1. These are the petitions filed by the three petitioner Companies for sanction of the Scheme of Arrangement embodied in the Scheme of Amalgamation of Vasupujya Jewels Private Limited, Mahendrakumar Babulal Jewels Private Limited (hereinafter referred to as "the Transferor Companies") with Kalyan Jewels Private Limited (hereinafter referred to as "the Transferee Company").
2. The petitioner of Company Petition No.198 of 2011 is Vasupujya Jewels Private Limited. It was originally incorporated on 1st February, 2010 as a Private Limited Company in the office of the Registrar of Companies, Gujarat under the provisions of the Companies Act, 1956. The registered office of the Transferee Company is currently situated at FF 5, Shandilya Complex, Opp. Vikas Gruh, Paldi, Ahmedabad-380007 in the State of Gujarat. The shares of the petitioner Company are not listed on any Stock Exchange and is therefore an unlisted Company.
3. The petitioner of Company Petition No.199 of 2011 is Mahendrakumar Babulal Jewels Private Limited. The Transferor Company Mahendrakumar Babulal Jewels Private Limited is converted from the partnership firm in the Part IX of the Companies Act, 1956 as a Private Limited Company in the office of the Registrar of Company, Gujarat under the provisions of the Companies Act, 1956. The incorporation certificate issued on 4th day of January, 2011 by the office of the Registrar of Company, Gujarat under the provisions of the Companies Act, 1956. The registered office of the Transferor Company is currently situated at 5, Onyx Building, Beside Reliance Fresh, H.L. Commerce College Road, Navrangpura, Ahmedabad-380009. The shares of the petitioner Company are not listed on any Stock Exchange and are therefore an unlisted Company.
4. The petitioner of Company Petition No.200 of 2011 is Kalyan Jewels Private Limited. The petitioner Company was originally incorporated on 10th November, 2004 in the name and style of Kalyan Jewels Private Limited as a Private Limited Company in the office of the Registrar of Companies, Gujarat under the provisions of the Companies Act, 1956. The registered office of the Transferee Company is currently situated at 49, Super Mall, Nr. Lal Bunglow, C.G. Road, Ahmedabad-380009. The share of the petitioner Transferee Company is not listed on any Stock Exchange and is therefore Unlisted Company.
5. Circumstances and/or reasons and/or grounds have necessitated and/or justified the Scheme and the advantages thereof are inter-alia as under:-
It is appropriate to merge the two Companies to achieve a sustained growth, development and for the purpose of the future growth strategies. Accordingly it has been proposed to merge the three Companies registered in the State of Gujarat. The management envisages the following reasons/advantages of Merger:
It is considered advantageous to amalgamate the Transferor Company with the Transferee Company. The amalgamation would result in optimum utilization and management of other resources and would reduce the administrative costs. The resources of the Company will be conveniently merged and pooled together leading to a more effective and centralized management and reduction in administrative expenses and overheads which are presently being multiplicated because of separate entities. The amalgamation will result in the larger pool of financial and other resources, which will enable the Amalgamated Company to broaden its asset base and in long run improve financial gearing. Besides that, amalgamation would reflect the new economic value of the businesses. On account of amalgamation, operations would be streamlined through new management initiatives. After amalgamation, merged entity could install and implement adequate and suitable measure for corporate governance.
6. The petitioner of Company Petition No.198 of 2011 i.e. Vasupujya Jewels Private Limited had filed an application in this Court being Company Application No.336 of 2011 was preferred by the petitioner Company. This Court (Coram: Anant S. Dave, J.) vide order dated 20.6.2011 has dispensed with the meeting of Equity Shareholders and Unsecured Creditors of the petitioner Company in relation to the proposed scheme of amalgamation as required under Section 391(2) of the Companies Act is not necessary to be held and direct to call and convene the meeting of the Secured Creditor. Company Application No.372 of 2011 was preferred by the petitioner Company for seeking modification of the date of convening the meeting on 25.8.2011.
7. Mr.
Virat B. Shah was appointed as Chairman of the meetings to consider the proposed scheme of amalgamation.
8. The Chairman of meeting was also directed by this Court to issue advertisements in Western Times, English daily in Ahmedabad edition and Jansatta, Gujarati daily in Ahmedabad edition.
9. Accordingly as per the direction of this Court individual notice was sent by certificate of posting to the Secured Creditor of the Company together with the scheme of arrangement and explanatory statement as required under Section 393 of the Companies Act, 1956 with Proxy form and Attendance Slip. The notice of the meeting was also advertised as directed by this Court in Western Times, English daily in Ahmedabad edition and Jansatta, Gujarati daily in Ahmedabad edition on 3rd August, 2011.
10. The meeting of the Secured Creditor of the Company was held on 25th August, 2011 at 3:00 p.m., The Chairman of the meeting read out the explanatory statement and explained the scheme. The resolution was put to vote to ascertain the wishes of the Secured Creditor.
11. The meeting of the Secured Creditor held on 25th August, 2011 at 3:00 p.m. and in the said meeting, 1 Secured Creditor remained present either personally to vote on the scheme. The scheme was approved by 100% in no. and 100% in amount of Secured Creditor present and voting.
12. Chairman reports have been filed as on 2nd September, 2011 i.e. within the 7 days of the said meetings. The meeting of Secured Creditor was attended by 1 Secured Creditor and the total value of debt was Rs.600 lacs.
13. Similarly the petitioner of Company Petition No.199 of 2011 i.e. Mahendrakumar Babulal Jewels Private Limited had filed an application in this Court being Company Application No.335 of 2011 was preferred by the petitioner Company. This Court vide order dated 20.6.2011 has dispensed with the meeting of Equity Shareholders of the petitioner Company in relation to the proposed scheme of amalgamation as required under Section 391(2) of the Companies Act is not necessary to be held and direct to call and convene the meetings of the Secured Creditor and Unsecured Creditors. Company Application No.371 of 2011 was preferred by the petitioner Company for seeking modification of the date of convening the meetings on 25.8.2011.
14. Mr.
Virat B. Shah was appointed as Chairman of the meetings to consider the proposed scheme of amalgamation.
15. The Chairman of meetings was also directed by this Court to issue advertisements in Western Times, English daily in Ahmedabad edition and Jansatta, Gujarati daily in Ahmedabad edition.
16. Accordingly as per the direction of this Court individual notice was sent by certificate of posting to the Secured Creditor and Unsecured Creditors of the Company together with the scheme of amalgamation and explanatory statement as required under Section 393 of the Companies Act, 1956 with Proxy form and Attendance Slip. The notice of the meeting was also advertised as directed by this Court in Western Times, English daily in Ahmedabad edition and Jansatta, Gujarati daily in Ahmedabad edition on 3rd August, 2011.
17. The meeting of the Secured Creditor was held on 25th August, 2011 at 3:30 p.m. since requisite quorum was not present therefore the said meeting was adjourned to 26th September, 2011.
18. The meeting of the Unsecured Creditors was held on 25th August, 2011 at 4:00 p.m. and in the said meeting, 23 Unsecured Creditors remained present personally to vote on the scheme. Out of 23 Unsecured Creditors, one Unsecured Creditor has given consent on attendance slip, stated no objection. If considered valid vote, valid vote in favour are 23 in number and none votes against. The scheme was approved by 100% in number and 100% in amount of Unsecured Creditor present and voting. If one vote has considered invalid vote, valid votes in favour are 22 in number and none vote against. The scheme was approved by 100% in number and 100% in amount of Secured Creditor present and voting. Thus, the resolution approving the proposed scheme was carried by requisite statutory majority by the Unsecured Creditors present and voting.
19. Chairman reports have been filed as on 2nd September, 2011 i.e. within the 7 days of the said meetings.
20. The adjourned meeting of the Secured Creditor was held on 26th September, 2011 at 3:30 p.m. and since requisite quorum was not present therefore the said meeting was adjourned to 4th November 2011. The adjourned meeting of the Secured Creditor was held on 4th November, 2011 at 3:30 p.m. and since requisite quorum was not present therefore the said meeting was adjourned to 18th November, 2011. The adjourned meeting of the Secured Creditor was held on 18th November, 2011 at 3:30 p.m. and in the said meeting, 1 Secured Creditor remained present personally to vote on the scheme. Valid vote in favour is 1 in number and none vote against. The scheme was approved by 100% in number and 100% in amount of Secured Creditor present and voting. Thus, the resolution approving the proposed scheme was carried by requisite statutory majority by the Secured Creditor present and voting.
21. The Chairman report dated 30th September, 2011, 11th November, 2011 and 25th November, 2011 has been filed on 30th September, 2011, 11th November, 2011 and 25th November, 2011 i.e. within the 7 days of the said meeting.
22. The petitioner of Company Petition No.200 of 2011 i.e. Kalyan Jewels Private Limited had filed Company Application No.337 of 2011 was preferred by the petitioner Company. This Court vide order dated 20.6.2011 has dispensed with the meeting of all the equity shareholders of the petitioner Company in relation to the proposed scheme of amalgamation as required under Section 391(2) of the Companies Act is not necessary to be held and further held that meeting of the creditors is not required to be called for as the rights of the creditors of the petitioner Company in no manner affected by the scheme and no compromise is offered to any of the creditors and neither any liability of the creditors under the scheme is being reduced or extinguished.
23. The petitioners thereafter filed Company Petitions namely Company Petition Nos.198 of 2011, 199 of 2011 and 200 of 2011 seeking sanction of the Scheme of Arrangement in the nature of amalgamation. This Court vide its order dated 2.2.2012 admitted all the three petitions and directed issuance of notice to the Regional Director, in case of all the three Companies and notice to the Official Liquidator in case of the Transferor Companies. This Court also directed the publication of notice of petition in Western Times, English daily in Ahmedabad edition and Jansatta, Gujarati daily in Ahmedabad edition.
24. Pursuant to the orders dated 2.2.2012, the petitioners have published a notice of admission in Western Times, English daily in Ahmedabad edition and Jansatta, Gujarati daily in Ahmedabad edition on 15.2.2012. Similarly, notice of hearing of petitions was served upon the Official Liquidator and the Regional Director on 13.2.2012. Mr. Virat B. Shah, the Director of the Company filed an affidavit of service indicating the service of notice published in the newspapers and also the notice of hearing of the petition served upon the Regional Director as well as the Official Liquidator.
25. Pursuant to the advertisement published in the newspapers as per orders in company application, no objections have been received.
26. In response to the notice to the Official Liquidator, in respect of the Transferor Companies, Mr. A.K. Chaturvedi, Official Liquidator has filed a report dated 26.4.2012 in Company Petition No.198 of 2011 and a report dated 25.4.2012 in Company Petition No.199 of 2011, enclosing therewith the report/letter dated 19.3.2012 submitted by the Chartered Accountants. A perusal of this report discloses observations made by Official Liquidator based on the report of the Chartered Accountant in the Company Petition No.198 and 199 of 2011 is that "Therefore, in view of the aforesaid report of the Chartered Accountants, the Official Liquidator most respectfully submits that the affairs of the petitioner Company have not been conducted in a manner prejudicial to the interest of its members or in the public at large. This Court may be pleased to decide the company's petition on merits and may be pleased to direct the Company to preserve its books, papers and records and not to dispose of the records without prior permission of the Central Government under Section 396A of the Companies Act, 1956. It is further submitted that the related office expenses of the office of the Official Liquidator for submitting this report are Rs.7,500/- approximately. Therefore, this Court may be pleased to direct the petitioner Company to pay such cost to the office of Official Liquidator as may be considered appropriate by this Court."
27. Mr.
Sudhir Mehta, learned advocate appearing for the petitioner company in support of his submissions, while dealing with the observations made by the official liquidator as well as the chartered accountants, has submitted that Petitioner Company [Vasupujya Jewels Private Limited, Mahendrakumar Babulal Jewels Private Limited] will preserve its books, papers and records and not to dispose off the records without prior permission of the Central Government under section 396A of the Companies Act, 1956 before the aforesaid period and Petitioner Companies [Vasupujya Jewels Private Limited, Mahendrakumar Babulal Jewels Private Limited] will pay such cost of Rs.7,500/- each or as may be considered appropriate by this Court to the office of Official Liquidator."
28. In response to the notice to the Regional Director, Western Region, Department of Company Affairs, Mr. M.
Iqbal A. Shaikh, learned Central Government Standing Counsel appearing for the Central Government has appeared and has filed an affidavit dated 25.4.2012 of Mr. Kashmir Lal Kamboj, the Regional Director. A perusal of this Affidavit discloses that there is five observations made by the office of the Regional Director.
a. The observation No. 1 is as under :
"That, Clause No.8.4 of the scheme inter alia provides that upon the scheme becoming finally effective, the Authorized Share Capital of all the Transferor companies would be merged with the Authorized Shares capital of the Transferee Company without any further act and deed and without the requirement of payment of any Roc fees/stamp duty/registration charges as, such charges has already been paid in past by the respective companies. The Deponent however, respectfully submits that, the scheme does not provide for automatic amendment in the capital clause of the Memorandum of Association and the Articles of Association of the Transferee company. The Deponent further respectfully submits that Memorandum of association and the Articles of Association of a company can be amended only after complying with the provisions of section 17, 31, r.w. section 192 of the Companies Act, 1956 and on payment of requisite filing fees required to be paid on the prescribed forms to be filed with the Registrar of Companies. The Court may therefore, be pleased to direct the petitioner Transferee company to amend the capital clause of the Memorandum of association and the Articles of Association, as the case may be, after complying with the aforesaid provisions of the Companies Act, 1956 and on payment of requisite filing fees thereon.
It is submitted that petitioner Transferee company will amend the capital clause of the Memorandum of association and the Articles of Association, as the case may be, after complying with the provisions of section 17, 31, r.w. section 192 of the Companies Act, 1956 and on payment of requisite filing fees thereon.
Therefore, the observation does not survive.
b. The observation No. 2 is as under :
"It is submitted that the accounting entries/adjustments to be made in the books of accounts of the petitioner Transferee company are stated at Clause No. 10 of the Scheme. It is further submitted that the accounting entries/adjustments, as a consequence of the scheme of Amalgamation, are to be made as per Accounting Standard-14 notified by the Central Government u/s 211(3A) of the Companies Act, 1956."
The Deponent respectfully submits that clause no. 11.1, provides as under : It is provided that the excess of the value of the net assets of the Transferor companies as per methods suggested in AS 14 over the paid up value of the shares to be issued and allotted pursuant to the terms of Clause 7 above, shall be credited in the books of the Transferee Company to a separate account to be named and styled as "Amalgamation Reserve Account". The said account shall be considered as free/general reserve and shall form part of the net worth of the Transferee Company however short fall of the value of the net assets of the Transferor Companies, shall be accounted for and dealt with in the books of the Transferee Company as separate account to be named and styled as "Amalgamation Shortfall/Goodwill Account" or "titles/trade mark Account" as the case may be."
The Deponent respectfully submits that, the aforesaid clause of the scheme inter alia seeks sanction of this Court, through this scheme, for giving effect of and adjustment of the amalgamation in the General reserve indirectly treating the "Amalgamation Reserve Account" as free/general reserve, which is not in accordance with the requirements of Accounting Standard-14 [AS-14] notified by the Central Government under section 211[3A]/[3C] of the Companies Act, 1956.
Further, the subsequent sub-clause No. 11.5 of the said clause, indirectly empowers the Board of Directors of the Transferee company to account any of the balances in its books of accounts, in any manner as it may deem fit, and indirectly enables the Transferee company to escape from the exact compliance of requirements of AS-14 under the order of this Court on the Scheme.
The Court may therefore, be pleased to direct the petitioner Transferee Company to comply with the requirements of AS - 14 r.w. Section 211(3A) of the Companies Act, 1956 strictly."
It is submitted that petitioner Transferee Company will make adjustments in their Books of accounts as per the Accounting Standard - 14 notified by the Central Government under Section 211(3A) of the Companies Act, 1956.
Therefore, the observation does not survive.
c. The observation No. 3 is as under:
That, Clause No.11.2 of the scheme provides as under :-
"It is provided that any share application money of the Transferor company will be treated as unsecured loan of the Transferee Company."
The Deponent respectfully submits that the Transferee company being a private limited company under the provisions of section 3 of the Companies Act, 1956, is banned by its Articles of Association in accepting, renewing or otherwise any deposits which includes unsecured loans which is not from its own shareholders or directors. The deponent further respectfully submits that he is not aware as to whether the Transferor companies have accepted/renewed any further share application money from the persons other than their shareholders and directors after the date of their last audited balance sheets. The deponent respectfully submits that in case, any such share application money have been accepted, the same shall required to be refunded before the scheme is sanctioned by this Court. As such the said clause in the scheme is not in accordance with the provisions of section 3 of the companies act, 1956. The Court may be pleased to direct the petitioner companies to amend the scheme to that extent by deleting aforesaid clause no. 1.2 from the scheme.
It is submitted that Transferor companies have not accepted/renewed any further share application money from the persons other than their shareholders and directors after the date of their last audited balance sheets. It is submitted that Petitioner Companies will amend the scheme to that extent by deleting clause no. 1.2 from the scheme.
Therefore, the observation does not survive.
d. The observation No. 4 is as under:
"That the Registrar of Companies, Gujarat has submitted his report vide his letter No. ROC/Mahendra-Vasupujya-Kalyan/STA/(K)/2010-11/ 151 dated 20.4.2012 and as per the said report, no complaint and/or representation has been received against the petitioner companies including any complaint/representation in respect of the proposed Scheme of amalgamation."
The above said observation is formal observation.
e.
The observation No. 5 is as under :
"That, the Deponent further submits that, there appears no other objection to the proposed scheme of amalgamation of Transferor companies namely Vasupujya Jewels Private Limited and Mahendrakumar Babulal Jewels Private Limited with the Transferee company namely Kalyan Jewels Private Limited and, the scheme does not, prima facie appear to be prejudicial to the interest of the shareholders of the petitioner Companies and the public at large."
The above said observation is formal observation.
29. In view of the Report of the Regional Director and Official Liquidator, the scheme is not prejudicial to the interest of shareholders and public and the petitioner companies have not been conducted in a manner prejudicial to the interest of its members or the public interest.
30. It is further submitted that section 391 of the Companies Act is a complete code in itself. A Scheme of arrangement/amalgamation falls squarely within the four corners of the Section. The scheme of arrangement/amalgamation can be sanctioned even if it involves doing acts for which the procedure is specified in other Sections of the Act.
31. Having heard Mr. Sudhir Mehta, learned advocate appearing for the petitioner companies and Mr. M.
Iqbal A. Shaikh, learned Central Government Standing Counsel appearing for the Central Government and having considered the observations made by the Regional Director as well as the reply affidavit filed on behalf of the petitioner companies, the Court is of the view that none of these observations have any bearing in the eye of law.
32. Considering the entire facts and circumstances of the case, the Court is of the view that the Scheme of Arrangement as proposed is in the interest of the companies and they are duly approved by the shareholders and all concerned. No one has raised any objection. It is also not contrary to the public interest. In view of the Report of the Regional Director and Official Liquidator, the scheme is not prejudicial to the interest of shareholders and public and the petitioner companies have not been conducted in a manner prejudicial to the interest of its members or the public interest. Hence prayers made in the respective Company Petitions are hereby granted.
33. The petitions are disposed of accordingly. So far as cost to be paid to the learned Central Government Standing Counsel is concerned, the same is quantified at an amount of Rs.10,000/- (Rupees ten thousand only) per petition. The same may be paid to Mr. M. Iqbal A. Shaikh, learned Central Government Standing Counsel appearing for the Central Government. So far as cost to be paid to the Official Liquidator is concerned, the same is quantified at an amount of Rs.7,500/- each (Rupees seven thousand five hundred only) for transferor companies.
[R.M.CHHAYA, J.] mrpandya Top