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2015 (4) TMI 307 - HC - Companies LawApplication for approval of Scheme of Arrangement under Section 391-394 of the Companies Act,1956 - Objections received from Sales promotion employees of transferor company and one Unsecured creditor - Observations made by Official Liquidator and Regional Director - Held that - It was submitted that it does not dispute the locus of employees, who filed the applications. He submitted that it is a small group of 750 employees out of total 13000- 14000. All the rights of the existing employees of the Transferee Company have been fully protected under Clause 13 of the Scheme of Arrangement. It has been specifically mentioned therein. Further submitted that the objector was one of the unsecured creditor to the extent of ₹ 17,86,276.80. A sum of Euro 45,000 were paid to the objector in June, 2014, which cleared entire debt due against the transferor company. Once it was not the creditor of the Transferor Company, it had no locus to file the application. In the report of the Official Liquidator, it has been stated that the Scheme of Arrangement is prejudicial to the interest of revenue and public at large, as the Scheme is designed to set off Carry Forward and Set Off Accumulated Losses and Unabsorbed Depreciation of the Transferor Company against profits of the profit making Transferee Company. The Scheme was sent to the Income Tax Department. No comments have been received. In case it is legally permissible for the Transferor Company to carry forward and set off all the losses, it shall be entitled to the benefit in case the law does not put a restriction thereon. In response to observation made by Regional Director it was submitted that scheme has been prepared in terms of Accounting Standard-14. Copy of the Scheme was sent to the Chief Commissioner of Income Tax, Chandigarh. How ever, no comments have been received.Also all legal formalities required shall be complied with by the Transferor Company. A perusal of the order passed by the Commission shows that exhaustive exercise was carried out to find out the effect of merger on the public at large. The Commission has issued comprehensive directions in consonance with the provisions of the Competition Act, which are to be complied with by the Transferor / Transferee Companies.No doubt, the Commission has taken full care of the interest of the consumers of the medicines manufactured by both the companies, however, still as an abundant caution, it is added that during the period the entire process of Divestment is completed, the monitoring agency shall also monitor the prices of the drugs manufactured by the combined entity. For the reasons afore-stated and on consideration of all the relevant facts and the procedural requirements contemplated under Sections 391 to 394 of the Companies Act, 1956 and the relevant Rules the Scheme of Arrangement approved.
Issues Involved:
1. Sanctioning of the Scheme of Arrangement between the Transferor Company and the Transferee Company. 2. Objections filed by Sales Promotion Employees regarding employment terms. 3. Objections filed by an unsecured creditor regarding non-receipt of notice and assignment of agreement. 4. Compliance with legal and procedural requirements, including those raised by the Regional Director, Ministry of Corporate Affairs, and the Official Liquidator. Detailed Analysis: 1. Sanctioning of the Scheme of Arrangement: - The petition was filed under Sections 391-394 of the Companies Act, 1956, by the Transferor Company and the Transferee Company for the sanctioning of the Scheme of Arrangement. - The registered offices of the Transferor and Transferee Companies are situated in Punjab and Gujarat, respectively. - The Scheme was approved by the Board of Directors of both companies in meetings held on 6.4.2014. - The court had previously dispensed with convening the meetings of the secured and unsecured creditors, considering the substantial consent received from them. - The majority of equity shareholders approved the Scheme in a meeting held on 19.9.2014. 2. Objections Filed by Sales Promotion Employees: - Sales Promotion Employees, through their federation, objected to clauses 13(a) and 13(b) of the Scheme, arguing that the terms and conditions of employment could be changed to their detriment. - They were concerned about potential transfers to subsidiaries and the recognition of existing negotiating committees. - The Transferor and Transferee Companies assured that all employee rights would be protected and that there would be no reduction in base salary or base wage rates even after the specified period. - The court found the apprehensions of the employees to be baseless and dismissed their objections. 3. Objections Filed by an Unsecured Creditor: - Genepharm S.A. Greece, an unsecured creditor, objected on the grounds of non-receipt of notice and the assignment of a license and supply agreement without their consent. - The Transferor Company argued that the objector was no longer a creditor as the debt was cleared in June 2014. - The court noted that the agreement would remain binding despite any change in management control and that any disputes would be resolved through arbitration as specified in the agreement. - The objections raised by Genepharm S.A. were dismissed as not tenable. 4. Compliance with Legal and Procedural Requirements: - The Regional Director, Ministry of Corporate Affairs, raised issues regarding the accounting treatment under AS-14 and compliance with the Competition Commission of India's approval. - The Transferor Company clarified that the Scheme was in accordance with AS-14 and that all legal formalities would be complied with. - The Official Liquidator raised concerns about the Scheme being prejudicial to revenue and public interest due to the set-off of accumulated losses and unabsorbed depreciation. - The court noted that the Income Tax Department had no objections and that the Scheme's compliance with legal provisions would be ensured. - The court also referred to the Competition Commission of India's order, which had comprehensively addressed the impact of the merger on competition and consumer interests. Conclusion: - The Scheme of Arrangement was sanctioned by the court, binding on the Transferor and Transferee Companies, their shareholders, creditors, and all concerned. - The Transferor Company was to be dissolved without being wound up, and the procedural requirements were to be complied with in accordance with the law. - The petitioner company voluntarily agreed to deposit a sum of Rs. 1,00,000/- in the Common Pool Fund of the Official Liquidator. - Notice of the order was to be published in specified newspapers and the official Gazette of the Government of Punjab. Disposition: - The petition was disposed of accordingly.
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