1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY SCHEME PETITION NO.320 OF 2010 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.174 OF 2010 Ethix Realtors Private Limited …Petitioner/ Transferor Company AND COMPANY SCHEME PETITION NO.321 OF 2010 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.173 OF 2010 In the matter of the Companies Act, 1956 AND In the matter of Sections 391 and 394 of the Companies Act, 1956 AND In the matter of Scheme of Arrangement Between Ethix Realtors Private Limited - Transferor Company AND Euro Ceramics Limited - Resulting Company / Transferee Company Euro Ceramics Limited ...Petitioner/ Transferee Company Mr. Sanjay Udeshi i/b M/s Sanjay Udeshi & Co, Advocate for the Petitioners in both Petitions. 2 Mr. C.J.Joy and Mr.Riyaz Chagla i/b Mr. H. P. Chaturvedi, for the Regional Director in both Petitions Coram: S. J. Vazifdar, J. Date : 15th April, 2011 P.C:- 1. Heard Learned Counsel for the parties. 2. The sanction of the court is sought under Sections 391 to 394 of the Companies Act, 1956 to the Scheme of Arrangement between Ethix Realtors Private Limited, the Transferor Company and Euro Ceramics Limited, the Resulting Company / Transferee Company. The Scheme provides for Demerger / Spin off of the Mumbai Realty Division of Ethix Realtors Private Limited as a going concern to Euro Ceramics Limited. 3. Counsel appearing on behalf of the Petitioners has stated that the Petitioners have complied with all requirements as per directions of this Court and they have filed necessary affidavits of compliance in the court. Moreover, Petitioner Companies through their counsel also undertakes to comply with all statutory requirements, if any, as required under the Companies Act, 1956 and the Rules made thereunder. The said undertaking is accepted. 3 4. The Regional Director has filed his affidavit stating therein that save and except what is stated in paragraphs 6(a) and 6(b) of the said Affidavit, it appears that the Scheme is not prejudicial to the interest of the shareholders and public. In paragraphs 6(a) and 6(b) of his Affidavit, the Regional Director has stated that:- “6(a). Clause 12(c) of the scheme provides that excess of assets over liability will be credited as “General Reserve” and treated as “Free Reserve”. In this regard it is submitted that the reserves so created be classified as reserves arising out of arrangement and that reserve shall not be treated as Free Reserve and shall not be available for distribution of dividend by the Resulting Company. In this connection, the Resulting Company may be directed to furnish an undertaking. (b) By the present scheme of arrangement there is Demerger of only immovable property alone from the Demerged Company into Resulting Company. Any tax liability arising out of capital gain in this regard shall be paid by the Demerged Company.” 5. The Counsel for the Petitioner submits that the both the Petitioner Companies have filed their respective Affidavits in reply to the observations by the Regional Director. As far as the observation in paragraph 6(a) is concerned, the Resulting Company has given an undertaking that the reserves arising out of the Demerger would not be treated as free reserves and shall not be available for distribution of dividend by the Resulting Company. The said undertaking is accepted. 4 6. So far as the observation in paragraph 6 (b) is concerned, the Demerged Company in its Affidavit has raised objection to the observation and stated that there is a demerger of the whole of the undertaking i.e. Mumbai Realty Division and not the immovable property alone and that the demerger is in compliance and in accordance with the provisions of the Income Tax Act, 1961 and hence there is no income tax liability which arises on the demerger of the undertaking. However, the Demerged Company has given an undertaking that the tax liability, if any, arising on Demerger under the Income Tax Act, 1961, the same shall be paid by the Demerged Company. The said undertaking is also accepted. 7. 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. None of the parties concerned have come forward to oppose the Scheme. 8. Since all the requisite statutory compliances have been fulfilled, I am of the considered view that the scheme shall have to be sanctioned, subject to the conditions as raised by the Regional Direction in paragraphs 6(a) and 6(b) of his common Affidavit. In the circumstances, both the Petitions are made absolute in terms of prayer Clause (A) of the respective Petition. 5 9. The Transferee Company 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 this Order. 10. The Petitioners in both the Company Scheme Petitions to pay costs of Rs.10,000/- each to the Regional Director, Western Region, Mumbai. 11. Filing and issuance of the drawn up order is dispensed with. 12. All concerned authorities to act on a copy of this order alongwith the Scheme duly authenticated by Company Registrar, High Court, Bombay. (S. J. VAZIFDAR, J.)