IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY SCHEME PETITION NO. 411 OF 2011 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.283 OF 2011 Bharat Insulation Company (India) Limited …Petitioner/ Transferor Company AND COMPANY SCHEME PETITION NO. 412 OF 2011 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO.283 OF 2011 In the matter of the Companies Act, 1956; AND In the matter of Sections 391 to 394 of the Companies Act, 1956. AND In the matter of the Scheme of Arrangement between – Bharat Insulation Company (India) Limited with Jyoti Wire India Limited for Demerger of the Wire Manufacturing Undertaking known as Wire Manufacturing Division of Bharat Insulation Company (India) Limited as a going concern to Jyoti Wire India Limited. Jyoti Wire India Limited …Petitioner/ Transferee Company Mr. Sanjay Udeshi i/b M/s Sanjay Udeshi & Co, Advocate for the Petitioners in both Petitions. Mrs. Soma Singh, Counsel i/b Mr. H. P. Chaturvedi, for the Regional Director in both Petitions Coram: S.C. Dharmadhikari J. Date : 21st October, 2011 1 P.C.: 1. Heard Counsel for the parties. 2. The sanction of the court is sought under Sections 391 to 394 of the Companies Act, 1956 to a Scheme of Arrangement between Bharat Insulation Company (India) Limited, the Transferor Company and Jyoti Wire India Limited, the Resulting Company. 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, the Petitioner Companies through their counsel 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. 4. The Regional Director has filed an affidavit stating therein save and except stated in paragraph 6 (a), (b) and (c) of the said Affidavit, it appears that the Scheme is not prejudicial to the interest of the shareholders and public. In paragraph 6 (a), (b) and (c) of the said Affidavit it is stated that;- “6(a). In clause 11 (ii) (c) of the Scheme, it is stated that the excess of deficit, if any, shall be credited by the Resulting Company to its General Reserve Account or debited to Goodwill, as the case may be. In this connection, it is submitted that the Reserve arising out of this scheme shall not be utilized for the purpose of declaring dividend by the Resulting Company” 2 “6(b) Clause 7(viii) read with clause 16(B) of the scheme interalia provides for change of name of Demerged Company as well as Resulting Company. By this clause it is proposed to change the name of the Resulting Company by adopting the name of the Demerged Company and vice versa. There is no provision in the Companies Act for exchange of name. Further both the companies will continue to be in existence and therefore it is not possible to adopt the name of the other company. Besides the proposed swapping of names would invariably confuse and mislead the mind of the stakeholders of the both the companies and therefore it is not just and proper to allow this clause. Further more after Demerger of Wire Manufacturing Undertaking, the remaining business of the Demerged Company is only property development. Therefore, the existence name of the resulting company viz. Jyoti Wire India Limited will not be in consonance with that of its activities i.e. Property Development and hence, such name cannot be allotted to the Demerged Company. It is therefore suggested that these clauses may be deleted for the scheme. Further, it is submitted that any proposal for change of name is subject to its availability and procedure as is laid down in the Companies Act, 1956 and in the e- governance MCA- 21 system”. “6(c) Clause 16 (A) (a) of the scheme provides for split of authorized capital of the Transferor Company by transferring Rs. 350,00,000/- value of share capital representing equity share capital and Rs. 1,00,00,000/- value of preferential share capital to the resulting company by reducing Rs. 4,50,00,000/- from the existing authorized capital of the Transferor Company. In this regard, it is respectfully submitted that the transferee company can reduce its authorized capital is at all its Articles of Association of the company enables it to reduce its authorized capital and the reduction in the authorized capital is possible to the extent of that part of the authorized capital which has not 3 been granted to be subscribed or taken. In other words, unutilized part of the authorized capital alone can be reduced from the existing authorized capital. In this company as against Rs. 400,00,000/- authorized equity capital, company had already issued equity share capital to an extent of Rs. 340,00,000/-. Therefore, unutilized part of the authorized equity capital is only Rs. 60,00,000/-. In view of the above, the Transferor Company/ Demerged Company can reduce its unutilized equity part of the authorized capital of Rs. 60,00,000/- and by canceling Rs. 100,00,000/- as against preference share capital and bring down its existing authorized capital from Rs. 5,00,00,000/- to Rs. 3,40,00,000/-. In this scheme, it is proposed to reduce up to Rs. 150,00,000/- which is beyond the scope of Sec 94(1)(e) of the Companies Act, 1956. It is further submitted that even the authorized capital is reduced by Rs. 160,00,000/- by Demerged Company/ Transferor Company, that part of the unutilized authorized capital cannot be transferred to resulting company and hence, this clause is against the provisions of Section 94 of the Companies Act, 1956 and the same shall be deleted for the scheme. The deponent further submits in view of the submissions made herein above, sub clause (b) & (c) of Clause 16(A) of the scheme becomes redundant and the same shall be deleted for the scheme. 5. As far as the content of paragraph 6 (a) of the Affidavit of Regional Director is concerned the counsel appearing on behalf of the Petitioner Companies have tendered an Affidavit dated 19th October, 2011 stating that the reserves arising out of the Demerger shall not be utilized for 4 declaring dividend by the Resulting Company. The undertaking is accepted. 6. As far as the content of paragraph 6 (b) of the Affidavit of Regional Director is concerned the counsel appearing on behalf of the Petitioner Companies has tendered an Affidavit dated 19th October, 2011 stating that the the manufacturing activity of Bharat Insulation Company (India) Limited is demerging to Jyoti Wire India Limited alongwith all its benefits intellectual property rights, licenses etc and therefore it is the part of scheme that the name of the Transferee Company should be changed to Bharat Insulation Company (India) Limited. As all the intellectual property rights, Licenses, etc. are in the name of Bharat Insulation Company (India) Limited and therefore, it is necessary that the name of the Transferee Company be changed to Bharat Insulation Company (India) Limited. The Petitioners are agreeable to file necessary forms and comply with provisions of Section 21/23 of the Companies Act. As far as name of Demerged Company after demerger of the manufacturing division, it was proposed in Scheme that the same be changed to Jyoti Wire India Limited. However since Regional Director has raised an objection that after demerger the activity of demerged Company shall be only of property development and therefore they should not be given name Jyoti Wire India Limited and therefore the Petitioner Companies state that the name of demerged Company can be Jyoti Properties Limited or any other available name in this regard and the Petitioners agrees to accept the same and for 5 that purpose are agreeable to file necessary form and comply with provisions of Companies Act. The undertakings are accepted. 7. As far as the content of paragraph 6 (c) of the Affidavit of Regional Director is concerned the counsel appearing on behalf of the Petitioner Companies has tendered an Affidavit dated 19th October, 2011 stating that the Petitioner Companies are agreeable that Authorized Capital will not be split as mentioned in 16(A)(a) of the scheme accordingly clause 16(A)(a), 16(A)(b), 16(A)(c) shall stand deleted. The undertaking is accepted. 8. 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. 9. Since all the requisite statutory compliances have been fulfilled, both the Petitions are made absolute in terms of prayer Clause (a) of the respective Petitions. 10.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. 6 11.Petitioners in both the Company Scheme Petitions to pay costs of Rs. 10,000/- each to the Regional Director, Western Region, Mumbai. Costs to be paid within four weeks from today. 12.Filing and issuance of the drawn up order is dispensed with. 13.All concerned authorities to act on a copy of this order alongwith the Scheme duly authenticated by Company Registrar, High Court, Bombay. (S. C. Dharmadhikari, J.) 7