In Re: Hindustan Coca Cola ... vs Unknown
1999 Latest Caselaw 676 Del

ORDER

Dalveer Bhandari, J.

1. The petition under Sections 391 to 394 of the Companies Act of 1956 for according sanction of the scheme of arrangement/amalgamation has been filed in this Court. I propose to decide company petition Nos. 154 to 157 The scheme of arrangement/amalgamation is between Hindustan Coca-Cola Bottling North West Private Limited (HCCNW), (Transferor Company No. 1); Bharat Coca-Cola Bottling South East Private Limited (BCCSE), (Transferor Company No. 2); and Bharat Coca-Cola Bottling North East Private Limited (BCCNE), (Transferor Company No. 3) and Hindustan Coca-Cola Bottling South West Private Limited (HCCSW) (Transferee Company).

2. It is incorporated in the petition that the petitioner company is presently engaged in the operations relating to the preparation, packaging, sale and distribution of non-alcoholic beverages. The main objects of the petitioner company have been set out in the Memorandum and Article of Association. The transferor companies 1 to 3 are also engaged in the simi-

lar operations.

3. It is incorporated in the petition that the present scheme of arrangement/amalgamation is primarily with a view to consolidate the undertakings of the transferor companies 1 to 3 and the undertaking of transferee company by the merger and amalgamation of transferor companies 1 to 3 into the transferee company.

4. It is further alleged that the present scheme has been proposed to facilitate the smooth management, administration and financial efficiencies and alignment, coordination and streamlining of the day to day operations relating to preparation, packaging, sales and distribution of non-alcoholic beverages in the Republic of India. According to the scheme there are some significant benefits which will accrue to the transferee company. These benefits are reproduced as under:-

a) The transfer and vesting of bottling undertakings into transferee company will substantially reduce the operational cost;

b) The arrangement will make available to the transferee company the combined financial resources with much higher earnings. The transferee company will have a strong financial and operational structure which will be capable of resource mobilisation and financial consolidation necessary to withstand competition from domestic competitors.

c) The arrangement would bring synergistic linkages through combined technological capillaries beside savings in administration and management cost in addition to savings from sales tax accruing from the arrangement. The arrangement will incorporate all activities of the management functions in relation to the operations in Transferee Company leading to improvement in operating efficiency.

e) The arrangement will consolidate the operations relating to the preparation, packaging etc. of non-alcoholic beverages resulting in a cohesive structure and management.

f) The transfer and vesting of the transferred undertakings of the transferor companies No. 1 to 3 into the transferee company will substantially reduce duplication of administrative responsibility and multiplicity of records and legal compliances.

5. Company applications 236 to 239 were filed in this Court. On 3.2.1999, the Court ordered the convening of meetings of the unsecured creditors on 10.4.1999. The Court noted that 100% of the share holders had consented to the scheme. There were no secured creditors in any of the four companies. The scheme was unanimously sanctioned in the meeting of the unsecured creditors present and voting. The scheme of arrangement was filed for the purpose of confirmation in this Court vide company petitions 154 to 157 of 1999. This Court issued notice to the department of Company Affairs under the provisions of Section 394(a).

6. The Regional Director, Northern Region and the Official Liquidator have filed affidavits and reports respectively giving approval to the arrangement/amalgamation between the transferor companies and transferee company. Both the authorities have only one objection to this arrangement/amalgamation that the transferee company has not increased its authorised share capital from Rs. 50,00,000/- to Rs. 600 crores, and the direction be given to the transferee company to increase its authorised share capital up to Rs. 600 crores and file Form No. 5 with the Registrar of Companies, Delhi before sanctioning the scheme of amalgamation. Though in the scheme of arrangement in part IV and clause IV (a) and (b) which read as under:

(a) The authorised share capital of the Transferee Company shall be increased to Rupees Six Hundred Crores (Rs.600,00,00,000/-) as on the effective date.

(b) The transferee company shall file the requisite applications/forms with the Registrar of Companies for the increase of the Authorised Capital of the Transferee Company as aforesaid. The transferee company shall make suitable amendments to the transferee company's Memorandum and Articles of Association to reflect the increase of the Authorised Share Capital.

7. It may be pertinent to mention that during the course of hearing of this petition, the learned counsel appearing for the petitioner Mr. S.S. Shroff has undertaken to file an affidavit on behalf of the petitioner and consequently an affidavit of Mr. Mukesh Bhavnani, authorised signatory, on behalf of the petitioner company was filed on 4.8.1999. The relevant portion of the affidavit reads as under :

"On behalf of the transferee company, I state that upon the sanction of the Scheme of Arrangement in its entirety, in accord ance with the provisions of Part IV para 4, the Transferee company shall submit the necessary form to the Registrar of Companies, Delhi for increase of the Authorised Capital of the Transferee Company as is increased to the sum of Rs. 600 crores upon the sanction of the scheme as on the effective date. This form shall be submitted in accordance with the provisions of Part IV para 4 of the Scheme of Arrangement within 15 days from the date of the pronouncement of the sanction order and even before the certified copy of the sanction order can be filed with the Registrar of Companies, Delhi.

8. In view of this affidavit, there is no pending objection to the scheme of arrangement or amalgamation.

9. Mr. S.S. Shroff, learned counsel for the petitioner during the course of the hearing has prayed that it may be declared that only a consolidated balance sheet of the merged company, i.e., consolidated balance sheet of Hindustan Coca Cola Bottling South West Private Limited representing the company accounts of all the four companies upon merger be permitted to be filed within thirty days of the effective date of the scheme and separate balance sheets of the four companies need not be filed.

10. During the course of hearing of these submissions, the learned counsel for the petitioner has placed reliance on the judgment of the Supreme Court in Miher H. Mafatlal Vs. Mafatlal Industries Ltd.; [1996] 87 Company Cases 792. Their lordships of the Supreme Court have observed as under :

"On this aspect, the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in view by the court. The Court certainly would not act as a court of appeal and sit in judgment over the in formed view of the concerned parties to the compromise, as the same would be in the realm of corporate and commercial wisdom exercised by the creditors and the members of the company who have ratified the scheme by the requisite majority. Consequently, the company court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts like an umpire in a game of cricket who has to see that both the teams play their game according to the rules and do not overstep the limits. But subject to that how best the game is to be play is left to the players and not to the umpire."

11. I have considered the averments incorporated in the petition, documents on record and submissions advanced by the learned counsel appearing for the petitioner. I have also heard the learned counsel for the Official Liquidator and the Regional Director, Northern Region, Kanpur. Both these authorities have submitted that in view of the affidavit dated 4.8.1999 now they have no objection to the arrangement or amalgamation, as prayed for.

12. I have carefully and objectively seen the scheme of amalgamation. The rights and interests of the shareholders, creditors and employees are not likely to be jeopardised. The scheme of amalgamation does not appear to be unfair, contrary to public policy or in violation of public interest. In my opinion, the scheme in substance is fair and reasonable and accordingly, I accord sanction to the scheme of arrangement, amalgamation as prayed for, in this petition.

13. The scheme of amalgamation shall be binding on all the equity share-holders, secured and unsecured creditors of both the companies and shall take effect from the effective date as defined in the scheme. A certified copy of this order alongwith the scheme of amalgamation will be filed with the Registrar of Companies within two weeks from the date of this order.

14. The transferor companies shall stand dissolved from the effective date, without the process of winding up. The statement of assets be filed within ten days.

15. The petitioner is also permitted to file only a consolidated balance sheet of the merged companies, i.e., the consolidated balance sheet of Hindustan Coca-Cola Bottling South West Private Limited (transferee company) from the appointed date till 31.12.1998 be filed within thirty days of filing of the certified copy of the sanctioned order with the ROC, Delhi.

16. A formal order shall be drawn up by the Registry in accordance with law.

17. The petition is accordingly disposed of.