-: 1 :- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY PETITION NO.359 OF 2008 CONNECTED WITH COMPANY APPLICATION NO.440 OF 2008 In the matter of Scheme of Arrangement and Amalgamation between New Holland Tractors (India) Private Limited with Fiat India Private Limited and their respective shareholders. Fiat India Private Limited : Petitioner ... Mr.Hemant Sethi i/b. Hemant Sethi & Co., for the petitioner. Mr.Joy Bhattacharya i/b. Prism Juris for objector. Mr.C.J.Joy i/b. S.K.Mohapatra for Regional Director. ... CORAM : S.A.BOBDE, J. DATE : AUGUST 08, 2008. P.C. 1. The petitioner - Fiat India Private Limited - seeks approval of the Scheme of Arrangement and Amalgamation between New Holland Tractors (India) Private Limited with Fiat India Private Limited under sections 391 and 394 of the Companies Act, 1956, hereinafter referred to as "the Act". A meeting of the shareholders and creditors was -: 2 :- dispensed with by an order dated 4.4.2008. The requirement of obtaining the consent of the creditors has also been dispensed with on the undertaking that the company has issued individual notices to all creditors. An affidavit of service pointing out that individual notices have been issued to all the creditors by registered post A/D. has been filed. In pursuance of the notices, an objection has been raised by one of the objectors i.e. Divesh Goyal, partner of M/s.Kalyan Auto Sales, who claims to an unsecured creditor of the petitioner company in the sum of Rs.1,23,62,436/- inclusive of interest at 24% thereon. The extent of liability is denied by the respondent. According to the learned counsel for the objector, the principal amount that is due is about Rs.25 lakhs. According to the learned counsel for the company, the amount that is due is Rs.11,931/- which the company claims to have already paid. 2. Equity and preference shareholders of the company have given their consent to the arrangement. 3. The learned counsel for the objector pointed out from the balance-sheet of the company that the company has outstanding unsecured loans of Rs.1,155,000,000/- and current liabilities are Rs.1,387,788,745/-. The learned counsel also points out from the auditor’s report that the -: 3 :- company has not deposited certain amounts before various authorities as follows:- "............ excise duty of Rs.3,918,276,129/- (pending before Supreme Court (Rs.3,111,649,260/-)/ Central Excise and Service-tax Tribunal (Rs.154,906,052/-)/ Commissioner (Rs.647,636,502/-)/Commissioner (Appeals) (Rs.3,953,528/-)/ Assistant Commissioner (Rs.130,787/-)/ sales-tax of Rs.714,141,288/- (pending before the Sales-tax Tribunal (Rs.32,690/-)/ Commissioner (Appeals) (Rs.8,853,863/-)/ Deputy Commissioner (Appeals) (Rs.704,837,180/-)/ Deputy Commissioner (Rs.356,245/-)/ Assistant Commissioner (Rs.61,310/-) and income-tax of Rs.825,058,524/- (pending before Income-tax Appellate Tribunal)." It is the contention of the objector that the company is in financial doldrums. It is difficult to see why the merger should be refused on those grounds. 4. It may, however, be noted that there is no submission made on behalf of the objector which may lead to the -: 4 :- conclusion that the financial position of the company would, in any way, deteriorate as a result of the merger. It appears that the financial position is likely to improve and the company has referred to the position of the share capital before and after the merger as follows:- "Share Capital of Fiat India Private Limited pre merger Particulars Amount (In Rs.) ------------- --------------- Authorised Capital 15,00,00,000 Equity shares of 15,000,000,000 Rs.100 each 5,00,00,000 9% Preference Shares 5,000,000,000 of Rs.100 each. --------------- Total 20,000,000,000 Issued, Subscribed and Paid-up capital 381,56,864 Equity Shares of 3,815,686,400 Rs.100 each. 6,86,472 9% Preference Shares 68,647,200 of Rs.100 each. --------------- Total 3,884,333,600 ---------------- Share Capital of Fiat India Private Limited post merger. Particulars Amount (In Rs.) ------------- --------------- Authorised Capital 3,00,00,000 Class "A" equity shares of Rs.100 each 3,000,000,000 -: 5 :- 12,00,00,000 Class "B" equity shares of Rs.100 each. 12,000,000,000 5,00,00,000 9% Preference Shares of Rs.100 each. 5,000,000,000 ---------------- Total 20,000,000,000 ---------------- Issued, Subscribed and Paid-up capital 74,45,916 Class "A" equity shares of Rs.100 each. 744,591,600 11,67,23,086 Class "B" equity shares of Rs.100 each. 11,672,308,600 6,86,472 9% Preference Shares of Rs.100 each. 68,647,200 --------------- Total 12,485,547,400" ---------------- 5. It was further argued by the learned counsel for the objector that the proposal should not be allowed because the company proposes to cancel 90.04 per cent of its equity capital. Though the proposal by the company is to cancel 90.04 per cent of its equity capital by paying 0.48 paise per share, the position of the share capital pre-merger and post-merger will be as given above. The merger appears to be beneficial to the transferee-company, in view of the financial position of the transferor company which shows the net current assets of the transferee company to be Rs.316,29,82,000/- for the year ending 31.12.2007 which is an improvement over its net current assets of the year ending 31.12.2006 which is Rs.241,57,54,000/-. The transferee company -: 6 :- seems to be making substantial profits. In any case, while considering such an objection, it is important to see how the interest of the objectors could be adversely affected. There is nothing brought on record to show how the interest of the objectors would be adversely affected. Only some negative financial aspects of the transferee company has been pointed out without showing how the merger would make the financial position of the company worse. 6. In Emco Ltd. in Re, reported in (2004) 3 Comp. LJ 411 (Bom), this Court observed:- "Considering overall view of the scheme of the arrangement in question as well as the affidavits filed to oppose the scheme by objections, as raised by the respective creditors, and after considering the merits of the objections by the creditors, it is clear that such creditors cannot object to the sanctioning of the arrangement in question. If liabilities or dues are in dispute, unless those disputes or liabilities are settled in appropriate court or forum in appropriate proceedings, sanction of such scheme or arrangement -: 7 :- cannot be halted or stopped or delayed. All creditors or parties are free to take appropriate steps to recover those amounts, to have those amounts settled or crystallised by appropriate forum or court. The Company Court at this stage is not considering the case of any undisputed amount between the creditors and company. In the present case, petitioner’s affidavit as well as material placed on record are sufficient to demonstrate that the petitioner company has not admitted the said amount and in fact is disputing vehemently the said exaggerated amount. The financial position of the company is sufficient to cover those liabilities or dues, if any. At this stage, therefore, this, by itself, cannot be the reason to halt sanction of the scheme of arrangement." The above observations apply in equal force to the present case. 7. In this view of the matter, the objection is rejected and the proposed scheme is sanctioned. The Company -: 8 :- Petition is made absolute in terms of prayer clauses (a) to (c). 8. The petitioner company to lodge a copy of this order and the Scheme with the concerned Superintendent of Stamps for the purpose of adjudication of stamp duty payable, if any, on the same within 30 days of obtaining the authenticated and/or certified copy of this order. 9. The petitioner to pay costs of Rs.7,500/- to the Regional Director. Costs to be paid within four weeks from today. 10. Filing and issuance of the drawn up order is dispensed with. 11. All authorities to act on a copy of this order duly authenticated by the Company Registrar of this Court. S.A. BOBDE, J.