IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY PETITION No. 82 of 2011 with COMPANY PETITION No. 83 of 2011 and COMPANY PETITION No. 84 of 2011 For Approval and Signature:
HON'BLE SMT. JUSTICE ABHILASHA KUMARI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? No 2 To be referred to the Reporter or not ? No 3 Whether their Lordships wish to see the fair copy of the judgment ? No 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? No 5 Whether it is to be circulated to the civil judge ? No ========================================================= HILLOCK AGRO FOODS (INDIA) LTD - Petitioner(s) Versus .............. - Respondent(s) ========================================================= Appearance :
MR NAVIN K PAHWA for Petitioners MR YV VAGHELA CENTRAL GOVERNMENT COUNSEL for Regional Director =========================================================
CORAM : HON'BLE SMT. JUSTICE ABHILASHA KUMARI
Date : 01/11/2012 COMMON ORAL JUDGMENT
1. The present petitions have been filed under Sections 391394 of the Companies Act, 1956, seeking sanction of the Composite Scheme of Demerger of Flour/ Agro Foods Business of Hillock Agro Foods (India) Limited (Demerged/ Transferee Company) into Deepvandana Tradelink Private Limited (Resulting Company), Re organization of Share Capital of Hillock Agro Foods (India) Limited and Amalgamation of Real Realty Management Company Private Limited (Transferor Company) with Hillock Agro Foods (India) limited (Transferee Company).
2. The petitioner Hillock Agro Foods (India) Limited, the Demerged/ Transferee Company, filed Company Application No.279 of 2011 seeking directions to convene meetings of the Equity Shareholders and Unsecured Creditors of the said Company. It was reported that the petitioner Company does not have any Secured Creditor. This Court, vide order dated 13.04.2011, passed in Company Application No.279 of 2011, directed that the meetings of Equity Shareholders and Unsecured Creditors of the petitioner be convened and held on 09.05.2011. The Court appointed Shri Pradip J. Vyas, Managing Director and failing him, Shri Harshad J. Vyas, as Chairman of both the meetings.
3. The petitioner Hillock Agro Foods (India) Limited has placed on record a copy of each of the Reports of the Chairman, both dated 09.05.2011, in respect of the meetings of the Equity Shareholders and Unsecured Creditors, supported by his affidavit dated 11.05.2011. The said Reports would show that the meetings of the Equity Shareholders and Unsecured Creditors of the petitioner Company were held on 09.05.2011, as ordered by this Court. Further, a perusal of the Reports would suggest that the Equity Shareholders and the Unsecured Creditors present in the meeting in person or through proxy, have unanimously approved the Composite Scheme of Arrangement.
4. Real Realty Management Company Private Limited, the Transferor Company, filed Company Application No.280 of 2011, seeking dispensation of the meetings of Equity Shareholders and Unsecured Creditors of the petitioner Company on the ground that all the Equity Shareholders and Unsecured Creditors of the said Company have given their consent in writing, in approval of the Composite Scheme. It was reported that there are no Secured Creditors. By an order dated 13.04.2011 passed in Company Application No.280 of 2011, this Court ordered dispensation of the meetings of the Equity Shareholders and the Unsecured Creditors of the petitioner Transferor Company.
5. Deepvandana Tradelink Private Limited, the Resulting Company, filed Company Application No.281 of 2011, seeking dispensation of the meeting of the Equity Shareholders on the ground that all the Equity Shareholders of the said Company have given their consent in writing, in approval of the Composite Scheme. It was submitted that the petitioner, being the Resulting Company, the meeting of Creditors is not required to be held. By an order dated 13.04.2011, passed in Company Application No.281 of 2011, this Court ordered dispensation of the meeting of the Equity Shareholders of the petitioner Resulting Company. Further, this Court also ordered that, as this is a Resulting Company, the meeting of the Creditors is not required to be held.
6. The petitioners have, thereafter, filed the present Company petitions, seeking sanction of the Composite Scheme.
7. All the petitions came to be admitted by separate orders made on 13.06.2011, passed in Company Petition No.82 of 2011 filed by Hillock Agro Foods (India) Limited, Company Petition No.83 of 2011 filed by Real Realty Management Company Private Limited and Company Petition No.84 of 2011 filed by Deepvandana Tradelink Private Limited. By the said orders, this Court issued notice to the Central Government through the Regional Director in respect of all the Companies and issued notice to the Official Liquidator in respect of the Transferor Real Realty Management Company Private Limited. The Court also directed publication of notice of the petitions in the English Daily Newspaper “Indian Express” and the Gujarati Daily Newspaper “Lok SattaJan Satta”, both Ahmedabad Editions.
8. The petitioners thereafter filed different O.J. Civil Applications being O.J. Civil Application No.414 of 2011, filed by Hillock Agro Foods (India) Limited, O.J. Civil Application No.415 of 2011, filed by Real Realty Management Company Private Limited and O.J. Civil Application No.416 of 2011, filed by Deepvandana Tradelink Private Limited, seeking a revised date of final hearing of the respective petitions. This Court, by separate orders dated 07.09.2011 passed in the aforementioned applications, rescheduled the date of final hearing of the three petitions to 14.10.2011.
9. Pursuant to the aforesaid orders passed by this Court in the respective Company Petitions read with the orders made in the O.J. Civil Applications, the petitioners have published the notices of the petitions in the English Daily Newspaper “Indian Express” and the Gujarati Daily Newspaper “Lok SattaJan Satta”, both Ahmedabad Editions, on 15.09.2012. The Directors of the petitioner Companies have filed separate affidavits, all dated 19.10.2011 in respect of the respective petitions.
10. The affidavits also state that apropos to the advertisement, neither the petitioner Companies nor the advocate for the petitioners, have received any objection against the sanction of the Scheme.
11. Pending the final hearing of the petitions, the petitioner Hillock Agro Foods (India) Limited filed a Draft Amendment seeking to substitute clause 8.1 of the Scheme as per the clause contained in the draft amendment. This Court, by order dated 11.05.2012 passed in Company Petition No.82 of 2011, permitted the petitioner to carry out the amendment.
12. Pursuant to the issuance of notice to the Official Liquidator in respect of the Company Petition No.83 of 2011, a report has been filed by the Official Liquidator. A perusal of the Report suggests that the Official Liquidator has reported that the affairs of the Transferor Company have not been conducted in a manner prejudicial to the interest of its members or the larger public interest. The Official Liquidator has, however, requested this Court to direct the Transferor Company to preserve its books, papers and records for a period of 8 years from the date of sanctioning of the Scheme and not to dispose of the records without prior permission of the Central Government under Section 396A of the Companies Act, 1956, before the aforesaid period.
13. In response to the notice to the Regional Director, Western Region, Department of Company Affairs, Shir Y.V. Vaghela, learned Central Government Standing Counsel, has appeared and has filed an affidavit of the Regional Director dated 03.08.2012. A perusal of the Report would show that the Regional Director has made certain observations.
14. In response to the affidavit filed by the Regional Director, the petitioner Hillock Agro Foods (India) Limited, the Demerged/ Transferee Company has filed an affidavit of its Managing Director dated 24.08.2012, and has explained the observations made by the Regional Director. The Regional Director has filed another common reply affidavit dated 26.10.2012. In response thereto, the petitioner Hillock Agro Foods (India) Limited, the Demerged/ Transferee Company has filed its response vide affidavit dated 30.10.2012.
15. A perusal of the affidavit filed on behalf of the petitioner Transferee Company would show that the petitioner Transferee Company has explained all the observations made by the Regional Director.
16. With regard to the observation regarding the appointed date, it is stated that it is open for the petitioner to fix any appointed date. In this regard, reliance is also placed on the common oral judgment dated 23.09.2009 rendered by Division Bench of this Court in O.J. Appeal No.65 of 2009, and order dated 15.06.2012 passed in Company Petition No.137 of 2011 in Company Application No.362 of 2011 with Company Petition No.138 of 2011 in Company Application No.378 of 2011. The petitioner Company however has placed on record, a copy of each of the audited balance sheets of all three Companies as at 31.03.2011 along with affidavit dated 30.10.2012.
17. With regard to the observation on fraction of Shares, it is stated that as a result of issuance of Shares, no fraction of Shares is likely. This is also reiterated in the further affidavit dated 30.10.2012.
18. With regard to the observations on complying with the requirements of AS14 and more particularly, in the context of what is contained in Clauses 8.5 and 8.6 of the Scheme, it is stated that Clause 8.4 of the Scheme in terms, stipulates that the transfer of the assets of the Transferor Company pursuant to the Scheme shall be accounted for, in accordance with AS 14 and other applicable standards prescribed under the Act or by the Central Government or by the Institute of Chartered Accountants of India and in accordance with the generally accepted accounting practices. It is further stated that clause 8.5 and 8.6 of the Scheme are in accordance with AS 14.
19. With regard to the clause pertaining to reconstitution of the Board of Directors of the Transferee Company, it is stated that it is permissible for the Company to reconstitute its Board and no separate procedure is required to be followed. It is further stated that there is no restriction under the Act for not permitting such reconstitution of the Board as part of the Scheme under Sections 391394 of the Act. The petitioner Company, however, undertakes to file the requisite forms with the office of Registrar of Companies required under Section 303 of the Act once the reconstitution takes place.
20. With regard to the stipulation regarding obtaining “no objection” from the Stock Exchange, the petitioner has produced a no objection letter from the Bombay Stock Exchange dated 26.06.2012, along with the affidavitin reply.
21. As regards the determination of exchange ratio, it is submitted that it is now a settled principle of law that determination of the exchange ratio and the acceptance thereof, falls exclusively with the domain of the Shareholders of the Companies to the Scheme. Once the Shareholders of the Companies have approved the Scheme, the Regional Director may not have any legal basis to object to the exchange ratio. The exchange ratio is based on the Valuation Report prepared by a Firm of Chartered Accountants by applying the well accepted accounting principles. A fairness opinion report is also availed from a Merchant Banker as required under the Listing Agreement. The Bombay Stock Exchange has also granted its “no objection” to the Scheme. In the circumstance, it is stated that the observation made by the Regional Director is not legally sustainable.
22. With regard to the observations regarding sale of assets, it is stated that the sale of assets has taken place before presenting the Scheme, therefore, such transactions would have no bearing on the Scheme. Even otherwise, it is stated that the sale of assets, as such, does not have any effect on the Scheme.
23. With regard to the observations as contained in para 2(g)(III), it is stated that the revival would only infuse funds in the Company and would eventually be in the interest of the Shareholders and Creditors of the petitioner Transferee Company. The Shareholders and Creditors have already approved the Scheme. There is no objection from any other person having any concern with the affairs of the petitioner Transferee Company or other Companies, to the Scheme. The observation made by the Regional Director in this regard, therefore, is not sustainable.
24. No counter affidavit or rejoinder has been filed by the Regional Director, in response to the reply affidavit dated 30.10.2012 filed by the petitioner Transferee Company. No submissions are canvassed against what is stated in the said two reply affidavits filed by the petitioners even during the course of hearing of the present petitions. Further no legal provisions on principle of law have been pleaded by the learned Central Government Standing Counsel, in support of the observations made by the Regional Director in the face of the explanations rendered by the petitioners.
25. Having heard Mr. Navin Pahwa, learned advocate for the petitioners Companies, Mr. Y.V. Vaghela, learned Central Government Standing Counsel for the Regional Director and the Official Liquidator, and having considered the Composite Scheme and the relevant documents on record, and as the concerns raised by the Regional Director have, in the view of the Court been successfully redressed by the two affidavits filed by the petitioner Transferee Company, it would be appropriate to grant sanction to the present Scheme, with amendment, as granted by this Court by order dated 11.05.2012 passed in Company Petition No.82 of 2011.
26. In view of the above, the proposed Scheme is thus sanctioned. It is, however, observed that the Transferor Company will preserve its books, papers and shall not dispose of the records without the prior permission of Central Government under Section 396A of the Companies Act, 1956.
27. The cost of the petition is determined at Rs.7,500/ per petition, which shall be paid by the petitioners respectively, by drawing a Pay Order in favour of Mr. Y.V. Vaghela, learned Central Government Standing Counsel. The cost of the office of the Official Liquidator is quantified at Rs.7,500/ in respect of the Transferor Company.
28. All the petitions are disposed of, in the above terms.
(sunil) (Smt. Abhilasha Kumari, J.)