2015 (5) TMI 281 - HC - Companies Law

Application for Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956 - Observations of Regional director regarding short term unsecured borrowings , insufficiency of authorized share capital of the transferee company, duly addressed - Held that - In response to the objections raised by the Official Liquidator and the Regional Director, Northern Region with regard to insufficiency of authorized share capital of the transferee company, the petitioner/transferor company has filed the affidavit dated 6th February, 2015 of Mr. Ajay Kumar Maan, Chief Finance Officer and Authorized Signatory of the petitioner/transferor company stating that, upon sanction of the Scheme, the transferee company shall issue and allot 01 equity share of ₹ 10/- each to the shareholders of the petitioner/transferor company holding 24.0205 equity shares of ₹ 10/- each and the fraction, if any, shall be rounded off to the next number. Therefore, in terms of the said share exchange ratio, the transferee company shall issue and allot equity shares amounting to ₹ 53,13,660/- to the shareholders of the transferor company. He, therefore, submits that the increase of ₹ 55,00,000/- in the authorized share capital of the transferee company, as approved in Clause 10.1 of the Scheme of Amalgamation, is sufficient to allot shares to the shareholders of the petitioner/transferor company. In view of the above, the objections raised by the Official Liquidator and the Regional Director, Northern Region do not survive. So far as the objection of the Regional Director with regard to short term unsecured borrowings of ₹ 19.05 crores of the petitioner/transferor company is concerned, the petitioner company in the affidavit dated 6th February, 2015 of Mr. Ajay Kumar Maan, Chief Finance Officer and Authorized Signatory of the petitioner/transferor company has submitted that the unsecured loans with the Deutsche Bank and ING Vysya Bank have been arranged by the group company i.e. Sogefi SpA with their global relation and engagement with the bank. Security has been provided by the Ultimate Holding Company and its subsidiary companies through BNP Paribas Bank and ING Bank NV respectively. It is further submitted that this loan is therefore secured with respect to the company, Sogefi SpA but is unsecured with respect to the transferor company. Copies of the loan agreements entered into by the transferor company with the banks are placed on record. Further, the petitioner company has undertaken to comply with all requirements as may be needed under the Foreign Exchange Management Act, 1999 and any other rules and regulations issued by the Reserve Bank of India. 17. The matter was listed for consideration on 19th February, 2015 when the Regional Director, Northern Region sought and was granted time to file further affidavit in support of the objections raised by him. Pursuant to said order, the Regional Director has filed his additional affidavit dated 4th March, 2015 stating that all the objections/observations that had been raised by him earlier now stand adequately addressed and that he has no further objection in the matter. In view of the above, nothing survives so far as the objection of the Regional Director, Northern Region is concerned. No objection has been received to the Scheme of Amalgamation from any other party. Considering the approval accorded by the equity shareholders, secured and unsecured creditors of the petitioner/transferor company, to the proposed Scheme of Amalgamation and there being no surviving objection to the same by the Regional Director, Northern Region, and the Official Liquidator; and also in view of the order dated 2nd February, 2015 passed by the Karnataka High Court in CP 210/2014 granting sanction to the proposed Scheme of Amalgamation in respect of the transferee company, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Companies Act, 1956. - Application for Scheme of Amalgamation approved.

Summary

Issues:
Petition under Sections 391 to 394 of the Companies Act, 1956 for sanction of Scheme of Amalgamation.

Analysis:
1. The petition was filed seeking sanction for the Scheme of Amalgamation between two companies. The transferor company was incorporated in 2009 and later changed its name. The authorized share capital and details of the company were provided in the petition.

2. The Scheme of Amalgamation aimed at leveraging assets, products, and intellectual capital to enhance shareholder value. It highlighted operational benefits, cost optimization, and simplification of business processes.

3. The share exchange ratio was specified in the Scheme, and it was mentioned that no proceedings under specific sections of the Companies Act, 1956 were pending against the transferor company.

4. The Board of Directors of the transferor company had approved the Scheme in meetings held on specific dates, and previous court directions had dispensed with the requirement of convening shareholder and creditor meetings.

5. Reports from the Official Liquidator and Regional Director were submitted, raising concerns about the share capital of the transferee company and unsecured borrowings of the transferor company.

6. Responses to objections were filed, addressing the share exchange ratio and clarifying the nature of unsecured loans. The Regional Director later withdrew objections after receiving satisfactory explanations.

7. No objections were received from any other party, and compliance with statutory requirements was emphasized. The Karnataka High Court had already sanctioned the Scheme for the transferee company.

8. The court granted sanction to the Scheme of Amalgamation, directing compliance with statutory requirements and clarifying that the order did not exempt from stamp duty payment. The transferor company was to be dissolved post-amalgamation.

9. The petitioner company agreed to deposit a sum in the Common Pool Fund of the Official Liquidator, and the petition was allowed based on the provided terms.