Esugarindia Clearing ... vs Esugarindia Limited
2016 Latest Caselaw 2448 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

                                     Judgement reserved on: 23.03.2016
%                                    Judgement delivered on: 30.03.2016


+                 CO.PET. 634/2015

      IN THE MATTER OF

      ESUGARINDIA CLEARING CORPORATION LIMITED

                                ....Petitioner No.1/ Transferor Company



                               AND



      ESUGARINDIA LIMITED
                    .... Petitioner no.2/ Transferee Company



                         Through: Mr A K Agarwal, Advs. for the
                         Petitioners.
                         Ms Aparna Mudiam, Asstt.ROC for the RD.
                         Ms Ruchi Sindhwani, Adv. for the OL.

CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER

RAJIV SHAKDHER, J
1.

This is a second motion petition filed jointly by Esugarindia Clearing Corporation Limited (i.e. petitioner no.1 / transferor company) with Esugarindia Limited (i.e. petitioner company no.2 / transferee company),

under Section 391 and 394 of the Companies Act, 1956 (hereafter referred to as the Act) for approval of the scheme of amalgamation (hereafter referred to as the scheme).

2. The transferor company and the transferee company, will hereafter collectively be referred, to as the petitioners.

3. The registered office of the petitioners are located within the territorial jurisdiction of this court.

4. The details with respect to the petitioners' authorised, issued, subscribed and paid up capital are set out in paragraph 3 and paragraph 7 of the petition.

5. The copies of Memorandum and Articles of Association as well as the profit and loss account and the balance sheet as on 31.03.2014 have been filed by the petitioners.

6. Copies of Board of Directors' resolution of even date i.e. 12.09.2014, concerning the petitioners, whereby, the scheme has been approved, are filed with the petition.

7. The petitioners have averred that the amalgamation of the transferor company with transferee company would result in pooling of resources of the aforementioned entities to their common advantage, resulting in more productive utilization of the resources, costs and operational efficiencies.

8. In terms of clause 4.6 of the scheme, the share exchange ratio as provided therein is mentioned below:

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

9. The petitioners have averred that there are no proceedings pending against them, under Sections 235 to 251 of the Act.

10. To recapitulate, the petitioners had in the earlier round filed an application (i.e. the first motion), being: CA (M) No.25/2015, whereby, a prayer had been made to convene the meetings of the equity shareholders of the petitioners. This court vide order dated 26.03.2015 directed the petitioners to hold the said meetings on 09.05.2015 to seek approval from the shareholders qua the scheme. However, on an application being made seeking postponement of the date of meetings scheduled on 09.05.2015, this court vide order dated 06.05.2015 rescheduled the meetings for 11.07.2015.

10.1 The court, also noted, that since, the petitioners did not have any secured or unsecured creditors, therefore, there was, obviously, no requirement to convene meetings with respect to the said classes of persons/ entities.

11. The meeting of the shareholders of the transferor company was held on 11.07.2015. The chairman of the meeting, consequently, submitted his report of even date (i.e. 11.07.2015), wherein, it is stated that 9 out of a total of 27 equity shareholders (being 66% in value) were present, and had, unanimously, voted in favour of the scheme. Furthermore, the chairman reported that no objections qua the scheme were received by him.

11.1. Similarly, the meeting of the shareholders of the transferee company was, also, held on 11.07.2015. The chairman of this meeting submitted his report as well, which is, also dated 11.07.2015. In the said report, the Chairman has stated that 4 out of a total of 38 equity shareholders (being 96.73% in value) were present at meeting and that all 4 shareholders had voted in favour of the scheme. In addition, the chairman, also, reported that no objections to the scheme were received by him.

12. The petitioners, thereafter, filed the instant petition (i.e. second motion). Notice in this petition was issued on 28.08.2015. Notice was accepted on behalf of the Official Liquidator (OL) and the Regional Director (RD).

12.1. Furthermore, citations were ordered to be published.

13. Citations were published, on 12.09.2015, in Delhi edition of the following newspapers: Statesman (English) and Veer Arjun (Hindi). An affidavit dated 19.11.2015 demonstrating service of the petition on the RD and OL, and establishing publication of citation along with the newspaper extracts, was filed by the petitioners.

13.1 Further, the petitioners filed an affidavit dated 04.02.2016, wherein it is averred that subsequent to the publication of the notice, they have not received any objection or complaint qua the scheme.

14. Pursuant thereto, the RD filed its affidavit under Section 394 A of the 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.

14.1 Based on the aforementioned circulars, as per the affidavit of the RD, communication was sent to the Registrar of Companies, Delhi and Haryana (in short the ROC), and the Income Tax Department (I.T. Department), seeking their response to the scheme.

14.2 However, no comment or response of the I.T. Department has been, apparently received in the matter by the RD.

14.3 The RD, though, received information from the ROC vide communication dated 22.01.2016 which, inter alia, is indicative of the fact that the said authority has not received any complaint or objection from the shareholders or any of the stakeholders of the petitioners.

14.4. Therefore, in so far as the RD is concerned, no objections have been taken by him qua the scheme.

15. The OL, in his report, inter alia, stated that he has not received any complaint qua the scheme from any interested person or party. The OL has also averred, albeit based on the information supplied by the petitioners, that 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 its members or the public at large. 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.

15.1 Thus, the OL, in effect, has conveyed that he has no objection to the scheme being sanctioned.

16. To be noted, the scheme in clause 4.2(k) provides that all the employees of the transferor company in service immediately before the effective date shall become the employees of the transferee company on such date without any break and/or interruption in service and on the same terms and conditions as were applicable to them immediately prior to such transfer with reference to the transferor company as the case may be on the said date.

17. In terms of the provisions of Section 391 and 394 of the Act, and in terms of clause 4.2(a) 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, in terms of clause 4.2(c) of the scheme, all liabilities and duties of the transferor company shall stand transferred to the transferee company without any further act or deed.

17.1 Furthermore, as per clause 4.12 of the scheme, the transferor company shall stand dissolved without being wound up.

18. Accordingly, in view of the approval accorded to the scheme by the shareholders of the petitioners 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.

18.1 Furthermore, as noticed above, the shareholders of both the transferor company as well as the transferee company at their separate meetings held on 11.07.2015 have accorded their approval to the scheme. The fact that only 9 out of the 27 shareholders of the transferor company attended the meeting, and similarly, only 4 out of the 38 equity share holders of the

transferee company attended the meeting so convened, would not, to my mind, come in the way of sanction being accorded to the scheme in view of the fact that the resolutions moved were passed by all shareholders, who were present and had voted at the two meetings convened by the court.

18.2 The mandate of law in this behalf, clearly, is that, the resolution moved should be passed by a simple majority in number, representing 3/4 th in value of that class of members, who are present and vote either in person or by proxies, if allowed, at the meeting so convened by the court. In the instant case, this condition is met.

18.3 In this context, I may only note with profit, the following observations made by Division Bench of the Karnataka High Court in B.S. Kyatanagoudar & Ors. Vs Maharashtra Apex Corporation Ltd. 2007 SCC Online Kar 189.

"..... It is to be observed that the counsel for the appellants has canvassed the view under consideration notwithstanding the over whelming authorities cited in apposition, primarily on the premise that the said authorities are not binding on this Court. We are not inclined to subscribe to the view of the counsel of the appellants. It is to be seen that the Full Bench of the Punjab and Haryana High Court in Swift Formulations case (supra) has referred to and relied upon the case of Kirloskar Electric Company Limited, In re. decided by this Court and again referred to in the impugned order. We affirm the view taken by the learned Single Judge in this regard. In our opinion, the majority of the members contemplated is a majority in number present and voting at the meeting. The majority is dual, in number and in value; a simple majority of those voting is

sufficient, whereas the 'three-fourths' requirement relates to value..."

18.4 Having said so, in a given case, the court can examine the merits of the scheme in the larger public interest or qua interest of other stakeholders. In the instant case, I do not find that the scheme, as proposed for sanction, is perceptibly, prejudicial to the interest of other stakeholders.

18.5 Consequently, sanction is granted to the scheme in terms of Section 391 and 394 of the Act. The petitioners will, however, comply with all statutory requirements, as mandated in law.

18.6 A certified copy of the order, sanctioning the scheme, will be filed with the ROC, within thirty (30) days of its receipt.

19. Resultantly, it is directed that the petitioners will comply with all provisions of the scheme and, in particular, those which are referred to hereinabove.

20. 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 the 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.

21. Notwithstanding the above, if there is any deficiency found or, violation committed of 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/or officials of the petitioners.

22. It is made clear, that this order will not be construed as an order granting exemption, inter alia, 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.

23. Consequently, the petition is allowed and disposed of in the aforesaid terms.

RAJIV SHAKDHER, J

MARCH 30, 2016