COMP/107/2007 1/13 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY PETITION No. 107 of 2007 With COMPANY PETITION No. 108 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE K.A.PUJ ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= AVANI PETROCHEM PVT. LTD. - Petitioner(s) Versus . - Respondent(s) ========================================================= Appearance : MR HARMISH K SHAH for Petitioner(s) : 1, MR IQBAL SHAIKH for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE K.A.PUJ Date : 08/05/2008 ORAL JUDGMENT 1. These petitions filed by two petitioners for sanction of a scheme of arrangement in the COMP/107/2007 2/13 JUDGMENT nature of amalgamation of Amishi Petrochem Pvt. Ltd., - transferor Company with Avni Petrochem Pvt. Ltd., - transferee Company under Section 391 to Section 394 of the Companies Act, 1956. 2. It has been submitted that both transferor and transferee Companies belong to the same group of management and hence Board of Directors of these Companies thought it fit to restructure them through amalgamation for achieving synergic advantages. The amalgamated company would be in a position to maximize its profit through optimum utilization of its resources and minimizing the administrative and operative costs. The amalgamated company will have a much larger capital base, which will give it competitive edge and also provide financial requirements. Thus the proposed amalgamation would create synergy of operations, optimize cost, eliminate unnecessary administrative COMP/107/2007 3/13 JUDGMENT overheads, results into pooling of financial resources etc. and all would be to the mutual advantage of all the transferor and transferee companies. It has been further submitted that scheme is proposed to strengthen the financial position of transferee company and to minimize the administrative and other expenses. The amalgamation would enable the resultant company to attract superior managerial talents to manage its affairs thereby offer better satisfaction to its consumers and users which would enhance the value of its shareholders and strengthen its market position in the field of business. 3. The transferor Company preferred Company Application No.99 of 2007 before this Court praying for dispensation of convening and holding meeting of the shareholders in view of the consent letters obtained from all the shareholders and placed on record of this COMP/107/2007 4/13 JUDGMENT Court and in view of the fact that there are no secured and unsecured creditors of the Company. 4. This Court vide its order dated 27.2.2007 passed in Company Application No.99 of 2007 dispensed with the meeting of equity shareholders of the transferor company as required to be convened under Section 391(2) of the Companies Act, 1956. 5. Similarly transferee Company preferred application being Company Application No.98 of 2007 before this Court wherein it was prayed that separate meeting of the secured creditors and unsecured creditors for an amount of more than Rs.5,000/- be held and convened for the purpose of considering, and if thought fit, approving with or without modifications, the arrangement embodied in the scheme. The transferee Company sought dispensation of convening and holding the COMP/107/2007 5/13 JUDGMENT meeting of the members of the company in view of the consent letters having been placed on the record of this Court. This Court allowed the said application vide its order dated 27.2.2007 passed in Company Application No.98/2007. This Court has also dispensed with the publication of advertisement for convening meeting in Gujarat Government Gazette. 6. The transferee company as directed and required by the order dated 27.2.2007 had sent notices convening the meetings alongwith a copy of the scheme, and also the copy of the explanatory statement under Section 393 of the Companies Act and the prescribed form of Proxy under certificate of posting to the secured and unsecured creditors. The notice of the meetings of the secured and unsecured creditor was also advertised as per the direction of this Court in Indian Express and Sandesh, Baroda edition on 22.3.2007. A copy COMP/107/2007 6/13 JUDGMENT of the affidavit of publication is filed before this Court on 6.4.2007. 7. The meeting of the secured creditor duly convened in accordance with the order dated 27.2.2007 was held on 16.4.2007. The sole secured creditor did not to attend the said meeting. However, they conveyed their consent to the proposed scheme of amalgamation. The meeting of the unsecured creditors held on 16.4.2007 was attended to personally or by Proxy or through authorised representatives by 24 unsecured creditors of the aggregate value of Rs.63785649.58. The chairman of the meeting has filed report before this Court and scheme was approved by the requisite majority of the secured as well as unsecured creditors. 8. Both these petitions were admitted by this Court on 11.5.2007. They were duly advertised in the newspapers, namely, Indian COMP/107/2007 7/13 JUDGMENT Express (English daily) and Sandesh (Gujarati daily), both of Baroda edition. Publication in Government Gazette was dispensed with, as directed in the order dated 11.5.2007. An affidavit dated 13.8.2007 was filed confirming the said publication. No one has come forward with any objection to the said petitions even after the publication. 9. Notice of the petition was served upon the Official Liquidator for the transferor company. A report dated 7.8.2007 has been filed by the Official Liquidator and the same confirms that the affairs of the transferor company have not been conducted in a manner prejudicial to the interest of its members, creditors or public interest. 10. Notice of the petition has been served upon the Central Government and Mr.Iqbal Shaikh, learned Central Government Counsel appears for the Central Government. An affidavit COMP/107/2007 8/13 JUDGMENT dated 1.8.2007 has been filed by Mr. V.K.Khubcandani, Registrar of Companies alongwith letter of Regional Director dated 26.7.2007 wherein same observations are made with regard to the proposed scheme of amalgamation. The issue so raised have been dealt with vide affidavit dated 13.8.2007 filed on behalf of the petitioner Company. 11. Mr.Harmish K. Shah, learned advocate appearing for the petitioner Company submitted that the issues raised vide letter dated 26.7.2007 by the Regional Director are covered under widely accepted principle of 'Single Window Clearance'. He has further submitted that in the scheme of amalgamation under Section 391/394 of the Companies Act, 1956 it is not necessary for the transferee company to comply with the provisions of Section 94/97 read with Scheduled-X of the Companies Act, 1956 for increase in the authorised share capital to enable it to COMP/107/2007 9/13 JUDGMENT issue the shares to the share holders of the transferor Company in terms of the scheme of amalgamation. He has further submitted that the proceedings under Section 391 to 394 of the Companies Act, 1956 are in the nature of a single window clearance and there does not appear to be any reason for separate formalities to be followed. The share capital of the transferor company becomes the authorised share capital of the transferee company on sanction of the scheme by this Court. He has further submitted that the transferee Company would comply with the requirements of Section 94/97 of the Companies Act, 1956 for any increase in its authorised share capital beyond the amount of the combined authorised share capital of the transferor and transferee company. He has further submitted that the latest financial position of the transferee and transferor company are submitted alongwith the affidavit-in-reply filed on 13.8.2007. He COMP/107/2007 10/13 JUDGMENT has also submitted that no alterations either in domicile or in the object clauses of the Memorandum of Association of the transferee Company are sought to be made. It is, therefore, not necessary to comply with the provisions of Section 17 of the Companies Act, 1956. The Clause 12 of the scheme aims to alter the capital clause of the Memorandum of Association of the transferee company consequent upon the increase in its authorised share capital sought to be made by clause 13 of the scheme. Clause 13 of the scheme clearly stipulates that the capital clause of the Memorandum of Association stands altered accordingly. He has, therefore, submitted that the transferee company is not required to comply with the provision of Section 17 of the Companies Act. 12. The same issues raised by the Regional Director have been dealt with by this Court in Company Petition No.54 of 2008 and the COMP/107/2007 11/13 JUDGMENT said petition was disposed of on 6.5.2008 wherein issue regarding single window clearance was involved. So far as present petitions are concerned, the Company in its affidavit has raised the issue in relation to Clauses 12 and 13 of the proposed scheme of amalgamation proposing changes in the Capital Clause of the Memorandum and Articles of Association of the Company. The Court has dealt with such issues in the above referred Company Petition. For the reasons stated therein and in view of the various authorities considered by the Court in the said decision, the Court is satisfied that since all these changes are proposed to be effected as an integral part of the scheme, the approval granted by the shareholders at the meeting to the scheme as a whole amounts to approval to all such incidental proposals and no separate procedure is required to be followed as envisaged by Sections 17, 31, 94, and 97 respectively. It goes without saying COMP/107/2007 12/13 JUDGMENT that when this Court sanctions the scheme, the scheme is sanctioned as a whole with all its clauses and proposals. The certified copy of the order sanctioning the scheme by this Court, when filed with the Registrar of Companies, shall be treated as intimation to the Registrar of Companies and it shall take note of all the changes proposed and sanctioned by the Court. In view of the same, no separate compliances of aforesaid provisions of the Companies Act, 1956 are necessary. 13. Having gone through the petitions and being satisfied that the amalgamation would be in the interest of the Companies and their members and creditors, prayer in terms of para 22(a) of the Company Petition No.107 of 2007 and para 22(e) of the Company Petition No.108 of 2007 are hereby granted. 14. The petitions are disposed of accordingly. COMP/107/2007 13/13 JUDGMENT So far as the costs to be paid to the learned Central Government Counsel is concerned, the same are quantified Rs.3,500/- per petition. The same may be paid to the learned advocate Shri Iqbal Shaikh. (K. A. PUJ, J.) kks