THE HONOURABLE SRI JUSTICE N.V. RAMANA COMPANY PETITION No.159 OF 2009 ORDER: M/s.VSF Projects Limited, represented by its Managing Director, filed this company petition under Sections 391 and 394 of the Companies Act, 1956, seeking sanction of the scheme of arrangement, for reconstructing/restructuring the capital structure of the company. The petitioner was originally incorporated under the name and style ‘M/s. Vijaya Shrimp Farms & Exports Limited’ in the State of Andhra Pradesh, on 04.06.1992, under the provisions of the Companies Act, 1956 (for short ‘the Act’), under certificate of Incorporation No.01-14326 of 1992-93 issued by the Registrar of Companies. Later, its name was changed to VSF Projects Limited, vide fresh certificate of incorporation dated 08.09.2005, and its registered office is situated at Ankulapatur Village, Chillakur Mandal of Nellore District. The main objects of the company, as set out in its Memorandum of Association, is to carry on the business of importers and dealers in and producers of sea water foods, river water foods and to catch or arrange for the catch of all types of fish, prawns, frogs, crabs, shrimps, lobsters, and other crustacean including all other sea water foods or water foods, to freeze and preserve in cold storage and to carry on aquaculture operations, and to carry on civil works etc. The authorized share capital of the petitioner as on 31.03.2008 is Rs.5,00,00,000/- divided into 50,00,000 equity shares of Rs.10/- each. The issued and subscribed capital is Rs.4,82,25,000/- consisting of 48,22,500 equity shares and the paid up capital is Rs.4,30,07,000/- consisting of 43,00,700 equity shares of Rs.10/- each. The petitioner has accumulated losses to the tune of Rs.3,64,77,368/- , as is evident from the Profit and Loss Account for the period ended 31.03.2008. The petitioner has one secured creditor namely Reliance Finance Limited with secured loan of Rs.8,00,000/- and unsecured creditors, who are its Directors and others, with unsecured loan of Rs.4,01,83,924/- as at 31.03.2009. The Board of Directors of the petitioner company in their meeting held on 15.06.2009 approved the composite scheme of arrangement for reconstruction/restructuring of capital between the company and its shareholders and unsecured creditors with effect from 01.04.2008, subject to the consent of the shareholders and approval by the Court. The reasons assigned by the company for justification of the scheme are that it has been incurring losses for the past couple of years for various reasons and that the proposed scheme would enable the company in reduction of capital followed by conversion of unsecured loans into equity which will result in wiping off the losses to a considerable extent and will help the company to build reserves from the profits and, as a whole, it is beneficial to the members, creditors, stake holders and employees. The proposed scheme seeks reduction of paid up capital to Rs.2,15,35,500/- divided into 21,53,550 equity shares of Rs.10/- each and conversion of the unsecured loan of Rs.4,00,00,000/-, out of the total unsecured loan of Rs.4,01,83,924/-, into fully paid equity shares by allotment of 32,00,000/- equity shares of Rs.10/- each Rs.12.50 ps. per share including a premium of Rs.2.50 ps. per share. The Managing Director has filed the letters of the secured creditor namely Reliance Capital Limited and the unsecured creditors and also the Bombay Stock Exchange, Mumbai, indicating that they have no objection for sanction of the proposed scheme of arrangement. This Court, by order dated 20.07.2009 passed in Company Application No.808 of 2009, ordered convening of meeting of the shareholders of the petitioner company on 22.08.2009 and appointed an Advocate as Chairperson for the said meeting, and as directed by this Court, notices of the meeting were sent individually to all the equity shareholders and also published in the newspapers. On 22.08.2009, the meeting of the shareholders was convened under the chairmanship of the Advocate appointed by this Court. The Advocate, having conducted the meeting, filed report on 07.09.2009 stating that the meeting was attended by 45 shareholders in person and 54 shareholders by proxies and all of them voted in favour of the resolution and no votes were cast against the resolution. Considering that report, the said company application was disposed of. Thereafter, the petitioner filed the present company petition, praying to sanction the scheme of arrangement for reconstructing/ restructuring the capital structure as approved by the shareholders of the company so as to be binding on all the members, creditors and employees of the petitioner company. On 18.09.2009, this Court issued notice to the Central Government and ordered publication of the notice in Deccan Chronicle, English daily newspaper, and Andhra Bhoomi, Telugu daily newspaper, having circulation in Nellore. The petitioner took out notices as ordered by this Court to the Registrar of Companies, Andhra Pradesh, Hyderabad, as also the Regional Director, Ministry of Corporate Affairs, Chennai, and also by way of paper publication. The notices having been served, the Registrar of Companies, Andhra Pradesh, Hyderabad, has filed an affidavit, raising an objection that the scheme proposes conversion of unsecured loans taken from the directors/shareholders/their relatives into equity capital, but the company has not furnished the details of calculation/information regarding compliance of Section 58A of the Act read with Companies (Acceptance of Deposits) Rules, 1975, in respect of the said unsecured loans. In reply, the Managing Director of the petitioner company filed an affidavit stating that the company has obtained no- objection from all the unsecured creditors, to whom the shares are to be allotted as per the scheme of arrangement, for sanction of the proposed scheme of arrangement, and the no-objection letters obtained from them have also been filed before this Court and, as such, the objection raised by the Registrar of Companies, with regard to compliance of Section 58A of the Act, is not tenable. Heard the learned counsel on record and perused the scheme of arrangement. Considering the fact that the members of the company have not objected to the scheme of arrangement, as is evident from the report of the Chairperson appointed by this Court, and that the unsecured creditors, through letters, copies of which were filed before this Court, have also reported no objection for sanction of the scheme, which is proposed to raise finances in the best interest of the company, and the scheme being not opposed to any provision of law or public interest, I am of the considered opinion that this Court should also have no objection for sanctioning the scheme of arrangement. Hence, this Court hereby sanctions the scheme of arrangement as approved by the shareholders and unsecured creditors of the petitioner company, as set out in paragraph 9 of the petition herein and schedule thereto (Annexure-A3), and hereby declares that the same is binding on all the shareholders, creditors and employees of the petitioner company. The parties to the scheme of arrangement or other persons interested shall be at liberty to apply to this Court for any directions that may be necessary in regard to the working of the scheme of arrangement and that the petitioner company shall pay the costs of this petition set at Rs.2,500/- to the learned Assistant Solicitor General, and that the petitioner company do file with the Registrar of Companies a certified copy of the order within 30 days from this date. The company petition is allowed accordingly. _______________________ JUSTICE N.V. RAMANA 11th November, 2009 IBL