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TMI Blog2012 (12) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... bilities. There is, therefore, no question of the Scheme being detrimental to the public interest - stand taken by the Regional Director cannot be accepted - proposed Scheme of Amalgamation would be in the interest of the Transferor and Transferee Companies, their members and Creditors. - CO. PETITION NO. 80 OF 2012, CO. APPLICATION NO. 120 OF 2012 - - - Dated:- 8-10-2012 - SMT. ABHILASHA KUMARI, J. S.N. Soparkar, R.S. Sanjanwala and Dilip L. Kanojiya for the Petitioner. P.S. Champaneri for the Respondent. JUDGMENT 1. This petition under Sections 391 to 394 of the Companies Act,1956 has been preferred by Reliance Jamnagar Infrastructure Ltd. the Transferor Company, for sanction of the Scheme of Amalgamation of the Company with Reliance Industries Ltd. (the Transferee Company) whereby the entire businesses and the undertaking of the Transferor Company are to be transfered to, and vested in, the Transferee Company, in terms of the said Scheme of Amalgamation. 2. The details of Incorporation of the petitioner Transferor Company and its latest Audited Annual Accounts as on 31-3-2011, as well as the authorized Share Capital and the issued, subscribed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in greater profitability for the amalgamated Company. (d) The amalgamation will improve organizational capability arising from the pooling of human capital that have diverse skills, talent and vast experience with respect to development, operation and maintenance of infrastructure facilities. (e) Greater integration and greater employees strength and flexibility for the amalgamated entity, which would result in maximising overall shareholder value, and will improve the competitive position of the combined entity. (f) The Scheme will result in achieving synergies and economics of scale by reducing duplication of costs and improving administrative and operational efficiency. (g) Integrating and combining the businesses of both Companies will lead to greater and optimal utilization of available resources. The amalgamation would, therefore, enable the Transferee Company to increase value realization of its operations. The object of amalgamation is to effect internal economies and optimize profitability. 6. The Scheme of Amalgamation is annexed as Annexure-G to the petition. 7. The petitioner Company had filed Company Application No. 120 of 2012 under Section 391 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the prayers made in the petition. 11. Shri Kashmir Lal Kamboj, Regional Director, North Western Region, has filed an affidavit dated 25.07.2012, wherein it has been observed that the Transferee Company ought to have filed an application/petition in the High Court of Bombay which has jurisdiction over it. It has further been observed that the order of this Court dated 03.04.2012 passed in Company Application No. 120 of 2012, dispensing with filing of an application by the Transferee Company, is without jurisdiction. Apart from the above, the Regional Director has not raised any other objection. 12. In rejoinder to the said affidavit of the Regional Director, the petitioner has filed an affidavit dated 17.08.2012, dealing with the observations made by the Regional Director. It is stated in the said affidavit that Sections 391 to 394 of the Act do not oblige the Transferee Company, in a case such as the present one, to file appropriate proceedings seeking sanction of the Scheme. It is stated that the High Court dealing with the petition filed by the Transferor Company is entitled to examine the Scheme and requirement of filing proceedings under Sections 391 to 394 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, approach the High Court having jurisdiction over it to seek dispensation of the proceedings under Sections 391 to 394 of the Act. In support of the above submissions, reliance has been placed upon the following judgments. (a) Bank of India Ltd. v. Ahmedabad Manufacturing Calico Printing Co. Ltd. [1972] 42 Com. Cas. 211 (Bombay High Court) (b) In the matter of Sharat Hardware Industries (P.) Ltd., In re [1978] 48 Comp. Cas. 23 (Delhi High Court) (c) Mahaamba Investments Ltd. v. IDI Ltd. [2001] 105 Com. Cas. 16/33 SCL 383 (Bombay High Court) (d) Nebula Motors Ltd., In re: [2003] 45 SCL 143 (Andhra Pradesh High Court) (e) Andhra Bank Housing Finance Ltd., In re: [2004] 118 Comp. Cas. 295/[2003] 47 SCL 513 (Andhra Pradesh High Court) (f) Santhanalakshmi Investments (P.) Ltd., In re: [2006] 129 Comp. Cas. 789/65 SCL 406 (Madras High Court) (g) ESL India Ltd., In re: [2009] 95 SCL 133 (Raj.) (Rajasthan High Court) (B) That this Court has also accepted the proposition laid down in the above decisions, more particularly in the judgment of Delhi High Court in Sharat Hardware Industries (P.) Ltd. (Supra) and the judgment of the Bombay High Court in Mahaamba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n examine the Scheme as well as the requirement of making an application by the Transferee Company, therefore, the objections raised by the Regional Director are misconceived. 15. Mr. P.S. Champaneri, learned Assistant Solicitor General of India has submitted that the Transferee Company which is stated to be a 100% Holding Company of the petitioner Transferor Company, has its registered office in the State of Maharashtra, under the Jurisdiction of the High Court of Bombay. The Transferee Company has not filed an application or petition in the High Court having jurisdiction, which is mandatory as per the provisions of Section 391(1) of the Act, as per the judgment in the case of Kirloskar Electric Co. Ltd., In Re [2002] 40 SCL 745 (Kar). It is further stated that even for availing an exemption from filing of a petition by the Transferor Company, an application is required to be made with a specific prayer before such High Court, otherwise the exemption cannot be availed. It is only the concerned High Court that can pass orders for dispensation of, or for convening the meetings of the members and Creditors. In the present case, the Transferee Company falls under the jurisdiction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Sections 391 to 394 of the Companies Act,1956? (II) Whether the High Court considering the application/petition by the Transferor Company can observe that the Transferee Company is not required to file a separate application/petition for obtaining sanction to the Scheme of Amalgamation? 18. In order to decide the first issue, certain judicial pronouncements may be noted. In Bank of India Ltd. (Supra), the High Court of Bombay has held that, "...It must follow that, if a scheme by way of transfer of undertaking does not affect the rights of the members or creditors of the transferee Company, as between themselves and the Company, or does not involve a reorganisation of the share capital of the transferee Company, no application by the transferee Company under section 391 or section 394 would be necessary. This, in my opinion, is the clear position as it emerges on a careful analysis of the relevant statutory provisions". 19. In the matter of Sharat Hardware Industries (P.) Ltd. (Supra), the petitioner Transferor Company, a wholly owned subsidiary Company of the Transferee Company had its registered office at Delhi whereas the Transferee Company, M/s.Choudhari Metal I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Emphasis supplied) 21. In Nebula Motors Ltd. In re (Supra), the Transferor Company had its Registered Office at Hyderabad whereas the Transferee Company had its Registered Office at New Delhi. The Transferor Company sought sanction from the High Court of Andhra Pradesh to the Scheme of Amalgamation under Section 394 read with Section 391 of the Act. A similar objection was raised by the Registrar of Companies in that case, as has been raised by the Regional Director in the present case, regarding the Transferee Company not having filed a separate application for sanction of the Scheme before the High Court having jurisdiction over it, in that case the High Court of Delhi. In this context, the High Court of Andhra Pradesh has held as below: "19. Having regard to the scheme envisaged under Chapter V of the Act, the Company Court is required to see in the first instance whether the procedure envisaged under Sections 391 and 394 of the Act has been followed or not and then to examine the scheme of amalgamation. The scheme would be the same invariably whereunder the proposed amalgamation of transferor Company with the transferee Company is contemplated. In the event of both the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Amalgamation under Sections 391 to 394 of the Act can be dispensed with in a petition by the Transferor Company. 24. From the principles of law laid down in the above-quoted judgments by various High Courts it emerges that where the Scheme of Amalgamation provides for the transfer of all the assets and liabilities of the Subsidiary Transferor Company to the Holding Transferee Company, and such transfer does not affect the rights of its Members or Creditors and does not involve a reorganization of the Share Capital of the Transferee Company, no separate application by the Transferee Company, under Section 391 or Section 394 of the Act, would be necessary. In the present case, the net worth of the Petitioner Transferor Company which is a Subsidiary Company of the Transferee Company, is positive. Undoubtedly, it has an excess of assets over liabilities. The Scheme provides for transfer of all assets of the petitioner Subsidiary Company to the Transferee Holding Company. There is no doubt that the net worth of the Transferee Company is positive and it has an excess of assets over liabilities. As the Scheme does not envisage issuance of any Shares of the Transferee Company, the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell, in the proposed scheme, if such reorganisation of the share capital is not there and when the 100 per cent subsidiary Company is seeking to amalgamate with its holding Company where the scheme is not detrimental in any manner to the interests of the members or creditors of the transferee Company, in my considered view, that there is no need to examine the scheme by the court within whose territorial jurisdiction the transferee Company is situate. In that view of the matter, the sanctioning Court which has been approached by the transferor Company can just examine the scheme and see whether it does affect the rights of the members or creditors of the transferee Company as it either because it involves reorganisation of its share capital or otherwise and in the process the Court can certainly come to the conclusion that whether it is a case where the application is got to be presented before the Court for sanctioning of the scheme insofar as the transferee Company is concerned. Having regard to the same, I am of the considered view that it is not trenching upon the jurisdiction of any other Court by the sanctioning Court which has been approached by the transferor Company and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nataka in Kirloskar Electric Co. Ltd., In re, (Supra) wherein a view has been taken that both the Transferor and Transferee Company must comply with the requirements of Section 391(1) of the Act by obtaining directions, inter alia, for holding the meeting of the Shareholders and Creditors of both the Companies and that the Transferee Company should comply with the statutory requirements as envisaged in Sections 391 to 394 of the Act otherwise the directions issued by the Court would not bind the Transferee Company, its members or Creditors. 30. This judgment has been rendered in a totally different fact situation. The purport of the Scheme therein was to transfer the primary and valuable assets of the Company, including movable properties, to the Transferee Companies which were found to be merely paper Companies. The Court found that such a course of action was not in the public interest. Such a situation does not exist in the present case where the Scheme does not envisage issuance of any shares of the Transferee Company and the capital structure of the Transferee Company remains unaltered. In the present case the proposed Scheme does not involve any compromise or arrangement wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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