9911796707
TMI Blog2013 (7) TMI 1242X X X X Extracts X X X X X X X X Extracts X X X X ..... inbow Investment Limited. Subsequently, the name of the company was changed to Sterlite Cables Limited with effect from 19-10-1976 and its registered office was shifted from the State of West Bengal to the State of Maharashtra on 29.10.1979. Thereafter, the name of the company was again changed to Sterlite Industries (India) Limited on 28.2.1986 and its registered office was transferred from the State of Maharashtra to the State of Tamil Nadu, pursuant to the order of the .Company Law Board, Western Regional Bench, Mumbai dated 19.2.2007 and a certificate of Registration dated 7.3.2007 was issued by the Registrar of Companies, Chennai, Tamil Nadu. The Registered office of the company is now situated at SIPCOT Industrial Complex, Madurai Bypass Road, T.V. Puram P.O., Tuticorin-628 002, Tamil Nadu, which Comes within the jurisdiction of this court. A copy of the Memorandum and Articles of Association of 1st Amalgamating company has been filed as Annexure A. The authorised share capital of 1st Amalgamating company is Rs. 5,000,000,000/- divided into 5,000,000,000 equity shares of Re. 1/- each. The issued, subscribed and paid-up share capital of 1st Amalgamating company is Rs.3,361,207 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... convertible preference shares of Rs. 10/- each is to be added. The issued, subscribed and paid-up share capital of 3rd Amalgamating company is Rs.11,873,147,150/- comprising of 1.187,314,715 equity shares of Rs.10/- each fully paid up. A copy of the audited balance sheet of 3rd Amalgamating company for the period ending with 31.03.2012 has been produced as Annexure B. 5. Vedanta Aluminium Limited (hereinafter called as VA1/demerged company) is the petitioner in C.P.No.167 of 2012. The demerged company was originally incorporated on 18.1.2001 as "Sterlite Transmission Limited" under the provisions of the Companies Act, 1956. Subsequently, the name of the company was changed to Vedanta Alumina Limited with effect from 20.1.2004 and again changed to Vedanta Aluminium Limited on 25.8.2007 and a fresh certificate of incorporation was issued by the Registrar of companies, Chennai. Its registered office is situated at SIPCOT Industrial Complex, Madurai Bypass Road, T.V. Puram P.O., Tuticorin, Tamil Nadu 628 002, Which comes within the jurisdiction of this Court. A copy of the Memorandum and Articles of Association of the demerged company has been produced as Annexure A. Its aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e equity shareholders. Accordingly, equity shareholders meeting was convened on 21.6.2012 under the Chairmanship of Mr. Ponnuswamy Ramnath. 861 equity shareholders representing 243,76,13,221 equity shares having face value of Re. 1/- each fully paid up were present and cast their vote, of which the votes of 129 equity shareholders representing 12,51,78,914 equity shares were found to be invalid. Therefore, there were 732 equity shareholders representing 231,24,34,307 equity shares of Re. 1/- each whose votes were valid. Of these 657 equity shareholders holding 212,73,60,907 equity shares of Re. 1/- each fully paid up, constituting 89.75% in number and representing 92% in value, present for voting have voted in favour of the Scheme 75 equity shareholders holding 18,50,73,400 equity shares of Re. 1/- each fully paid up, constituting 10.25% in number and representing 8% in value, present for voting have voted against the scheme. Accordingly, the scheme was approved by the equity shareholders present and voting with requisite majority. 9. The 2nd amalgamating company has approached this court with C.A. No.395 of 2012 for convening the meeting of its equity shareholders and the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xchange Limited and the National Stock Exchange of India Limited and the copy of the no objection letters are enclosed as Annexures K1 and K2 respectively in typed set filed in CP.Nos.164, 165 and 166 of 2012 and as Annexure 01 and 02 respectively in C.P. 167 of 2012. The amalgamated company has also received approval from the Competition Commission of India and the copy of approval has been produced as Annexure L in the typed set. 14. While the amalgamating companies 1 to 3 and demerged company are the India's leading non-ferrous metals and mining companies and carrying on the business in power and sale of available power and in developing, constructing and operating power plants; and in producing metallurgical grade alumina and aluminium products respectively, the amalgamated company is a. producer and exporter of iron ore, pig iron and metallurgical coke. The scheme provides for amalgamation of Sterlite Industries (India). Limited (SIIL), Madras Aluminium Company Limited (MALCO) and Sterlite Energy Limited - (SEL) with the amalgamated company and vesting of the Power Business Undertaking of MALCO into Vedanta Aluminium Limited (VAL) and demerger of the Aluminium Business Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted in any manner prejudicial to the interest of their members and to the public. The official liquidator has in his report referred to about few disputed tax dues for Building cess and payment of electricity distribution tax in Tamil Nadu, in respect of M/s. Sterlite Energy Limited, the same is covered under the special clause mentioned in the proposed Scheme to the effect that the liability of the amalgamating company can be transferred and vested with the amalgamated company and the proceedings if any to be continued against the amalgamated company. In short, the official Liquidator has not raised any adverse remarks or expressed any objection for the sanction of the scheme. 18. During the pendency of the petitions for sanction of the proposed scheme of amalgamation and arrangement among the amalgamating and demerged and amalgamated companies, objections are received from number of objectors against granting approval of the scheme by this court. For better appreciation, the same can be dealt with individually. 19. Insofar as CP.164/2012 filed by SIIL is concerned, the sole objector is one Linden Capital IP (Bond holder). Though this objector submitted his detailed objectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs that the proposed merger will in any manner prejudicial to their interest to recover the money, if any, due to them as such the objection deserves no merit. This court finds greater force in the argument so advanced on the side of the petitioner. 23. In my considered view, the right of the parties/objectors to recover the amount is yet to be determined. As a matter of fact, the first objector has neither initiated arbitration proceedings nor invoked any proceedings before the civil court. The arbitration proceedings initiated in the second case is only by the amalgamating company and not by the objector and the objector has made only counter claim in the same. Both the claim and counter claim made by the petitioner and the objector are the subject matter of the arbitration proceeding and pending arbitration proceedings, no objection can be permitted to be raised against the relief sought for herein. Even otherwise, by reason of the proposed merger, the right to recover the amount if any can be duly enforced against the transferee company as per the liability clause in the proposed scheme and the same is sufficient enough to safeguard the right-' of the objectors. 24. As fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of swap ratio between, MALCO and SGL or the conversion of MALCO investment in SIIL. as. SGL or to modify the scheme of arrangement so as to distribute SGL shares to MALCO shareholders in proportion of 6.39 shares of SGL for 10 MALCO shares and subsequently to value all residual assets including power business, investments, cash and bank balance fairly and. to be merged with SGL. 26. The reply filed by the petitioner company MALCO is that the share exchange ratio has been determined by two independent and reputed firms of Valuers viz., Grant -Thornton India LLP and KPMG India Private Limited and the fairness opinion report on the Valuation Report has been given by Citi Group Global Markets India Private Limited and by DSP Merill Lynch Private Limited who are the experts in the field and no allegation of fraud or illegality is raised either against the valuer or against the manner of fixation of share exchange ratio arid the same has been duly approved by the majority of the equity shareholders in the court convened meeting and the objector representing himself and others, who. voted against the scheme, held only 50,004 equity shares representing 0.07% in value of the equity shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of expert opinion. There are more than one method of valuation and a valuation would vary if different methods are adopted. The shares are the properties of the shareholders and they are the ultimate and the best judge of the value they would put on their charges. There is no requirement in the Companies Act that in such a case, the ratio of exchange has to be determined on the valuation made by a chartered accountant or an auditor though the Court .feels that in the best interest of all concerned and to prevent controversy a proper basis of valuation should be recorded. In the absence of any challenge from the shareholders of the transferor company who are primarily and exclusively Interested in the question of ratio of exchange of shares, the court is not inclined to interfere in the matter. 28. This court finds much force in such factual and legal contention raised on the side of the petitioner, which is also fortified by Hon'ble Apex Court in Miheer. H Mafatlal case (supra). It is observed therein as follows: "Once the exchange ratio of the shares of the transferee company to be allotted to the shareholders of the transferor company has been worked out by a recog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tric Power Construction Corporation has come forward with various applications C.A.Nos.716, 762 and 780 to 783 of 2012 in CP.166/2012. While CA.No.716/2012 is filed for taking on record the objections filed by the applicant/objector, C.A.No.762/2012 is filed to take on. record the affidavit along with the documents in CA.No.716/2012 in CP.166/2012. Likewise, the objectors -7 to 9 in C.P.167 of 2012 viz., Electrification Charpente Levage S.A.S., Techno CAR SpA and Innovatherm have also filed similar applications C.A. Nos. 755, 759 and 760 of 2012 in CP.167/2012 to take on record their objections. It is noteworthy to mention that though the Rules provides for limitation for filing the objection before two days prior to the date of hearing, the objection were admittedly filed belatedly. Notwithstanding such delay the objections are received subject to limitation and heard on merits. As the objections are now received and taken on record and the objections and counter to the objections are permitted to be raised and argued on merits, no further orders are necessary in these applications and these applications are hence closed. 31. The second objector/SEPCO III Electric Power Construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dispute raised by the respondent was in existence 8 months prior to the issuance of statutory notice and the same was kept alive on receipt of statutory notice and the same cannot be thereafter rejected as non existent or imaginary dispute and 90% of total value of all the contracts, which was huge amount, having already been paid, the Company Petition was liable to be dismissed and the company petition was dismissed vide order dated 7.3.2013. Aggrieved against the same, the company petitioner/objector filed OSA.224/2013 and same is now pending determination before the Division Bench of this Court. 33. As rightly argued by the learned senior counsel for the petitioner, the objection raised by this objector against the proposed merger on the ground that the petitioner company herein owes huge amount due to the objector and pending discharge of their liability no sanction can be granted to the proposed merger is bound to fail, in view of the disposal of the winding up petition in CP.285/2012 against the objector herein as the petitioner therein. 34. The facts made available herein would reveal that the liability of this objector is not admitted one, but seriously disputed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second objector in. CP,166/2012, is inclined to commonly dispose of the identical objections raised by the objectors 5 to 9 in CP. 167/2012. 37. The learned counsel for the objectors has at the outset questioned the jurisdiction of this court in dispensing with the meeting of the creditors. It is contended that the meeting of the class is dispensed with on the undertaking to serve individual notices to the creditors of the petitioner companies, thereby communicating them the scheme of arrangement to enable them to file their objection. It is the specific case of the objectors that no notice was served on the objector, inspite of specific undertaking given before this court, while obtaining order for dispensing with the meeting. It is also stated therein that failure to issue notice to the creditors as directed by this court would render the presentation of the company petition to be contrary to and not in accordance with Rule 79 of the Company Court Rules, 1959. It is also stated therein that statement of the material particulars of the scheme of amalgamation and arrangement under section 393(1) of the Companies Act has not been sent to any of the unsecured creditors of the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and no separate scheme is offered to any sub class of members which has a separate interest and a separate scheme to consider, no question of holding a separate meeting of such a sub-class would at all survive. When commercial interest of the minority shareholder so far as the scheme is concerned is in common with other equity shareholders, he would have a common cause with them either to accept or to reject the scheme from commercial point of view. 40. It is held by Bombay High court in ICICI Ltd. case (supra) that where the arrangement is purely between the company and its members, not adversely affecting the creditors or any class of them, the Court is not bound to convene a meeting of the creditors. However, where the arrangement between the company and its members is likely to adversely affect the creditors, it would be proper for the court to exercise its judicial decision to convene the meeting of the creditors, unless majority of the creditors representing ¾th in value of the credit have otherwise given consent for the same. In view of the authorities cited above the view expressed by the learned judge of the Karnataka High Court in Ansys Software (P.) Ltd., In re [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the postal receipts for having sent the notice. In view of the same, no further orders are necessary in CA.Nos.780 to 783 of 2012, where the relief sought for is for one such report. 43. Thereafter, what is sought to be argued herein is that the notice was directed to be sent before the presentation of the petition and not after presentation of the petition and hence the same was not in substantial compliance with the direction of this court. In my considered view, the objection raised is baseless and without any substance for the following reasons. The learned senior counsel for the petitioner, while answering the question in this regard, drew the attention of this court to Rule 32 of Company court Rules, which provides for mode of service and the same is extracted as follows : Rule 32: Mode of service and service when deemed to be effected: "(1) Save as otherwise provided by these rules or by an order of Court, all notices, summonses and other documents required to be served on any person, may be served either personally by delivering a copy thereof to such person or upon his advocate where he appears by advocate or, except where personal service is required by prepa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with the requirements of the rules or the directions of the Judge or Registrar, as regards the advertisement and service of the petition, the petition shall, on the date fixed for hearing, be posted for orders of the Judge and the Judge may either dismiss the petition or give such further directions as he thinks fit." 46. It is further sought to be argued by the objectors by relying upon the judgment in Subhiksha Trading Services Ltd., In re [2011] 108 SCL 13/11 (Mad.) that the consent given In the course of meeting cannot be operated as estoppel against informing the court that the scheme fails to satisfy the twin tests of (i) interests of members and (ii) public interest and the failure of the share holders to attend the meeting would not amount, to an implied consent to the Scheme by that member. This Court do not dispute the reasoning behind the argument so advanced. However, in this case none of the other member or creditors except the objectors herein, who do not belong to majority who approved the scheme, has appeared before this Court, and raised any objection as such the presumption of consent can be easily drawn in all the cases. Further, the contesting objectors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, winding up proceedings is dismissed and the appeal is pending. Regarding the financial position of SGL, the same is through affidavits filed herein, satisfactorily established to be stronger enough to meet out the liabilities, after merger. 50. What are the other materials which are omitted to be disclosed, are not specifically mentioned herein. But it is, in the course of argument pointed out that the report by Senior Fraud Investigation Office (SFIO), who invested the amalgamated company under the provisions of Section 235 of the Act regarding the mismanagement and affairs of the company affecting public policy and public interest is omitted to be disclosed to enable the creditors to take appropriate decision to vote for and against the Scheme. It is contended that pending investigation if any, into any act of fraud upon the amalgamated company will have serious impact upon the financial status of the company, which in turn is Likely to affect the exchange ratio etc and creditors claim. The same is rightly answered by saying that the grant of approval if any of the proposed scheme will in no way affect the pending investigation. It is also brought to the notice of this court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the dispute and difference arose between the parties. The objectors invoked arbitration agreement and the Arbitral Tribunal is now constituted and the claims are pending determination before the Arbitral Tribunal. As rightly pointed out by the learned senior counsel for the petitioner, pursuant to the proposed merger, all the liabilities of the aluminium business of demerged company, shall get transferred to the transferee company and the arbitration proceedings shall continue against the amalgamated company and in the event of any award being passed, the same shall be enforced against the amalgamated company, which is a profit making company, whose networth post restructuring is Rs.36,549 crores and no prejudice will be caused in respect of the claims, if any payable to the objectors and no other ground is made out by the objectors in this regard. 54. The third objector viz., Voltas Material Handling Private Ltd. is concerned, their claim is arising out of the contractual obligations. It is in the course of argument, submitted that the dispute between the parties is under adjustment of reconciliation and no proceedings is till date initiated. The only apprehension raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch has according to the objector greatly affected the mining operation of the company and the entire business of the transferee company is shut down, as such there are remote chances for revival of business of the transferee company. It is also further argued that the scheme appears to be dishonest and fraudulent to deprive the creditors like of the objector of their fair chance of getting the dues repaid. 58. The next objector is Shenzen Sandong Nuclear Power Corporation Company Limited, (shortly referred to as SSNP). Here again, the amount claimed was .for Rs.1,424,449,444/-, Euro 25,133,831/- and USD 2,380,000 and the objections are raised against dispensation of convening the meeting of the creditors and non-compliance of the direction of this court in issuing notice to the unsecured creditors having outstanding of Rs. 1 lakh and more and failure to furnish material particulars along with the statement etc. which are already answered against the objector. Here again, the claims which are already dealt with are arising out of contractual obligations and the total value of contract awarded to the objector is Rs.1208 crores, out of which, the objector has raised running invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for furnishing bank guarantee subject to their right of appropriate remedy if any under law. As a matter of fact, the amalgamated company has also filed an affidavit of undertaking to discharge all liabilities of aluminium business undertaking of demerged company and liabilities of the unsecured creditors of Residual VAL as defined in the scheme and as determined in accordance with law and contractual and legal remedies by Residual VAL as defined in the scheme to the extent that Residual VAL is unable to discharge the same. In view of the undertaking given above, this court is of the view that the proposed, scheme of amalgamation will in no way affect the right of the unsecured creditors of aluminium business undertaking of demerged company and unsecured creditors of Residual VAL to enforce their claim if any against amalgamating or amalgamated company as the case may be. 60. The other general objection raised is regarding closure order of Tuticorin Copper Smelter Unit of Sterlite Industries (India) Limited (SIIL) 1st Amalgamating Company. The petitioner, on memo dated 29.4.2013 submitted that on account of certain complaints regarding gas leakage Tamil Nadu Pollution control B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court for its sanction, the court would ordinarily pose to itself, three questions viz., (i) whether the statutory provisions have been complied with or not; (ii) whether the class or classes have been fairly represented and (iii) whether the arrangement is such as a man of business would reasonably approve. It is argued by relying upon the judgment of Delhi High court in Mazda Theatres (P.) Ltd. (supra) that if the transaction is illegal, ultra vires, unjust or oppressive, the courts are inclined to hold that an irregularity is fatal to the validity of the transaction. 62. As rightly argued by the learned senior counsel for the petitioners, by citing the authority of Hon'ble Supreme Court in Miheer H. Mafatlal case (supra), the court has widest power under Section 391 to approve the Scheme of arrangement among the amalgamating, demerged company on one hand and the amalgamated company on other hand. It is the commercial wisdom of the parties to the Scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority votes which has to be kept in view by the Court. The court certainly would not act as a cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2010] 98 SCL 163 (Guj.) and EMCO Ltd., In re [2004] 54 SCL 76 (Bom.). 66. In this context, the learned senior counsel for the petitioner has relied upon the broad principles laid down by the Hon'ble Supreme Court regarding scope of enquiry under the relevant provisions of the Act and the role of the court while making such enquiry. It is observed in para 29 of the judgment in Miheer H Mafatlal case (supra), as follows: "29. ....... In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: 1. The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite to meetings as contemplated by Section 391(1) (a) have been held. 2. That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 sub-section (2). 3. That the meetings concerned of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angement are not exhaustive but only broadly illustrative of the contours of the Court's jurisdiction." 67. The Hon'ble Supreme Court in the decision in Hindustan Lever Employees' Union v. Hindustan Lever Ltd. [1994] 2 SCL 157 observed that it is not part of the judicial process to examine entrepreneurial activities to ferret out flaws. The court is least equipped for such oversights. Nor indeed, is it a function of the judges in our constitutional scheme. We do not think that the internal management, business activity or institutional operation of public bodies can be subjected to inspection by the Court. To do so, is incompetent and improper and therefore, out of bounds. A scheme of amalgamation cannot be faulted on apprehension and speculation as to what might possible happen in future.... Improved technology and scientific methods result in better employment prospects. Section 394 casts an obligation on the court to be satisfied that the scheme of amalgamation or merger was not contrary to public interest. The basis principle of such satisfaction is none other than the broad' and general principles inherent in any compromise or settlement entered into betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of the amalgamated company is as follows: Total assets - Rs.66,756 crores Total liabilities - Rs.30,207 crores Networth - Rs. 36, 549 crores As per networth affidavit dated 30.9.2012 the pre restructuring assets of amalgamated company is as follows: Total assets - Rs.17,990.71 crores . Total liabilities - Rs.4,802.02 crores Networth - Rs.13,188.69 crores and post restructuring is as follows: Total assets - Rs.75,653.69 crores Total liabilities - Rs.38,391.68 crores Networth - Rs.37,262.01 crores Thus, the calculated networth of the amalgamated company, post re-structuring, based on unaudited provisional financial statement as on 30.9.2012 is Rs.37,262.01 crores. Further, the calculated networth of VAL post demerger of aluminium business and after giving effect to transfer of power business of MALCO based on unaudited provisional financial statement as on 30-9-2012 is as follows: Total assets - Rs.9,476.09 crores Total liabilities - Rs.6,575.54 crores Networth - Rs.2,900.55 crores 70. Though it is vehemently argued that the affidavit filed is not based on audited financial statement and the affidavit is not filed by authorised signatory, this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme of amalgamation cannot be faulted on apprehension and speculation as to what might possibly happen in future." Further, there is absolutely no provision of law under the companies Act, which bars the amalgamation of profit making company with that of loss making company and it all depends on the decision to be taken by the majority of shareholders and once the decision is taken, the commercial wisdom of the same cannot be interfered with by this court. 72. As observed by High court of Bombay at Goa -in C.P.No.11 of 2012, when entrepreneurs take commercial decisions, it is not open for the court to judge their commercial wisdom. Whenever entrepreneurs take a commercial decision, there is always an element of risk involved and businessmen take such calculated risk after taking into consideration various facts and circumstances and pros and cons of all situations. The court is riot expected to dissect and conduct a postmortem of such decisions, which are based on business experience and commercial wisdom. The court is expected to be an impartial umpire and is not expected to enter the arena and examine the scheme under a microscope. Whenever decisions are taken, there is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine and has been awaiting statutory clearances from the concerned authorities so as to resume the mining operation shortly. Even otherwise, the proceedings initiated before the Supreme Court was temporary in nature and the same has not been extended to greater extent thereby mining operations were now permitted to be continued. It is nobody's case that SGL failed to comply with the conditions issued by the Supreme Court and is disentitled to avail the benefit granted under the same. Further, an affidavit was also filed on behalf of the amalgamated company to the effect that Sesa Goa Limited (SGL) has been, as per the particulars, available herein engaged not only in the business of production and sale of iron ore in the State of Goa and Karnataka, but also in the business of production and sale of pig iron and metallurgical coke. SGL also owns 51% equity stake in Western Cluster Limited, Liberia, a company with potential iron ore resources in excess of over a. billion tones in West Africa. Further, SGL currently holds 20% equity stake in Carin India Limited, a company engaged in oil and gas exploration, as such, the objection regarding temporary closure of its mining operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
