Delhi High Court
Radha Raj Ispat Private Limited vs - on 7 April, 2016
Author: Rajiv Shakdher
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgement reserved on: 11.03.2016
Judgement delivered on: 07.04.2016
+ CO.PET. 728/2015
IN THE MATTER OF
RADHA RAJ ISPAT PRIVATE LIMITED
.... Transferor Company/Petitioner No. 1
WITH
KRBL LIMITED .... Transferee Company/Petitioner No. 2
Through: Mr Kunal Tandon & Ms Snigdha
Sharma, Advs.
Ms Aparna Mudiam, Asstt. ROC for the RD.
Mr Rajiv Behl, Adv. for the OL
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
RAJIV SHAKDHER, J
1. This is a second motion petition filed jointly by the transferor
company Radha Raj Ispat Private Limited (i.e. the transferor
company/petitioner no.1) and KRBL Limited (i.e the transferee
company/petitioner no. 2) under Sections 391 and 394, read with Sections
100 to 103, of the Companies Act 1956 (in short the Act), to seek sanction of
the Scheme of Amalgamation (hereafter referred to as the scheme).
2. The transferor company and the transferee company will hereafter be
collectively referred to as the petitioners.
CO.PET. 728/2015 Page 1 of 11
3. The registered office of the petitioners is located within the
jurisdiction of this court. Hence, this court has the jurisdiction to entertain
and adjudicate upon the present petition.
4. The transferor company was incorporated on 21.07.1994, under the
name and style: Radha Raj Ispat Private Limited, in accordance with the
applicable provisions of the Act.
5. The transferee company, which had been originally incorporated
under the applicable provisions of the Act, on 30.03.1993, under the name
and style: Khushi Ram Behari Lal Limited, changed its name to „KRBL
Limited‟ on 01.02.2000.
6. The petitioners aver that the scheme aims at simplification of the
shareholding structure and reduction in shareholding tiers. It is submitted
that the transferor company forms a part of the promoter group of the
transferee company and therefore, the scheme will ensure direct commitment
of the promoter i.e. the transferor company, towards the transferee company.
7. To be noted, the transferor company holds 2,79,13,892 equity shares
in the transferee company. In percentage terms, this would work out to
nearly 11.86% of equity stake in the transferee company. It is, therefore,
averred that the transferor company constitutes the promoter group of the
transferee company.
8. The details with respect to petitioners‟ authorised, issued, subscribed
and paid-up capital, have been set out in Part-I of the scheme.
9. The copies of Memorandum and Articles of Association as well as the
profit and loss accounts and the balance sheets, of an even date i.e.
31.03.2014, have been filed with the petition.
CO.PET. 728/2015 Page 2 of 11
10. The copies of Board of Directors‟ (BOD) resolution of the petitioners,
of an even date i.e. 18.02.2015, approving the scheme, have been filed with
the petition.
11. The petitioners have further averred that there are no proceedings
pending against them under Sections 237, 243, 247(1A), 250A and 251 or
any other applicable provisions of the Act or under Sections 210, 212(1) to
(7) & (11) to (17), 214, 215, 216(1) & (3), 217, 219, 220, 223, 224(1), (3)
and (4) and 225 or any other applicable provisions of the Companies Act,
2013.
12. To recapitulate, the petitioners had earlier filed an application (i.e. the
first motion) being: CA No. (M) 127/2015, whereby, a substantive prayer
had been made for dispensing with the requirement of convening the
meetings of equity shareholders, creditors (i.e. secured and unsecured) of the
petitioners.
12.1 This court vide order dated 03.08.2015 dispensed with the requirement
of convening meetings of equity shareholders of the transferor company and
that of the secured creditors of the transferee company. In view of the fact
that the transferor company had no secured and unsecured creditors, the
court did not see the occasion to pass any orders with respect to the meetings
concerning said class of persons / entities.
13. Furthermore, by virtue of the very same order i.e. order dated
03.08.2015, the court directed the transferee company to convene a meeting
of its equity shareholders and unsecured creditors.
13.1 Both sets of meetings were convened on the same date i.e. 12.09.2015,
albeit, at different times, under the chairmanship of different persons. The
observations made in the chairpersons‟ report with regard to the meeting of
CO.PET. 728/2015 Page 3 of 11
the equity shareholders of the transferee company, to the extent they are
relevant, are set out hereinbelow :-
"....As per the directions of this Hon‟ble Court in Order dated
13th July 2015, pronounced on 3rd August 2015, the quorum
fixed for the meeting was 200 (Two Hundred) Equity
Shareholders in number and more than 25% in value of the
total equity share capital of the Amalgamated Company.
On 12th September 2015, at the scheduled time of meeting i.e.
11:00 A.M., the above stated quorum was present, therefore,
the meeting of the Equity Shareholders attended by 358
(Three Hundred Fifty Eight) Equity Shareholders including
proxy / authorized representative, together holding equity
share capital of Rs. 20,50,07,597 (constituting 87.09% in
value) out of the total equity share capital of the Amalgamated
Company was convened. As per the Order dated July 13,
2015, pronounced on August 3, 2015,of this Hon‟ble Court, at
the meeting 358 (Three Hundred Fifty Eight) Equity
Shareholders constituted proper quorum of the meeting and
the meeting was called "to order". A list of Equity
Shareholders who attended the meeting along with the
Attendance Slips are annexed hereto and marked collectively
as ANNEXURE"C" (COLLY)...."
13.2 Similarly, in so far as the observations made in the report dated
12.09.2015 of the chairperson appointed for the meeting of the unsecured
creditors of the transferee company are concerned, to the extent they are
relevant, are extracted hereinafter:-
2. That in compliance of the directions of this Hon'ble
Court contained in the Order dated 13thJuly, 2015,
pronounced on 03rdAugust, 2015, notice for convening
and holding the meeting of Unsecured Creditors of the
Amalgamated Company on the date fixed by this Hon'ble
Court i.e. 12th September 2015 along with a) the
CO.PET. 728/2015 Page 4 of 11
Explanatory Statement under section 393 of the
Companies Act 1956 read with Section 102 and other
applicable section of the Companies Act, 2013
b) Scheme of Amalgamation under Sections 391 to 394
read with Section 100 to103 and other applicable
provisions, if any, of the Companies Act, 1956 and
corresponding Sections of the Companies Act, 2013 (as
and when such corresponding Sections are notified in the
Official Gazette by the Central Government),
c) Observation Letter dated 23rd April, 2015 from BSE
Limited ('BSE') conveying no objection for filing the
Scheme with the Delhi High Court
d) Observation Letter dated 22nd April, 2015 from
National Stock Exchange of India Limited ('NSE')
conveying no objection for filing the Scheme with the
Delhi High Court
e) Fairness Opinion on the Scheme dated February 16th
2015 0btained from M/s Corporate Professionals Capital
Private Limited, Merchant Bankers
f) Complaints Report dated 23rd March, 2015 submitted
by the Company to BSE and NSE and also uploaded on
the Company Website.
g) Form of Proxy and
h) Attendance Slip were dispatched by the Applicant
Company II / Amalgamated Company to all the 2,487
(Two Thousand Four Hundred Eighty Seven) Unsecured
Creditors, having outstanding balance aggregating to
Rs.3,49,77,19,998 (Rupees Three Hundred Forty Nine
Crore Seventy Seven Lakh Nineteen Thousand Nine
Hundred and Ninety Eight) at their respective last known
addresses, in the presence of my Authorised
Representative, through registered post on 17th day of
August, 2015. Copies of the above stated documents have
CO.PET. 728/2015 Page 5 of 11
already been annexed to the Affidavit of Service filed
before this Hon‟ble Court on 4thday of September, 2015
vide dairy no. 447783.
.......
5. As per the directions of this Hon‟ble Court in Order
dated 13th July, 2015, pronounced on 03rd August, 2015,
the quorum fixed for the meeting was 200 (Two Hundred)
Unsecured Creditors in number and more than 25% in
value of the total unsecured debt of the Amalgamated
Company. On 11th September, 2015, at the scheduled
time of meeting i.e. 2:30 P.M., the above stated quorum
was not present, therefore the meeting was adjourned for
half an hour in accordance with the Order. Post
adjournment, the meeting of the Unsecured Creditors was
resumed and attended by 232 (Two Hundred Thirty Two)
Unsecured Creditors including proxy, together having
balance outstanding Rs. 71,79,41,680 (constituting
20.53% in value) out of the total balance outstanding
towards Unsecured Creditors of the Amalgamated
Company. As per the Order dated July 13, 2015,
pronounced on August 3, 2015,of this Hon‟ble Court, at
the resumed meeting 232 (Two Hundred Thirty Two)
Unsecured Creditors were deemed to constitute a proper
quorum of the meeting and the meeting was called "to
order". A list of Unsecured Creditors who attended the
meeting along with the Attendance Slips are annexed
hereto and marked collectively as ANNEXURE-
"B"(COLLY)."
13.3 Having regard to the aforesaid, it is quite clear that consents of the
equity shareholders as well as the unsecured creditors of the transferee
company are in accordance with law. The consents were obtained from
requisite majority both in number and value of the concerned class of
persons/ entities.
14. The petitioners, thereafter, filed the instant petition (i.e. second
motion). Notice in this petition was issued on 18.10.2015. Notice was
accepted on behalf of the Official Liquidator (OL) and the Regional Director
(RD). Furthermore, citations were ordered to be published in Business
Standard (English) and Jansatta (Hindi).
14.1 The citations were published in Delhi Editions of the newspapers;
Business Standard (English) and Jansatta (Hindi) on 19.10.2015. An
affidavit dated 29.10.2015, demonstrating service of the petition on the RD
and establishing publication of citation along with the newspaper extracts,
has been filed by the petitioners.
15. Further, petitioners have averred by way of the affidavit dated
15.02.2016, that subsequent to the publication of the notice in the petition,
they have not received any objection or complaint qua the scheme.
16. Pursuant thereto, affidavit has been filed by the RD under
Section394A of the 1956 Act. In the affidavit, the RD relied upon the general
circular bearing no. 53/2011, dated 26.07.2011 and, circular bearing no.
1/2014, dated 15.01.2014. Based on the aforementioned circulars, as per the
affidavit of R.D., communications were sent to the Registrar of Companies
(ROC) and the Income Tax Department (I.T. Department) seeking their
response to the scheme. However, no response by the I.T. Department, on
this matter, has apparently been received, till date.
16.1 The affidavit of RD, adverts to the fact that it has received information
from the ROC vide report, dated 09.02.2016, which is indicative of the fact
that the ROC has not made any adverse comments qua the scheme.
16.2 In so far as the RD is concerned, he appears to have no objection in
the scheme being sanctioned.
17. As far as the OL‟s report is concerned, it has, inter alia, stated that no
complaint qua the scheme has been received by him from any interested
person or party. The OL has also averred that, on the basis of information
supplied by the petitioners, it appears, the affairs of the transferor company,
have been conducted in a manner which could not be construed as being
prejudicial to either the interest of their members or the public at large.
17.1 In other words, affairs of the transferor company, according to the OL,
do not fall foul of the provisions of the second proviso to Section 394(1) of
the Act.
18. To be noted, in the scheme, clause7 provides that all employees of
transferor company, in service on the effective date, shall become the
employees of the transferee company, on such date without any break or
interruption in service and on terms and conditions as to remuneration not
less favorable than those subsisting with reference to transferor company, as
on the said date.
19. In terms of the provisions of Section 391 and 394 of the Act, and in
terms of clause 4 of the scheme, the entire undertaking, properties, rights
and powers of the transferor company, will stand transferred to and/or vest in
the transferee company, without any further act or deed. Similarly, all
liabilities and duties of the transferor company shall stand transferred to the
transferee company, without any further act or deed.
20. Importantly, in respect of the 11.86% equity stake held by the
transferor company in the transferee company of which cancellation is
sought upon completion of the process of amalgamation, the relevant
provisions stand incorporated in clause 5.4 and 5.5 of the proposed scheme.
These clauses read as follows:
"5.4 Upon New Equity Shares being issued and allotted
by the Amalgamated Company to the shareholders of the
Amalgamating Company, in accordance with Clause 5.1
above, the investment held by the Amalgamating
Company in the share capital of the Amalgamated
Company shall, without any further application, act,
instrument or deed stand cancelled. The shares held by
the Amalgamating Company in dematerialized form shall
be extinguished, on and from such issue and allotment of
New Equity Shares.
5.5 Such reduction of share capital of Amalgamated
Company as provided in Clause 5.4 above shall be
effected as an integral part of the Scheme and the orders
of the High Court sanctioning the Scheme shall be
deemed to be an order under Section 100-103 and any
other applicable provisions of the Act confirming the
reduction. The Amalgamated Company shall not be
required to add the words "and reduced" as a suffix to its
name consequent upon such reduction."
21. Furthermore, as per clause 15 of the scheme, the transferor company
shall stand dissolved without being wound up.
22. Accordingly, in view of the approval accorded to the scheme by the
shareholders of the petitioners and creditors of the transferee company, and,
given the fact, that the RD and the OL have not articulated any objections
qua the scheme, in my opinion, there appears to be no impediment in the
grant of sanction to the scheme. Consequently, sanction is granted to the
scheme in terms of Section 391 and 394 of the Act.
23. Consequently, the investment held by the transferor company, to the
extent of 11.86%, in the transferee company, shall stand cancelled. The
shares of the transferor company, which are in dematerialized form, shall
stand extinguished on or from the date of issuance and allotment of new
equity shares as envisaged under clause 5.4 of the sanctioned scheme. The
aforesaid order shall, therefore, be deemed to be an order under Section 100
and 103 of the Act, as well, and thus, result in confirmation of reduction in
capital. Consequently, the provision made in the scheme, in clause 5.5, to
the effect that there shall be no requirement of the transferee company, post
amalgamation, that is, for amalgamating company, to add the words, "and
reduced" as a suffix to its name post reduction in capital will also get
triggered. The petitioners will, however, comply with all statutory
requirements, as mandated in law.
24. A certified copy of the order, sanctioning the scheme, will be filed
with the ROC, within thirty (30) days of its receipt.
25. Resultantly, it is directed that the petitioners will comply with all
provisions of the scheme and, in particular, those which are referred to
hereinabove.
26. In any event, notwithstanding what is stated by the petitioners, the
transferee company will file an undertaking with this court, within two
weeks from today, stating therein, that it will take over and defray all
liabilities of the transferor company. It is also made clear, that the concerned
statutory authority will be entitled to proceed against transferee company qua
any liability which it would have fastened on to the transferor company for
the relevant period, and that, which may arise on account of the scheme
being sanctioned.
27. Notwithstanding the above, if there is any deficiency found or,
violation committed qua any enactment, statutory rule or regulation, the
sanction granted by this court to the scheme will not come in the way of any
action being taken, albeit in accordance with law, against the concerned
persons, directors and officials of the petitioners.
28. It is made clear, that this order will not be construed as an order
granting exemption from: payment of stamp duty or, taxes or, any other
charges, if any, payable, as per the relevant provisions of law or, from any
applicable permissions that may have to be obtained or, even compliances
that may have to be made, as per the mandate of law.
29. Consequently, the petition is allowed and disposed of in the aforesaid
terms.
RAJIV SHAKDHER, J
APRIL 07, 2016
