- 1 - IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY SCHEME PETITION NO.43 OF 2011 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.8 OF 2011 In the matter of the Companies Act, 1956; And In the matter of Section 391 to 394 of the Companies Act, 1956; And In the matter of the Scheme of Amalgamation of - (1) Topworth Steels & Power Pvt. Ltd. (2) Topworth Urja & Metals Ltd. with (3) Crest Steel & Power Pvt. Ltd. Topworth Steels & Power Pvt. Ltd. …Petitioner (First Transferor Company) AND COMPANY SCHEME PETITION NO.44 OF 2011 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.9 OF 2011 Topworth Urja & Metals Ltd. ...Petitioner (Second Transferor Company) Mr. Sandeep Parikh, Counsel i/b Mr. Ramesh Saraogi, Advocate for Petitioners in both Petitions. Dr. T. Pandian, Official Liquidator, present in both Petitions. Mr. C. J. Joy and Ms. Soma Singh i/b Mr. H. P. Chaturvedi for Regional Director in both Petitions - 2 - CORAM: S. J. KATHAWALLA, J. DATE : 1st July, 2011 P.C.: 1. Heard learned counsel for parties. 2. The sanction of the Court is sought under Sections 391 to 394 of the Companies Act, 1956 to a Scheme of Amalgamation of Topworth Steels & Power Pvt. Ltd. and Topworth Urja & Metals Ltd. with Crest Steel & Power Pvt. Ltd. 3. The Advocate for the Petitioners submit that the Petitioner Companies are wholly owned subsidiaries of Crest Steel & Power Pvt. Ltd., the Transferee Company and that by order passed by this Court on 7th January, 2011, the filing of separate Company Summons for Direction and Company Scheme Petition by Crest Steel & Power Pvt. Ltd., the Transferee Company, was dispensed with. 4. The Advocate appearing on behalf of the Petitioners has stated that the Petitioners have complied with all the requirements as per the directions of this Court and they have filed necessary Affidavits of compliance in the Court. Moreover, Petitioners undertake to comply with all statutory requirements, if any, as required under the Companies Act, 1956 and the rules made thereunder. The undertaking is accepted. 5. The Regional Director has filed an Affidavit stating therein that it appears that the Scheme is not prejudicial to the interest of the shareholders and public. - 3 - 6. The Official Liquidator has filed his report stating that the affairs of the Transferor Companies have been conducted in a proper manner and that the Transferor Companies may be ordered to be dissolved. 7. One Mr. Dilip Angara, Proprietor of Jayshree Metal & Engineering Company had filed his Affidavit dated 17th March, 2011 objecting to the Scheme of Amalgamation. The said Mr. Dilip Angara has filed a further affidavit dated 15th April, 2011 stating that his dues are fully paid off and he does not have any objection to the Scheme of Amalgamation. The same is noted. 8. State Trading Corporation of India Limited has objected to the sanction of the Scheme and has filed an affidavit dated 17th June 2011 objecting to the proposed Scheme. It is stated in the said Affidavit that a Memorandum of Agreement dated 21st August 2007 was executed with the First Transferor Company which is renewed and revalidated upto 20th September 2011 and that pursuant to the said Memorandum of Agreement 65 Letters of Credit were established and that as of date 3 Letters of Credit valued at Rs.80 crores approximately are overdue. 9. The sole objection raised by State Trading Corporation of India Limited is that it is a creditor of the First Transferor Company and that its dues ought to be repaid or secured by the Transferee Company by furnishing a Bank Guarantee prior to the sanction of the Scheme of Amalgamation. It is contended that if their dues are not paid, the Petition be dismissed with costs in the interest of justice. 10. In reply to the aforesaid objection the Petitioner submits that the Clauses 7 and 8 of the proposed Scheme of Amalgamation - 4 - envisage that the entire assets and liabilities of the Transferor Companies shall be transferred to the Transferee Company. Consequently, all liabilities of the Transferor Companies shall become the liabilities of the Transferee Company. State Trading Corporation of India Limited will be entitled to recover its legitimate dues from the Transferee Company. The Petitioners have also filed a Rejoinder Affidavit dated 21st June 2011 wherein it is stated that on sanction of the Scheme of Amalgamation, the Networth of the Transferee Company will be Rs. 522.58 crores. Hence, the Transferee Company will be a financially sound and will have a large asset base available to State Trading Corporation of India Limited in the event that State Trading Corporation of India Limited has to adopt legal proceedings for recovery of its legitimate dues. From a perusal of the Balance Sheets annexed to the Petition, it is evident that the Transferor Companies and the Transferee Company are financially sound companies and are able to meet their debts as and when they become due and payable. State Trading Corporation of India Limited has not denied the assertion of the aforesaid fact. 11. The Counsel for the Petitioner that the Scheme of Amalgamation does not seek any compromise with the creditors of the Transferor Companies and that a creditor such as State Trading Corporation of India Limited is not entitled to treat the present Petitions as a tool to recover monies or coerce the company to agree to pay the dues of State Trading Corporation of India Limited. Further, State Trading Corporation of India Limited must show that the Scheme is patently unfair to the members or creditors or any class of them or it is against public interest or against public policy. In support of this submission, the Petitioners rely upon the order passed by this Hon’ble Court in the matter of Zee Interactive Multimedia Limited reported in 2002 (4) BCR 137 at paragraph numbers 16 and 18. - 5 - 12. The Counsel further draw my attention to the order passed by the Court in the matter of Mayfair Ltd. and Zodiac Clothing Co. Ltd. reported in 2004 (2) BCR 235 at paragraph number 8 wherein it is stated that a creditor in order to raise a valid objection to the sanction of the Scheme of Amalgamation, ought to satisfy the following requirements: (a) that there is a debt due to him and that the debt is admitted by the company or the Court prima facie comes to the conclusion that the debt is due; (b) that the creditor would be adversely affected by sanctioning of the Scheme; (c) the Scheme is unjust and unfair to the creditors or any class of creditors to whom the objecting creditor belongs. The Counsel for the Petitioners, therefore submits that the objection raised by the State Trading Corporation of India Limited is devoid of any substance or merit and that the same ought to be rejected. 13. State Trading Corporation of India Limited has not made out any case that the present Scheme is unfair to the members or to the creditors or any class of creditors or the scheme is prejudicial to their interest. It is not the case of State Trading Corporation of India Limited that the creditor would be adversely affected by sanctioning of the Scheme or that the Scheme is unjust and unfair to them or any class of creditors to whom the objecting creditor belongs. The objection of State Trading Corporation of India Limited also does not satisfy the criteria laid down by this Court in the above referred judgement of Mayfair Ltd. & Zodiac Clothing Co. Ltd. It is not the case - 6 - of STC that the creditor would be adversely affected by sanctioning of the Scheme or that the Scheme is unjust and unfair to them or any class of creditors to whom the objecting creditor belongs. State Trading Corporation of India Limited has merely stated that it is a creditor of the First Transferor Company and its dues are to be paid or secured by the bank guarantee before the scheme is sanctioned by this court. There is no case made out that the proposed Scheme of Amalgamation is malafide or fraudulent or opposed to public policy. In view of the aforesaid legal position, the sole objection raised by STC deserves to be rejected. 14. From the material 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. 15. Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No.43 of 2011 and Company Scheme Petition No.44 of 2011 are made absolute in terms of prayer clauses (a) to (j) of the respective Petitions. 16. The Petitioners to lodge a copy of this Order and the Scheme duly authenticated by the Company Registrar, High Court (O.S.), Bombay, with the concerned Superintendent of Stamps for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of the order. 17. The Petitioners in both the Petitions to pay costs of Rs.10,000/- each to the Regional Director, Western Region, Mumbai, and also to the Official Liquidator. Costs to be paid within four weeks from today. 18. Filing and issuance of the drawn up Order is dispensed with. - 7 - 19. All authorities concerned to act on a copy of this order alongwith the Scheme duly authenticated by Company Registrar, High Court (O.S.), Bombay. (S. J. Kathawalla, J.)