IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION COMPANY SCHEME PETITION NO 341 OF 2010 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO 317 OF 2010 HOME SOLUTIONS RETAIL (INDIA) LIMITED …………Petitioner / Transferor Company COMPANY SCHEME PETITION NO 342 OF 2010 CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO 318 OF 2010 PANTALOON RETAIL (INDIA) LIMITED ………… Petitioner / the Transferee Company In the matter of the Companies Act, 1956 (1 of 1956); AND In the matter of Sections 391 to 394 read with sections 78, 100 to 103 of the Companies Act, 1956. AND In the matter of Scheme of Arrangement between Home Solutions Retail (India) Limited (‘HSRIL’ or ‘the Transferor Company’) and Pantaloon Retail (India) Limited (‘PRIL’ or ‘the Transferee Company’) and Their respective Shareholders and Creditors Mr. Janak Dwarkadas, Mr. Virag Tulzapurkar, Senior Counsels with Ms Alpana Ghone and Mr. Ankit Lohia i/b M/s. Rajesh Shah & Co., Advocates for the Petitioners. Mr. C J. Joy with Mr. Vishwajit P Sawant i/b S.K. Mohapatra for Regional Director in all the Petitions. CORAM : S. J. Kathawalla, J. DATE : 24th August, 2010 PC: 1. Heard learned counsels for the parties. 2. The sanction of the Court is sought under Sections 391 to 394 read with sections 78, 100 to 103 of the Companies Act, 1956, to the Scheme of Arrangement between Home Solutions Retail (India) Limited, the Transferor Company and Pantaloon Retail (India) Limited, the Transferee Company and their respective Shareholders and Creditors. 3. The Counsel for the Petitioner Companies states that the Scheme is presented for demerger of Business Undertaking of Home Solutions Retail (India) Limited, the Transferor Company in Pantaloon Retail (India) Limited, the Transferee Company. The scheme also provides for 2 various other matters consequential, incidental or otherwise integrally connected therewith. The Counsel further states that the Petitioner Companies have complied with all requirements as per directions of this Court and they have filed necessary affidavits of compliance in the Court. Moreover, Petitioner Companies through their Counsel undertake to comply with all statutory requirements, if any, as required under the Companies Act, 1956 and the Rules made there under. The said undertaking is accepted. 4. The Regional Director has filed its Affidavit stating therein that save and except as stated in paragraphs 6 (a) to (d) of the said Affidavit, the Scheme does not appear to be prejudicial to the interest of shareholders and public. The paragraphs 6(a) to (d) of the said Affidavit read thus : “(a) As per clause 6.3 of the Scheme, for the proposed in the authorized share capital, the Resulting Company may be directed to comply with provisions of section 94/97 read with Schedule X of the Companies Act 1956, in respect of filing of necessary forms with the 3 Registrar of Companies after payment of necessary filing fee and stamp duty as applicable on the said forms. (b) It is stated in clause 7.1.6 of the scheme that “the reduction of the paid up equity share capital shall not affect the authorized share capital of”…. In this regard it is submitted that the said clause is not in consonance with the provisions of section 80(3) of the Companies Act 1956. This privilege is available only in respect of preference share capital alone and on redemption of such preference shares by a company shall not be taken as reducing the amount of the authorized share capital. In future, the Resulting company can utilize only unused portion of the authorized share capital alone for further issue of capital and the company be directed to give an undertaking to this effect and delete the irrelevant portion from this clause viz “the reduction of paid up equity share capital shall not affect the authorized share capital.” (c) The proposed revaluation of investment made by the Resulting Company in Demerged Company as per clause 8.1.5 of the scheme, is an independent post Demerger issue. However, as per submission made in para 32 4 of the petition of the Resulting Company, the company has submitted that it will apply to the Hon’ble High Court for confirmation of the minute of reduction of the securities premium account after the amount of securities premium account to be adjusted is determined. Hence the Resulting Company may be directed to take such necessary steps accordingly. (d) The Resulting Company was inspected under section 209A of the Companies Act, 1956 by the Ministry of Corporate Affairs during the year 2007 and pointed out violations like 259/257/212/310(4 counts) 217(2)(a)/217(1)(e)/211(5) (5 counts) 215/147 and 113 of the Companies Act, 1956. The Directors of the Resulting Company have filed compounding applications under section 621A of the Companies Act, 1956 in respect of violation of section 212 of the Companies Act, 1956 and the same is pending for consideration before the appropriate authority. As regards other violations committed by the Resulting Company, the reply has been submitted by company in response to SCN issued by Registrar of Companies, Mumbai and same are pending before the appropriate authority for further consideration and directions. In this connection liberty may be granted to the Registrar of 5 Companies/Regional Director/ Ministry of Corporate Affairs to initiate necessary penal action against the company and its directors if the said violations are established against the Company and its Directors.” 5. The Petitioner Companies have filed their respective affidavits both dated 16th day of August, 2010 in reply to the above issues raised by the Regional Director. 6. As regards to the objection at paragraph 6(a) of the Regional Director’s Affidavit is concerned, the Transferee Company in paragraph 3 of its affidavit, has submitted that the it has already increased its Authorised Share Capital to Rs. 130,00,00,000/- (Rupees One Hundred Thirty Crores Only) divided into 25,00,00,000 (Twenty Five Crores) Equity Shares of Rs. 2/- (Rupees Two Only) each and 5,00,00,000 (Five Crores) Equity Shares with differential rights for voting and/or dividend (known as “Class B Shares”) of Rs. 2/- (Rupees Two Only) each also classified as Equity Shares and 70,00,000 (Seventy Lakhs) Preference Shares of Rs. 100 (Rupees One Hundred Only) each. The increased Authorised Share Capital is sufficient to issue shares pursuant to the Scheme. 6 7. As regards to the objection at paragraph 6(b) of the Regional Director’s Affidavit is concerned, the Transferor Company in paragraph 3 of its affidavit, has undertaken to utilize only unused portion of the authorized share capital for further issue of capital. The Scheme provides for cancellation of 2,91,38,149 equity shares aggregating to Rs.29,13,81,490/- of the Transferor Company. The Transferor Company has undertaken to cancel the equivalent authorized share capital and delete the irrelevant portion from clause 7.1.6 of the Scheme viz “the reduction of paid up equity share capital shall not affect the authorized share capital of HSRIL and.” The Transferor Company has further undertaken to comply with necessary provisions of the Companies Act and related rules there under in connection with cancellation of equivalent authorized share capital. The said undertaking is accepted. 8. As regards to the objection at paragraph 6(c) of the Regional Director’s Affidavit is concerned, the Transferee Company, in paragraph 5 of its affidavit, submitted that the amount to be adjusted in the Securities Premium Account as per clause 8.1.5 and 8.1.6 of the Scheme 7 cannot be determined currently. Post sanction of the Scheme, it has undertaken to apply to this Hon’ble High Court for confirmation of the minute of reduction of the Securities Premium Account after the amount of Securities Premium Account to be adjusted is determined. The Transferee Company has given the same undertaking in para 32 of the Company Scheme Petition No 342 of 2010. The said undertaking is accepted. 9. As regards to the objection at paragraph 6(d) of the Regional Director’s Affidavit is concerned, the liberty is granted to the Registrar of Companies / Regional Director / Ministry of Corporate Affairs to initiate necessary penal action against the Transferee Company and its directors if the said violations are established against the Transferee Company and its Directors. 10. The Counsel for the Petitioner Companies state that the some creditors viz. M/s R R Kabel Ltd, MEW Electricals Pvt. Ltd., M/s Featherlite Office Systems Private Limited, M/s Servo Tech Electricals Private Limited, Mr. Ashok Kumar Lalwani, Mr. Kamal Lalwani, Mr. Anand Kumar Chaurasia, Mrs. Chanda Chaurasia, Ms. Vinita Chaurasia, Ms. Parul 8 Chaurasia, and Mr. Kamal Kishore Chaurasia, of the Petitioner Companies had filed their affidavits and/or had appeared before the Court at the earlier occasion and/or written letters expressing their objections to the proposed Scheme. The Counsel further states that the Petitioner Companies have now received “No Objection Letters” from all the said creditors and that copies of all the said letters have been annexed to the respective Affidavits both dated 16th August, 2010 filed by the Petitioner Companies. Further, Mr. Ashok Loya, Director of R R Kabel and Mr. Sudhir Kasat, Director of MEW Electricals Pvt Ltd, unsecured creditors of the Transferor Company have filed their further affidavit withdrawing their objections to the Scheme. 11. 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 has come forward to oppose the Scheme except as mentioned in paragraph 10 herein above. 9 12. Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No. 341 of 2010 and 342 of 2010 filed by the Transferor Company and the Transferee Company respectively are made absolute in terms of prayer clauses (a) to (c) of the respective Petitions. The Counsel also states that except the said Creditors hereinabove, no other creditors who have come forward to oppose the Scheme. The Petitioner Companies are granted liberty to present form of minutes for cancellation of Share Capital and reduction of Securities Premium Account as per Clause 7, 8.1.5,8.1.6 and 8.2.3, of the Scheme, as per the averment made in the Company Scheme Petition nos. 341 of 2010 and 342 of 2010 as submitted in their respective petitions. 13. The Petitioner Companies to lodge a copy of this order and the Scheme, duly authenticated by the Company Registrar, High Court, 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 the Order. 10 14. The 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. 15. Filing and issuance of the drawn up order is dispensed with. 16. All concerned authorities to act on a copy of this order along with Scheme duly authenticated by the Company Registrar, High Court, Bombay. (S. J. Kathawalla, J.) 11