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2010 DIGILAW 496 (GUJ)

Sterling Addlife India Ltd. , In Re v. .

2010-10-07

K.A.PUJ

body2010
JUDGMENT : K.A. Puj, J. These are the petitions filed by the petitioner-companies for sanction of a composite scheme of arrangement in nature of demerger and transfer of treasury segment of Paras Pharmaceuticals Ltd., the demerged company to Sterling Addlife India Ltd., the resulting company and reduction of capital of Paras Pharmaceuticals Ltd., under sections 391 and 394 read with sections 78 and 100 to 104 of the Companies Act, 1956. 2. It has been submitted that vide the order dated April 26, 2010, passed in the Company Application No. 108 of 2010, meeting of the equity shareholders of the demerged company was dispensed with in view of the written consent letters placed on record. It has been noted in the said order that there were no secured or unsecured creditors of the demerged undertaking. Considering the substantial excess of the assets over the liabilities of the demerged company per se, the meetings of the secured and unsecured creditors of the demerged company were also dispensed with accepting the contention that the rights and interests of the secured and unsecured creditors of the demerged company were not likely to be adversely affected as a result of the proposed demerger. Vide the aforesaid order, the procedure as required to be followed under sections 100 and 101(2) of the Companies Act, 1956 and under rules 48 to 65 of the Companies (Court) Rules, 1959, were also specifically dispensed with, accepting specific averments made in paragraph 13 of the said application. 3. Whereas vide the order passed on April 23, 2010, in Company Application No. 109 of 2010, filed on behalf of the resulting company, meeting of the equity shareholders was directed to be convened for the purpose of considering and if thought fit approving with or without modifications, the proposed composite scheme of arrangement in the nature of demerger and transfer of the treasury segment of Paras Pharmaceuticals Ltd., to Sterling Add life India Ltd. Pursuant to the directions issued vide the aforesaid order, the meeting of the equity shareholders was duly convened on June 5, 2010. The scheme was unanimously approved by all the equity shareholders present and voting at the said meeting. The chairman's report confirming the same was filed along with the chairman's affidavit dated June 8, 2010. 4. The petitions for both the companies were admitted vide order dated June 29, 2010. The scheme was unanimously approved by all the equity shareholders present and voting at the said meeting. The chairman's report confirming the same was filed along with the chairman's affidavit dated June 8, 2010. 4. The petitions for both the companies were admitted vide order dated June 29, 2010. The public notices for the same were duly advertised in the newspapers The Indian Express English daily and Sandesh Gujarati daily, both Ahmedabad editions dated July 10, 2010 and the publication in the Government Gazette was dispensed with. Affidavits dated July 13, 2010, confirms the same. No one has come forward with any objections to the said petitions even after the publication. The same was been further confirmed by the additional affidavit dated October 5, 2010, annexed to the petition for the resulting company. 5. Notice of the petitions have been served upon the Central Government and Shri M. Iqbal Shaikh, learned standing counsel appears for the Central Government. An affidavit dated September 23, 2010, has been filed by Mr. S. M. Ameerul Millath, the Regional Director, Western Region, Ministry of Corporate Affairs, whereby the only observation pertains to the issue of reduction of share capital of the resulting company. The said issue is dealt with by the additional affidavit dated October 5, 2010, filed by the manager and authorised signatory of the resulting company. It has been pointed out in the aforesaid affidavit dated October 5, 2010, as well as in the letter dated September 3, 2010, addressed by the said petitioner-company to the Regional Director that the provisions of section 100 are not applicable as there is no net reduction of share capital of the resulting company. 6. Heard Smt. Swati Saurabh Soparkar, learned advocate for the petitioner-company and Shri M. Iqbal Shaikh, learned standing counsel appearing for the Central Government. 7. During the course of hearing it has been submitted by Smt. Soparkar, for the petitioner-companies that all the clauses of the scheme are to be read as a composite scheme and the ultimate effect of all such proposals are to be considered. 7. During the course of hearing it has been submitted by Smt. Soparkar, for the petitioner-companies that all the clauses of the scheme are to be read as a composite scheme and the ultimate effect of all such proposals are to be considered. In the light of the said contention, considering the simultaneous effect of the clauses 7.1 and 7.5 of the scheme, and considering the detailed working supplied to the Regional Director, placed on record, it is clear that the number of shares of the resulting company being cancelled (as the same are transferred as a part of the demerged undertaking to the resulting company), and the number of the new shares being issued by the resulting company to the equity shareholders of the demerged company towards the consideration of the said undertaking are the same and hence there is no net reduction of the equity share capital of the resulting company. Hence, there is no need of separate compliance with section 100 of the Companies Act. The objection of the Regional Director is therefore hereby overruled. 8. It has been further pointed out by Smt. Soparkar that under clause 13 of the said scheme, the demerged company had proposed to utilise its share premium account in order to adjust/write off the amount representing the surplus of assets over the liabilities of the demerged undertaking in the books of account of the demerged company. The aforesaid proposal amounts to reduction of capital under sections 78 and 100 of the Companies Act, 1956. Considering the dispensation of the separate procedure granted vide the order dated April 26, 2010 and considering the accepted principle of single window clearance the said proposal is also hereby sanctioned as a consequential and integral part of the scheme. 9. Considering the petitions and other relevant documents on record and considering the submissions made at the time of hearing the court is satisfied that the observations made by the Regional Director do not survive and the scheme of arrangement would be in the interest of the companies and their members and creditors. Prayers in terms of paragraph 20(a) in the case of Company Petition No. 87 of 2010 and paragraphs 16(a) and (b) in the case of Company Petition No. 88 of 2010 are hereby granted. 10. The petitions are disposed of accordingly. Prayers in terms of paragraph 20(a) in the case of Company Petition No. 87 of 2010 and paragraphs 16(a) and (b) in the case of Company Petition No. 88 of 2010 are hereby granted. 10. The petitions are disposed of accordingly. So far as the costs to be paid to the Central Government, standing counsel is concerned, the same are quantified at Rs.5,000 per petition. The same may be paid to the learned advocate Shri M. Iqbal Shaikh.