2013 (4) TMI 508 - HC - Companies Law

Scheme of amalgamation - Petitions u/s 391 and 394 of the Companies Act, 1956 as contention raised by the one of the equity shareholder of the Company for stay or the cancellation of the meetings of the shareholders for sanctioning scheme - as that during the inspection of the books of account and record of both companies had been conducted in 2008 and various violations of the Act were observed - the said application was disposed of noting that the meetings of the shareholders had already been held on 12th May 2011. Equity shareholder was given the opportunity to raise objections at the second motion stage and also forward his objections to the Regional Director ( RD ) as well as the Registrar of Companies ( ROC ) so that they could consider his objections while filing their replies at the second motion stage. Held that As no material records are found to be placed by Mr. H.K. Chadha to substantiate the plea this Court finds that apart from the objections of Mr. H.K. Chadha, the holder of 8 equity shares, which objections have been found to be without merit, there is no other objection to the sanctioning of the Scheme. Consequently this Court accords its sanction to the Scheme which is at Annexure V to the petition. As pointed out by the RD, upon the sanctioning of the Scheme, in terms of Sections 391 and 394 of the Act, all the properties, rights and powers of BSMCL will be transferred to and will vest in PSPL without any further act or deed. BSMCL will be taken to be dissolved without winding up and without any formal petition being filed for that purpose. The necessary intimation will be filed with the ROC within 21 days. However, this order will not be construed as an order from making exemption from payment of stamp duty or taxes or any charges, if payable in accordance with law or any permission required under any other law, or permission/compliance with any other requirement which may be specifically required under any law. The learned Senior counsel for BSMCL has stated voluntarily that upon the Scheme being sanctioned, it would deposit a sum of Rs. 1 lakh with the Common Pool Fund of the OL. The said statement is taken on record. The amount be deposited with the said fund of the OL within three weeks. The petitions are allowed in the above terms, but in the circumstances, with no order as to costs.

Issues Involved:
1. Sanction to the Scheme of Arrangement under Sections 391 and 394 of the Companies Act, 1956.
2. Objections raised by Mr. H.K. Chadha.
3. Compliance with statutory procedures and requirements.
4. Validity of AGMs and audit reports.
5. Allegations of fraudulent activities and mismanagement.
6. Requirement of No Objection Certificate (NOC) from Delhi Stock Exchange (DSE).

Issue-wise Detailed Analysis:

1. Sanction to the Scheme of Arrangement under Sections 391 and 394 of the Companies Act, 1956:
The petitions filed by Phenil Sugars Pvt. Ltd. (PSPL) and Basti Sugar Mills Co. Ltd. (BSMCL) sought sanction for the Scheme of Arrangement involving the amalgamation of BSMCL with PSPL effective from 1st April 2010. The Court directed the convening of meetings for shareholders and creditors, which were held, and approval was granted to the Scheme. The Court ultimately sanctioned the Scheme, noting that all statutory procedures were complied with, and there were no substantial objections from shareholders or creditors.

2. Objections raised by Mr. H.K. Chadha:
Mr. H.K. Chadha, a shareholder of BSMCL, raised several objections, including the validity of AGMs, the authenticity of audit reports, and allegations of fraudulent activities. The Court noted that Mr. Chadha had a history of litigation and his objections were found to be without merit. The Court also observed that the objections were similar to those raised in previous applications and were not substantiated by any material evidence.

3. Compliance with statutory procedures and requirements:
The Court examined whether all requisite statutory procedures were followed, including the holding of meetings and obtaining necessary approvals. It was noted that the Scheme was backed by the requisite majority vote and all relevant material was placed before the voters. The Court found that the Scheme was just, fair, and reasonable, and complied with the provisions of Sections 391 and 394 of the Act.

4. Validity of AGMs and audit reports:
The Court addressed the objections regarding the validity of AGMs held on 29th September 2004, 30th September 2005, and 30th December 2006. It was noted that the audited accounts for the relevant financial years were placed and adopted in subsequent AGMs, and any default in this regard was condoned. The Court found no merit in the objection that adjustment entries needed to be made in the accounts prepared by the previous auditor, BRS.

5. Allegations of fraudulent activities and mismanagement:
Mr. H.K. Chadha alleged that the property of BSMCL was transferred for an unrealistically low consideration and that shares of certain shareholders were illegally transferred to PSPL. The Court found no material evidence to support these allegations. It was noted that no other shareholder or creditor had objected to the sale or transfer of shares, and the allegations were not substantiated by any credible evidence.

6. Requirement of No Objection Certificate (NOC) from Delhi Stock Exchange (DSE):
The Court addressed the issue of obtaining an NOC from the DSE. It was noted that despite several reminders, the DSE did not respond. The Court observed that the requirement of obtaining an NOC from the stock exchange was not mandatory and that the Scheme could be approved as long as it was filed with the stock exchange one month before presenting it to the Court.

Conclusion:
The Court found that the objections raised by Mr. H.K. Chadha were without merit and that all statutory procedures and requirements were complied with. Consequently, the Court sanctioned the Scheme of Arrangement, transferring all properties, rights, and powers of BSMCL to PSPL, and dissolving BSMCL without winding up. The Court also directed that necessary intimation be filed with the Registrar of Companies within 21 days and ordered the deposit of Rs. 1 lakh with the Common Pool Fund of the Official Liquidator. The petitions were allowed, with no order as to costs.

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