THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition Nos.71 and 72 of 2011 (Dated : 27-06-2011) Between: Nagarjuna Oil Refinery Limited Rep. by its Director, Sri K.Soma Raju (Petitioner in Company Petition No.71 of 2011) Nagarjuna Fertilisers and Chemicals Limited Rep. by its Vice President-Legal & Secretary M.Ramakanth (Petitioner in Company Petition No.72 of 2011) ….Petitioners THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition Nos.71 and 72 of 2011 COMMON ORDER: These two Company Petitions have been taken out under Sections 391 to 394 of the Companies Act, 1956 read with Sections 78 and 100 to 102 and Rule 79 of the Companies (Court) Rules, 1959 seeking sanction of the composite scheme of arrangement and amalgamation. More precisely; Nagarjuna Oil Refinery Limited (hereinafter referred to as `NORL’) is the petitioner in Company Petition No.71 of 2011 and whereas Nagarjuna Fertilizers and Chemicals Limited (hereinafter referred to as `NFCL’) is the petitioner in Company Petition No.72 of 2011. Both the companies are part of the Nagarjuna Group. The proposed scheme envisages de-merger of oil business undertaking of Nagarjuna Fertilizers and Chemicals Limited into Nagarjuna Oil Refinery Limited and merger of residual Nagarjuna Fertilizers and Chemicals Limited and iKisan Limited into Kakinada Fertilizers Limited. `NORL’ was incorporated on 16th November 2010 under the provisions of the Companies Act, 1956. The authorised share capital of NORL as on 31st December 2010 is Rs.5,00,000/- (Rupees five lakhs only) divided into 50,000 equity shares of Rs.10/- each. The issued, subscribed and paid up capital of the company as on 31st December 2010 is Rs.5,00,000/- divided into 50,000 equity shares of Rs.10/- each, fully paid up. The objects of `NORL’ are to purchase or otherwise acquire, manufacture, refine, treat, reduce, distil, smelt, store, hold, transport, use experiment with, prospect for, mine, bore, extract, market, distribute, exchange, supply, sell or otherwise dispose of, import, export and trade or generally deal in all kinds of petroleum, petroleum products and petrochemicals including all varieties of plastics, oil field chemicals etc., more fully described in para (5) of company Petition No. 71 of 2011. `NFCL’ was incorporated on January 28th, 1976. The authorised share capital of the company as on 31st December, 2010 is Rs.800,00,00,000/- (rupees eighty hundred crores only) divided into 60,00,00,000 equity shares of Rs.10/- each amounting to 600,00,00,000 and 2,00,00,000 preference shares of Rs.100/- each amounting to 200,00,00,000/- (Rupees Two hundred crores only). The issued, subscribed and paid up share capital of `NFCL’ as on 31st December 2010 is Rs.465,38,55,410/- divided into 42,81,81,821 equity shares of Rs.10/- each and 37,20,372 preference shares of Rs.100/- each, fully paid up. The petitioner company as on March 22, 2011 has redeemed 18,60,185, 0.01% ordinary Redeemable preference shares of Rs.100/- each as stipulated by Corporate Debt Restructuring Cell (CDR Cell). The objects of `NFCL” are to carry on the business of manufacturing or producing, refining, mixing or preparing, mining or otherwise acquiring, trading and dealing in and with any and all cases and kinds of fertilizer, manures, their mixtures and formulations and any and all classes and kinds of chemicals, source materials ingredients, mixtures, derivatives and compounds thereof, more fully described in para (5) of the company petition 72 of 2011. `iKisan’ was incorporated on 11th April, 2007. It’s registered office is situate at A/612, Dalamal Tower, 211, Nariman Point, Mumbai-400 021. The authorised share capital of `iKisan’ as on 31st December, 2010 is Rs.30,00,00,000/- divided into 2,99,00,000 equity shares of Rs.10/- each and 1,00,000 preference shares of Rs.10/- each. The issued, subscribed and paid up share capital of iKisan as on 31st December 2010 is Rs.29,55,00,000/- divided into 2,95,50,000 equity shares of Rs.10/- each. The objects of `iKisan’ are to carry on the business in India and abroad of development of real estate and in that respect to conceive, design, invest, construct, build, manage etc., more fully described in para (13) of Company petition No.71 of 2011. Kakinada Fertilizers Limited (`KFL’) was incorporated on November, 7th 2006. It’s registered office is situated at A/612, Dalamal Tower, 211, Nariman Point, Mumbai-400 021. The authorized share capital of KFL as on 31st December, 2010 is Rs.1,00,00,000/- (Rupees one crore only) divided into 10,00,000/- equity shares of Rs.10/- each. The issued, subscribed and paid up share capital of KFL as on 31st December 2010 is Rs.5,00,000/- divided into 50,000 equity shares of Rs.10/- each. The objects of KFL are to carry on the business of manufacturing or producing, refining, importing and exporting, mixing or preparing, mining or otherwise acquiring, trading and dealing in and with any and all classes and kinds of fertilizers manures, their mixtures etc., more fully described in para 917) of Company petition No.72 of 2011. Nagarjuna Fertilizers and Chemicals Limited (`NFCL’) is flagship company of the Nagarjuna Group. The shareholders of NFCL have not been able to realize the value of their investments in view of the involvement of the company in two diverse sectors having unique opportunities and challenges. In view of the necessity to maintain market leadership position, expand their respective businesses, they have focussed attention of the business and attract investors into their respective businesses and it was considered appropriate to undertake a composite scheme of arrangement and amalgamation so as to demerge the fertilizer and oil business. The reasons for the proposed arrangement and amalgamation between NFCL, NORL,, iKisan and KFL have been detailed in para (18) of the Company Petition No.71 of 2011. According to the petitioners, the implementation of the scheme would ensure enhancement in the market perception and enable NFCL to emerge as a stronger market player both in the Fertilizer and Micro Irrigation sector and enable the shareholders to enjoy the benefits of both the Fertilizer and Oil sector by being shareholders in two listed companies, i.e., KFL and NORL. The scheme envisages segregation of like business and demerger of unlike business. The segregation of like business involvers merger of Ikisan Limited into Kakinada Fertilizers Limited (KFL) along with the fertilizer sector of NFCL for achieving synergies in business, inorganic growth and capturing the untapped market share by enhancing the product portfolio, service offerings, customer base and market positioning and the demerger of the oil business into an independent company termed “Nagarjuna Oil Refinery Limited” (`NORL’). The scheme has been considered by the Board of Directors of NFCL and NORL. By a resolution dated 10.1.2011, the Board of Directors of the respective companies resolved for implementation of the composite scheme. A Chairperson came to be appointed to conduct the meeting of the shareholders of NFCL for the purpose of considering the proposed scheme of arrangement and amalgamation, vide order dated 4.3.2011. The meeting was held on 15.4.2011 as ordered by this Court in Company Application No.178 of 2011, dated 14.3.2011. The meeting of the secured creditors and unsecured creditors of NFCL came to be dispensed with, as per the orders of this Court dated 4.3.2011 passed in Company Application No.179 of 2011. The meeting of the shareholders of NORL came to be dispensed with since all the shareholders have given their positive consent by way of affidavits for the proposed scheme of arrangement/Amalgamation, vide order dated 14.3.2011 passed in Company Petition No.177 of 2011. These company petitions came to be admitted on 26.4.2011. The applicants were directed to take out notice to the Official Liquidator, High Court of A.P., Hyderabad, Regional Director, Department of Company Affairs, Chennai and Registrar of Companies, Hyderabad. The petitioners were also directed to take out publication in “THE HINDU” English daily, Andhra Pradesh and main edition of “EENADU” telugu daily indicating the date of hearing as 15.6.2011. The petitioners took out publication and placed on record copies of proof publication. The Official Liquidator placed on record his report in Company Petition No.72 of 2011. It is stated in the report that the affairs of NFCL appears to have not been conducted in a manner prejudicial to the interests of the members or to the public interest. The Registrar of Companies filed a common affidavit. It is stated in the affidavit that the petitioners have to secure NOCs from secured/unsecured creditors including Debenture Holders and that NFCL and KFL have to comply Section 31 and 192 of the Companies Act, 1956. The petitioners filed reply affidavit to the common affidavit filed by the Registrar of Companies. It is stated in the reply affidavit that the CDR Cell has approved the composite scheme of arrangement and amalgamation, vide its letter dated 16.6.2011. It is also stated in the reply affidavit t that the debenture holders of NFCL are none other than the secured creditors of CDR and the CDR approved the composite scheme of arrangement and amalgamation. Therefore, the objection raised by the Registrar of Companies cannot be sustained. Paras (4) and (5) of the reply affidavit of the petitioner in Company Petition No.72 of 2011 needs to be noted and it is thus:- “ Contrary to what has been submitted by the Registrar of Companies in his affidavit, the order dated 4-3-2011 passed by the Hon’ble High Court in C.A.Nos.179 and 180 of 2011 does not require NOCs from unsecured creditors to be furnished. The Hon’ble High Court dispensed with the meetings of the unsecured creditors of the petitioner company upon being satisfied that the assets of the petitioner company that are being transferred to Kakinada Fertilizers Limited are adequate to meet its liabilities , that the scheme does not involve any compromise with the unsecured creditors of the company and that it would not affect the interests of the unsecured creditors. It is further submitted that the amendment of Article 94 in Nagarjuna Fertilizers and chemicals Limited and Kakinada Fertilizers Limited shall be in compliance with Section 31 and 192 of the Companies Act, 1956”. Heard Sri S.Ravi, learned Senior Counsel appearing on behalf of the petitioners, Sri Anil Kumar, learned counsel representing the Official Liquidator and the learned Assistant Solicitor General appearing on behalf of the Registrar of Companies. Learned senior counsel submits that NFCL is engaged in various business activities like production, manufacture and sale of Urea and micro irrigation system apart from sale of other fertilizers and has an oil business undertaking. The segregation of like business involves merger of Ikisan Limited into Kakinada Fertilizers Limited (KFL) along with the Fertilizer sector of NFCL for achieving synergies in business, inorganic growth and capturing the untapped market share by enhancing the product portfolio , service offerings. He would further contend that the scheme does not effect the interest of the workers, employees of the NFCL, NORL, IKisan and KFL as their services shall be deemed to have been continuous and not interrupted by reason of the composite scheme of arrangement and amalgamation. The only objection taken by the Registrar of companies is that NOC has not been obtained from the secured creditors. As could be seen from the material placed on record, the CDR has stepped into the shoes of the secured creditors and it has accorded its approval under letter dated 16.6.2004 for the proposed scheme of arrangement and amalgamation. In view of the letter, the objection of the Registrar of Companies has been complied with by the petitioners. 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 the public policy. Having considered the report of the Registrar of Companies and the Official Liquidator and there being no opposition from any quarter for the proposed scheme and as all the statutory compliances have been fulfilled, I do not see any impediment in granting sanction to the scheme of arrangement and amalgamation as proposed by the petitioners. Since the registered offices of KFL and iKisan Limited have been situated in Maharashtra State, the scheme is sanctioned subject to the orders to be passed by the Bombay High Court in the petitions filed by them. Accordingly, these Company Petitions are allowed sanctioning the scheme of arrangement and amalgamation subject to the orders to be passed by the High Court of Bombay in the petitions relating to K.F.L. and iKisan Limited companies. The parties to the scheme or other persons interested shall be at liberty to apply to this Court for any directions that may be necessary in regard to working of the scheme and the petitioners do lodge an authenticated copy of this order with the Registrar of Companies within 30 days from today. The petitioners in both the company petitions are to pay costs of Rs.5,000/- each to the Registrar of Companies, Hyderabad and the Official Liquidator, High Court of A.P., Hyderabad. Costs are to be paid within four weeks from today. _____________________ B.SESHASAYANA REDDY, J Dt.27-06-2011 RAR THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition Nos.71 and 72 of 2011 (Dated : 27-06-2011)