THE HON'BLE Ms. JUSTICE G.ROHINI COMPANY PETITION Nos. 230 AND 231 OF 2010 Dated:18.02.2011 COMPANY PETITION No. 230 OF 2010 Between: Gayatri Sugars Limited ..... Petitioner Company COMPANY PETITION No. 231 OF 2010 Between: GSR Sugars Private Limited …… Petitioner Company The Court made the following : THE HON'BLE Ms. JUSTICE G.ROHINI COMPANY PETITION Nos. 230 AND 231 OF 2010 COMMON ORDER : These two petitions are filed under Sections 391 to 394 of the Companies Act, 1956 (for short, ‘the Act’) with a prayer to sanction the scheme of amalgamation of GSR Sugars Private Limited with Gayatri Sugars Limited. The petitioner in Company Petition No.231 of 2010- GSR Sugars Limited is the Transferor Company whereas the petitioner in Company Petition No.230 of 2010- Gayatri Sugars Limited is the Transferee Company. The Transferor Company was originally incorporated under the Act on 08.08.2001 under the name and style of Indira Sugars and Industries Private Limited with certificate of incorporation No.37115 of 2001-2002. The name of the Transferor Company was changed to GSR Sugars Private Limited with effect from 21.12.2001. The registered office of the Transferor Company is situated at B2, 2nd floor, 6-3-1090, TSR Towers, Rajbhavan Road, Somajiguda, Hyderabad- 500 082, Andhra Pradesh. The authorised share capital of the Transferor Company is Rs.37,00,00,000/- divided into 3,70,00,000 equity shares of Rs.10/- each. The issued, subscribed and paid-up share capital of the Transferor Company is Rs.36,58,10,000/- divided into 3,65,81,000 equity shares of Rs.10/- each fully paid up. The objects for which the Transferor Company was incorporated as set out in its memorandum of association have been enumerated in Para No.5 of Company Petition No.231 of 2010. The Transferee Company was originally incorporated as NCS Gayatri Sugars Private Limited under the Act on 15.06.1995 with certificate of incorporation No.01-20720 of 1995-96. Consequent upon conversion into a public company, a fresh certificate of incorporation was issued in the name of NCS Gayatri Sugars Limited by the Registrar of Companies on 22.01.1997. Later the name of the Transferee Company was changed to its present name i.e., Gayatri Sugars Limited on 17.07.2003. The registered office of the Transferee Company is situated at B2, 2nd floor, 6-3-1090, TSR Towers, Rajbhavan Road, Somajiguda, Hyderabad-500 082. The authorised share capital of the Transferee Company is Rs.53,00,00,000/- divided into 4,30,00,000 equity shares of Rs.10/- each and 1,00,00,000/- preference shares of Rs.10/- each. The issued, subscribed and paid- up capital as on 31.03.2010 was Rs.52,52,20,530 divided into 4,29,93,140 equity shares of Rs.10/- each paid up to the extent of Rs.42,98,52,400/- and Rs.95,36,813 6% cumulative redeemable preference shares of Rs.10/- each aggregating Rs.9,53,68,130/-. The objects for which the Transferee Company was incorporated as set out in its memorandum of association have been enumerated in Para No.5 of Company Petition No.230 of 2010. It is stated that since the Transferee Company is in the related business as that of the Transferor Company and it is interested in the acquisition of the business of manufacturing and sale of sugar through the scheme of amalgamation, the Board of Directors of both the Transferor and Transferee Companies in their respective meetings held on 20.04.2010 passed resolutions approving the scheme of amalgamation between the Transferor and Transferee Companies and their respective shareholders. The rationale and reasons for the proposed scheme of amalgamation have been summarised in company petitions and it is stated that the audited accounts of both the Transferor and Transferee Companies for the year ending 31.03.2010 were duly approved by the shareholders at their respective annual general meetings held on 31.07.2010. It is further stated that the Transferee Company being a listed company on the Bombay Stock Exchange Limited, the scheme of amalgamation has been drawn up in consonance with the provisions of securities laws as well as the SEBI Act, 1992 and other statutes. The Bombay Stock Exchange Limited has also conveyed its no objection vide letters dated 11.08.2010 for filing the scheme of amalgamation with this Court. Pursuant to the orders passed by this Court, the meetings of the equity shareholders and the preference shareholders of the Transferee Company were held on 03.11.2010 and the resolutions were passed approving the proposed scheme of amalgamation unanimously. So far as the members of the Transferor Company are concerned, on the basis of the written affidavits filed by all the shareholders, this Court by order dated 27.09.2010 in Company Application No.721 of 2010 had dispensed with the convening of the meeting of the shareholders. Thereafter, the present company petitions have been filed with a prayer to sanction the scheme of amalgamation. I have heard the learned counsel for the petitioners and perused the material available on record. By order dated 20.12.2010 this Court directed notice to the Regional Director, Ministry of Corporate Affairs, Chennai; the Registrar of Companies, Andhra Pradesh at Hyderabad and the Official Liquidator, High Court of Andhra Pradesh. Pursuant thereto, the Official Liquidator filed a report dated 27.01.2011 stating that the scheme of amalgamation had taken due care for protecting the services of the permanent employees of the petitioner companies and that the information and records furnished had not revealed anything about pending litigation and prosecution either against or by the petitioner companies and its Directors. It is also stated that the affairs of the Transferor Company did not appear to have been conducted in a manner prejudicial in the interest of its members or to the public interest. However, it was pointed out that the petitioners had not clarified as to whether the shareholders had knowledge of the reduction of the paid-up share capital. It is also contended that though the balance sheet as on 31.03.2010 shows that the petitioner companies had availed secured loans, the petitioners had not submitted the no objection letters from the secured creditors to the proposed scheme of amalgamation. Similar objections were raised in the common affidavits filed by the Registrar of Companies. The said objections may be extracted herein: “a) The transferor and the transferee companies have availed secured and unsecured loans. Both the companies have to produce ‘NOC’s before the Hon’ble High Court. b) The transferee company should pay the Stamp Duty wherever applicable as per the Regulations of Andhra Pradesh Stamp Act. c) Regarding re-arrangement of capital in the transferee company, compliance of Section 94 & 97 of the Companies Act, 1956 should be ensured.” So far as the objection raised by the Official Liquidator as well as the Registrar of Companies that the petitioner companies had failed to produce no objection certificates from the creditors it is to be noticed that during the course of the hearing the learned counsel for the petitioners placed before this Court the no objections certificates from the secured creditors as well as unsecured creditors of both the Transferor and Transferee Companies vide USR Nos.175, 176, 177 and 178 dated 04.02.2011. So far as the objection that no notice was issued in terms of Sections 94 and 97 of the Act is concerned, the learned counsel for the petitioners while placing reliance upon a decision of the Division Bench of this Court In Re: Kemira Laboratories Limited[1] contended that since the amalgamation is brought about by virtue of statutory instrument, compliance with the provisions of Sections 94 and 97 of the Act is not necessary. An identical question was considered by the High Court of Delhi in Telesound India Limited., In Re. (1983) 53 Company Cases 926 and it was held as under: “Amalgamation of a company with another or an amalgamation of two companies to form a third is brought about by two parallel schemes of arrangements entered into between one company and its members and the other company and its members and the two separate arrangements bind all the members of the companies and the companies when sanctioned by the Court. Amalgamation is, therefore, an absorption of one company into another or merger of both to form a third, which is not a mere act of the two companies or their members but is brought about by virtue of a statutory instrument and to that extent has statutory genesis and character, and to that extent it is distinguishable from a mere bilateral arrangement to merger or join in a common endeavour, an undertaking or enterprise.” Accepting the said view a Division Bench of this Court In Re: Kemira Laboratories Limited (supra) held as under: “On merger, the two companies cease to exist i.e., to say that neither the transferee company remains nor the transferor company remains, but a third Company comes into existence on the basis of the scheme sanctioned by the Court. In such a situation, it is hard to accept that there would be an increase in the share capital of one of the Companies.” In the light of the above noticed settled legal position, the objection raised by the Official Liquidator as well as the Registrar of Companies that notice in compliance with Section 97 of the Act was not given is untenable. Having regard to the facts and circumstances noticed above and taking into consideration the fact that the scheme of amalgamation is not opposed to any provision of law or public interest, I am of the opinion that it is a fit case for granting sanction of the scheme of amalgamation as sought by the petitioners. Accordingly, both the Company Petitions are allowed and the scheme of amalgamation is approved. A copy of this order shall be filed before the Registrar of Companies within 30 days from the date of receipt of this order. ___________ G. ROHINI, J Date: 18.02.2011 Ivd [1] 2007 (3) ALD 386