--- 1 --- HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE S.B.: HON'BLE MR. S. C. SHARMA, J COMPANY PETITION NO. 3 / 2011 Connected With Company Petition (Application) No. 21 of 2010 In the matter of Section 391-394 of the Companies Act, 1956; AND In the matter of the Scheme of Amalgamation of Kriti Corporate Services Private Limited, Kasta Pipes Private Limited, Kriti Auto Accessories Private Limited and Shipra Pipes Private Limited with Sakam Trading Private Limited; AND In the matter of: SAKAM TRADING PRIVATE LIMITED a Company incorporated under the Companies Act 1956 and having its Registered Office at Mehta Chambers, 34, Siyaganj, Indore-452 007 PETITIONER NO.1/ TRANSFEREE KRITI CORPORATE SERVICES PRIVATE LIMITED a Company incorporated under the Companies Act 1956 and having its Registered Office at Mehta Chambers, 34, Siyaganj, Indore-452 007 PETITIONER NO.2/ TRANSFEROR NO.1 KASTA PIPES PRIVATE LIMITED a Company incorporated under the Companies Act 1956 and having its Registered Office at Mehta Chambers, 34, Siyaganj, Indore-452 007 PETITIONER NO.3/ TRANSFEROR NO.2 --- 2 --- KRITI AUTO ACCESSORIES PRIVATE LIMITED a Company incorporated under the Companies Act 1956 and having its Registered Office at Mehta Chambers, 34, Siyaganj, Indore-452 007 PETITIONER NO.4/ TRANSFEROR NO.3 SHIPRA PIPES PRIVATE LIMITED a Company incorporated under the Companies Act 1956 and having its Registered Office at Mehta Chambers, 34, Siyaganj, Indore-452 007 PETITIONER NO.5/ TRANSFEROR NO.4 Date:………….. Shri Vijayesh Atre Advocate for the Petitioner Companies. Shri H.Y. Mehta Advocate for the Official Liquidator. Shri Manish Nair Advocate for the Regional Director, Ministry of Corporate Affairs, North-Western Region, Ahmedabad. Heard learned counsel for the parties. The sanction of the Court is sought, under Section 391 to 394 of the Companies Act, 1956, to the scheme of amalgamation of Kriti Corporate Services Private Limited, Kasta Pipes Private Limited, Kriti Auto Accessories Private Limited and Shipra Pipes Private Limited with Sakam Trading Private Limited. --- 3 --- Counsel appearing on behalf of the Petitioner Companies has stated that the Petitioner Companies have complied with all the requirements prescribed under the Companies Act, 1956 and actions have been taken as per the order of this Court dated 2nd February, 2011. Moreover, the Petitioner Companies also undertake to comply with all statutory requirements, if any, as required under the Companies Act, 1956 and the Rules made thereunder. Mr. Atre submits that as directed by this Hon’ble Court vide order dated 2nd February, 2011, notices were issued to the Office of Registrar of Companies, Madhya Pradesh & Chhattisgarh, the Official Liquidator attached to this Court and the Regional Director, Ministry of Corporate Affairs, North Western Region, Ahmedabad. An affidavit dated 8th March, 2011 has been submitted by the petitioner companies through advocate thereby placing on record acknowledgements from the aforesaid three offices as to the service of Hamdast notice. Mr. Atre also submits that as per order dated 2nd February, 2011 notices have also been published in Navbharat dated 23rd February, 2011, Free Press dated 19th February, 2011 and Official Gazette of the State of Madhya Pradesh dated 25th February, 2011 and all necessary formalities prescribed under the Companies Act, 1956 have been complied with. --- 4 --- The Regional Director, Ministry of Corporate Affairs, North- Western Region, Ahmedabad vide his affidavit dated 30th June, 2011 under Para 2, has made the following observations:- (a)That Clause No.9 of the Scheme provides that upon approval of the Scheme of amalgamation, the transferee company shall issue and allot shares to the members of the respective petitioner transferor companies as under:- a. “9313 Equity shares of Rs.100/- of Sakam Trading, credited as fully paid up, at par, in proportion to their respective shareholdings in Kriti Corporate and b. 5723 Equity shares of Rs.100/- of Sakam Trading, credited as fully paid up, at par, in proportion to their respective shareholdings in Kasta Pipes and c. 1122 Equity shares of Rs.100/- of Sakam Trading, credited as fully paid up, at par, in proportion to their respective shareholdings in Kriti Auto and d. 1629 Equity shares of Rs.100/- of Sakam Trading, credited as fully paid up, at par, in proportion to their respective shareholdings in Shipra Pipes.” It is respectfully submitted that the aforesaid clauses do not specifically provide for ratio of exchange of shares --- 5 --- i.e. entitlement of each shareholder of the shares of the transferee company against his existing holding in the Transferor Company. The Hon’ble Court may therefore, be pleased to direct the Petitioner Companies to make suitable amendments in the Scheme and provide for exact ratio of exchange of shares. (b) That as per entitlement of shares provided at Clause No.9 of the Scheme, there is likelihood of entitlement of shares by the shareholders of the Transferor Companies, in fraction. There is however, no clause in the Scheme about treatment of the said fractional entitlement. The Hon’ble Court may therefore, be pleased to direct the Petitioner Companies to make suitable amendments in the Scheme. (c) That as per the valuation report submitted by M/s.Fadnis & Gupte, Chartered Accountants, Indore, a copy of which has been submitted by the Petitioner Transferee Company vide its letter dated 24-03-2011 to the Office of the Deponent, the valuation of shares has been made taking in to consideration the assets and liabilities of the respective Petitioner Companies as on 31-3-2009, whereas, as per the scheme, the Appointed date/Transfer date is 1-4-2010. Thus, the valuation of shares is as per the financial --- 6 --- position of the respective Petitioner Companies as on 31-3-2009 which is one year prior to the Appointed date. (d) That, the accounting entries/adjustments to be made. In the books of accounts of the Petitioner Transferee company are stated at Para No.10 of the Scheme which are not as per AS-14 notified by the Central Government under Section 211 (3A) of the Companies Act, 1956. It is further submitted that the Accounting entries/adjustments, as a consequence of the Scheme of Amalgamation, are to be made as per the Accounting Standard-14 notified by the Central Government under Section 211(3A) of the Companies Act, 1956. The Hon’ble Court may, therefore, be pleased to direct the Petitioner Transferee Company to comply with AS-14 r.w. Section 211(3A) of the Companies Act, 1956 (e) It is submitted that the Registrar of Companies of the State of Madhya Pradesh has submitted his report vide his letter No. ROC-G/391-394/STA(S)/638 dated 31-03-2011 and as per the said report, no complaint and/or representation has been received in respect of the proposed Scheme of Amalgamation. (f) That, the Deponent further submits that, there appear no --- 7 --- other objection to the proposed scheme of amalgamation between the Petitioner companies and the scheme does not, prima facie appear to be prejudicial to the interest of the shareholders of the respective Petitioner Companies and the public at large. The Official Liquidator has filed his report OLR No.18/2011 making the following observations under Para 11, 12 and 13:- 11. That, it has been mentioned in Para 15 of the Petition that, no winding up proceedings are pending against the Petitioner Companies and no investigation proceedings have been instituted and/or pending in relation to the Petitioner Companies under section 235 to 251 of the Act. 12. That, the Official Liquidator has not received any complaint against the proposed Scheme of Amalgamation from any person/party interested in the Scheme in any manner. 13. That, on the basis of information submitted by the Transferor Companies it appears that, the affairs of the Transferor Companies have not been conducted in a manner prejudicial to the interest of its member, creditors --- 8 --- or to public interest as per the second proviso of section 394(1) of the Companies Act, 1956. Upon perusal of the entire material placed 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 has come forward to oppose the scheme and the scheme of amalgamation is hereby approved as the Regional Director and the Official Liquidator have informed this court that the scheme does not appear to be prejudicial to the interest of the shareholders, creditors of the petitioner companies and the public at large. However, in view of the observations of the Regional Director, it is directed that the Petitioner No.1 Transferee Company while filing a certified copy of this order with the Office of the Registrar of Companies, Madhya Pradesh and Chhattisgarh, shall also file a list of shareholders of the transferor companies with the number of shares held by them in the respective transferor company and also the number of shares allotted to them by it with explanation as to the treatment of fraction, if any. The counsel for the petitioner companies submits that the transferor companies are closely held family owned companies and are under the same management and are being managed by the same family. All transferor companies are primarily into the business of --- 9 --- holding shares of one of the listed group company and all other business activities of the transferor companies have come to stand still. He pointed out Clause No.12 of the Petition and also Para No.6 of the Report of the Official Liquidator in this regard. He submits that after 31st March, 2009 there are no material changes in the financial position of the transferor companies and in view of this aspect the difference in the dates of assets and liabilities as on 31st March, 2009, for the valuation, and the appointed date which is 1st April, 2010 no prejudice shall be caused to any person concerned with the scheme. I am of the considered view that since the companies are closely held and family owned, the difference in the dates has no material impact on the scheme. The petitioner companies shall comply with the Accounting Standard-14 as required under Section 211(3A) of the Companies Act, 1956, while making accounting entries in their respective books of accounts, with respect to implementation of the present scheme of amalgamation. The Petitioner Companies to file a copy of this order and the scheme duly authenticated by the Company Registrar, High Court, Indore Bench, with the concerned Office of the Registrar of Companies within 30 days from the date of the order alongwith a list of shareholders and explanation as to treatment of fraction, if any. --- 10 --- The petitioner No.1 transferee company to pay a cost of Rs.25,000/- to the Official Liquidator for deposit in the Common Pool Fund maintained by the Official Liquidator. Cost to be paid within four weeks from today. The petitioner No.1 transferee company to pay a cost of Rs.5,000/- to the advocate appearing on behalf of the Regional Director, Ahmedabad. Payment to be made within four weeks from today. The petitioner No.2 to 5 transferor companies shall stand dissolved without winding-up. Filing and issuance of the drawn up order is dispensed with. All concerned authorities to act on a copy of this order alongwith the Scheme duly authenticated by the Company Registrar, High Court, Indore Bench. (S. C. SHARMA) J U D G E KR