2016 (4) TMI 392 - HC - Companies Law

Scheme of Amalgamation - Held that - 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. 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.

Issues Involved:
1. Jurisdiction of the court.
2. Background and incorporation details of the transferor and transferee companies.
3. Objectives and benefits of the Scheme of Amalgamation.
4. Shareholding structure.
5. Capital details and financial documents.
6. Board of Directors' approval.
7. Pending proceedings against the petitioners.
8. First motion petition and court orders.
9. Meetings of equity shareholders and unsecured creditors.
10. Notice and publication of the second motion petition.
11. Objections or complaints received.
12. Regional Director’s (RD) affidavit and Registrar of Companies (ROC) report.
13. Official Liquidator’s (OL) report.
14. Transfer of employees.
15. Transfer of properties, rights, powers, liabilities, and duties.
16. Cancellation of equity stake and reduction of share capital.
17. Dissolution of the transferor company.
18. Compliance with statutory requirements and liabilities.
19. Sanction of the scheme.

Detailed Analysis:

1. Jurisdiction of the Court:
The court has jurisdiction to entertain and adjudicate the petition as the registered office of the petitioners is located within its jurisdiction.

2. Background and Incorporation Details:
The transferor company, Radha Raj Ispat Private Limited, was incorporated on 21.07.1994, and the transferee company, originally Khushi Ram Behari Lal Limited, was incorporated on 30.03.1993 and later renamed KRBL Limited on 01.02.2000.

3. Objectives and Benefits of the Scheme of Amalgamation:
The scheme aims to simplify the shareholding structure and reduce shareholding tiers, ensuring direct commitment of the promoter group towards the transferee company.

4. Shareholding Structure:
The transferor company holds 2,79,13,892 equity shares in the transferee company, constituting nearly 11.86% of the equity stake.

5. Capital Details and Financial Documents:
Details of the authorized, issued, subscribed, and paid-up capital of the petitioners are provided in Part-I of the scheme. Copies of the Memorandum and Articles of Association, profit and loss accounts, and balance sheets dated 31.03.2014 were filed with the petition.

6. Board of Directors' Approval:
The Board of Directors of both companies approved the scheme on 18.02.2015.

7. Pending Proceedings Against the Petitioners:
The petitioners confirmed that there are no pending proceedings against them under various sections of the Companies Act, 1956, and the Companies Act, 2013.

8. First Motion Petition and Court Orders:
The first motion petition (CA No. (M) 127/2015) sought to dispense with the requirement of convening meetings of equity shareholders and creditors. The court dispensed with these requirements for the transferor company and secured creditors of the transferee company but directed the transferee company to convene meetings for its equity shareholders and unsecured creditors.

9. Meetings of Equity Shareholders and Unsecured Creditors:
Meetings were held on 12.09.2015. The equity shareholders' meeting had a quorum of 358 shareholders holding 87.09% of the equity share capital. The unsecured creditors' meeting, after an adjournment, had a quorum of 232 creditors holding 20.53% of the unsecured debt.

10. Notice and Publication of the Second Motion Petition:
Notice of the second motion petition was issued on 18.10.2015, and citations were published in Business Standard (English) and Jansatta (Hindi) on 19.10.2015. An affidavit confirming service and publication was filed.

11. Objections or Complaints Received:
No objections or complaints were received regarding the scheme post-publication.

12. Regional Director’s (RD) Affidavit and Registrar of Companies (ROC) Report:
The RD filed an affidavit under Section 394A of the Companies Act, 1956, stating no adverse comments from the ROC. The RD had no objections to the scheme.

13. Official Liquidator’s (OL) Report:
The OL reported no complaints against the scheme and confirmed that the transferor company's affairs were not conducted prejudicially to its members or the public.

14. Transfer of Employees:
Clause 7 of the scheme ensures that all employees of the transferor company will become employees of the transferee company without any break or less favorable terms.

15. Transfer of Properties, Rights, Powers, Liabilities, and Duties:
Clause 4 of the scheme provides for the transfer of all undertakings, properties, rights, powers, liabilities, and duties of the transferor company to the transferee company without any further act or deed.

16. Cancellation of Equity Stake and Reduction of Share Capital:
Clause 5.4 and 5.5 of the scheme detail the cancellation of the transferor company's 11.86% equity stake in the transferee company and the reduction of share capital as an integral part of the scheme.

17. Dissolution of the Transferor Company:
Clause 15 of the scheme states that the transferor company shall stand dissolved without being wound up.

18. Compliance with Statutory Requirements and Liabilities:
The transferee company will file an undertaking to take over and defray all liabilities of the transferor company. Statutory authorities can proceed against the transferee company for any liabilities of the transferor company.

19. Sanction of the Scheme:
The court sanctioned the scheme under Sections 391 and 394 of the Companies Act, 1956, with compliance to all statutory requirements. The scheme's provisions, including the cancellation of shares and reduction of share capital, were confirmed. The petitioners must file a certified copy of the order with the ROC within 30 days and comply with all provisions of the scheme.

Conclusion:
The petition was allowed, and the scheme was sanctioned, subject to compliance with statutory requirements and liabilities. The court's order does not exempt the petitioners from paying stamp duty, taxes, or obtaining necessary permissions.

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