1. The present petitions are filed for sanction of the Composite Scheme of arrangement in the nature of amalgamation of Integra India Group Company Limited with Integra Engineering India Limited and also for reduction of share capital of Integra Engineering India Limited, proposed under Sections 391 and 394 read with Sections 100 and 103 of the Companies Act, 1956.
2. The scheme is produced at Annexure 'C' in both these petitions.
3. It has been submitted that both the petitioner companies are the listed public limited companies and the shares are listed on Bombay Stock Exchange for both the companies and also on Vadodara Stock Exchange for the Transferor Company. The approvals from the concerned stock exchanges have already been obtained before filing the proceedings before this Court and the same are placed on record. It has been further pointed out that substantial shareholding in both these companies belong to a common foreign company viz. Integra Holding Ag of Switzerland.
4. The petitions give details of the current commercial activities of both the companies. Briefly, Integra India Group Company Limited, the Transferor Company is engaged in manufacturing of Railway Signaling and Control Systems and has turnover of more than Rs.10 crores during last financial year. Integra Engineering India Limited, the Transferee Company has been currently engaged in manufacturing of draw frames, used in textile mills and has turnover of more than Rs.4 crores. The petitions provide the historical background of the Transferee Company and the circumstances under which it has come out of the situation of Sick Industrial Undertaking after paying off all its liabilities. The financial details as presented before the Court indicate that both the companies are currently loss making companies. However, it is envisaged that the proposed arrangement shall provide the synergic benefits. Further the expected cost savings and economies of scale shall help the amalgamated company to improve its financial strength. The petitions provide in detail, the commercial advantages that would flow by virtue of the proposed amalgamation. It is visualized by the Board of Directors of the petitioner company that this will be beneficial to shareholders, creditors and investors.
5. Further, the transferee company proposes to recognize its capital structure by reducing its issued and subscribed equity share capital in order to make its balance sheet realistic by writing off its accumulated losses, as per the provisions of Sec.100 to 104 of the Companies Act, 1956. The same is proposed as an integral part of the proposed composite scheme of arrangement.
6. Pursuant to order dated 11.11.2011 passed by this Court (Coram:K.M. Thaker, J.) in Company Application No.518 of 2011, meeting of the secured creditor of the transferor company was ordered to be dispensed with in view of the written approval of the scheme and separate meetings of the equity shareholders and unsecured creditors of the transferor company were ordered to be convened on 22.12.2011, after issuance of due notices to the concerned parties as well as the public advertisement for the purpose of seeking approval from all the concerned parties to the proposed scheme. Pursuant to the directions issued by this Court in Company Application No.518 of 2011, meetings were held after due notice to the concerned parties as well as the public advertisement on 22.12.2011 and the proposed scheme was duly approved unanimously i.e. 100% in number and 100% in value at the respective meetings of the equity shareholders, secured creditors and unsecured creditors. Pursuant to the said meetings, the Chairman appointed for such purpose has filed report alongwith the affidavit dated 04.01.2012.
7. Similarly, pursuant to order dated 11.11.2011 passed by this Court (Coram:K.M. Thaker, J.) in Company Application No.519 of 2011, as the consent letter of sole preference shareholder was produced, meeting of the preference shareholder was dispensed with. Pursuant to the directions issued by this Court, meeting of the equity shareholders to the proposed scheme was ordered to be convened on 23.12.2011, after issuance of individual notices to the equity shareholders as well as the public advertisement. The result of the said meeting was duly reported to this Court by the Chairman appointed for such purpose by report and affidavit dated 04.01.2012 together with the copy of the proceedings of the meeting showing that the scheme is approved by 100% in number and 100% in value in the meeting of the equity shareholders. It has also been pointed out that the resolution passed in the meeting of equity shareholders specifically includes the requisite approval as envisaged under several other Sections including Section 100 of the Companies Act, 1956 also. Vide aforesaid order dated 11.11.2011, in light of the submission that the proposed reduction does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid-up share capital and the order of the Court sanctioning the scheme shall be deemed to be an order under Section 102 of the Companies Act, 1956 confirming the reduction, separate procedure for reduction of capital and the procedure under Section 101(2) read with Rules 48 to 65 of the Company Court Rules were dispensed with.
8. The substantive petitions for sanction of the scheme were filed by the petitioner companies, which were admitted on 23.01.2012. The notice for the hearing of the petitions were duly advertised in the newspapers being 'Indian Express' and 'Divya Bhaskar' both Ahmedabad editions of 06.02.2012 and the publication in the Government gazette was dispensed with as directed in the said orders. Pursuant to the said publication in the newspapers, no objections were received by the petitioner or its advocate. However, communication entered into with one of the shareholders holding 200 shares of the transferee company has been placed on record which indicates that the said shareholder had asked for information and copies of the petitions which were duly supplied by the company and no objections have been filed by the said shareholder thereafter with regard to the scheme.
9. Notice of the petition have been served upon the Central Govt. and Mr.P.S. Champaneri, learned Assistant Solicitor General appears for the Central Government. An affidavit dated 01.03.2012 has been filed by Mr.Kashmir Lal Kamboj, the Regional Director, (In-Charge) North-Western to – (a) the approval to the scheme from the creditors of the transferee company (b) the accounting treatment to be followed by the
provided that “the company shall not be required to add “And Reduced” after its name.”
10. The attention of this Court is drawn to the additional affidavit dated 13.03.2012 whereby, all the above issues have been dealt with. I have further heard submissions made by Mrs.Swati Soparkar, learned advocate appearing for the petitioners as follows:
(a) It has been submitted that the said transferee company has no secured creditors. So far as unsecured creditors are concerned, their rights and interests are not likely to be affected in any manner due to the proposed scheme of amalgamation. As explained vide para 7.3 of the petition, the amalgamation is proposed between two companies belonging to the same group of management which are involved in the commercial activities of the same nature. It is envisaged that the economies of scale and synergic benefits shall be achieved which will be in the interest of the shareholders as well as creditors of the amalgamated company. The said contention is further supported by the fact that even after the publication of notice of petition in newspapers both at Ahmedabad and Vadodara, no creditor has come forward with any objections. Considering the facts and circumstances, it is not found necessary to issue any such directions to obtain the approval of the unsecured creditors of the transferee company and the observation of the Regional Director is hereby overruled.
(b) It has been undertaken by the transferee company that upon scheme being effective, the transferee company shall pass the necessary accounting entries under the Pooling of Interest method, in compliance with the Accounting Standard 14, issued by the Institute of the Chartered Accountants of India and in compliance with Section 211(3A) of the Companies Act, 1956. The transferee company is hereby directed that upon scheme being effective, it shall pass the accounting entries in its books in compliance with the said Accounting Standard 14 and Section 211(3A) of the Companies Act, 1956.
(c) It has been observed by the Regional Director that the Hon'ble Court should direct the petitioner company to add the words “And reduced” as suffix to its name for a period of five years or more in order to enable the prospective investors, other shareholders and general public dealing with the company to know the said fact, even in future. As regards the objection raised by the Regional Director, it is pointed out on affidavit that as such, the whole scheme was placed before the equity shareholders in the meeting so held. As per the order passed by this Court, as aforesaid, all the relevant information were supplied to the shareholders. It was pointed out that, in fact, the resolution has been passed whereby, the scheme of amalgamation is approved by 100% in number and 100% in value in the meeting of equity shareholders and no one has raised any such objection while exercising their commercial wisdom on any objection or any other issue in this regard. As it can be seen from order dated 11.11.2011 passed by this Court in Company Application No.518 of 2011 that even this fact was pointed out before this Court, as noted by this Court in the said order that as company is listed with Bombay Stock Exchange as well as Vadodara Stock Exchange, no objection certificates from both the stock exchanges were placed on record.
(d) It is further pointed out that the reduction of capital proposed under the present scheme does not involve diminution of any liability towards unpaid share capital or payment to the shareholder of any paid up share capital. The reduction is proposed merely to write off past accumulated losses and make its financial statements realistic. In view of this, it has been reiterated that there is no justification or special reason for issuing such direction to add 'And Reduced' as a suffix to its name. It has been therefore prayed on behalf of the petitioner that no such direction be issued by this Hon'ble Court while sanctioning the scheme. Moreover, it has no secured creditors and has not proposed any compromise with the unsecured creditors. In fact, it has been specifically asserted that the proposed scheme does not cause any prejudice to its creditors and their rights and interests are not in any way affected. It has been categorically stated that the petitioner shall fulfill all its liabilities in the normal course of business. Hence, interest of shareholders, creditors or public at large is not likely to be affected due to proposed scheme. It is also pointed out that while issuing the no objection certificate, the concerned stock exchanges, which otherwise protect the interest of the shareholders and investors have not found it necessary to add such a stipulation.
11. Considering the facts and circumstances of the present case and considering the submissions made, in my view it is not necessary to issue the directions to add the words 'And Reduced' as suffix to the name of the company for any period.
12. Considering all the facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits and the submissions during the course of hearing, I am satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs do not survive. I have come to the conclusion that the present scheme of arrangement is in the interest of its stakeholders viz. Shareholders, creditors as well as in the public interest and the same deserves to be sanctioned.
13. Prayers in terms of paragraph 21(a) of the Company Petition No.20 of 2012 for the transferor company and prayers made in paragraph Nos.22(a) and (b) as well as the minutes as under Section 103 in terms of paragraph 17 of Company Petition No.21 of 2012 for the transferee company are hereby granted.
14. The petitions are disposed of accordingly. So far as the costs to be paid to the Central Government Standing counsel is concerned, I quantify the same at Rs.7500/- per petition. The same may be paid to the learned counsel appearing for the Central Government. The cost of Rs.7500/- be paid to the office of the Official Liquidator for the transferor company.
Hitesh (R.M.CHHAYA, J.)