Rps Vikas Castings Private ... vs ...
2015 Latest Caselaw 3738 Del

                   IN THE HIGH COURT OF DELHI
                 COMPANY PETITION NO. 716/2014

                                           Reserved on 7th April, 2015
                                Date of pronouncement: 8th May, 2015
In the matter of
The Companies Act, 1956 & the Companies Act, 2013 (to the extent
applicable):

And

Petition under Sections 391(1), 393 & 394 read
with Sections 100 to 104 of the Companies
Act, 1956

Scheme of Amalgamation of:
RPS Vikas Castings Private Limited
                                          Petitioner/Transferor Company
      WITH
Garima Vikas Metals Private Limited
(Now HNV Castings Private Limited)
                                         Petitioner/Transferee Company

                              Through Mr. S. Sengupta, Advocate for
                              the petitioners
                              Ms.     Aparna     Mudiam,  Assistant
                              Registrar of Companies for the
                              Regional Director
                              Mr. Rajiv Bahl, Advocate for the
                              Official Liquidator

SUDERSHAN KUMAR MISRA, J.

1. This joint petition has been filed under Sections 391(1), 393 & 394

read with Sections 100 to 104 of the Companies Act, 1956 by the

petitioner companies seeking sanction of the Scheme of Amalgamation

of RPS Vikas Castings Private Limited (hereinafter referred to as the

transferor company) with Garima Vikas Metals Private Limited (now HNV

Castings Private Limited) (hereinafter referred to as the transferee

company).

2. The registered offices of the transferor and transferee companies

are situated at New Delhi, within the jurisdiction of this court.

3. The transferor company was incorporated under the Companies

Act, 1956 on 29th December, 2004 with the Registrar of Companies, NCT

of Delhi & Haryana at New Delhi.

4. The transferee company was originally incorporated under the

Companies Act, 1956 on 12th January, 2005 with the Registrar of

Companies, Rajasthan at Jaipur under the name and style of Garima

Overseas Private Limited. The company changed its name to Garima

Overseas Limited and obtained the fresh certificate of incorporation on

22nd December, 2005. Thereafter, the company shifted its registered

office from the State of Rajasthan to Delhi and obtained a certificate in

this regard from the Registrar of Companies, NCT of Delhi & Haryana at

New Delhi on 31st July, 2012. The company again changed its name to

Garima Vikas Metals Limited and obtained the fresh certificate of

incorporation on 17th August, 2012. The company again changed its

name to Garima Vikas Metals Private Limited and obtained the fresh

certificate of incorporation on 18th September, 2012. The company finally

changed its name to HNV Castings Private Limited and obtained the

fresh certificate of incorporation on 17th September, 2014.

5. The authorized share capital of the transferor company, as on 31st

March, 2014, was Rs.18,88,78,000/- divided into 1,88,87,800 equity

shares of Rs.10/- each. The issued, subscribed and paid-up share capital

of the company was Rs.18,88,78,000/- divided into 1,88,87,800 equity

shares of Rs.10/- each.

6. The authorized share capital of the transferee company, as on 31st

March, 2014, was Rs.54,67,45,000/- divided into 5,46,74,500 equity

shares of Rs.10/- each. The issued, subscribed and paid-up share capital

of the company was Rs.54,67,45,000/- divided into 5,46,74,500 equity

shares of Rs.10/- each.

7. Copies of the Memorandum and Articles of Association of the

transferor and transferee companies have been filed on record with the

joint application, being CA(M) 115/2014, earlier filed by the petitioners.

The audited balance sheets, as on 31st March, 2013, of the transferor

and transferee companies, along with the report of the auditors, and the

unaudited balance sheets, as on 31st March, 2014, of the transferor and

transferee companies had also been filed.

8. A copy of the Scheme of Amalgamation has been placed on record

and the salient features of the Scheme have been incorporated and

detailed in the petition and the accompanying affidavit. It is claimed that

the proposed amalgamation will provide emergence of a fully integrated

single entity positioned to provide more extensive and integrated

products in the automobile castings sector. It is further claimed that by

the proposed amalgamation, benefit of financial resources, managerial,

technical and marketing expertise of both the companies shall be

available to the amalgamated entity. It is further claimed that the

amalgamation would result in enhanced potential for increase in

revenues and profits for the amalgamated entity and its shareholders and

would also provide synergistic linkages besides economies in costs and

other benefits resulting from the economies of scale, by combining the

businesses and operations of both the companies and thus contribute to

the profitability of the amalgamated entity by rationalization of

management and administrative structure.

9. So far as the share exchange ratio is concerned, the Scheme

provides that, upon coming into effect of this Scheme, the transferee

company shall issue and allot equity shares to the shareholders of the

transferor company in the following ratio:

"27 equity shares of Rs.10/- each fully paid up of the transferee company for every 10 equity shares of Rs.10/- each fully paid up held by the shareholders in the transferor company."

10. It has been submitted by the petitioners that no proceedings under

Sections 235 to 251 of the Companies Act, 1956 are pending against the

transferor and transferee companies.

11. The Board of Directors of the transferor and transferee companies

in their separate meetings held on 14th May, 2014 have unanimously

approved the proposed Scheme of Amalgamation. Copies of the

Resolutions passed at the meetings of the Board of Directors of the

transferor and transferee companies have been placed on record.

12. The petitioner companies had earlier filed CA (M) No. 115/2014

seeking directions of this court to dispense with the requirement of

convening the meetings of their secured creditors and for convening of

separate meetings of their equity shareholders and unsecured creditors,

which are statutorily required for sanction of the Scheme of

Amalgamation. Vide order dated 4th September, 2014, this court allowed

the application and dispensed with the requirement of convening and

holding the meetings of the secured creditors of the transferor and

transferee companies and directed convening of separate meetings of

their equity shareholders and unsecured creditors, to consider and, if

thought fit, approve, with or without modification, the proposed Scheme

of Amalgamation. The Court, however, directed the petitioners to issue

specific individual notices to their secured creditors at the time of moving

second motion petition calling for their objection, if any, to the Scheme.

13. The Chairpersons of the ordered meetings of the equity

shareholders and unsecured creditors of the transferor and transferee

companies have filed their reports stating that the meetings were duly

held on 30th October, 2014, as directed, and that the Scheme of

Amalgamation has been approved unanimously by the equity

shareholders and unsecured creditors of the transferor and transferee

companies, present and voting, in the meetings.

14. The petitioner companies have thereafter filed the present petition

seeking sanction of the Scheme of Amalgamation. Vide order dated 21st

November, 2014, notice in the petition was directed to be issued to the

Regional Director, Northern Region, and the Official Liquidator. Citations

were also directed to be published in 'Indian Express' (English) and

'Dainik Bhaskar' (Hindi) editions. Affidavit of service has been filed by the

petitioner showing compliance regarding service on the Official Liquidator

and the Regional Director, Northern Region and also regarding

publication of citations in the aforesaid newspapers on 26th December,

2014. Copies of the newspaper clippings containing the publications have

been filed along with the said affidavit. The petitioners also placed on

record the factum of service on the secured creditors of the transferor

and transferee companies, calling their objections, if any, to the Scheme

as directed by the court vide order dated 4th September, 2014,.

15. Pursuant to the notices issued, the Official Liquidator sought

information from the petitioner companies. Based on the information

received, the Official Liquidator has filed a report dated 13th February,

2015 wherein he has stated that he has not received any complaint

against the proposed Scheme of Amalgamation from any person/party

interested in the Scheme in any manner and that the affairs of the

transferor company do not appear to have been conducted in a manner

prejudicial to the interest of its members, creditors or public interest, as

per second proviso of Section 394(1) of the Companies Act, 1956.

16. In response to the notices issued in the petition, Mr. A. K.

Chaturvedi, Regional Director, Northern Region, Ministry of Corporate

Affairs has filed his report dated 20th February, 2015. Relying on Clause

5 of Part-III of the Scheme, he has stated that, upon sanction of the

Scheme of Amalgamation, all the employees of the transferor company

shall become the employees of the transferee company without any

break or interruption in their services. He has further submitted that in

Clause 9 of Part-III of the Scheme, it has been stated that the accounting

treatment shall be in compliance with Accounting Standard-14 governed

by the Companies (Accounting Standards) Rules, 2006. He further

submitted that in Clause 12 of Part-III of the Scheme, it has been stated

that upon this scheme becoming effective, the transferor company shall

stand dissolved without the process of winding up.

17. Although no objection has been raised by the Regional Director,

but in para 10 of his report, he has pointed out that the appointed date for

the proposed Scheme has been fixed on 01.05.2014. Accordingly, the

valuation report has been prepared on the basis of financial information

upto 30.04.2014. But both the companies have filed the balance sheets

for the year ended at 31.03.2014 and have taken the figures as on

30.04.2014 for valuation. The Regional Director, therefore, prays that an

undertaking from both the companies be taken that there is no material

change/transactions within one month i.e. from 01.04.2014 to

30.04.2014.

18. The Regional Director in para 10 of his report has further submitted

that subsequent to 31.03.2014, Hitachi Metals Singapore Pte. Limited

and Namyang Metals Company Limited (both subsidiaries of Hitachi

Metals Limited) have acquired 51% stake in the share capital of the

transferor and transferee companies and accordingly the paid-up share

capital of both these companies was increased to Rs.18,88,78,000/- and

Rs.54,67,45,000/- on 22.04.2014. He, therefore, prays that an

undertaking from the transferee company be sought stating that the

proposed Scheme of Amalgamation and resultant allotment of shares to

the shareholders of the transferor company especially foreign entities

does not exceed the sectoral cap under FDI policy and that its other

terms and conditions have been complied with.

19. In reply to the aforesaid observations, the petitioner companies in

the affidavit dated 23rd March, 2015 of Sh. Ki Ho Park, authorized

representative of the petitioner companies has submitted that between

31st March, 2014 (i.e. the date of audited accounts) and 1st May, 2014

(i.e. the appointed date of amalgamation), there has been no material

financial changes in the accounts of the transferor and transferee

companies apart from the investment by Hitachi Metals Singapore Pte.

Limited and Namyang Metals Company Limited and, consequently, the

deferred tax has been written off to the extent of carried forward losses. It

is further submitted that the joint valuation report submitted along with

CA(M) 115/2014 takes into account the investment by Hitachi Metals

Singapore Pte. Limited of Rs.11,71,37,280/- in the transferor company; of

Rs.12,53,66,464/- in the transferee company; and the investment of

Namyang Metals Company Limited of Rs.17,57,05,920/- in the transferor

company; and of Rs.18,80,49,696/- in the transferee company for the

purpose of conducting the valuation as on 30th April, 2014 and the

consequent adjustments made in the deferred tax carried in the books.

Therefore, the said investment does not have any adverse effect on the

proposed Scheme of Amalgamation. The petitioner companies have

further submitted that at present the foreign shareholders are holding

51% of paid-up share capital of the transferee company and remaining

49% is held by the resident shareholders, and the current shareholding

held by the foreign shareholders are within the permitted sectoral cap

under the provisions of Foreign Direct Investment Policy (FDI) issued by

RBI i.e. upto 100% FDI under the automatic route. The transferee

company undertakes that subsequent to sanction of the Scheme, the

allotment of shares to the shareholders of the transferor company

including allotment of shares to the foreign shareholders will continue to

be within the permitted sectoral cap under the FDI. The Assistant

Registrar of Companies has stated that after considering the reply of the

petitioner, the Regional Director had no further objections. In view of the

aforesaid, the observations raised by the Regional Director stand

satisfied.

20. No objection has been received to the Scheme of Amalgamation

from any other party. The petitioner companies, in the affidavit dated 23rd

March, 2015 of Sh. Ki Ho Park, authorized representative of the petitioner

companies, have submitted that neither the petitioner companies nor

their counsel have received any objection pursuant to the citations

published in the newspapers on 26th December, 2014.

21. Considering the approval accorded by the shareholders and

creditors of the petitioner companies to the proposed Scheme of

Amalgamation and the affidavits filed by the Regional Director, Northern

Region, and the Official Liquidator not raising any objection to the

proposed Scheme of Amalgamation, there appears to be no impediment

to the grant of sanction to the Scheme of Amalgamation. Consequently,

sanction is hereby granted to the Scheme of Amalgamation under

Sections 391 and 394 read with Section 100 of the Companies Act, 1956.

The petitioner companies will comply with the statutory requirements in

accordance with law. Certified copy of this order be filed with the

Registrar of Companies within 30 days. It is also clarified that this order

will not be construed as an order granting exemption from payment of

stamp duty as payable in accordance with law. Upon the sanction

becoming effective from the appointed date of Amalgamation, i.e. 1st

May, 2014, the transferor company shall stand dissolved without

undergoing the process of winding up.

22. Learned counsel for the Official Liquidator prays that costs may be

imposed on the petitioner companies in view the fact that the matter has

involved examination of voluminous record and prioritized hearings. He

submits that cost of at least Rs.1,00,000/- per company be imposed.

Learned counsel for the petitioners states that the petitioner companies

are ready and willing to pay cost of Rs.1.0 lakh each. Looking to the

circumstances, the petitioner companies shall deposit cost of Rs.1.0 lakh

each in the Common Pool Fund of the Official Liquidator within one week

from today.

23. The petition is allowed in the above terms.

Dasti.

SUDERSHAN KUMAR MISRA, J.

April 08, 2015