IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH C.P. No. 60 of 2011 Date of Decision: 8.7.2011. Petition under Sections 391 to 394 of the Companies Act In the matter of: Scheme of arrangement between Prince Stone Investment Ltd. --PSIL LANCO Group Ltd. --Petitioner Company No.1. LANCO Enterprise Pvt. Ltd. --Petitioner Company No.2. CORAM:- HON'BLE MR.JUSTICE PERMOD KOHLI. Present:- Mr. Deepak Suri, Advocate for the petitioners. Mr. D.P.Ojha, Official Liquidator. *** PERMOD KOHLI.J (ORAL) This joint petition has been filed under Sections 391 to 394 of Companies Act, 1956 for sanction of the scheme arrangement for amalgamation of Prince Stone Investment Ltd. (PSIL) with petitioner no.1 and subsequent demerger of the business of supplying material for turnkey projects, providing services for project management consultancy and holding investments in the shares of companies engaged in sector other than infrastructure (Demerged Undertaking) of the petitioner company no.1 into petitioner no.2-company. Petitioner no.1 is having its registered office at Lanco House, Plot No.397, Udyog Vihar, Phase-3, Gurgaon (Haryana) and is engaged in the business of supplying material for turnkey projects, providing services for project management consultancy, holding investments in various companies including investments in companies engaged in infrastructure sector. This company was incorporated on 27.12.2002. The objects for which the petitioner no.1-company was established are set out in its C.P. No. 60 of 2011 -2- Memorandum and Articles of Association. Share capital of the petitioner no.1-company as on 3.3.2011 are as under:- Share Capital Amount in Rs. Authorized: 220,000,000 Equity shares of Rs.10 each 2,200,000,000 Issued, Subscribed and Paid-up: 205,925,195 Equity shares of Rs.10 each fully paid-up 2,059,251,950 It is stated that there has been no change in the share capital of the petitioner no.1-company. Clause B Point 14 of the Memorandum and Articles of Association of petitioner no.1-company provides and empowers the company to amalgamate, enter into any partnership or partially amalgamate with or acquire the whole or any part of the business, property and liabilities of, or acquire any interest in the business or undertaking or company. Petitioner no.2-company is having its registered office at Lanco House, Plot No.397, Udyog Vihar, Phase-3 Gurgaon (Haryana). The objects for which this company was established are set out in Memorandum and Articles of Association of the company. Clause B Points 18 and 20 of the Memorandum and Articles of Association of this company also provide for amalgamation, entering into partnership and to make any arrangement with any other association, firm or company. The share capital of the petitioner no.2-company as on 3.3.2011 are as under:- Share Capital Amount in Rs. Authorised: 100,000 Equity shares of Rs.10 each 1,000,000 100,000 Equity shares of Rs.10 each fully paid up 1,000,000 It is stated that there has been no change in the share capital of petitioner no.2-company. All the companies have placed on record their Memorandum and Articles of Association as amended up to date as C.P. No. 60 of 2011 -3- Annexures P-4 to P-6 respectively. The audited accounts reflecting their financial position have also been placed on record as Annexures P-7 to P-9, respectively. Board of Directors of PSIL, petitioner company no.1and the petitioner company no.2 considered the composite scheme of arrangement and adopted the same by their resolutions passed on 15.3.2011 annexed as Annexures P-10, Annexure P-1 and Annexure P-2 respectively. There are no creditors of the companies. Meetings of the share holders was dispensed with by the High Court vide order dated 24.3.2011 passed in C.P. No.43 of 2011 in the 1st motion petition jointly filed by both the petitioners-companies as the share holders of both the companies have given their consent to the scheme. The scheme provides for:- . The amalgamation of PSIL with LGL for cosolidation of investments in infrastructure companies in one company (i.e.) LGL. (Appointed dated 31 March, 2011). Clause III B.14 of Memorandum and Articles of Association of LGL authorizes for amalgamation. . After the merger of PSIL into LGL, the scheme provides for demerger of the business of supplying material for turnkey projects, providing services for project management consultancy and holding investment in share of companies engaged in sector other than infrastructure (Demerged undertaking) into LEPL (Appointed date 1 April, 2011). Clause III.B.1 & Clause III.B.19 of Memorandum and Articles of Association of LEPL provides for acquiring business and amalgamation respectively.” From para 12 of the scheme it transpires that foreign company from Mauritius namely Prince Stone Investments Ltd. is getting merged with the petitioner company no.1 M/s. Lanco Group Ltd. under Global C.P. No. 60 of 2011 -4- Business License (Category 2) under the Mauritius Companies Act. The Mauritius company has also passed a resolution dated 15.3.2011 approving the scheme and the share holders of Mauritius company also passed resolution dated 15.3.2011 approving the scheme. It is stated that no proceedings under Sections 235 to 251 of the Companies Act, 1956 are pending against the petitioners-companies. On presentation, notice of this petition was issued to the Regional Director, Ministry of Corporate Affairs, NOIDA and Official Liquidator. Notice was also directed to be published in “The Tribune”, “Dainik Bhaskar” (Hindi) and official gazette of the State of Haryana. Affidavit of publication has been filed by the counsel for both the petitioner companies along with the copies of the newspaper cuttings and official gazette. O.L has also filed his report conveying no objection to the approval of the scheme. Regional Director in his affidavit has pointed out in para 4.1 that the increase in authorized share capital and Memorandum and Articles of Association of the company can be changed/altered only after following the procedure prescribed under the relevant provisions of the Companies Act. The companies have undertaken to comply with the provisions of the Companies Act, 1956 in this regard. To meet the points raised by the Regional Director, learned counsel for the petitioners has referred to following clauses of the scheme:- “5.6 LGL shall increase the authorized share capital as may be required to issue equity shares in terms of Clause 5.1. 5.7 For the purpose of issue of equity shares to the shareholders of PSIL pursuant to Clause 5.1 above, LGL and/or PSIL shall, if and to the extent required, apply for and obtain the required statutory approval for the issue and allotment by LGL of such equity shares. C.P. No. 60 of 2011 -5- 14.6 LEPL shall increase the authorized share capital as may be required to issue equity shares in terms of Clause 14.1 and pay the appropriate stamp duty on the same. 14.8 The approval of this scheme by the shareholders of LGL and LEPL shall be deemed to be due compliance of the provision of Sections 16, 31, 94 and other relevant and applicable provisions of the Act for alteration of the share capital of LGL and LEPL.” In view of these stipulations in the scheme the points raised by the Regional Director in the affidavit shall be complied with. I have carefully considered the scheme which aims at:- “Rationale for the composite scheme of arrangement: Amalgamation of PSIL with LGL to consolidate the business of holding investments in the shares of infrastructure companies in India in a single entity which would enable the management to strategically focus on this business. Amalgamation to result in decreased administrative costs, overheads, multiplicity of legal compliances and would bring organizational efficiency and optimal utilization of various resources. Investment in infrastructure related companies requires specialized management, distinct capital requirement, cash flow profiles, training requirement etc. Since the inherent risks and competition of the infrastructure related business are distinct from other businesses, demerger would allow management to dedicate special skills on infrastructure and run it more efficiently. Scheme would result in greater synergy in operations, better utilization of capital, create strong platform for business, and help in preventing cost duplication that can erode financial efficiencies.” The companies have also undertaken to comply with the laws of Mauritius in this regard. I have carefully examined the scheme of amalgamation of PSIL into petitioner company no.1 and demerger of “Demerged Undertaking” of petitioner company no.1 into petitioner C.P. No. 60 of 2011 -6- company no.2. I am of the opinion that the scheme will be in the best interests and demerger of the companies and their shareholders. The scheme is also not against public interest and is fair, reasonable and practical. No person has objected to the sanction of the scheme of arrangement after notice was published in newspapers and official gazette of Haryana Govt. I, accordingly, sanction the scheme of arrangement for amalgamation subject to approval of the scheme by the competent court of law at Mauritius. The scheme shall come into operation from the effective date on completion of the necessary formalities. A notice of this order be published in “The Tribune” and “Dainik Bhaskar” (Hindi) in all editions (Chandigarh, Panipat, Hisar, Ambala and Faridabad) and in the official gazette of the State of Haryana, within 30 days. Any person interested shall be at liberty to approach this Court in the above matter for any directions that may be necessary. Let formal order of sanction be drawn in accordance with law and the certified copy of the formal order shall be filed with the Registrar of Companies within 30 days after receipt of the same. Petition disposed of. (PERMOD KOHLI) JUDGE 8.7.2011. lucky