9911796707
TMI Blog2000 (7) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate the issue raised by the appellants in the correct perspective. Highway Cycle Industries Ltd. (appellant No. 1 in Company Appeal Nos. 1 and 3 of 2000) and the sole appellant in Company Appeal No. 2 of 2000 (hereinafter described as "the transferor-company") was incorporated as a private limited company on May 20, 1971. Its authorised share capital is Rs. 5,00,00,000 divided into 50 lakh equity shares of Rs. 10 each. The issued, subscribed and paid-up capital of the transferor-company was Rs. 3,48,80,000 as on March 31, 1996. The transferor-company initially started the business of manufacturing and dealing in automobile components, special purpose machines etc. in its factory at Ludhiana. Later on, it started the business of manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme on February 10, 1999, with the following observations: "The unit of the transferor-company is being transferred to the transferee-company. The scheme as proposed was approved by the board of directors of the respective companies. The report of the chartered accountants of the respective companies had also been filed on record copy annexed to this petition as well. Along with the balance-sheet of the company as on March 31, 1996, the Bank of Baroda, the lead bank in relation to the affairs of the companies, has issued a "no-objection certificate" for the implementation of the proposed scheme. It is true that consideration in cash is not being paid for transfer of the unit but for this purpose, the scheme has to be construed and read i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... large. In other words, there appears to be no objection to the acceptance of the scheme. The concerned financial institutions have consented to the arrangement." 4. Soon after the sanction of the scheme of arrangement, the transferor and the transferee companies filed Company Application Nos. 241 and 242 of 1999 for modification of the scheme in the following terms: "( a )The transfer date shall be April 1, 1999 (instead of April 1, 1996, as sanctioned). ( b )The Sunbeam Auto Ltd. shall issue 17,44,000 equity shares of Rs. 10 each fully paid up on a premium of Rs. 30 per share to the shareholders of Highway Cycle Industries Ltd. (transferor company) on a proportionate basis (instead of issuing to Highway Cycle Industries Ltd. trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shareholders of appellant No. 1 for reducing the paid up share capital are ex facie erroneous and, therefore, the impugned orders should be quashed. He submitted that the observation of the learned company judge about the possibility of the appellants taking undue benefit under the Finance Bill, 1999, by seeking change in the scheme of arrangement is based on pure conjectures and there was no legal justification to decline the prayer made by them. He argued that the proposed amendment does not, in any manner, affect the existing shareholders and creditors and, therefore, the learned company judge was not justified in refusing to entertain the request of the appellants ignoring the fact that the shareholders of appellant No. 1 had approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 9. Not only this, the learned company judge delved into the realm of conjectures by observing that the proposed amendment in the scheme of arrangement was meant to take undue advantage of the provisions introduced by the Finance Bill, 1999, and that the creditors are likely to be adversely affected by such modification. In our opinion, the impugned order suffers from an error of law because the learned company judge has not only ignored material aspects of the case but has also proceeded on conjectures. 10. Hence, the appeals are allowed. Order dated October 12, 1999, passed by the learned company judge is set aside and Company Application Nos. 241 and 242 of 1999 as well as Company Petition No. 135 of 1999 are allowed in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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