2015 (3) TMI 1033 - HC - Companies Law

Application for approval of Scheme of Amalgamation under sections 391 to 394 of the Companies Act, 1956 - Regional Director observation regarding Valuation of shares and Swap ratio , Undertaking from RBI for all NBFC compliances. Held that - In reply to regional director observation, it is submitted that neither the fair price of the company was ₹ 20 per share at which the buyback was done nor ₹ 309.27 per share is the fair price which has been determined only for the sole purpose of arriving a SWAP Ratio with respect to the Transferee Company. Both the values cannot be painted with the same brush as there are different dates, formula, mechanism and purpose so as to determine and arrive. Further submitted that Since the Transferor Company is being dissolved, the shareholders of the Transferor Company would become of the shareholders of the Transferee Company in the above ratio of 100 53. As the Transferor Company has 99.98% shareholdings in the Transferee Company, the said entire 99.98% shares would be allotted to the shareholders of the transferor company. If the contention and calculation of the Regional Director were to be accepted, the shareholders of the transferor company at the ratio of 100 53 would still have approximately 99.96% shareholding in the Transferee Company. The shareholders of both the transferor and the transferee companies have approved the scheme. As such looked at from any angle, the scheme of amalgamation would not be prejudicial to the interest of the shareholders of the transferor company. In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme. Consequently, sanction is hereby granted to the 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. - Scheme of Amalgamation approved.

Summary

Issues:
1. Sanction to the Scheme of Amalgamation under sections 391 to 394 of the Companies Act, 1956.
2. Valuation of shares and share exchange ratio concerns raised by the Regional Director.
3. Compliance with RBI Guidelines by the Transferee Company.
4. Approval of the Scheme by shareholders and creditors.
5. Transfer of property, rights, and liabilities from Transferor Company to Transferee Company.

Analysis:
1. The judgment pertains to a second motion joint Petition filed seeking sanction to the Scheme of Amalgamation under sections 391 to 394 of the Companies Act, 1956. The Petitioner Companies, LRSD Global Holdings Private Limited (Transferor Company) and Rajasthan Global Securities Limited (Transferee Company), have complied with all necessary requirements, including filing resolutions, memorandum, and articles of association, and obtaining dispensation of meetings of shareholders and creditors.

2. The Regional Director raised concerns regarding the valuation of shares and the share exchange ratio. The Regional Director highlighted discrepancies in the valuation of shares between the years 2012-13 and the present scheme. The Petitioner responded by explaining the valuation process, emphasizing the determination of a fair share exchange ratio for the merger rather than standalone valuation. The Petitioner also clarified the buyback of shares at different prices and how the proposed valuation was solely for determining the swap ratio.

3. Another concern raised was the requirement for the Transferee Company, being an NBFC, to comply with RBI Guidelines. The Transferee Company provided an affidavit undertaking to comply with all applicable RBI Guidelines, addressing the concern raised by the Regional Director.

4. The judgment noted that no objections were received from any other party regarding the Scheme of Amalgamation. The approval of shareholders and creditors, along with the reports filed by the Regional Director and Official Liquidator, supported the grant of sanction to the Scheme. The Petitioner Companies were directed to comply with statutory requirements.

5. The judgment directed the transfer of property, rights, and powers from the Transferor Company to the Transferee Company without further act or deed, leading to the dissolution of the Transferor Company. The order clarified that it did not exempt from payment of stamp duty or other charges and required compliance with all legal requirements. Additionally, the Petitioner Companies agreed to deposit a sum in the Common Pool Fund of the Official Liquidator.

In conclusion, the judgment granted sanction to the Scheme of Amalgamation, addressing concerns raised by the Regional Director, ensuring compliance with RBI Guidelines, and confirming approval from relevant parties for the transfer of assets and liabilities between the companies.