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2009 DIGILAW 911 (KAR)

Regional Director v. Mphasis Ltd

2009-11-26

ARAVIND KUMAR, K.L.MANJUNATH

body2009
JUDGMENT Manjunath, , J.—The short question that arises for consideration is, whether on account of merger of a company, the transferee-company is required to pay registration fee due to consequential increase of authorised share capital of the transferee-company? 2. The facts leading to this case are stated hereunder : The respondent is a company incorporated under the provisions of the Companies Act, 1956 ( the Act ), having its registered office at No. 139/1, Hosur Main Road, Koramangala, Bangalore-95. The main object of the company is to manufacture either for its own use or for sale in India or for export outside India computer systems, computer peripherals and accessories, etc. The authorised share capital of the respondent-company as on 18th August, 2006 is 20 crore equity share of Rs. 10 each amounting to Rs. 200 crore. The issued, subscribed and paid-up capital is 161,859,420 equity shares of Rs. 10 each totalling to Rs. 1,618,594,200. E D S Electronic Data Systems (India) (P.) Ltd., had also been established with the same object. The share capital of the said company as on 18th August, 2006, was 4,50,00,000 equity shares of Rs. 10 each amounting to Rs. 45 crore. The issued, subscribed and paid-up capital of the said company was 3,52,83,252 shares of Rs. 10 each amounting to Rs. 35,28,32,520. 3. E D S Electronic Data System (India) (P.) Ltd., was merged with the respondent-company pursuant to a scheme drawn. Accordingly, permission was granted by the company Court to convene a meeting of the shareholders to seek approval of the scheme. Accordingly, a meeting was convened and subsequently, in Company Application No. 937 of 2006, the Court approved the scheme of amalgamation with the transferee-company by the High Court of Bombay by order dated 2nd February, 2007, in Company Petition No. 663 of 2006 connected with Company Application No. 937 of 2006. Since the transferor-company was registered before the Registrar of Companies, Bombay, in Company Petition No. 121 of 2006 (Mphasis Ltd., In re. [2007] 81 CLA 297 : [2008] 141 Comp Cas 558 (Kar) : (2007 (5) AIR Kar R 440), the company Judge issued notice to the appellant herein inviting objections, if any to the scheme of amalgamation. The appellant filed objections stating that on account of amalgamation. 4. The transferor-company would be dissolved and the transferee-company would exist. [2007] 81 CLA 297 : [2008] 141 Comp Cas 558 (Kar) : (2007 (5) AIR Kar R 440), the company Judge issued notice to the appellant herein inviting objections, if any to the scheme of amalgamation. The appellant filed objections stating that on account of amalgamation. 4. The transferor-company would be dissolved and the transferee-company would exist. On account of the scheme of amalgamation, the authorised capital of the respondent-transferee-company gets increased and based on the increase of authorised capital, the respondent-company has to pay registration fee/filing fees, etc. The objection raised by the appellant herein has been rejected by the learned company judge by his order dated 19th June, 2007 [Mphasis Ltd. (supra)]. Challenging the legality and correctness of the order of the company Court, the present appeal is filed. 5. We have heard learned counsel for the appellant and Sri Naganand, learned senior counsel appearing for the respondent. 6. The main contention of learned counsel for the appellant before us is that, in view of Schedule X, clause 3 of the Act, the respondent-company is required to pay the requisite registration/filing fees on account of the increase of authorised capital fees due to merger of the transferor-company. To support his arguments, learned counsel has relied upon the judgment of the Hon ble Supreme Court in Ratnabali Capital Markets Ltd. v. Securities and Exchange Board of India [2008] 82 CLA 266 : [2007] 140 Comp Cas 677 : AIR 2007 SCW 6774 : ( AIR 2008 SC 290 ). Further, relying upon headnote A of the said judgment, he contends that, on account of increase in authorised share capital of the respondent-company due to the merger of the transferor-company with it and since there is increase in the authorised share capital, the respondent-company is bound to pay the registration fees as contemplated in Schedule X(3) of the Act. 7. Per contra, Sri Naganand, contends that the learned company judge has not committed any error in interfering with the order as the learned company judge has clearly held in paragraph 18 of the order relying upon the judgments of other Courts. According to him, the judgment relied upon by learned counsel for the appellant is not applicable to the facts and circumstances of the case since the Supreme Court had no occasion to consider the case of merger read with Schedule X(3) of the Act. According to him, the judgment relied upon by learned counsel for the appellant is not applicable to the facts and circumstances of the case since the Supreme Court had no occasion to consider the case of merger read with Schedule X(3) of the Act. According to him, the question raised by the appellant herein has been answered by several High Courts and the same has not been challenged by the Regional Director of said States. Therefore, he requests the Court to dismiss the appeal. 8. On perusal of the judgment relied upon by learned counsel for the appellant, we are of the view that the facts involved in the said case and the facts involved in this case are entirely different. Therefore, the aforesaid decision would not come to the aid of the appellant. 9. The learned company judge in paragraph 18 of the order has clearly held that there is no necessity for the respondent-company to pay additional fee or stamp duty since there is no obligation or reason for the two amalgamated companies to pay duty on the same authorised capital on which they have already paid. 10. Sri Naganand has relied upon the Division Bench judgment of the Madras High Court in Regional Director v. Cavin Plastics & Chemicals (P.) Ltd. [2008] 82 CLA 337 : [2008] 141 Comp Cas 475. The question now raised in this appeal was the question that was considered by the Madras High Court. Para 11 of the said judgment reads as herein under : ' In the case of Hotline Hoi Celdings (P.) Ltd., In re. [2005] 127 Comp Cas 165 : (2004 CLC 1204), the Delhi High Court followed the decision of the Andhra Pradesh High Court in Saboo Leasing (P.) Ltd., In re. [2003] 117 Comp Cas 728 : (2003 CLC 1132), while considering an objection of the Regional Director to the effect that the authorised share capital of the merged company was being increased as a result of the scheme of amalgamation and this could only be carried out after following the procedure prescribed by the relevant provisions of the Companies Act and held that in the case of such merger no such payment of fee to the Registrar of Companies or stamp duty to the State Government shall be payable.' [p. 341 of 82 CLA] 11. Considering para 11 of the judgment of the Madras High Court in Cavin Plastics case (supra), we have no other option than to dismiss this appeal on the ground that, the question of law raised in this appeal is squarely answered by the Division Bench of the High Court of Madras. Following the aforesaid judgment, we have to dismiss this appeal. 12. In the result, the appeal is dismissed. 13. Appeal dismissed.