Dayco Engine Systems Private ... vs ...
2015 Latest Caselaw 7549 Del

                    IN THE HIGH COURT OF DELHI
                   COMPANY PETITION NO. 818/2014
                                        Reserved on 9th September, 2015
                               Date of pronouncement: 5th October, 2015
In the matter of
The Companies Act, 1956 & the Companies Act, 2013 (to the extent
applicable):
And
Petition under Sections 391 to 394 of the
Companies Act, 1956
Scheme of Amalgamation of:
Dayco Engine Systems Private Limited
                                              Petitioner/Transferor Company
      WITH
Dayco Power Transmission Private Limited
                                       Petitioner/Transferee Company
                                 Through      Mr.    Sandeep  Bhuraria,
                                 Advocate for the petitioners
                                 Ms. Aparna Mudiam, Asstt. Registrar
                                 of Companies for the Regional Director
                                 Mr. Ashish Makhija, Advocate for the
                                 Official Liquidator
SUDERSHAN KUMAR MISRA, J.

1. This joint petition has been filed under Sections 391 to 394 of the

Companies Act, 1956 by the petitioner companies seeking sanction of

the Scheme of Amalgamation of Dayco Engine Systems Private Limited

(hereinafter referred to as the transferor company) with Dayco Power

Transmission 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 originally incorporated under the

Companies Act, 1956 on 29th October, 2007 with the Registrar of

Companies, Maharashtra at Mumbai under the name and style of Dayco

Engine Systems India Limited. The company changed its name to Dayco

Vikas Engine Systems Private Limited and obtained the fresh certific ate

of incorporation on 3rd July, 2010. Thereafter, the company shifted its

registered office from the State of Maharashtra to Delhi and obtained a

certificate in this regard from the Registrar of Companies, NCT of Delhi &

Haryana at New Delhi on 13 th November, 2010. The company again

changed its name to Dayco Engine Systems Private Limited and

obtained the fresh certificate of incorporation on 6 th February, 2014.

4. The transferee company was originally incorporated under the

Companies Act, 1956 on 23rd July, 2010 with the Registrar of

Companies, NCT of Delhi & Haryana at New Delhi under the name and

style of Dayco Vikas Power Transmission Private Limited. The company

changed its name to Dayco Power Transmission Private Limited and

obtained the fresh cer tificate of incorporation on 6th February, 2014.

5. The present authorized share capital of the transfer or company is

Rs.15,85,00,000/- divided into 1,58,50,000 equity shares of Rs.10/- each.

The issued, subscribed and paid-up share capital of the company is

Rs.15,77,96,400/- divided into 1,57,79,640 equity shares of Rs.10/- each.

6. The present authorized share capital of the transfer ee company is

Rs.7,00,00,000/- divided into 70,00,000 equity shares of Rs.10/- each.

The issued, subscribed and paid-up share capital of the company is

Rs.6,78,57,140/- divided into 67,85,714 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. The

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

transferee companies, along with the report of the auditors, have 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 incorpor ated and

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

by the proposed amalgamation, the company would be able to derive

benefits of economies of operation by combining relevant activities as

well as eliminating overlapping of certain activities. It is further claimed

that by the proposed Scheme reduction in cost of operation would be

achieved by reducing the number of entities, thereby consolidating the

value for stakeholders.

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:

"4532 equity shares of Rs.10/- each of the transferee company for every 10,000 equity shares of Rs.10/- each 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 17th March, 2014 have unanimously

approved the proposed Scheme of Amalgamation. The Board of

Directors of the petitioner companies vide their separate meetings held

on 12th January, 2015 and again on 14th August, 2015 have also

approved certain amendments in the 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. 165/2014

seeking directions of this court to dispense with the requirement of

convening the meetings of their equity shareholders, secured and

unsecured creditors, which are statutorily required for sanction of the

Scheme of Amalgamation. Vide order dated 9th December, 2014, this

court allowed the application and dispensed with the requirement of

convening and holding the meetings of the equity shareholders, secured

and unsecured creditors of the transferor and transferee companies, to

consider and, if thought fit, approve, with or without modification, the

proposed Scheme of Amalgamation. Since the written consents/no

objections given by the corporate unsecured creditors of the transferee

company, namely Gallay India Private Limited, Garima Vikas Metals

Private Limited, and Dayco Europe S.r.l. were not supported by the

Board Resolutions, the Court directed the petitioners to issue specific

advance notice to the said corporate unsecured creditors at the time of

moving of the second motion calling for their objection, if any, to the

Scheme and to file proof of service of the said notice along with the

second motion petition.

13. The petitioner companies have thereafter filed the present petition

seeking sanction of the Scheme of Amalgamation. Vide order dated 24th

December, 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 'Financial Express' (English) and

'Jansatta' (Hindi) editions. Affidavit of Service has been filed by the

petitioners showing compliance regarding ser vice on the Official

Liquidator and the Regional Director, Northern Region and also regarding

publication of citations in the aforesaid newspapers on 15th January,

2015. Copies of the newspaper clippings containing the publications have

been filed along wi th the said affidavit. Further, in terms of directions

passed by this Court vide order dated 9th December, 2014, the petitioners

have also placed on record the courier receipts evidencing service of

notice to the corporate unsecured creditors of the transferee company.

14. 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 12th March, 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.

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

Chaturvedi, Regional Director, Northern Region, Ministry of Corpor ate

Affairs has filed his report dated 17th March, 2015. Relying on Clause

4.2.10 of Section-2 of Part-B 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 6.3.1 of Section-4 of Part-B of the

Scheme, it has been stated that all assets and liabilities as appearing in

the books of the transferor company on the appointed date, shall be

recorded in the books of the transferee company as assets and liabilities

at their respective fair values in accordance with the 'Purchase Method'

as prescribed under Accounting Standard-14 issued by the Institute of

Chartered Accountants of India. He further submitted that in Clause 8 of

Section-4 of Part-B 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.

16. The Regional Director in para 14 of his report has referred to

Clause 12.2 of Part-C of the Scheme, wherein it has been stated that in

the event of non-occurrence of effective date before 31.12.2014 or within

such further time as may be agreed to by the Board of Directors of the

transferor and transferee companies, this Scheme shall become null and

void. He has further submitted that the petitioner companies have not

filed any Board Resolution regarding extension of period of the present

Scheme of Amalgamation, hence the proposed Scheme is null and void

to this extent. A similar objection has also been raised by the Official

Liquidator in para 16 of his report.

17. In response to the objections raised by the Regional Director,

Northern Region and the Official Liquidator, learned counsel for the

petitioners has submitted that the Board of Directors of the petitioner

companies in their separate meetings held on 12 th January, 2015 have

extended the validity of the Scheme from 31.12.2014 to 30.09.2015. He

had also moved an application being Co. Appln. No. 1172/2015 in this

regard seeking to amend the relevant Clause 12.2 of the Scheme to the

extent that the date setting down the validity of the Scheme has been

extended from 31.12.2014 to 30.09.2015 and to place on record the

revised Scheme of Amalgamation. Notice of this application was issued

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

18. In response to the notices issued in CA 1172/2015, the Regional

Director, Northern Region has filed his additional report on 25 th July,

2015. In para 5.1 of his report, the Regional Director has submitted that

none of the petitioner companies have filed copy of the purported Board

Resolutions passed in their meetings held on 12th January, 2015 for the

amendment of the proposed Scheme of Amalgamation. In para 5.2 of his

report, the Regional Director has further submitted that Para s 3.1 and 3.2

of Part-B of the modified Scheme of Amalgamation shows the capital

structure of both the petitioner companies as per their balance sheet as

at 31.03.2013 mentioning therein, inter-alia, that subsequent to the

aforesaid balance sheet, there has been no change in the issued,

subscribed and paid up capital of the respective companies. However,

there is material change in the capital structure of both the companies

subsequent to their balance sheets as at 31.03.2013 and reporting in

Para 3.1 and 3.2 of Part-B of the modified Scheme is prima facie not

factually correct to this extent. He has also submitted that contents of

Para 6.1.1 of Section-4 of the amended Scheme are also not factually

correct and requires further amendment in the revised Scheme.

19. In response to the aforesaid objections of the Regional Director,

Northern Region, learned counsel for the petitioners has submitted that

keeping in mind the various observations raised by the Regional Director,

the petitioners have moved another fresh application being Co.Appln.

2470/2015, seeking appropriate modifications to the Scheme, which

would in effect meet all the observations/objections raised by the

Regional Director in the said affidavit. In the aforesaid application, the

petitioners, in response to the first objection raised by the Regional

Director in para 5.1 of his additional report, have submitted that the

necessary Board Resolutions dated 12th January, 2015 of the petitioner

companies extending the validity of the Scheme have been filed with

ROC on 20th July, 2015 in the requisite form MGT-14. Copies of the said

forms have been placed on record along with the said application. In

response to the second objection raised by the Regional Director in para

5.2 of his report, the petitioners have submitted that the Board of

Directors of the petitioner companies in their separate meetings held on

14th August, 2015 have amended Paras 3.1, 3.2, 6.1.1 of Part-B and 12.2

of Part-C of the Scheme with regard to increase in the authorized share

capital of the transferor and transferee companies; merger of the

authorized share capital of the transferor company into the transferee

company, post amalgamation; and extension of validity of the Scheme

upto 31st December, 2015 respectively. Copies of the requisite forms filed

with ROC have also been placed on record along with the application.

The petitioners have also placed on record the amended Scheme of

Amalgamation, in view of the amendments made in Paras 3.1, 3.2, 6.1.1

of Part-B and 12.2 of Part-C of the Scheme. Vide order dated 9th

September, 2015, this Court disposed off the application viz. Co.Appln.

1172/2015, being infructuous, and allowed the application viz. Co.Appln.

2470/2015 and the modified Scheme, as annexed to the application, was

also taken on record. In view of the aforesaid, the objections raised by

the Regional Director, Northern Region stand satisfied.

20. Learned counsel for the petitioners has also submitted that there is

no change in the share exchange ratio pursuant to increase in the share

capital of the petitioner companies, and a certificate dated 12th August,

2015 to this effect has been issued by AMR & Co., Chartered

Accountants, which is placed on record along with CA 2470/2015. He has

further submitted that the Board of Directors of the petitioner compani es

in their meetings held on 14th August, 2015 have also considered this

aspect and adopted the said opinion dated 12th August, 2015. In view of

the aforesaid, the observation raised by the Official Liquidator in para 15

of his report to the effect that the Board of Directors have approved the

draft Scheme of Amalgamation which inter-alia includes Share

consideration, on 17.03.2014 prepared by AMR & Co., Chartered

Accountants, whereas the Share Valuation Report was prepared on

01.04.2014, also stands satisfied.

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

from any other party. The petitioner companies, in the affidavit dated 17th

March, 2015 of Mr. Ajay Kumar, authorized signatory 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 15th January, 2015.

22. Considering the approval accorded by the equity shareholders and

creditors of the petitioner companies to the proposed Scheme of

Amalgamation and there being no surviving objections to the same by the

Regional Director, Northern Region and the Official Liquidator, there

appears to be no impediment to the grant of sanction to the amended

Scheme of Amalgamation annexed with CA 2470/2015. Consequently,

sanction is hereby granted to the amended Scheme of Amalgamation

under Sections 391 and 394 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. 01.04.2014, the transferor company

shall stand dissolved without undergoing the process of winding up.

23. Learned counsel for the Official Liquidator prays that keeping in

view the fact that the matter has involved examination of extensive

records and also prioritized hearings costs of at least Rs.1,00,000/ -

should be paid by the petitioners. Learned counsel for the petitioners

submits that he has no objection to the prayer being granted. Considering

the facts and circumstances of the case, petitioners shall deposit a sum

of Rs.1,00,000/-, by way of costs, with the Common Pool Fund of the

Official Liquidator within three weeks.

24. The petition is allowed in the above terms.

Dasti.

SUDERSHAN KUMAR MISRA, J.

October 05, 2015