1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH, NAGPUR. ORDINARY ORIGINAL CIVIL JURISDICTIONAL COMPANY PETITION NO.15 OF 2009 CONNECTED WITH COMPANY APPLICATION NO. 108 OF 2009. In the matter of Scheme of Amalgamation of Solar Components Private Limited with Economic Explosives Limited and their respective Shareholders and Creditors. Solar Components Private Limited. ….Petitioner/Transferor Company WITH COMPANY PETITION NO.16 OF 2009 CONNECTED WITH COMPANY APPLICATION NO. 109 OF 2009. In the matter of Scheme of Amalgamation of Solar Components Private Limited with Economic Explosives Limited and their respective Shareholders and Creditors. Economic Explosives Limited. ….Petitioner/Transferor Company ------------------------ Mr. Anjan De, Advocate for Petitioners. Mr. S.K. Mishra, A.S.G.I., for Regional Director in both matters. Mr. R.K. Tiwari, Advocate for Official Liquidator in both matters. -------------------- 2 CORAM : B.P. DHARMADHIKARI, J. Date of reserving the order : 4th August, 2010. Date of pronouncement : 26th August, 2010. MINUTES OF ORDER. 1. Heard Shri Anjan De, learned Counsel for Petitioners, Shri S.K. Mishra, learned A.S.G.I., for Regional Director and Shri R.K. Tiwari, learned Counsel for Official Liquidator, in both matters. 2. The Company Petition Nos. 15 and 16 of 2009 filed by the aforesaid petitioners under Sections 391 to 394 of the Companies Act, 1956 is for the sanction of this Hon'ble Court to the Scheme of Amalgamation of Solar Components Private Limited (the Transferor Company) with Economic Explosives Limited (the Transferee Company) and their respective shareholders and creditors. 3. The registered address of both the petitioners is in Nagpur and hence the proceedings for the same has been undertaken before this Bench of the Bombay High Court. 4. It has been pointed out that vide order dated 20.11.2009 passed in Company Application No.108/2009 for the Transferor Company, the meeting of the Shareholders was dispensed with, as 3 Seven [7] Equity Shareholders of the Petitioner / transferor company have already given their consent to the scheme of Amalgamation. The meeting of the secured creditors of the Petitioner/Transferor Company was dispensed with since there was no Secured Creditors as on the date of the Company Application. The Petitioner/Transferor Company has given an undertaking to give an individual notice of final hearing of the Company petition to such unsecured creditors of the Petitioner /Transferor Company, who have outstanding balance of above Rs. 10,000/- (Rs. Ten thousand only) constitute 99.80% in the value of 57.89% in the numbers of total list of unsecured creditors of the Petitioner/Transferor Company confirms that the Petitioner/Transferor Company has sent the individual notice of final hearing of the Company petition to such unsecured creditors by registered post acknowledgment due, the list of the same is annexed as Exhibit -G, of the Company Petition No.15/2009. No unsecured creditors of the Petitioner /Transferor Company have come to this court for any objection for the Scheme of Amalgamation. 5. It has been pointed out that vide order dated 20.11.2009 passed in the Company Application No.109/2009 for the Transferee Company, the meeting of the Shareholders was dispensed with, as Seven [7] Equity Shareholders of the Petitioner / transferee company have already given their consent to the scheme of Amalgamation. The 4 meeting of the secured creditors of the Petitioner/Transferee Company was dispensed, as one [1] Secured Creditor of the Petitioner/Transferee Company has already given consent to the Scheme of Amalgamation. The Petitioner/Transferor has given an undertaking to give an individual notice of final hearing of the Company petition to such unsecured creditors of the Petitioner /Transferee Company, who have outstanding balance of above Rs. 10,000/- (Rs. Ten thousand only) constituting 99.79% in value of 70.70% in numbers of total list of unsecured creditors of the Petitioner/Transferee Company confirms that the Petitioner/Transferee Company has sent the individual notice of final hearing of the Company petition to such unsecured creditors by registered post acknowledgment due, the list of the same is annexed as Exhibit -G, of the Company Petition No.16/2009. No unsecured creditors of the Petitioner /Transferee Company have come to this court for any objection for the Scheme of Amalgamation. 6. The learned Counsel appearing on behalf of the petitioners have stated that they have complied with all the requirements as per the directions of this Hon'ble Court and they have filed necessary affidavits of compliance in the Court. The statutory requirements for amalgamation have been carried out. 5 7. There is no objection to the scheme by the Official Liquidator in its report dated 03.02.2010, and it is stated that the Chartered Accountant was directed to inspect the books of accounts and other related document of the Transferor Company. On the basis of the report of the Chartered Accountant the Official Liquidator has submitted that the affairs of the Transferor Company have not been conducted in the manner prejudicial to the interest of its members / creditors or to the pubic interest. 8. The Regional Director in its report dated 29.01.2010 has stated that “Save as aforesaid in para 6, I find that the Scheme is not prejudicial to the interest of Creditors and shareholders and public. In the light of aforesaid facts the Hon'ble Court may pass such order as deem fit and proper.” 9. Clause 6 of the Affidavit of the Regional Director is reproduced below : “That, the Deponent further submits that the Transferee/Transferor Company do not have holding/subsidiary relationship. However, it is stated in Clause 8.4 read with 8.5 of the Scheme that no shares will be allotted by the Transferee Company. This will effect the investment of the 6 ultimate holding company (SIIL) of the Transferor and Transferee Company, which is not the party to the scheme. How the accounting treatment will be met in the holding company are not disclosed in the Scheme. The Transferee Company shall allot additional shares at least as per the book value of the shares held in the Transferor Company.” 10. The petitioners filed the Affidavit dated 05.03.2010 of Shri Satyanarayan Nuwal in reply to the Regional Director's report to this Court. The petitioners submitted that the Transferor Company and the Transferee Company are the wholly owned subsidiaries of the Solar Industries India Limited (the “Holding Company”). In other words, the Holding Company along with its nominees holds entire share capital of the Transferor Company and the Transferee Company. 11. The Affidavit of Shri Satyanarayan Nuwal further provides that the Scheme will not have any effect on the investment of the Holding Company since all the assets and liabilities of the Petitioner / Transferor Company will be transferred to the Petitioner/Transferee Company, which again is and will continue to be owned and controlled by the Holding Company even after the Scheme is sanctioned by this Court. The ultimate effect of the scheme will not have any adverse impart on the Holding Company or the Petitioner / Transferee 7 Company. 12. The petitioner further submitted that Part-V of the Scheme deals with the Accounting Treatment of the Scheme. Further, the Transferee Company shall comply with the terms of Accounting Standard 14, as applicable, relating to the Scheme issued by the Institute of Chartered Accountants of India for the purpose of accounting of the Scheme. 13. After hearing both the parties, this Court on 11.06.2010 ordered the Regional Director to file the fresh affidavit in this regard, in the matter. 14. In compliance of the order dated 11.06.2010, Mr. Rakesh Chandra, the Regional Director filed its further affidavit dated 18.06.2010 to this Court whereby the Regional Director submitted that whatever stated in para 5[1] of the affidavit dated 29.01.2010 are the facts and submissions reproduced as stated in clause no.8.5 of the Scheme of Amalgamation of the Transferor and Transferee Company. The Regional Director in its affidavit reproduced the submission in para no.6 of the Affidavit dated 29.01.2010, which is hereby further reproduced for the sake of convenience and clarification. 8 “That, the Deponent further submits that the Transferee/Transferor Company do not have holding/subsidiary relationship. However, it is stated in Clause 8.4 read with 8.5 of the Scheme that no shares will be allotted by the Transferee Company. This will effect the investment of the ultimate holding company (SIIL) of the Transferor and Transferee Company, which is not the party to the scheme. How the accounting treatment will be met in the holding company are not disclosed in the Scheme. Therefore the Transferee Company should allot additional shares at least as per the book value of the shares held in the Transferor Company to the holding Company (SIIL) in lieu of its investment in the Transferor Company.” 15. At the hearing on 25.06.2010, this Court perused the further affidavit of the Regional Director. This Court observed that in further affidavit while reproducing that para 6, the word “shall” has been substituted by word “should”. 16. The Holding Company through its Chairman, Shri Satyanarayan Nuwal filed its affidavit of Holding Company dated July 1, 2010 whereby confirming that the Holding Company shall duly comply with the relevant accounting standards as may be applicable to it to record in its books of accounts regarding the cancellation of its 9 investment in the Transferor Company pursuant to the order of this Hon'ble Court. 17. The Affidavit filed by the Holding Company further states that suggestions made by Regional Director in his report in para 6 regarding issuance of shares under the scheme to the Shareholders of the Transferor Company is not correct as - [a] the Holding Company will have to record in its books of accounts the cancellation of its investment in the Transferor Company, which will be similar to the present situation in which no shares are being proposed to be allotted to the Shareholders of the Transferor Company; and [b] the Transferee Company will continue to be the wholly owned subsidiary of the Holding Company. 18. To show its bonafide, the Holding Company has also obtained the no objection letters from its secured creditors and annexed as the Annexure-A-1 to A-2 to the affidavit, the consent letters of the secured creditors of the Holding Company i.e. State Bank of India and Bank of India, approving the Scheme of Amalgamation between the Transferor Company and the Transferee Company. 19. Mr. M. Chandramuttu, the Joint Director for the Regional Director in letter dated July 7, 2010 confirmed that since affidavit of 10 Shri Satyanarayan Nuwal, the Chairman of the Holding Company has undertaken to comply with the accounting Standards as may be applicable, the observations made by the Directorate in Para 6 of the affidavit is complied with and hence, his office had no objection for considering the scheme favourably. Thus objection raised by the said office is complied with. 20. Learned Counsel for the petitioners also pointed out Clause 6 of the Scheme of Amalgamation which inter alia provides for the provision of the merging of the authorized share capital of the Petitioner/ Transferor Company with the Petitioner / Transferee Company. Clause 6.4 of the Scheme of Amalgamation provides that the Transferee Company shall not be obliged to follow the procedure or filing as required under Section 16, Section 94, Section 97 or any other applicable provisions of this Act. The order of the High Court under Section 394 of the Act shall be filed with the Office of the Registrar of Companies, Maharashtra and shall be deemed to be a Notice to the Registrar of Companies, Maharashtra under Section 97 of the Act. It is further clarified that no registration fee/ROC fees, stamp duty etc., shall be payable by the Transferee Company. In order to support the contention that requirement of notice to be furnished to the Registrar under Section 95 and 97 of the Companies Act, 1956 was duly fulfilled when a certified copy of an order sanctioning a scheme under Section 11 391 to 394 was filed with the Registrar. Petitioner relied upon the judgment of this Court in Company Petition No. 64/2007 (You Telecom India pvt. Ltd ) with Company Petition No. 65/2007 (You Boradband Networks India Pvt. Ltd.) decided on 11th April, 2007 by Dr. D.Y. Chandrachud, J. The decision in Re Avani Petrochem Pvt Ltd. (2009) 149 Corporate Cases 604 (Gujarat), was also cited. 21. After reviewing the copies of the aforesaid judgment, this Court is satisfied that no separate procedure is required to be follow as envisaged by Section 97 of the Companies Act. 22. On the question whether the Scheme of Amalgamation will have any effect on the voting rights of shareholders of the Transferee Company and the Holding Company, it is stated on behalf of petitioner that the Scheme of Amalgamation will not have any effect on the voting rights of the shareholders of either the Transferee Company or the Holding Company. 23. After the merger of Transferee Company into Transferor Company as per the Scheme, Share Capital of the Transferee Company increases to Rs. 6 Crores. Its issued subscribed and paid up share capital remains at Rs. 4.80 Crores which is divided into 48 lakhs fully paid equity share of Rs. 10/- each. The remaining capital remains with 12 the Transferee Company. 24. Upon perusal of the entire material placed on record, there is no other objection to the scheme save and except for the objections raised by the Regional Director which have been dealt with herein above. the Scheme is stated to be fair and reasonable and neither violates any provisions of law, nor is contrary to any public policy. The Scheme is also stated to be not prejudicial to the shareholders, creditors or the members of the public. In the circumstances, there is no reason why the Scheme should not be sanctioned. The Company Petitions are accordingly made absolute in terms of prayer clause [a] to [c] of the Company Petition Nos. 15 and 16 of 2009. 25. That all the property, rights and powers of the Transferor Company be transferred without further act or deed to the Transferee Company and accordingly the same shall pursuant to Section 394[2] of the Companies Act, 1956 be transferred to and vest in the Transferee Company for all the estate and interest of the Transferor Company therein but, subject to nevertheless to all charges now affecting the same. 26. That all the liabilities and duties of the Transferor Company be transferred without further act or deed to the Transferee Company 13 and accordingly the same shall pursuant to section 394[2] of the Companies Act, 1956 be transferred to and become the liabilities and duties of the Transferee Company. 27. That all the proceedings now pending by or against the Transferor Company be continued by or against the Transferee Company. 28. That, the Transferor Company and the Transferee Company do within 14 days after the date of this order clause a certificate copy of this order to be delivered to the Registrar of Companies. 29. That any person interested shall be at liberty to apply to the Court in the above matter for any directions that may be necessary; 30. The petitioners in both the Company Petitions to pay cost of Rs. 5000/- each to the Regional Director and to the Official Liquidator in relation to the petition filed by the Transferor Company. Costs be paid within four weeks from today. 31. All authorities concerned to act on a copy of this Order duly authenticated by the Registry. 14 32. A copy of Scheme of arrangement as sanctioned by the Court and duly signed by Shri De, learned Counsel, is annexed to this order which is marked as “F” for identification with Company Petition No.15/2009. The same is subject to Clause Nos. 16, 17 and 23 of this Order. JUDGE Rgd.