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TMI Blog2016 (7) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... . P. Nos. 119 to 121 of 2016 - - - Dated:- 6-6-2016 - Rajiv Shakdher, J. For Petitioners : Mr.P.H.Arvind Pandian, Mr.Harishankar Mani, Mr.G.Venkatesan For the Official Liquidator : Mr.Achutha Ramaiah ORDER 1. These are three petitions, filed, to seek sanction of a Scheme of Amalgamation (in short the Scheme), placed before this court by the petitioners herein. CP No. 119/2016 has been filed by Equitas Micro Finance Limited (hereafter referred to as transferor no.1 company), while CP No. 120/2016 has been filed by Equitas Housing Finance Ltd. (hereafter referred to as transferor no.2 company). CP No. 121/2016 has been filed by Equitas Finance Ltd. (hereafter referred to as the transferee company). For the sake of convenience, transferor company no. 1 and 2, and transferee company will be collectively referred to as petitioner companies. 1.1. The scheme envisages the merger of transferor company no. 1 and 2 with the transferee company. In this context, it is noticed that the first prayer in the three petitions is identical. Insofar as company petition No.191/2016 and 120/2016 are concerned, since these are the petitions filed by the transferor companies, quite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .10.2015 granted an in-principle approval subject to certain conditions which, inter alia, required the proposed merger of the transferor company no. 1 and 2 with the transferee company, to be effected, prior to the commencement of business of the SFB. Pertinently, the RBI fixed an eighteen (18) months validity period for completion of relevant formalities by the Holding company including the conditions referred to above before it would consider issuing a banking license in favour of the proposed SFB, under Section 22 of the 1949 Act. 2.3. It is in this context that the petitioners took steps for bringing about the amalgamation/ merger of the transferor company no. 1 and 2 with the transferee company. 3. A perusal of the three petitions would show that the transferor company no.1 is, inter alia, engaged in the business of micro finance lending and, in extending finance to weaker sections of the society, as also, in financing developmental activities. It is averred that transferor company no.1 has been classified by the RBI as a Non-Banking Financial Company Micro Finance Institution (NBFC-MFI). It is further averred that transferor company No.1 is a systemically important No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... demonstrated at the relevant point in time that it had thirty eight (38) secured creditors, while transferor company no.2 had ten (10) secured creditors. In so far as transferee company was concerned, it had ninety six (96) secured creditors. 6.5. Upon directions of this court meetings of the respective secured creditors of the each of the petitioner companies was convened. The report filed by the chairperson appointed by this court demonstrates that the secured creditors of petitioner companies at their respective meetings held on even date i.e. 07.03.2016 approved the scheme placed before them. The reports of even date, i.e., 08.03.2016 of the chairperson of each of the meetings of the secured creditors qua the petitioner companies bears out this fact. 6.6. Therefore, as would be evident upon perusal of the facts delineated above, that the shareholders and the secured creditors of each of the petitioner companies have given their consent to the scheme, which is being considered for grant of sanction by this court. 7. Upon notice being issued in the captioned petitions, the RD, Ministry of Corporate Affairs, Chennai, on behalf of the Central Government has filed his affid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner, in which, it appears, keeping in mind the in-principle approval granted by RBI vide its communication dated 07.10.2015. 9. Having regard to the facts adverted to above and the submissions advanced on behalf of the petitioner companies and the RD, what is required to be analyzed is : as to whether the scheme, as proposed, can be sanctioned with or without modification. Though, several judgments were cited by Mr.Arvind Pandian in support of the submissions advanced on behalf of the petitioner, none of them appear to be directly on the point. 9.1. According to me, what has to be examined is the relevant provision, as appearing in the Companies Act, 1956 (in short 1956 Act). Section 394 of the 1956 Act, to my mind, gives the relevant leeway in that behalf which, in the context of facts and circumstances obtaining in the present case, remind one of, in a manner of speech, a typical chicken and egg situation. 9.2. The reason that I liken the present circumstances to a chicken and egg situation is on account of the fact that the RBI has given an in-principle approval for commencing SFB business based on an assurance that amalgamation/merger of transferor company No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make provision for all or any of the following matters:- (i) the transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company; (ii) the allotment or appropriation by the transferee company of any shares, debentures, policies, or other like interests in that company which, under the compromise or arrangement, are to be allotted or appropriated by that company to or for any person; (iii) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company; (iv) the dissolution, without winding up, of any transferor company; (v) the provision to be made for any persons who, within such time and in such manner as the Court directs, dissent from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out: [Provided that no compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mencement of the business of the proposed SFB is dependent on a banking licence being issued by the RBI under the 1949 Act, which, in turn, is dependent on the scheme being sanctioned. 10.2. As alluded to hereinabove by me, the RD, in its affidavit, has clearly recorded that no prosecution, complaint(s) or investigation(s) are pending either against transferor company No.1 and 2 or, the transferee company. It is also stated in the very same affidavit by the RD that the ROC has submitted a report that the petitioner companies have been regular in filing their statutory returns. The RD's report does not point to any misdemeanor or infraction of any of the provisions of law by the petitioner companies. 11. Having regard to the aforesaid, I am inclined to agree with the submissions advanced on behalf of the petitioner companies, by Mr.P.H.Arvind Pandian, that I could sanction the scheme having regard to the peculiar situation arising in the present case, by placing reliance on the subsisting provisions of the 1956 Act, qua appointed date and effective date . 12. To my mind, if this submission is accepted, which I have, then the other concern of the RD with regard to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies will move applications for their dissolution, albeit, without winding up within 30 days of the effective date . In this behalf, I intend to append an additional condition, which is, that an advance notice of the applications will be served on both, the RD and the OL. The OL, in particular, upon receipt of the application will file a fresh report with this Court indicating therein as to whether the affairs of the transferor companies continue to be conducted in a manner which is neither prejudicial to the interest of its members or, the public. 15. Having regard to the aforesaid discussion and given the fact, as indicated above, the equity share holders and the secured creditors of the petitioners have approved the scheme, I am inclined to grant prayers (a) and (b) as set out in paragraph 30 (a) and (b) of Company Petitions No.119 of 2016 and 120 of 2016 and, the prayer made in paragraph 30 (a) of the Company Petition No.121/2016. The OL will adhere to the condition stipulated in paragraph 14.2 above in the form of an application, whereupon the matter will be listed in Court to establish due compliance. 16. Needless to say, the petitioners will abide by the terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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