Allahabad High Court

Birmingham Properties Limited ... vs Halwasiya Developments Private ... on 7 August, 2015

Bench: Rajan Roy




HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

 								A.F.R.
 

 
 								Court No. 10
 

 
 	    Company Application No. 01 of 2015. 
 

 
Birminghan Properties Limited. 
 
                       ......Applicant Company-1
 

 
 					Versus 
 

 
Halwasiya Developments Private Limited 
 
                   ..........Applicant Company-2
 

 

 
Hon'ble Rajan Roy,J.

Heard Sri Sudeep Seth, learned counsel for the applicant.

The reporting section of the Registry of this Court has made a note requesting the Court as to whether the matter is maintainable at Lucknow or not. The note reads as under:--

"In view of notification No. 576 dt. 05.08.1975, it is provided that all the matters of Companies Act (except upto the stage of winding i.e. upto the stage of proceedings under Section 439 of Companies Act) shall be heard at Allahabad.

May the Hon'ble Court kindly see whether this Company Application is maintainable before this Hon'ble Court?"

The said note refers to Notification No. 576 dated 05.08.1975. The said notification, a copy of which has been placed before the Court by Sri Sudeep Seth, reads as under:--

"HIGH COURT OF JUDICATURE AT ALLAHABAD

ADMINISTRATIVE DEPARTMENT

NOTIFICATION

No. 576/lb-39 dated- Allahabad: August 5, 1975

WHEREAS by notification No. 8427/lb-39-49 dated the 16th of July, 1949 the Lucknow Bench of the High Court of Judicature at Allahabad was not to exercise the jurisdiction and power of the High Court in respect of cases arising in the areas of erstwhile Oudh under the following Acts and those were to be heard at Allahabad;

1. The Indian Divorce Act, 1869 (Act IV of 1869).

2. The Special Marriage Act, 1872 (Act III of 1872)

3. The Indian Succession Act, 1925 (Act XXXIX of 1925)

4. The Indian Matrimonial Cases (War Marriages) Act,

1948 (Act XL of 1948).

5. The Companies Act, 1913 (Act VII of 1913)

6. The Income Tax Act, 1922 (Act XI of 1922).

AND WHEREAS by the subsequent notification no. .... dated the 2nd of July, 1954, the Lucknow Bench of the High Court of Judicature at Allahabad was to exercise the jurisdiction and power of the High Court in respect of cases under the following Acts arising in the areas of erstwhile Oudh;

1. The Indian Divorce Act, 1869 (Act IV of 1869)

2. The Special Marriage Act, 1872 (Act III of 1872)

3. The Indian Succession Act, 1925 (Act XXXIX of 1925)

4. The Indian Matrimonial Cases (War Marriages) Act,

1948.

In the cases under the Indian Companies Act, 1913 (Act VII of 1913) and Indian Income Tax Act, 1922 (Act XI of 1922) arising in the areas of erstwhile Oudh continued to be heard and decided at Allahabad and the Lucknow Bench was not to exercise jurisdiction and power of the High Court in respect to these classes of cases;

AND WHEREAS it is desirable that the Lucknow Bench of the High Court of Judicature at Allahabad should exercise the jurisdiction and power of the High Court in respect of cases under the Income Tax Act, 1961 and under the Companies Act, 1956 upto the stage of winding up lying with the area of erstwhile Oudh;

NOW THEREFORE, in exercise of the powers conferred by Clause 14 of the U.P. High Court (Amalgamation) Order, 1948 ... the Hon'ble Chief Justice of the High Court of Judicature at Allahabad is pleased to direct that w.e.f. 1st October, 1975, the Lucknow Bench of the High Court of Judicature at Allahabad shall exercise the jurisdiction and power of the High Court in respect of the cases under the following Acts arising in the areas of erstwhile Oudh:

1. The Income Tax Act, 1961 (Act No. XLIII of 1961)

2. The Companies Act, 1956 (Act No. 1 of 1956)

Upto the stage of winding up i.e. upto the stage of

proceedings under Section 439 Companies Act, 1956;

PROVIDED that after the winding up order is passed the subsequent proceedings will be heard at Allahabad.

PROVIDED FURTHER that all proceedings under above Acts instituted or commenced before the date of enforcement of this notification, shall continue to be heard at Allahabad.

PROVIDED FURTHER that this notification shall not affect the operation of notification no. 5877/lb-39 dated April 15, 1975 and notifications dated May 1, 1973 and December 21, 1975, which shall continue to remain in force."

By means of the said notification issued by the Chief Justice in exercise of his powers conferred by Clause 14 of the U. P. High Court (Amalgamation) Order, 1948 it has been ordered that with effect from 01.10.1975 the Lucknow Bench of the High Court of Judicature at Allahabad shall exercise the jurisdiction and power of the High Court in respect of the cases under the Income Tax Act, 1961 and the Companies Act, 1956 arising in the areas of erstwhile Oudh, upto the stage of winding up i.e. upto the stage of proceedings under Section 439 of the Companies Act, 1956 provided that after the winding up the subsequent proceedings shall be heard at Allahabad.

From the aforesaid notification it is evident that all proceedings under the aforesaid Acts including Companies Act, 1956 prior to the passing of an order of winding up under Section 439 are maintainable at Lucknow Bench if the cause of action, whether wholly or in part, arises within its territorial jurisdiction. This notification was considered by a Division Bench of this Court in the case of Registrar of Companies Vs. Kamal Infosys Ltd. And others reported in [(2006) 133 Comp Cases 455 (Alld) and the Division Bench opined as under:--

"To sum up, our conclusions are that in company manners that court has the jurisdiction in whose territorial jurisdiction the company has the registered office. It is so necessary also for the reason that directors of a company may be prosecuted at hundreds of places, as in a given case, shareholders of the company may file complaints at different places throughout India. Section 10(3) of the 1956 Act, clarifies the necessity further, as the company may change the location of its registered office. In the instant case, the registered office of the company is at Lucknow. The jurisdiction of the Lucknow Bench in company matters ousted by the notification dated July 15, 1949, had been restored vide notification dated Au9 gust 5, 1975. However, it is only up to the stage of winding up proceedings, and subsequent thereto, the case is required to be decided by this court. This position is crystal clear from the notifications dated August 5, 1975, January 4, 2003 and January 14, 2003. The petition requires to be returned to the petitioners to be presented before the Lucknow Bench."

The present matter is in the nature of Judges Summons under Section 391 (1) of the Companies Act, 1956, therefore, it relates to a proceeding which is prior to the stage of winding up under Section 439 of the said Act. The registration of both the companies is at Lucknow, the cause of action, therefore, for preferring this application clearly has occurred at Lucknow where a scheme of amalgamation has been prepared and proposed. Even after first motion is granted the proceedings will take place in terms of Section 394(1) which is a stage much prior to the winding up of the company. In these circumstances the Court is of the view that this Judges Summons is maintainable before this High Court at Lucknow.

This is a joint Judges Summons filed by Birmingham Properties Limited having its registered office at Halwasiya Court, First Floor, Hazratganj, Lucknow (hereinafter referred to as the transferor company) and Halwasiya Developments Private Limited having its registered office at Halwasiya Court, Hazratganj, Lucknow (hereinafter referred to as the transferee company) seeking dispensation of requirement of having a meeting of the equity shareholders, secured creditors and unsecured creditors of the transferor and transferee companies.

The transferor and transferee companies have filed a joint Judges Summons under Section 391 (1) of the Companies Act, 1956 read with Rule 67 of the Companies Rules 1956 supported by an affidavit as required under the aforesaid Act and the Rules proposing a scheme of amalgamation of the two companies. The transferor company is wholly owned subsidiary of the transferee company. The shareholders of the transferor and transferee companies have submitted no objection certificates which are enclosed with the application under consideration. The transferor company does not have any creditors. The transferee company has one secured creditor and 21 unsecured creditors. No objection certificates of all the said creditors have also been enclosed along with the application under consideration.

The Judges Summons discloses the details of authorized share capital, issues subscribed and paid up capital of the transferor and transferee companies, their liabilities and assets. As per para 22 of the Judges Summons total liabilities of the transferor company are 35, 80, 260 (Non current liabilities = Rs.34,88032.00 + current liabilities = Rs.92,228.00) whereas the total assets of the said company are to the tune of Rs.11096218.80. Thus, apparently the assets outweigh the total liabilities. Likewise as per para 27 of the Judges Summons total liabilities of the transferee company are to the tune of Rs. 20,96,29,917.75 whereas the total assets of the said company are to the tune of Rs.25,61,49,189.00 which also outweigh the total liabilities.

The annual reports of the transferor and transferee companies containing the audited balance sheets, profit and loss account along with auditor's report for the year ending on 31.03.2014 have also been enclosed with the Judges Summons.

As per proposed scheme i.e. clause 2.10 and 2.11 with effect from the appointed date and upon the scheme becoming effective, all debts, liabilities, contingent liabilities, duties and obligations, secured or unsecured, whether provided for or not in the books of accounts or disclosed in the balance sheets of transferor company, shall be deemed to be the debts, liabilities, contingent liabilities, duties and obligations of the transferee company and without prejudice to the generality of the provisions contained therein, all loans raised after the appointed date but before the effective date and liabilities incurred by transferor company after the appointed date but before the effective date for its operations shall be deemed to be of transferee company.

Likewise as per clause 3.1.5 with effect from the appointed date, all debts, liabilities, duties and obligations of transferor company as on the close of business on the date preceding the appointed date, whether or not provided in its books and all liabilities which arise or accrue on or after the appointed date shall be deemed to be the debts, liabilites, duties and obligations of transferee company.

As per clauses 1.1 and 1.2 of Part III (Reorganization of Capital) the entire share capit5al of the transferor company is held by the transferee company direct. Therefore, the transferee company shall not be required to issue any shares or pay any consideration to the transferor company or to their shareholders. Upon coming into effect of this scheme, the shares or the share certificates of the transferor company in relation to the shares held by its member shall, without any further application, act, instrument or deed, be deemed to have been automatically cancelled and be of no effect on and from the effect date without any necessity of them being surrendered.

Thus no reorganization or shares would be involved consequent to the sanction being granted to the proposed scheme. Clause 4 of the proposed scheme (at page 97) states that on occurrence of the effective date, transferor company shall, without any further act or deed, shall stand dissolved without winding up.

Considering the no objection certificates filed by the respective shareholders of the transferor and transferee companies as also by the creditors of the transferee company and considering the financial position of the two companies as also the provisions contained in the proposed scheme, the interest of the shareholders and creditors are not likely to be affected and in view of the dictum of the Punjab and Haryana High Court in the case of Punjab Chemicals and Crop Protection Ltd, reported in [2008]142 Comp Cases 259 (P&H) decided on 3rd July, 2007, the requirement of summoning the meeting of equity shareholders, secured and unsecured creditors of the transferor and transferee companies for the purpose of considering the scheme of amalgamation of the transferor company with the transferee company is hereby dispensed with.