1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION rpa COMPANY APPLICATION NO. 47 OF 2010 IN COMPANY PETITION NO. 101 OF 2006 CONNECTED WITH COMPANY APPLICATION NO. 133 OF 2006 In the matter of the Companies Act I, 1956; And In the matter of Sections 391, 392 and 394 of the Companies Act, 1956; And In the matter of a Scheme of Amalgamation of Calyx Pharmaceuticals & Chemicals Pvt. Ltd. With Calyx Chemicals and Pharmaceuticals Pvt. Ltd. Calyx Chemicals & Pharmaceuticals Pvt. Ltd. .. Applicant (Org. Petitioners) .... Mr. Virag Tulzapurkar, Senior Advocate a/w. Mr. Mayur Khandeparkar i/b. M/s. Kanga & Co. for the Petitioners. Mr. C. J. Joy-Regional Director. .... CORAM : S. J. KATHAWALLA, J. DATE : FEBRUARY 17, 2010. P.C. 2 Draft amendments tendered on behalf of the Petitioners are taken on record and marked “X” for identification. Applicant to carry out amendments on or before 23rd February, 2010. 2. By this Company Application, the Applicant Company (Original Petitioners) Calyx Pharmaceuticals & Chemicals Pvt. Ltd., has sought modification of the scheme of Amalgamation sanctioned by this Court by its order dated 19th April, 2006 in Company Petition No. 101 of 2006, by adding the words “on or before” before the words “31st March, 2010’ appearing in clause 8(iii)(c) of the Scheme of Amalgamation. 3. Clause 8 (iii) of the Sanctioned Scheme reads thus : “ (iii) The Preference shares to be issued and allotted to the members of the Transferor Company as aforesaid shall be issued and allotted subject to the following terms and conditions: (a) the Preference shares shall carry interest at the rate of 9 % from the date of their Issue till conversion ; (b) They shall be cumulative; 3 (c) They shall be fully convertible into equity shares and 50 % thereof shall be so converted on 31st March, 2009 and the balance 50 % shall be converted on 31st March, 2010;” 4. Thus, under the sanctioned Scheme, the Preference shares were to be fully converted in to Equity shares. 50 % of the Preference shares were to be converted on 31st March, 2009 (which was already done), and the balance 50 % was to be converted on 31st March, 2010. 5. The Applicant Company is now desirous of coming out with an IPO. Clause 26(5) of SEBI (ICDR) Regulations 2009 provides : “ No issuer shall make an IPO if there are any outstanding convertible securities or any other rights which would entitle any person any option to receive equity shares after the IPO.” In view of the above regulation, the Applicant Company shall not be able to make an IPO prior to 31st March, 2010 in view of the date of conversion of 50 % of the Preference shares into Equity shares fixed on 31st March, 2010 under clause 8(iii) of the Sanctioned Scheme. The Applicant Company for this 4 reason is desirous of converting the preference shares into equity shares prior to 31st March, 2010, and is therefore seeking to amend clause 8 (iii) of the Sanctioned Scheme by adding the words “on or before” before “31st March, 2010”. 6. The Applicant Company has filed an affidavit of its Company Secretary dated 15th February, 2010 setting out therein that the Applicant Company had on 10th February, 2010 at 11.00 a.m. convened an Extra Ordinary General Meeting (EOGM) of its equity shareholders and passed the following resolutions : “ Item No. 1 EARLY CONVERSION OF 1,85,185% CONVERTIBLE PREFERENCE SHARES INTO EQUITY SHARES : “RESOLVED THAT pursuant to the provisions of Section 391 and 394 and other applicable provisions of the Companies Act, 1956, provisions of Article 26 of Articles of Association of the Company and subject to the approval of Hon’ble High Court, Bombay, the consent of the Equity shareholders of the Company be and is hereby accorded to te Board of Directors to convert 1,85,185% Convertible Preference Shares of Rs. 100.00 each due for conversion on 31st March, 2010 into 18,51,850 Equity Shares of Rs. 10.00 each by 15th February, 2010 or such other date as may be sanctioned by the Hon’ble High Court, Bombay.” 5 “RESOLVED FURTHER THAT Board of Directors of the Company be and is hereby authorized to fix the record date and to take such steps as may be necessary in relation to the above and to settle all matters arising out of and incidental thereto and to sign and execute all documents and writings that may be required, on behalf of the Company and also to delegate all or any of the above powers to the any Director or principal officer of the Company and generally to do all acts, deeds and things that may be necessary, proper, expedient or incidental for the purpose of giving effect to the aforesaid resolution.” Similarly, an EOGM was convened by the Applicant Company of its Preference Shareholders on the same day at the same venue at 12.00 noon where similar resolutions according consent of the preference shareholders were passed. According to the Applicant Company they had issued notice of the EOGM to all their Equity shareholders. 72 % of the shareholder (52 in number) were present at the meeting and the resolutions were passed by 100 % of the Equity shareholders present and voting. Notice of the EOGM was also issued to all the Preference shareholders out of which 68 % of the shareholders (40 in number) were present and the resolutions were passed by 100 % of the Preference shareholders present and voting. The Applicant Company has undertaken to file an affidavit setting out these facts 6 on or before 23rd February, 2010. The said undertaking is accepted. 7. The learned Advocate appearing for the Regional Director has opposed the Application for modification of the sanctioned Scheme on the ground, that the Court could have allowed the amendments/modifications to the scheme under Section 392 of the Companies Act, 1956 only if the amendments/modifications pertained to the proper working of the compromise or arrangements. It is submitted that the reasons given for the modification of the sanctioned scheme cannot be termed/treated as necessary for the proper working of the compromise or arrangement. However, the first part of clause 14 of the sanctioned Scheme itself provides that the Transferor Company and the Transferee Company through the respective Board of Directors may be allowed to make or assent from time to time on behalf of all persons concerned to any modifications or amendments of the Scheme. In the instant case, the Applicant Company has not sought the modification/amendment only through the Board of Directors, but have called Extra Ordinary General Meetings of the Equity shareholders as well as the 7 preference shareholders and have obtained their assent for modification of clause 8 (iii) of the sanctioned scheme by passing necessary resolutions at the said Extra Ordinary General Meetings. 8. In view thereof, I see no reason why the modification sought by the Applicant Company in the above Company Application to clause 8 (iii) (c) of the Scheme of Amalgamation sanctioned by this Court by its order dated 19th April, 2006 should not be allowed. 9. The Company Application, is therefore, allowed in terms of prayer clause (a) as amended. [ S. J. KATHAWALLA, J. ]