare, process, purchase, import, export, sell and generally to deal in all kinds of cement, cement products of any description, limestone, gypsum, kankar and/or by-products thereof and in connection therewith to acquire, erect, construct, establish, operate and maintain cement factories, quarries, workshops and other work relating thereto, more fully described in Para.5 of C.P.No.44 of 2011. 6. The transferee company is in the related business as that of the transferor company. The transferee company is financially and technically sound and equipped to make the acquisition and continue the business carried on by the transferor company. The salient features of the scheme of amalgamation of the transferor company with the transferee company have been fully set out in para.14 of the respective company petitions. The scheme is effective from 01.04.2010 and all undertakings, properties, rights and powers, debts, liabilities, duties and obligations whatsoever nature including all properties movable and immovable assets of whatsoever in nature shall stand transferred and vested in the transferee company. In consideration of the transfer, 10 equity shares of Rs.10/- each in the share capital of the transferee company credited as fully paid up for every 14 equity shares of Rs.10/- each fully paid up held by such members in the share capital of the transferor company. Upon the effective date, 9,00,000 equity shares held in the transferee company by the transferor company shall stand extinguished and no equity shares shall be allotted to the transferor company. Consequently, the subscribed and paid up share capital of the transferee company shall stand reduced upon such extinguishments to the extent of 9,00,000 equity shares. With effect from the effective date, the transferor company shall stand dissolved without being wound-up. 7 The Board of Directors of the transferor and transferee companies at the their meeting held on 22.10.2010 passed resolutions approving the proposals for merger of the transferor company with the transferee company. The transferor company filed C.A.No.6 of2011 for a direction to convene the meeting of the equity share holders of the company to consider and approve the proposed scheme of amalgamation to be held at Hotel Golkonda, Masab Tank, Hyderabad – 500 028, on 07.03.2011 at 2.30 P.M. The said application came to be ordered. The meeting of the equity share holders of the transferor company had been convened under the chairmanship of Sri S.Lakshmikanth and so also the meeting of the unsecured creditors of the transferor company had been held on 07.03.2011 at 10.30 A.M. The scheme of arrangement was read over and explained at the respective meetings of the shareholders and unsecured creditors of the transferor company. Resolutions came to be passed in the said meetings approving the scheme of amalgamation. Sri S.Lakshmikanth, who acted as a Chairperson of the said meetings placed on record his report on 16.03.2011. 8. The transferee company filed C.A.No.5 of 2011 for a direction to convene the meeting of the equity shareholders of the company to consider and approve the proposed scheme of amalgamation to be held at Hotel Golkonda, Masab Tank, Hyderabad – 500 028, on 07.03.2011 at 3.30 P.M. and so also the unsecured creditors of the transferee company to consider and approve the proposed scheme of arrnagement to be held at Hotel Gokonda, Masab Tank, Hyderabad, on 07.03.2011 at 11.30 A.M. Sri S.Lakshmikanth came to be appointed as Chair person for conducting the meeting of the equity shareholders and unsecured creditors of the company. Sri S.Lakshmikanth, presided over the meetings of the shareholders and unsecured creditors. Resolutions came to be passed in the said meetings approving the scheme of amalgamation. Accordingly, Sri S.Lakshmikanth placed on record his report dated 16.03.2011. Hence, these two company petitions seeking sanction of the proposed scheme of amalgamation. 9. Notice to the Regional Director, Ministry of Corporate Affairs, Chennai, the Registrar of Companies, Andhra Pradesh, Hyderabad and to the Official Liquidator, Hyderabad, came to be ordered on 23.03.2011 in both these Company Petitions. The petitioner Companies were also directed to take out publication in BUSINESS STANDARD (English daily) and ANDHRA BHOOMI (Telegu daily) published in Hyderabad Editions. The petitioner Companies took out publications and filed copies of the same as proof of compliance of the directions. 10. The Official Liquidator placed on record his report. The Deputy Registrar of Companies, A.P., Hyderabad filed common affidavit in both the company petitions. 11. These two company petitions were filed seeking sanction of the scheme of amalgamation as approved by the shareholders of the respective companies, so as to bind all the members of the transferor company and transferee company and to dissolve the transferor company without winding up. 12. The Deputy Registrar of Companies in para.3 of his affidavit stated as follows: “3. That it is humbly submitted that pursuant to the instructions received from the Regional Director, Ministry of Corporate Affairs, Chennai, the following facts are placed for consideration of the Hon’ble High Court. a) Upon the effective date, 9,00,000 equity shares held in the transferee company by the transferor company shall stand extinguished and no equity shares shall be allotted to the transferor company pursuant to clause 8.1. Consequently, the subscribed and paid up share capital of the transferee company shall stand reduced upon such extinguishment to the extent of 9,00,000 equity shares. Hence, the Hon’ble High Court has to pass order u/s 100 to 105 of the Act. The application filed by the transferee company does not have a prayer about the reduction of capital. b) The petition filed by the transferee company shall be renumbered i.e. after para.No.25, there should be para. No.26, 27, 28, 29 and 30 instead of 23, 24, 25 and 26. c) The transferee company should pay the Stamp Duty wherever applicable as per the Regulations of Andhra Pradesh Stamp Act.” 13. The Official Liquidator stated in his affidavit that the affairs of the transferor company do not appear to have been conducted in a manner prejudicial in the interests of its members or to the public interest. 14. No objections have been received from any quarter opposing the proposed scheme of amalgamation. 15. Heard learned counsel appearing for the petitioners; learned Assistant Solicitor General appearing for the Registrar of Companies and learned counsel appearing for the Official Liquidator. 16. Learned counsel appearing for the petitioner in both the company petitions submits that 9,00,000 equity shares held by the transferee company in the transferor company shall stand extinguished and therefore, the question of reduction in the share capital of the transferee company does not arise. He would also contend that it is not necessary that extinguishment of shares in all cases result for reduction of the share capital. Section 100 of the Act would not come into play where the scheme of amalgamation contemplates that the transfer of entirety of the assets and liabilities of the transferor company to the transferee company. In support of his submission, learned counsel placed reliance on the decision of the Madras High Court in Asian Investments Ltd. , In re.[1], wherein it has been held that where a scheme of amalgamation of companies contemplates the transfer of entirety of the assets and liabilities of the transferor company to the transferee company, the assets of the transferor company on amalgamation stand transferred to and vested in the transferee company and there cannot be said to be any release of assets of the transferor company. In such a case, the provisions of Section100 of the Companies Act, 1956, prescribing that a special resolution should be passed before reduction of the company’s share capital, would not apply. Further, Rule 85 of the Companies (Court) Rules, 1959, which is part of the scheme of sections 101 and 102 of the Act, which provides that where a proposed compromise or arrangement involves reduction of capital of the company, the procedure prescribed by the Act and the Rules relating to reduction of capital shall be complied with, before the compromise or arrangement so far as it relates to reduction of capital, is sanctioned, would stand attracted only to cases of compromise or arrangement involving reduction of capital and not to cases of amalgamation simpliciter when the entirety of the assets and liablities are transferred and when there is no release of any assets. 17. As seen from the scheme of amalgamation, 9,00,000 equity shares held by the transferor company in the transferee company shall stand extinguished. Therefore, there is no question of share capital in the transferee company being reduced. The transferor and the transferee companies placed on record the consent letters given by the secured creditors of the respective companies. 18. From the material placed on record, the scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. None of the parties concerned have come forward to oppose the scheme. 19. Since all the requisite statutory compliances have been fulfilled, both the company Petitions i.e., C.P.No.43 of 2011 filed by the transferor company and C.P.No.44 of 2011 filed by the transferee company are allowed sanctioning the scheme of amalgamation with effect from 01.04.2010. The transferor company shall stand dissolved without winding up with effect from 01.04.2010. The parties to the scheme of amalgamation 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 amalgamation; and the transferor company and the transferee company shall pay a sum of Rs.5,000/- (Rupees five thousand only) each to the Registrar of Companies, A.P., Hyderabad and also to the Official Liquidator attached to this Court, towards the costs. The petitioner companies do file with the Registrar of Companies an authenticated copy of this common order and the scheme within 30 days from this date. 20. Accordingly, both the Company Petitions are allowed. ______________________ B.SESHASAYANA REDDY, J. Date:27th April, 2011. cs THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition Nos.43 and 44 of 2011 Date:27th April, 2011 [1] 1992 Company Cases Vol.73, page 517