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TMI Blog2020 (9) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... to the typed set filed along with the Petition. 3. Transferor Company - (CP/1396/CAA/2019) 3.1. The Transferor Company, as already alluded supra is a listed public limited Company whose shares are listed in the Stock Exchanges. The Learned Authorized Representative (AR) for the Petitioner Companies submitted that the Transferor Company is inter-alia engaged in the business of enhancing the quality of life of the patients by providing comprehensive, high quality hospital services on a cost - effective basis and the principal activities of the Transferor Company includes operation of multi-disciplinary private hospitals, clinics and pharmacies. 3.2. The Learned AR for the Petitioner Companies submitted that the Board of the Transferor Company believe that business of front end retail pharmacy carried out at standalone pharmacy has matured to a stage that it requires greater business attention and possesses high growth potential, independent of the hospital business and thereby allowing the Transferor Company to focus on hospitals and healthcare services which is its core business as the risks and reward associated with each of the aforesaid business verticals is different. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn accelerate growth and unlock value for the shareholders; d. Creation of value for shareholders by acquiring ready-to use of assets, including business undertakings and reducing time to markets; e. Strengthening and streamlining the Direct - to - Consumer (D2C) front end operations of the standalone retail pharmacies; f. Enhancing the private label business; and g. Enabling foray into Digital/Online Pharmacy. 7. In the second motion application filed by the Petitioner Companies, this Tribunal vide order dated 13.02.2020 has directed the Petitioner Companies to issue notice to the Statutory/Regulatory Authorities viz. (i) Regional Director (Southern Region), (ii) RoC, Chennai, (iii) the Income Tax Department, (iv) Reserve Bank of India, (v) State Drug Control Authority, as well as for paper publication to be made in "Financial Express", English (All India Edition) and "Makkal Kural" Tamil (Tamil Nadu Edition). 8. In compliance with the said directions issued by this Tribunal, the Petitioner Companies have filed an affidavit of service on 17.03.2020 in relation to the compliance of the order passed by the Tribunal as noted above and a perusal of the same discloses that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y nor raised any objections to the Scheme and in the circumstances, this Tribunal presumes that other statutory authorities viz. Securities & Exchange Board of India, the BSE Limited, the National Stock Exchange of India Limited, the Reserve Bank of India and the State Drug Control Authorities do not have any objection to the sanction of the Scheme. 10. Valuation Report 10.1. The Learned AR for the Petitioner Companies invited the attention of this Tribunal to the Valuation Report obtained from one M/s. B S R & Associates LLP dated 13.11.2018, wherein it has been discussed that the retail pharmacy business operated by the Company provides multi brand pharmacy products and as of 30th September 2018, the Company operates 3,167 retail standalone pharmacy stores having presence in 400+ cities, 24 States and 4 Union territories and has a dedicated staff of 21,000+ employees. Thus, it is discussed that for arriving at a fair valuation for the Transaction would require determining the Enterprise Value of the Demerged Undertaking being transferred as part of slump sale. 10.2. The Independent Valuer after analysing the scheme in toto has adopted Discounted Cash Flow Method for arriving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company, instead of paying consideration of Rs. 235 crores to the Transferor Company and this is prima facie against the interest of shareholders of the Transferor Company. The Court observed that merely because consideration is being paid to the Transferor Company, it cannot be presumed that the scheme as such is contrary to public interest or against the interest of shareholders of the Transferor Company. Under normal circumstances, the Transferor Company could have always transferred/sold any of its assets for consideration to the third party. The Court further observed that the sale consideration as fixed is based upon independent judgment of two valuers, namely, M/s. SPB Products and Consultancy Limited, Chennai and M/s. Infrastructure Leasing and Financial Services Ltd., New Delhi. The Regional Director nowhere stated or even contended that the sale consideration so fixed is inadequate and does not represent the market value of "transferred undertaking-1". The Court did not find any merit in the said objection and rejected the same. The second objection is that there is no object clause of the scheme and therefore, the purpose and benefits under the scheme as proposed may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of Arrangement is in compliance with the Applicable Indian Accounting Standards and more particularly Ind AS 103 - Business Combinations. The aforesaid Accounting Treatment standard is also captured in Clause 15 of the Scheme. 13. Dispositive Reasoning 13.1. This Tribunal has done an extensive analysis of the Scheme proposed between the Petitioner Companies. Part A of the Scheme deals with the Definitions and Share capital. Part B of the Scheme Deals with Transfer of Divestment Business of the Transferor Company to the Transferee Company on a going concern basis by way of a Slump Sale. Part C of the Scheme deals with General Terms and Conditions. 13.2. Clause 4 of Part B of the Scheme deals with the Transfer and vesting of the Divestment Business upon the Transferee Company and it discusses the mode in which it is being vested. Clause 5 of the Scheme deals with the Transfer of Divestment Assets, which are movable in nature the cash equivalents, sundry debtors, outstanding loans and advances, bank balances, etc more particularly stated therein, shall be vested with the Transferee Company. Clause 6 of the Scheme deals with Transfer of Divestment Liabilities, wherein the Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghty Four Crores Thirty Lakhs only). 13.6. Clause 14 of the Scheme deals with the residual undertaking of the Transferor Company wherein it has been stated that the excluded assets, excluded liabilities, rights, title, interest or obligation thereto shall continue to belong and be vested in the Transferor Company. Clause 15 and 16 deals with the Accounting Treatment in the books of the Transferee and Transferor Companies respectively. 13.7. From the standalone Financial Statement (at Pg. No. 317) of Apollo Hospitals Enterprise Limited, the Net Segment Assets and Liabilities is culled out as follows; Rs. in Million As on 31.03.2019 Retail Pharmacy Segment Assets (A) 11,233.51 Retail Pharmacy Segment Liabilities (B) 2,249.68 Net Segment Assets (A-B) 8,983.83 It is seen that the Net Assets of the Pharmacy business Segment of the Transferor Company is transferred to the Transferee Company for a consideration of Rs. 527.80 Crores. As per the valuation Report, the valuers have considered the Discounted Cash Flow Method and this Tribunal, is however not inclined to venture into the commercial wisdom e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordance with law, against the concerned persons, directors and officials of the petitioners. 13.12. While approving the Scheme as above, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law. It is further clarified that this approval shall not be construed as an approval for any regulatory compliance required to be done or obtained under the appropriate statutes. THIS TRIBUNAL DO FURTHER ORDER: (i) That all properties, rights and powers of Demerged undertaking of the Transferor Company be transferred by way of a Slump Sale, without further act or deed to the Transferee Company and accordingly the same shall pursuant to Section 232 of the Companies Act, 2013 be transferred to and vested in the Transferee Company for all intents, purposes and interest of the Demerged undertaking subject nevertheless to all changes now affecting the same; and (ii) That all the liabilities, (if any) and powers, engagements, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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