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TMI Blog2012 (8) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... n other sections of the Companies Act - Having once duly paid the amounts on periodic increases in share capital, further duty and charges cannot be levied when part of the same share capital becomes the share capital of the Resulting Company by effect of law - that none of the objections raised by the Regional Director are sustainable - Scheme of arrangement / demerger is allowed. - CO. PETITION NOS. 56 & 57 OF 2012, CO. APPLICATION NOS. 131 & 132 OF 2012 - - - Dated:- 19-6-2012 - Smt. ABHILASHA KUMARI, J. Mihir Joshi and Tanvish Bhatt for the Petitioner. P.S. Champaneri for the Respondent. ORDER 1. These petitions are filed by two petitioner Companies for sanction of a Scheme of Arrangement, namely Elitecore Technologies Private Limited - the Transferor Company/Demerged Company and Cyberoam Technologies Private Limited-the Transferee Company/Resulting Company under Section 391 to 394 of the Companies Act, 1956. 2. It has been submitted that the Transferor Company/Demerged Company was originally incorporated under the Companies Act, 1956 on 17.12.1999. On 3.8.2001, the Company was converted into a public limited Company and thereafter again converted into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different set of investors, strategic partners, lenders and other stakeholders. There are also differences in the manner in which each of these businesses are required to be managed. It has further been submitted that the Transferee Company/Resultant Company is engaged in the business of software and appliance development/ providing networking solutions/security solutions/e-commerce solutions, related project implementation, sales and marketing of the said products and providing consultancy services. So, in order to enable the management to lend greater focus to the operation of each business, the Board of Directors of the Transferor Company/Demerged Company proposed to reorganize and segregate, by way of a demerger of its Cyberoam Division and subsequent transfer of the same to the Transferee Company/Resultant Company. It has further been submitted that sanction of the Scheme of Arrangement between the Transferor Company/Demerged Company and Transferee Company/Resultant Company, shall result in providing a greater focus to the operations of each of the businesses and increase the efficacy of the business operation, profitability and ultimately the return on capital. 4. The T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en opposed on the ground of the same are not in compliance of Sections-94, 97 read with Section 192 of the Companies Act, 1956. Further, the Registrar of Companies, Gujarat has submitted his report vide letter No. ROC/Guj/Elitecore/Cyberoam/STA/(K)/2011 - 12/413 dated 30-4-2012 and as per the said report, no complaint and/or representation has been received against the petitioner Companies including any complaint/representation in respect of the proposed Scheme of Arrangement. The Regional Director has also submitted the report of the Registrar of Companies in Company Petition No. 56 of 2012 connected with Company Application No. 131 of 2012, and Company Petition No. 57 of 2012, connected with Company Application No.132 of 2012, which have been examined by him and has stated that there appears to be no other objection to the proposed Scheme of Arrangement and that the Scheme does not, prima facie, appear to be prejudicial to the interest of the shareholders of the petitioner Companies and the public at large. 9. In response to the objections raised by the Regional Director, the petitioner Companies filed a common rejoinder/affidavit stating that pursuant to the Scheme, the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merger, thus business-wise bifurcation is not lawful; (ii) there is no mechanism in the provisions of Companies Act, 1956 to devise and/or reduce the authorised capital of any Company and to give credit in respect of fees and stamp duty already paid, to any other Company under the circumstance; (iii) there is no provision in the Companies Act, 1956 for decrees/reduction in the authorised share capital of a Company; (iv) the MCA21 system does not allow the Registrar of Companies to effect such reduction in the authorised share capital, in absence of specific provisions in the Companies Act, 1956; and (v) the Scheme of Arrangement is not in accordance with the provisions of Companies Act, 1956 and should not be granted sanction by the Court. 11. This Court has heard Mr. Mihir Joshi, learned Senior Advocate with Mr. Tanvish Bhatt, learned advocate for M/s Wadia Ghandy Co., for the petitioners, Mr. P.S. Champaneri, learned Assistant Solicitor General of India and has considered the report of the Regional Director. 12. With regard to the objections contained in the additional affidavit filed by the Regional Director, Mr. Mihir Joshi, learned Senior Advocate has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Solicitor General of India has submitted that the judgments in Bazley Finvest Ltd. and Aegis Healthcare (P.) Ltd. ( supra ), have been rendered in cases of amalgamation, whereas the present case is that of demerger. 14. No other contentions have been raised by way of pleading or oral submissions before this Court. 15 . Having heard the learned counsel for the respective parties and upon consideration of the submissions made by them and the judgments cited at the Bar, this Court is of the considered view that none of the objections raised by the Regional Director are sustainable. Though the judgments in Bazley Finvest Ltd. and Aegis Healthcare (P.) Ltd. ( supra ), have been rendered in cases of amalgamation, however, the judgments in the cases of Alchemist Ltd. and Alchemist Foods Ltd. and Ashim Investment Co. Ltd. ( supra ), are in the cases of demerger. Moreover, in Bazley Finvest Ltd. ( supra ), this Court has approved the ratio in the case of Ashim Investment Co. Ltd. ( supra ), which is a case of demerger. The principle of law laid down by the Courts in these judgments, namely that Section-391 is a complete code and the principle of Single Window Clearance p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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