1 IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 25.03.2009 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN C.P.No.12 of 2009 Alved Pharma and Foods Private Limited having its registered office at No.549, 14th Street, Sector IV, K.K.Nagar, Chennai – 600 078 represented by its Director Mr.Anand Sonbhadra .. Petitioner/Transferor Company Petitions filed under sections 391 to 394 of the Companies Act, 1956 to sanction the composite scheme of arrangement, amalgamation and reconstruction between RFCL, petitioner company and VAHPL. For Petitioner : Mr.R.Murari Mr.C.V.Ramachandra Murthy Central Government Counsel for Regional Director Ministry of Company Affairs Chennai. Mr.M.Jayakumar Deputy Official Liquidator ---- O R D E R This company petition is preferred under sections 391 to 394 of the Companies Act, 1956 for sanctioning the composite scheme of arrangement, amalgamation and reconstruction between RFCL, the petitioner company and VAHPL. The scheme of arrangement, amalgamation and reconstruction is annexed as Annexure G in this petition. https://hcservices.ecourts.gov.in/hcservices/ 2 2. The petitioner is the transferor company. The registered offices of RFCL and VAHPL are situated at New Delhi. They have obtained the scheme sanctioned before the Delhi High Court vide order dated 20.3.2009 in common C.P.No.27 of 2009. 3. A perusal of the records show that the petitioner has complied with the prescribed procedure. The Chartered Accountant's Certificate certifying that there are no secured creditors in respect of the petitioner/transferor company is annexed as Annexure No.I. The copy of the resolution dated 13th October 2008 of the Board of Directors of the transferor company adopting the composite scheme of arrangement, amalgamation and reconstruction is enclosed. 4. The consent affidavits from the equity shareholders of the transferor company are annexed as Annexure No.J. By order dated 27th January 2009 in C.A.No.140 of 2009, this Court, dispensed with the convening, holding and conducting of the meeting of the shareholders for the purpose of considering and if thought fit, approving with or without modification, the composite scheme of amalgamation, arrangement and reconstruction between RFCL, the petitioner company and VAHPL. 5. On notice, the Regional Director, Ministry of Company Affairs has filed his report raising the following objections: "3. The transferor company has its https://hcservices.ecourts.gov.in/hcservices/ 3 regsitered office at Chennai and the demerged and transferee company have their registered office in New Delhi and hence the scheme is subject to approval of Honourable High Court of Delhi also. 4. The Net Assets to be demerged by the demerged company which includes the entire assets of the transferor company and the Vetnex Division are valued as Rs.47,80,56,156/- whereas the consideration proposed as per the exchange ratio mentioned in clause 4.1 of the scheme is Rs.6,57,45,180/-. The consideration proposed to be paid is comparitively much less than the value of the assets to be demerged which includes petitioner company's assets. It is clarified that the consideration paid by the demerged company for the petitioner company was to acquire the brand, goodwill of Alved and Controlling Interest so as to establish itself in South India and thus the consideration was more than the intrinsic value of the assets. It is also stated that the accounting treatment of the above is being done as per AS-14 of the Accounting Standards issued by Institute of Chartered Accountants of India. This may be taken into consideration while sanctioning the scheme." 6. As regards the first objection of the Regional Director, learned counsel for the petitioner submits that the Delhi High Court has sanctioned the scheme vide order dated 20.3.2009 in Common C.P.No.27 of 2009. Hence, the https://hcservices.ecourts.gov.in/hcservices/ 4 first objection does not survive for consideration. 7. As regards the second objection raised by the Regional Director that the consideration proposed to be paid in the case of demerger is much less than the value of the assets to be demerged which includes the petitioner company's assets, a perusal of the report shows that there is no denial of the fact that the consideration paid to the demerged company for the petitioner company was to acquire the brand, goodwill of Alved and Controlling Interest so as to establish itself in South India and thus the consideration was more than the intrinsic value of the assets. Quite apart from this admission in the Regional Director's report, learned counsel for the petitioner pointed out that here is a case of demerger of a Vetnex Division of RFCL Limited and vested into Vetnex Animal Health Private Limited and merger of Alved Pharma and Foods Private Limited with Vetnex Animal Health Private Limited. Alved Pharma and Foods Private Limited is a wholly owned subsidiary company of RFCL. In the circumstances, the exchange ratio which was contemplated in respect of demerger of Vetnex Division of RFCL Limited is balanced by the amalgamation of Alved Pharma and Foods Private Limited, which is a wholly owned subsidiary of RFCL. In any event, the scheme of demerger and amalgamation is passed through by the majority of the creditors and shareholders, it being a commercial decision, the Regional Director cannot have any https://hcservices.ecourts.gov.in/hcservices/ 5 objection, unless there are materials to touch on the bonafides of such an exchange ratio. Learned counsel for the petitioner also produced before this court the valuation report made by the Chartered Accountants, which, on a perusal show that the exchange ratio has been made on a capitalisation basis and when so working out, the differences between the value of these two companies viz., Vetnex and RFCL Limited was very marginal on amalgamation. 8. I agree with the said submission of the learned counsel for the petitioner. As rightly pointed out that the decision of demerger and working of share exchange ratio is a result of a considered decision of the shareholders in meeting which is approved by the unanimous majority decision of the shareholders, I do not find any justification in rejecting the plea of the petitioner herein on working of share exchange ratio. As already pointed out the Regional Director himself as pointed out that the consideration given was the amalgamation of the wholly owned subsidiary of the petitioner company, which is more than inter se value of the assets of the demerged company. Hence, when the answer itself is given in the report for such an alleged imbalance, the remark cannot be taken as a serious objection by the Regional Director for granting the scheme. 9. The Official Liquidator has filed his report along with the report of the Chartered Accountant. It is stated that the records maintained in the office of the Registrar https://hcservices.ecourts.gov.in/hcservices/ 6 of Companies were also caused to be inspected by the said Chartered Accountant. The report of the chartered accountant states that the affairs of the transferor company have not been conducted in a manner prejudicial to the interest of its members or to public interest and they do not come across any act of misfeasance by the Directors attracting the provisions of Sections 542 and 543 of the Companies Act, 1956. In the absence of any material to indicate that the affairs of the transferor company were being conducted in a manner prejudicial to the interest of its members or public interest, the Official Liquidator has filed his report before this Court for orders as to the dissolution of the transferor company without winding up. 10. I have perused the scheme filed in the company petition. The Scheme contains no objectionable feature detrimental to the interest of the employees of the transferor company or of the demerged company. The said scheme is not violative of any statutory provisions. The scheme is fair, just, sound and is not against any public policy or public interest. No proceedings are pending under Sections 231 to 237 of the Companies Act, 1956. All the statutory provisions are complied with. 11. Consequently, there shall be an order approving the composite scheme of arrangement, amalgamation and reconstruction of M/s. RFCL Limited and M/s. Alved Pharma and Foods Private Limited and their respective share holders https://hcservices.ecourts.gov.in/hcservices/ 7 for demerger of the Ventex division of RFCL Limited and vesting thereof in Ventex Animal Health Private Limited and amalgamation of M/s. Alved Pharma and Foods Private Limited with M/s. Ventex Animal Health Private Limited, as provided in Annexure G with effect from 01.04.2008 as the procedure laid down under Sections 391 and 394 of the Companies Act are duly complied with. The petition is allowed. 12. Taking note of the report by the Chartered Accountant as enclosed by the Official Liquidator, in terms of the order passed by this Court, Alved Pharma and Foods Private Limited, petitioner in this petition/transferor company shall stand dissolved without winding up. 13. The learned Central Government Counsel is entitled to a fee of Rs.2,500/- from the petitioner company. sd/.C.V.J 25.03.2009 //Certified to be a true copy// Dated this the day of 2016 R.s/24.02.2016 COURT OFFICER From 25.09.2008 the Registry is issuing certified copies of the Order/Judgment Decree in this format. https://hcservices.ecourts.gov.in/hcservices/