Kanoria Petroproducts Limited vs Unknown
1999 Latest Caselaw 1002 Del

ORDER

Dalveer Bhandari, J.

1. This order will dispose of the petition, filed under Section 391(2) and 394 of the Companies Act, 1956, seeking sanction to the Scheme of Arrangement whereby and whereunder share capital of the Applicant Company would be re-organized and re-structured to improve and strengthen the financial position of the applicant company , i.e., M/s. Kanoria Petro-products Limited through the Scheme of Arrangement. The registered offices of the applicant company is situated within the jurisdiction of this Court.

2. In the scheme of arrangement it is mentioned that the applicant company has an authorised share capital of Rs. 10 crores divided into 99,70,000 shares of Rs. 10/- each and 3,000, 9.8% redeemable cumulative preference shares of Rs. 100/- each and issued, subscribed and paid-up capital of Rs. 4,94,94,370/- divided into 49,48,977 equity shares of Rs. 10/- each fully paid up and 46 9.8% redeemable cumulative preference shares of Rs.100/- each fully paid up.

3. It is also mentioned in the Scheme that during the course of business, the applicant suffered substantial losses and as on 31.3.1998, the applicant company had accumulated losses of Rs. 6,18,09,226/-. It is mentioned in the Scheme that the applicant company has since diversified its activities in the area of acting as indenting agents for foreign enterprises and the applicant company has earned a net profit of Rs. 10,46,780/- on account of this diversification. However, as per the Company Board of Directors, the applicant company would not be in a position to fully write off the huge carried forward losses and unamortized miscellaneous expenses remaining to be carried out in the near future and in the absence of sufficient funds the applicant company could not declare any dividends to its equity shareholders in the past. It is mentioned in the Scheme that the Directors of the applicant company are, therefore, of the opinion that unless and until the share capital of the company is reorganized and the financial position of the Company restructured by setting off and/or adjusting a part of the accumulated losses and the unamotrized miscellaneous expenses with Share Capital of the Company, the Company would not in near future have the ability to declare dividend to its equity shareholders.

4. The learned counsel for the petitioner has stated the circumstances, reasons and grounds that have necessitated and/or justified the scheme of arrangement as under :

(i) The existing share capital of the Company is not represented by the assets of the Company in view of the substantial accumulate losses. The restructuring of the share capital is necessary in order to give a true picture of the assets base of the Company.

(ii) The Scheme of Arrangement will lead to optimum, growth and development of the business of the Company consequent to the reorganisation of the share capital and restructuring of the financial position of the applicant company.

(iii) The re-organisation of the share capital and the restructuring of the financial position of the applicant company would result in better and more productive utilisation of various resources and provide the applicant company strong and focused base to undertake the business more advantageously and thereby increase its profitability and shareholders network.

(iv) The scheme will strength, consolidate and stabilise the business of the applicant company which would enable the applicant company to participate more vigorously and profitably in competitive market.

(v) In the absence of sufficient funds, the Applicant Company could not declare any dividend to its equity shareholders in the past. The reorganisation of the share capital and the restructuring of the financial position of the applicant company by setting off and/or adjusting a part of the accumulated losses and the unamortized miscellaneous expenses with the share capital of the applicant company, would enable the applicant company to declare dividends to its equity shareholders in the near future.

(vi) The reorganization of the share capital of the applicant company and the re-structuring of the financial position of the applicant company through the present scheme of arrangement would improve/strengthen the financial position of the applicant company and enable the company to improve its net worth.

(vii) The scheme of arrangement would enable the applicant company to increase and conserve its financial resources.

(viii) The scheme of arrangement would facilitate the applicant company to borrow loans from banks and/or financial institutions in view of the strengthened and improved financial position of the applicant company. This would enable the applicant company to meet its working capital requirements and enable it to increase its operations.

(ix) The scheme of arrangement will contribute in furthering and fulfillling the objectives and business strategies of the applicant company thereby accelerating growth, expansion and development of business.

(x) The scheme of arrangement will have beneficial results for the applicant company, the shareholders, employees, creditors and all concerned.

5. The Board of Directors of the Applicant Company have passed the resolution on 29th July, 1998 unanimously approving the said Scheme of Arrangement the same has been annexed with the petition as Annexure 'E'.

6. In the petition it is also mentioned that there are 11351 equity shareholders and one secured creditor and approximately 30 unsecured creditors in the applicant company. This court vide its order dated 15.10.1998 appointed Mr. P.C. Dhingra, Advocate as Chairman and Ms Era Bhutani, Advocate as Alternate Chairperson for the meeting of the members of applicant company and they have filed their reports. According to the reports of the Chairman for the meetings, the scheme of arrangement has been approved by the members.

7. The Regional Director (Northern Region) Department of Company Affairs, Changer have filed his report, stating that the scheme is not in any manner prejudicial to the public interest or the interests of members of the applicant company and the affairs of the company have not been carried out in any manner prejudicial to the creditors or shareholders or public at large.

8. Keeping in view the objects for which the arrangement is sought, I do not find that the public interest is likely to be affected in any manner if the Scheme of Arrangement of the applicant company is sanctioned.

9. Accordingly, the scheme of arrangement is approved and the same shall be binding with effect from the commencement of business on the 1st day of April, 1998 on the shareholders, creditors and all concerned. A certified copy of this Order along with the scheme of amalgamation will be filed with the Registrar of Companies within 30 days from the date of this Order.

10. This petition is accordingly disposed of.