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TMI Blog2020 (3) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... oner Company is primarily engaged in business of purchase, sale, import, export and marketing of refractories, refractory products, chemicals, formulations and related equipment required in industries such as steel plants, furnaces, power house and cement plants. The Second Petitioner Company is engaged in the business of manufacturing and marketing of refractories and allied products. The Third Petitioner Company is engaged in the business of manufacture and marketing of refractory products, systems and services and has various global partners for its international quality products. 4. The rationale for the Scheme is that the proposed amalgamation will lead to / enable: simplification of the corporate structure and consolidation of the India businesses of the RHIM group; establishing a comprehensive refractory product portfolio; realising business efficiencies, inter alia, through optimum utilisation of resources due to pooling of management, expertise, technologies and other resources of the Petitioner Companies; improved allocation of capital and optimisation of cash flows contributing to the overall growth prospects of the combined company; creation of a larger asset base and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copy of the Petition, and Minutes of Order for admission of the Petition. In this regard, the Petitioner has to submit the same for the record of Regional Director. (c) The Hon'ble NCLT may kindly direct to the Petitioners to file an undertaking to the extent that the Scheme enclosed to the Company Application and the scheme enclosed to the Company Petition are one & same and there is no discrepancy or deviation. (d) In addition to compliance of AS-14 (IND AS-103), the Petitioner Companies shall pass such accounting entries which are necessary in connection with the scheme to comply with other applicable Accounting Standards such as AS-5 (IND AS-8) etc. (e) Petitioner Company have to undertake to comply with section 232(3)(i) of Companies Act, 2013, where the transferor company is dissolved,, the fee, if any, paid by the transferor company on its authorised share capital shall be set-off against any fees payable by the transferee company on its authorised capital subsequent to the amalgamation and therefore, petitioners to affirm that they comply the provisions of the section. (f) As per Definition of the scheme, "Appointed Date" means 1st day of January, 2019 or such other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds such as AS-5 (IND AS-8). 13. In so far as observations made in paragraphs IV(e) of the Report of Regional Director are concerned, the Petitioner Companies undertake to comply with provisions of Section 232(3)(i) of the Companies Act, 2013. 14. In so far as observations made in paragraph IV(f) of the Report of the Regional Director are concerned the Petitioner Companies confirm and undertake that the Appointed Date has been fixed as the 1st day of January, 2019 which is in compliance with section 232(6) of the Companies Act, 2013 and the Scheme shall be effective from such Appointed Date but shall be operative from the Effective Date. 15. The observations made by the Regional Director have been explained by the Petitioner Companies in paragraphs 9 to 14 above. The clarifications and undertakings given by the Petitioner Companies are hereby accepted. 16. The Official Liquidator has filed his report, inter alia, stating therein that the affairs of the Transferor Companies have been conducted in a proper manner and that the Transferor Companies may be ordered to be dissolved. Upon perusal of the documents, the Bench has made the following observations:- 17. Valuation Report is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof. 26. .......Appointed date shall be the date determining the value of the transfer of Assets and its implications, so that shareholders, creditors and all other stakeholders will be in a position to know the permutations and combinations of that arrangement, therefore, basing on which they will make up their mind how to go about the Scheme. Likewise, the Tax Authorities as well as Stamp Duty Authorities will be in a position to assess the Tax Liability as well as Stamp Duty payable over such transfer. 27. Let us assume a converse situation that valuation of the asset has been fixed on March 31, 2017, appointed date has been fixed as September 30, 2017, in the meanwhile if any material change has come in between to the asset of the company varying financials of it, what valuation will become relevant for levying stamp duty for transfer, for assessing tax implications, will it be the valuation date or appointed date opted by the company subsequent to valuation? If this is correct, what for appointed date has come into existence? Can it be conceived that appointed date has been mentioned in the statute without any purpose and reason? 28. It is simple common sense, for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce on the same date, (appears to be within a gap of few hours) which raises concern. 25. Further, upon scrutiny of the shareholding and other details of both the transferor Companies, the Bench observed that both the transferor Companies are ultimately owned by RHI Magnesita N.V., Netherlands (through various Layers) and this parent Company is listed on London Stock Exchange. From the Share Exchange Ratio it is observed that a total of 4,08,57,131 shares would be issued to the Shareholders of both the Transferor Companies-I and II and the further break-up is 2,41,49,931 shares would be allotted to the shareholders of Transferor Company-I and 1,67,07,200 shares would be allotted to the shareholders of the Transferor Company-II. 26. The shares of Transferee Company is listed on both BSE and NSE. Accordingly, the value of shares to be allotted to both the Transferor Companies would be approximately Rs. 745.96 crore and the further break-up for the Transferor Company-I is approximately Rs. 440 crore and balance amount of Rs. 305 crore is for the shareholders of the Transferor Company-II. 27. Further, as per shareholding pattern of both the transferor Companies, it is observed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the number of shares to be allotted by the Transferee Company the same would amount to approximately Rs. 958 crore. In case of shareholders of Transferor Company-I would get shares worth approximately Rs. 566.31 crore and shareholders of Transferor Company-II would get shares worth approximately Rs. 391.78 crore of Transferee Company. 32. Further, the Bench has observed that upon the share capital of Rs. 34.28 Lakhs, (Securities Premium amounting to Rs. 64.93 crore) on a profit of Rs. 40.90 crore as on 31.03.2018, in case of Transferor Company No.I, the allotment of shares of Transferee Company would be approximately of Rs. 440 crore as on 31.07.2018 and would be approximately of Rs. 566.31 crore as on the appointed date i.e. 01.01.2019 and on the share capital of Rs. 18.40 crore, on a profit of Rs. 13.84 crore of Transferor Company No.II the shareholders would be allotted shares worth Rs. 305 crore as on 31.07.2018 and Rs. 391.78 crore as on the appointed date. 33. All the three companies are ultimately held by RHI Magnesita, N.V. Netherlands. 34. In the matter of de-merger of East West Pipelines (demerged Company) and Pipeline Infrastructure Pvt. Ltd. (the resultant Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it earning capacity and other financials of the Transferor-I and Transferor-II Companies, the share exchange ratio as per the valuation given by the Auditor and the Fairness Opinion given by the Merchant Banker appears to be too high which results in undue advantage/ enrichment to the shareholders of both the Transferor Companies and to the shareholders of the ultimate holding Company RHI Magnesita. Therefore, we are of the considered view that the Scheme is devised/ designed majorly to benefit the Two shareholders of Transferor Company-I and few shareholders of Transferor Company-II which in turn the undue advantage ultimately flows to the shareholders/ holding Company, i.e. RHI Magnesita. In view of the above analysis, we are of the considered view that the Scheme appears to benefit only a few shareholders of Transferor Company to be unfair and unreasonable and contrary to the public policy, public shareholders of the listed Company therefore, we deem it fit not to sanction/ approve the proposed Scheme of Amalgamation. Therefore, we do not sanction/ approve the Scheme as prayed for. 40. Petitioner Companies are directed to file a copy of this Order with the Registrar of Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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