Company Petition No. 42 of 2010 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Company Petition No. 42 of 2010 Date of Decision: August 05, 2010 In the matter of Scheme of Arrangement between: 1. Alchemist Limited, having its registered office at 23, Nehru Place, New Delhi -110019 ..... Transferor company 2. Alchemist Foods Limited, having its registered office at SCO SCO 12-13, Sector 9-D, Chandigarh – 160 009 ...... Transferee / Petitioner company 1.Whether Reporters of local papers may be allowed to see the judgment ? 2. Whether to be referred to the Reporters or not ? 3. Whether the judgment should be reported in the Digest? Present:- Mr. Atul V. Sood, Advocate for the petitioner. Mr. D.P. Ojha, Official Liquidator. HEMANT GUPTA, J. This is second motion petition for sanction of the Scheme of Arrangement between the transferor company i.e. Alchemist Limited, and transferee company i.e., Alchemist Foods Limited, under Sections 391 to 394 of the Companies Act, 1956 (for short “the Act”). The transferor company was initially incorporated as “Toubro Mesh Private Limited” on 05.07.1988 under the Act. Subsequently, the name of the company was changed to “Toubro Industries Limited” and still later on to “Toubro Infotech and Industries Limited”, pursuant to which fresh certificate of incorporation was issued on 07.03.2000. On 01.10.2004, another certificate of incorporation was issued when the transferor company Company Petition No. 42 of 2010 [2] changed the name to “Alchemist Limited”. In pursuance of the order dated 10.06.2009 passed by the Company Law Board, the transferor company shifted its registered office at 23, Nehru Place, New Delhi. On the other hand, transferee company was incorporated on 08.04.2008 as a wholly owned subsidiary of the transferor company. The transferee company has not commenced any commercial operation and, therefore, there is no profit or loss account. The Board of Directors of the petitioner companies considered the Scheme of Arrangement in their respective meetings. The transferor company on 24.02.2009 and transferee company on 09.01.2009 approved the Scheme of Arrangement. Under the Scheme of Arrangement, it is pointed out that several businesses carried on by the transferor company have different business dynamics and growth drivers and each of said business has tremendous growth and profitability potential. The transferor company proposes to re-organize and segregate by way of transfer / hiving off its diverse business i.e., food business into separate legal entity having distinct management focus. Presently, the transferor company is engaged in multifarious business activities i.e. Steel, Pharmaceutical, Healthcare, Floriculture and Food Processing. The transfer of Food Division to the transferee company will lead to a focused approach to carry out the Food Business as there is a lot of business scalability in the Food Division. The demerged undertaking of the transferor company was to vest in the transferee company. This Court in CP No. 67 of 2009 dispensed with the meeting of the shareholders of the transferee company vide order dated 28.05.2009 as there was no secured or unsecured creditors of the transferee company. The Scheme of Arrangement contemplates that it shall be Company Petition No. 42 of 2010 [3] subject to the approval of this Court in respect of the transferee company, whose registered office is within the jurisdiction of this Court and of Delhi High Court, in whose jurisdiction the transferor company has its registered office. In this second motion petition, notice was published in the newspapers “Indian Express” [English] and “Dainik Bhaskar” [Hindi] and the official Gazette of Union Territory, Chandigarh. Notice was also issued to the Regional Director, Ministry of Corporate Affairs, Government of India, Noida. The said publication has been carried out and affidavit dated 12-07-2010 to this effect has been placed on record. Dr. Navrang Saini, Regional Director, Northern Region, Ministry of Corporate Affairs, Noida has given his report by way of his affidavit dated 17-06-2010. It has been pointed out that the Scheme contemplates clubbing of authorised share capital of the transferee company with the share capital of the transferor company which is not permissible as the authorised share capital of a company can be increased only after following the procedure prescribed under the relevant provisions of the Act and payment of requisite fees to the Registrar of Companies and stamp duty to the State Government. It has also been pointed out that the Memorandum of Association can be amended only after a special resolution is passed by the members of the company in the General Meeting and filing of relevant form with the office of Registrar of Companies. It has also been pointed out that the appointed date has been fixed as 01.04.2008, whereas the transferee company was incorporated on 08.04.2008. It is also pointed out that it is not clear as to how the shareholders, secured and unsecured creditors of both the companies could take a decision for transfer of assets and liabilities of Company Petition No. 42 of 2010 [4] the transferor company to the transferee company without knowing the details thereof and how the appointed date can be fixed before incorporation of the transferee company. Today Mr. Sood, has filed a resolution passed by the transferee company in its meeting held on 24.07.2010. The said resolution reads as under:- “RESOLVED that whereas the Board of Directors had approved a Scheme of Arrangement with Alchemist Limited vide Board Resolution dated 9.1.2009 wherein the valuation of Food Business of Alchemist Ltd has been approved at book value as on 31.3.2008 and accordingly, the Appointed Date was fixed as April 1, 2008 for the purpose of identifying the opening figures and assets and liabilities as on 1.4.2008 and whereas Alchemist Foods Ltd was incorporated on April 08, 2008, i.e., after the Appointed Date i.e., 1.4.2008 and the Effective Date of the Scheme has been fixed as the date of filing of the order of the Hon'ble High Court approving the Scheme with the Registrar of Companies or Appointed Date whichever is later. RESOLVED further that the assets and liabilities of Food Division as per the valuation report on the basis of closing accounting figures of 31.3.2008 and all accounting entries pertaining to the said assets and liabilities, and the business of Food Division carried out after that date shall be deemed to be transferred to Alchemist Foods Ltd on the date of incorporation, i.e. 8.4.2008, upon the Scheme becoming effective in accordance with the Scheme”. I have heard learned counsel for the parties and found that the comments of the Regional Director in respect of amendment of authorised share capital of the transferee company is not tenable. In Motorola India Private Limited, 2006(2) Punjab Law Reporter, 191 this Court has held Company Petition No. 42 of 2010 [5] that the Scheme of Arrangement in terms of Sections 391 to 394 of the Act is one window arrangement for the companies and all issues relating to the arrangement can be approved by the Company Court. Once the shareholders have resolved to approve the Scheme of Arrangement, the procedure prescribed for increasing the authorised share capital stands complied with. It could not be pointed out that any other procedure was required to be followed by the transferee Court for increasing its authorised share capital. However, the transferee company was to pay the requisite fee to the Registrar of Companies and stamp duty to the State Government as leviable in law. Similarly, the objection that the Memorandum of Association can be amended after following the procedure prescribed under the Act is again untenable for the same reasons as mentioned above. In respect of the observation that the transferee company has been incorporated after the appointed date, the company has produced resolution to the effect that the assets and liabilities of the Food Division of the transferor company as per valuation report on the basis of closing accounting figures of 31.03.2008 shall be deemed to be transferred to the transferee company on the date of incorporation i.e. 08.04.2008, upon the Scheme becoming effective. In view of the said resolution, the objection of the Regional Director in respect of transfer of assets and liabilities of the Food Division of the transferor company to the transferee company prior to its incorporation no longer survive. The transferee company has further confirmed that there is no investigation or proceeding pending against the transferor or transferee company under Sections 235 and 251 of the Act and the Scheme of Arrangement in no way runs contrary to the public policy nor it affects the Company Petition No. 42 of 2010 [6] interest of the share-holders, secured/ unsecured creditors of the transferee/ transferor companies and there is reservation from the Central Government and by the Official Liquidator. Further, it has also been pointed out that no proceedings under Sections 397 and 398 of the Act have ever been instituted against the transferor and transferee companies. Thus, I am satisfied that the prayer made in the petition deserves to be allowed. I also do not find any legal impediment to the grant of sanction to the Scheme of Amalgamation. Therefore, the Scheme of Arrangement (Annexure P-1) is approved subject to the orders that may be passed by the competent Court of jurisdiction in respect of transferor company. The Food Division of the transferor company is permitted to be merged with the transferee company in terms of the Scheme of Arrangement. The Scheme shall be binding on the petitioner companies, their respective shareholders, secured and unsecured creditors and all concerned. A certified copy of the order shall be filed with the Registrar of Companies within 14 days from the date of receipt of certified copy of this order, in Form No. 41. A notice of the orders be published in the newspapers i.e. “Indian Express” [English] and “Dainik Bhaskar” [Hindi] and the official Gazette of Union Territory, Chandigarh. Any person interested shall be at liberty to apply to the Court for any direction as per law. Disposed of accordingly. August 05, 2010 ( HEMANT GUPTA ) ks JUDGE