IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL ORIGINAL ORIGINAL CIVIL JURISDICTION CIVIL JURISDICTION CIVIL JURISDICTION COMPANY COMPANY COMPANY PETITION PETITION PETITION NO.122 OF 2007 NO.122 OF 2007 NO.122 OF 2007 connected connected connected with with with COMPANY COMPANY COMPANY APPLICATION APPLICATION APPLICATION NO.1119 OF 2006 NO.1119 OF 2006 NO.1119 OF 2006 Core Core Core Projects Projects Projects and Technologies Limited and Technologies Limited and Technologies Limited ...... Petitioner Company Petitioner Company Petitioner Company Mr.Rishab Mr.Rishab Mr.Rishab Shah i.b Mr.Raval Shah for Shah i.b Mr.Raval Shah for Shah i.b Mr.Raval Shah for Petitiioner Petitiioner Petitiioner Company Company Company Mr.C.J.Joy Mr.C.J.Joy Mr.C.J.Joy for for for RDC RDC RDC Ms.K.V.Gautam, Ms.K.V.Gautam, Ms.K.V.Gautam, Dy.O.L.present Dy.O.L.present Dy.O.L.present CORAM CORAM CORAM : : : DR.D.Y.CHANDRACHUD, J DR.D.Y.CHANDRACHUD, J DR.D.Y.CHANDRACHUD, J DATED DATED DATED : : : 15th June, 2007 15th June, 2007 15th June, 2007 P.C. P.C. P.C. 1.1.1. The sanction of the Court is sought to a scheme The sanction of the Court is sought to a scheme The sanction of the Court is sought to a scheme of of of amalgamation under Sections 391 to 394 of the amalgamation under Sections 391 to 394 of the amalgamation under Sections 391 to 394 of the Companies Companies Companies Act, 1956. The petition before this Act, 1956. The petition before this Act, 1956. The petition before this Court Court Court is is is by the transferee company. The transferor by the transferee company. The transferor by the transferee company. The transferor isisis a company by the name of Software Technical a company by the name of Software Technical a company by the name of Software Technical Services Services Services Inc. and is incorporated in the State of Inc. and is incorporated in the State of Inc. and is incorporated in the State of Georgia Georgia Georgia in the U.S. The transferee company has in the U.S. The transferee company has in the U.S. The transferee company has convened convened convened a meeting of its share holders on 23rd a meeting of its share holders on 23rd a meeting of its share holders on 23rd December, December, December, 2006 at which a resolution in support of 2006 at which a resolution in support of 2006 at which a resolution in support of the the the proposed scheme was duly carried in accordance proposed scheme was duly carried in accordance proposed scheme was duly carried in accordance with with with law. The transferee has no secured or law. The transferee has no secured or law. The transferee has no secured or unsecured unsecured unsecured creditors. creditors. creditors. 2.2.2. The Regional Director has filed an affidavit on The Regional Director has filed an affidavit on The Regional Director has filed an affidavit on 6th 6th 6th June, 2007 raising the following objections : June, 2007 raising the following objections : June, 2007 raising the following objections : "(a) "(a) "(a) As transferor company is registered in As transferor company is registered in As transferor company is registered in the the the State of Georgia, Atlanta, USA, its State of Georgia, Atlanta, USA, its State of Georgia, Atlanta, USA, its dissolution dissolution dissolution without without without winding up is subject to winding up is subject to winding up is subject to that that that country’s country’s country’s laws laws laws; (b) (b) (b) In normal conditions the loss to In normal conditions the loss to In normal conditions the loss to transferee transferee transferee company as contributory is of $ company as contributory is of $ company as contributory is of $ 4,60,291 4,60,291 4,60,291 whereas on amalgamation the extra whereas on amalgamation the extra whereas on amalgamation the extra 2 liabilities liabilities liabilities taken over by the transferee taken over by the transferee taken over by the transferee company company company in in in addition is $ 10,46,467 addition is $ 10,46,467 addition is $ 10,46,467; (c) (c) (c) For considering and sanctioning the For considering and sanctioning the For considering and sanctioning the Scheme Scheme Scheme of Amalgamation, necessary approval of Amalgamation, necessary approval of Amalgamation, necessary approval of of of RBI RBI RBI is also required. " is also required. " is also required. " 3.3.3. In so far as the first objection is concerned, In so far as the first objection is concerned, In so far as the first objection is concerned, the the the transferor is a wholly owned subsidiary of the transferor is a wholly owned subsidiary of the transferor is a wholly owned subsidiary of the transferee. transferee. transferee. The transferee company has produced on The transferee company has produced on The transferee company has produced on record record record a certificate of merger issued by the a certificate of merger issued by the a certificate of merger issued by the competent competent competent authority in the State of Georgia in the authority in the State of Georgia in the authority in the State of Georgia in the U.S. U.S. U.S. for sanctioning the amalgamation of the for sanctioning the amalgamation of the for sanctioning the amalgamation of the transferor transferor transferor company in accordance with the laws of company in accordance with the laws of company in accordance with the laws of the the the State State State of Georgia. A similar objection has also of Georgia. A similar objection has also of Georgia. A similar objection has also been been been considered and dealt with in a Judgment dated considered and dealt with in a Judgment dated considered and dealt with in a Judgment dated 28th 28th 28th April, 2006 of a learned Single Judge of this April, 2006 of a learned Single Judge of this April, 2006 of a learned Single Judge of this Court Court Court in the matter of Zenta Private Limited in the matter of Zenta Private Limited in the matter of Zenta Private Limited (Company (Company (Company Petition No.229 of 2006). In the judgment Petition No.229 of 2006). In the judgment Petition No.229 of 2006). In the judgment of of of the learned Single Judge, it has been held that the learned Single Judge, it has been held that the learned Single Judge, it has been held that the the the provisions of Sections 391 to 394 of the provisions of Sections 391 to 394 of the provisions of Sections 391 to 394 of the Companies Companies Companies Act, 1956 do not prohibit the Act, 1956 do not prohibit the Act, 1956 do not prohibit the amalgamation amalgamation amalgamation of a foreign corporate body with an of a foreign corporate body with an of a foreign corporate body with an Indian Indian Indian company. The first objection is therefore, company. The first objection is therefore, company. The first objection is therefore, without without without merit. merit. merit. 4.4.4. In so far as the second objection is concerned, In so far as the second objection is concerned, In so far as the second objection is concerned, the the the petitioner has filed an affidavit of its petitioner has filed an affidavit of its petitioner has filed an affidavit of its Company Company Company Secretary dated 15th June, 2007 in which Secretary dated 15th June, 2007 in which Secretary dated 15th June, 2007 in which the the the following averments have been made: following averments have been made: following averments have been made: "In "In "In so far as the reference to the loss so far as the reference to the loss so far as the reference to the loss being being being incurred by the Transferee Company in incurred by the Transferee Company in incurred by the Transferee Company in the the the sum of US $ 4,60,291 is concerned, the sum of US $ 4,60,291 is concerned, the sum of US $ 4,60,291 is concerned, the said said said sum represents the equity contribution sum represents the equity contribution sum represents the equity contribution 3 of of of the transferee company in the transferor the transferee company in the transferor the transferee company in the transferor company company company which gets cancelled. The extra which gets cancelled. The extra which gets cancelled. The extra liabilities liabilities liabilities in the sum of US $ 10,46,467 is in the sum of US $ 10,46,467 is in the sum of US $ 10,46,467 is concerned, concerned, concerned, the said sum represents the the said sum represents the the said sum represents the carried carried carried forward forward forward losses which will be set off losses which will be set off losses which will be set off against against against the profits of the transferee the profits of the transferee the profits of the transferee company. company. company. As per the balance sheet for the As per the balance sheet for the As per the balance sheet for the year year year ending 31 March 2006 the transferee ending 31 March 2006 the transferee ending 31 March 2006 the transferee company company company has made a profit after tax of has made a profit after tax of has made a profit after tax of Rs.5,08,93,148. Rs.5,08,93,148. Rs.5,08,93,148. In the consolidated In the consolidated In the consolidated financial financial financial statement the Profit After Tax is statement the Profit After Tax is statement the Profit After Tax is Rs.12,16,99,002. Rs.12,16,99,002. Rs.12,16,99,002. The loss on being absorbed The loss on being absorbed The loss on being absorbed by by by the Transferee Company was approximately the Transferee Company was approximately the Transferee Company was approximately Rs.4,70,91,015 Rs.4,70,91,015 Rs.4,70,91,015 (approximately the rate of (approximately the rate of (approximately the rate of conversion conversion conversion of US $ to INR Rs.45 at that of US $ to INR Rs.45 at that of US $ to INR Rs.45 at that time. time. time. Thus, the transferee company does not Thus, the transferee company does not Thus, the transferee company does not suffer suffer suffer any any any financial set back. " financial set back. " financial set back. " The The The aforesaid averment which has not been aforesaid averment which has not been aforesaid averment which has not been controverted controverted controverted will show that the proposed scheme will show that the proposed scheme will show that the proposed scheme would would would not result in a financial set back to the not result in a financial set back to the not result in a financial set back to the transferee transferee transferee company. company. company. 5.5.5. In so far as the third objection is concerned, In so far as the third objection is concerned, In so far as the third objection is concerned, the the the attention of the Court is drawn to a circular attention of the Court is drawn to a circular attention of the Court is drawn to a circular issued issued issued by the Reserve Bank of India on 12th May, by the Reserve Bank of India on 12th May, by the Reserve Bank of India on 12th May, 2005 2005 2005 (A.P.DIR Series) Circular No.42). The (A.P.DIR Series) Circular No.42). The (A.P.DIR Series) Circular No.42). The circular circular circular which has been issued to all banks which has been issued to all banks which has been issued to all banks authorised authorised authorised to deal in foreign exchange enumerates to deal in foreign exchange enumerates to deal in foreign exchange enumerates terms terms terms of liberalisation of foreign investment by of liberalisation of foreign investment by of liberalisation of foreign investment by Indian Indian Indian companies. Under the automatic route for companies. Under the automatic route for companies. Under the automatic route for overseas overseas overseas investment, eligible Indian entities are investment, eligible Indian entities are investment, eligible Indian entities are now now now permitted to invest in overseas Joint Ventures permitted to invest in overseas Joint Ventures permitted to invest in overseas Joint Ventures (JVOs) (JVOs) (JVOs) up to 200 per cent of their net worth. In up to 200 per cent of their net worth. In up to 200 per cent of their net worth. In the the the affidavit of the Company Secretary of the affidavit of the Company Secretary of the affidavit of the Company Secretary of the transferee transferee transferee company dated 15th June, 2007 it has company dated 15th June, 2007 it has company dated 15th June, 2007 it has been been been stated that the net worth of the transferee stated that the net worth of the transferee stated that the net worth of the transferee company company company at the relevant time was Rs.3.12 crores. at the relevant time was Rs.3.12 crores. at the relevant time was Rs.3.12 crores. 4 The The The cost of acquisition of the transferor was cost of acquisition of the transferor was cost of acquisition of the transferor was equivalent equivalent equivalent to Rs.1.80 crores which was therefore to Rs.1.80 crores which was therefore to Rs.1.80 crores which was therefore within within within the permissible limits as set out in the the permissible limits as set out in the the permissible limits as set out in the circular circular circular of the Reserve Bank of India dated 12th of the Reserve Bank of India dated 12th of the Reserve Bank of India dated 12th May, May, May, 2005. 2005. 2005. 6.6.6. In the circumstances, the objections which have In the circumstances, the objections which have In the circumstances, the objections which have been been been raised by the Regional Director have been raised by the Regional Director have been raised by the Regional Director have been adequately adequately adequately answered. answered. answered. 7.7.7. All the requisite statutory requirements have All the requisite statutory requirements have All the requisite statutory requirements have been been been duly fulfilled. There is no other objection duly fulfilled. There is no other objection duly fulfilled. There is no other objection toto to the scheme of amalgamation other than those the scheme of amalgamation other than those the scheme of amalgamation other than those already already already dealt dealt dealt with hereinabove. The Court has been with hereinabove. The Court has been with hereinabove. The Court has been informed informed informed by learned counsel for the Regional by learned counsel for the Regional by learned counsel for the Regional Director Director Director that the scheme of amalgamation as that the scheme of amalgamation as that the scheme of amalgamation as proposed proposed proposed does not operate against the interest of does not operate against the interest of does not operate against the interest of the the the public or of the share holders, or creditors or public or of the share holders, or creditors or public or of the share holders, or creditors or employees. employees. employees. 8.8.8. In the circumstances, the Company Petition will In the circumstances, the Company Petition will In the circumstances, the Company Petition will have have have to be allowed and is accordingly made absolute to be allowed and is accordingly made absolute to be allowed and is accordingly made absolute inin in terms of prayer clauses (a) to (e). terms of prayer clauses (a) to (e). terms of prayer clauses (a) to (e). (Dr.D.Y.Chandrachud, (Dr.D.Y.Chandrachud, (Dr.D.Y.Chandrachud, J) J) J) 5 ...