IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY PETITION No. 58 of 2012 in COMPANY APPLICATION No. 101 of 2012 For Approval and Signature:
HON'BLE SMT. JUSTICE ABHILASHA KUMARI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
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 ?
5 Whether it is to be circulated to the civil judge ?
========================================================= KOMAL MARKETING PRIVATE LIMITED - Petitioner(s) Versus . - Respondent(s) ========================================================= Appearance :
MR PAVAN S GODIAWALA for Petitioner MR M IQBAL A SHAIKH, CENTRAL GOVT. COUNSEL for Respondent (Regional Director-RoC) =========================================================
CORAM : HON'BLE SMT. JUSTICE ABHILASHA KUMARI
Date : 23/10/2012 ORAL JUDGMENT
1. The present petition under Sections 391 to 394 of the Companies Act, 1956, has been preferred by Komal Marketing Private Limited (the Transferor Company), which is a wholly owned subsidiary Company of GSEC Limited (the Transferee Company), seeking sanction of the Scheme in the nature of amalgamation of Komal Marketing Private Limited with GSEC Limited. A copy of the Scheme has been produced at ExhibitC to the petition.
2. The details of the incorporation of the petitionerTransferor Company as well as those regarding the authorised Share Capital of the petitioner and the objects of the Company, as set out in the Memorandum of Association, have been enumerated in the petition.
3. It is stated that the petitionerTransferor Company is a wholly owned subsidiary of the Transferee Company. The Scheme of Arrangement in the nature of amalgamation of the subsidiary Transferor Company with the holding Transferee Company has been proposed with a view to availing synergic benefits of merging the wholly owned subsidiary with the holding Company. It is stated that the merger will improve the efficiency of the Transferee Company. The details of the Transferee Holding Company have also been set out in the petition.
4. The petitioner had preferred Company Application No.101 of 2012, seeking dispensation of the meetings of its two Equity Shareholders and Unsecured Creditors for considering and if thought fit, approving with or without modifications, the proposed Scheme in the nature of amalgamation pursuant to obtaining individual consent letters in writing and a Resolution approving the Scheme from both the Equity Shareholders and consent letters from the Unsecured Creditors of the petitionerCompany. This Court, vide order dated 27.03.2012, passed in Company Application No.101 of 2012, granted the prayers made by the petitioner. The petitioner has stated at Paragraph14 of the petition that within seven days of the passing of the above order, the petitioner preferred Company Petition No.51 of 2012. It was noticed that there was a typographical mistake in the verification of the petition, therefore, the petitioner sought the liberty of the Court to withdraw the petition and prefer a fresh petition. Accordingly, this Court permitted the petitioner to withdraw the said petition vide order dated 03.04.2012 and the petitioner has filed the present petition, being Company Petition No.58 of 2012.
5. This Court, vide order dated 11.04.2012, admitted the petition and fixed the same for hearing on 04.05.2012. Notice was issued to the Official Liquidator and the Central Government through the Regional Director, North Western Region, Ministry of Corporate Affairs. It was further ordered that, an advertisement be published in the English daily newspaper “Indian Express” and the Gujarat daily newspaper “Divya Bhaskar”, both Ahmedabad Editions. Publication in the Government Gazette was dispensed with.
6. The petitioner has complied with the above order by serving a notice to the Official Liquidator and the Regional Director and by publishing the notice of the petition in the aforementioned newspapers on 18.04.2012. The necessary affidavit of compliance dated 02.05.2012 has been filed by Mr.Nimish Chunibhai Sakhaiya.
7. Shri Kashmir Lal Kamboj, Regional Director, NorthWestern Region, has filed an affidavit dated 25.07.2012, wherein certain observations have been made. The first observation is to the effect that the Transferee Company has not filed an application or a petition and has not been exempted from filing the application or petition.
the Transferee Company even though all the Members or Creditors of the Transferee Company have sanctioned the Scheme at their respective meetings. It is stated by the Regional Director that unless such facts are placed before the Court by making an application and directions of this Court are obtained for such exemption by the Transferee Company, the Scheme cannot be said to have been approved by the Members and Creditors of both the Companies and as such, it cannot be sanctioned by this Court. Reliance has been placed by the Regional Director, upon a judgment of the Karnataka High Court in the case of Kirloskar Electric Co. Ltd. Re. (2002) 40 SCL 745 (Kar.) in support of the stand taken in the affidavit in this regard.
8. The second observation made by the Regional Director is to the effect that as per Clause No.9 of the Scheme, at the first instance, the petitioner has shown the Share Exchange Ratio and at another instance, has stated in the Scheme that no allotment shall be made as the Shares are getting cancelled since the Transferor Company, being the wholly owned subsidiary of the Transferee Company, no Shares are required to be issued by the Transferee Company. It is stated that this amounts to a material contradiction.
9. The third observation made by the Regional Director is pertaining to the Accounting Standard 14, which is to be followed mandatorily, and that Clause 10(g) of the Scheme is deviating from the compliance of the requirements of the said Accounting Standard 14.
10. Pursuant to service of notice, the Official Liquidator has filed his report dated 24.07.2012 wherein, upon consideration of the Report of the Chartered Accountant, it has been opined at Paragraph15, that the affairs of the petitioner Company have not been conducted in a manner prejudicial to the interests of its members or the larger public interest. Further, it has also been urged by the Official Liquidator that the Company should be directed to preserve its Books of Accounts, papers and records and not to dispose of the same without the prior permission of the Central Government. The Official Liquidator has also prayed that expenses of Rs.7,500/ be paid by the Transferor Company for preparing the Report.
11. The petitionerTransferor Company has filed an affidavit dated 03.09.2012 in regard to the observations made by the Regional Director. Insofar as the first observation is concerned, it is stated that as the petitioner is the wholly owned subsidiary Company of the Transferee and as all the Equity Shares are held by the Holding Transferee Company, it is not at all mandatory to convene the meetings of the Shareholders and Creditors of the Transferee Company, as referred to in Clause 16 of the Scheme, which specifically states regarding the requirement of convening and calling a meeting and filing of an application / petition by the Transferee Company. That, the case of Kirloskar Electric Co. Ltd. (supra) relied upon by the Regional Director is not at all applicable on the facts and circumstances of the case as the said judgment pertains to demerger.
12. The petitioner has relied upon a judgment of the Bombay High Court in the case of Mahaamba Investments Ltd. V. IDI Ltd. (2001) 105 Company Cases 16. Further, reliance has been placed by the petitioner on a judgment of this Court in Reliance Jamnagar Infrastructure Limited – Company Petition No.80 of 2012 in Company Application No.120 of 2012, decided on 08.10.2012.
13. Regarding the second observation made by the Regional Director, it is stated on behalf of the petitioner that the petitioner has only worked out the Share Exchange Ratio and has made it clear that the Shares are not going to be allotted as they shall get cancelled and hence, there is no contradiction in the Scheme.
14. Regarding the third observation, it is stated that upon sanction of the Scheme, the petitioner Transferee Company would follow the Accounting Standard 14 and the observation has been made only upon an apprehension.
15. This Court has heard Mr.Pavan S.Godiawala, learned advocate for the petitioner and Mr.M.Iqbal A.Shaikh, learned Central Government Counsel for the Regional Director.
16. In the view of this Court, reliance placed by the Regional Director on the judgment Kirloskar Electric Co. Ltd. (supra) is misplaced as the said judgment has been distinguished by the Karnataka High Court in Vibank Housing Finance Ltd., In re.(2006) 130 Company Cases 705 (Karnataka).
17. This Court, in Company Petition No.80 of 2012 in Company Application No.120 of 2012 in the matter of Reliance Jamnagar Infrastructure Limited has held, after considering the judgments of various High Courts that where the Scheme of Amalgamation provides for the transfer of all the assets and liabilities of the Subsidiary Transferor Company to the Holding Transferee Company, and such transfer does not affect the rights of its Members or Creditors and does not involve a reorganization of the Share Capital of the Transferee Company, no separate application by the Transferee Company, under Section 391 or Section 394 of the Act, would be necessary. This judgment would be applicable to the facts and circumstances of the present case, therefore, the observation of the Regional Director regarding initiation of separate proceedings by the Transferee Company cannot be upheld.
18. It further appears that the petitioner has dealt with the second observation of the Regional Director regarding the aspect that upon amalgamation, as the shares of the Transferor Company would get cancelled, there is no contradiction. Further, the petitioner has given undertaking in the form of an affidavit to adhere to and follow the Accounting Standard 14. The queries of the Regional Director are, therefore, sufficiently dealt with.
19. However, it is directed that the petitioner shall not dispose of its Books of Accounts, papers and records without the prior permission of the Central Government.
20. For the aforestated reasons, the petition is allowed in terms of Paragraph18(a) of the petition.
21. As regards costs to be paid to the Central Government, an amount of Rs.7,500/ shall be paid to Mr.M.Iqbal A.Shaikh, learned Central Government Counsel. Further, an amount of Rs.7,500/ shall be paid as expenses to the Official Liquidator.
22. Subject to the above, the petition is disposed of.
(sunil)
(Smt. Abhilasha Kumari, J.)