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2016 DIGILAW 1115 (GUJ)

In Re: Artistique Ceramics Private Limited v. .

2016-06-16

R.M.CHHAYA

body2016
JUDGMENT : R.M. Chhaya, J. 1. These petitions are filed by two companies for the purpose of obtaining the sanction of this court to a Scheme of Arrangement in the nature of Amalgamation of Artistique Ceramics Private Limited, the petitioner Transferor Company with Asian Granito India Limited, the petitioner Transferee Company, proposed under section 391 to 394 of the Companies Act, 1956. 2. It has been submitted that both the companies are engaged in similar commercial activities viz. manufacturing and marketing a wide range of ceramic and glazed tiles. These companies are also engaged in trading as well as export of the said products. The present scheme of arrangement is proposed for synergic benefits arising out of consolidation of activities, integration of resources and reduction in administrative and operative costs. The petitions provide the details of anticipated advantages. 3. It has been further pointed out that the Transferee company viz. Asian Granito India Limited is a listed public limited company and the shares are listed on BSE Limited and NSE Limited. In compliance with clause 24(f) of the listing agreement, the Petitioner Company had already approached the concerned stock exchanges, and the approvals/clearances obtained from the said exchanges had been placed on record. 4. It has been submitted that vide order dated 15th February 2016 passed in Company Application No. 56 of 2016, meeting of the Equity Shareholders of the Transferor Company was dispensed with in light of the consent letters of all the shareholders placed on record. The meetings of the Secured Creditors and Unsecured creditors of the Transferor Company were directed to be convened in order to obtain their approval to the proposed scheme. Pursuant to the directions, issued with regard to the conduct of the meetings, after the due service of individual notices to all the Secured and Unsecured creditors of the Transferor Company as well as the public notice, the said meetings were duly convened on 21st March 2016. The proposed Scheme of Arrangement was duly approved unanimously i.e. 100% in number and 100% in value at the respective meetings of the secured and unsecured creditors of the Transferor Company. The result of these meetings had been placed on record in form of Chairman's reports dated 30th March 2016. 5. The proposed Scheme of Arrangement was duly approved unanimously i.e. 100% in number and 100% in value at the respective meetings of the secured and unsecured creditors of the Transferor Company. The result of these meetings had been placed on record in form of Chairman's reports dated 30th March 2016. 5. It has been submitted that vide order dated 15th February 2016 passed in Company Application No. 55 of 2016, meeting of the Unsecured Creditors of the Petitioner Transferee Company was dispensed with in light of the substantially high positive net worth of the Transferee Company, as certified by a Chartered Accountant. The contention of the said petitioner company that the rights and interests of the unsecured creditors of the Transferee Company are not prejudicially affected as a result of the proposed scheme was accepted. 6. However, vide the said order, separate meetings of the Equity Shareholders and Secured Creditors of the Transferee Company were directed to be convened for the purpose of obtaining their approval to the proposed Scheme. Pursuant to the directions, issued with regard to the conduct of the meetings, after the due service of individual notices to all the Equity Shareholders and Secured creditors of the Transferee Company as well as the public notice, the said meetings were duly convened on 18th March 2016. The proposed Scheme of Arrangement was duly approved unanimously i.e. 100% in number and 100% in value at the respective meetings of the Equity Shareholders and secured creditors of the Transferee Company. The result of these meetings had been placed on record in form of Chairman's reports dated 30th March 2016. 7. Further, the attention of the court was drawn to Para 10 of the Petition. It was submitted that the Transferee company was not required to undertake the procedure for the requisite approval from the Public Shareholders through be voting and Postal Ballot, in light of the exemption available to it vide clause 5.16(a) of SEBI circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013 read with SEBI circular No. CIR/CFD/DIL/8/2013 dated May 21, 2013 read with SEBI circular CIR/CFD/CMD/16/2015 dated November 30, 2015. The Petitioner Company had already submitted the requisite Undertaking and the Auditor's certificate to the SEBI and the copies of the same were also placed on record as Exhibit-'F' to the said petition. 8. The Petitioner Company had already submitted the requisite Undertaking and the Auditor's certificate to the SEBI and the copies of the same were also placed on record as Exhibit-'F' to the said petition. 8. The substantive petitions for the sanction of the scheme were filed by the petitioner companies which were admitted on 7th April 2016. The notice for the hearing of the petitions were duly advertised in Ahmedabad editions of English dailies 'Indian Express' and 'Financial Express' and Gujarati daily 'Divya Bhaskar' dated 20th April 2016. Affidavits dated 28th April 2016 confirm the same. The publication in the Government gazette was dispensed with as directed in the said orders. Pursuant to the said publication in the newspapers, no objections were received by the petitioner or its advocate. The said fact has been confirmed vide the common additional affidavit dated 8th June 2016. 9. Notice of the petition has been served upon the Office of the Official Liquidator for the Transferor company. The report dated 3rd June 2016 has been filed by the Official Liquidator after taking into account the report of the Chartered Accountant appointed by him out of the panel. It has been observed by the Official Liquidator that the affairs of the Transferor Company have been conducted within its object clauses and it has not been conducted in any manner prejudicial to the interest of the members or public interest, hence the petitioner transferor company may be dissolved without following the process of winding up. However, the Official Liquidator has sought directions to be issued to preserve the books of accounts, papers and records and not to dispose of the same without prior permission of the Central Govt. as per the provisions of Section 396(A) of the Companies Act, 1956. Accordingly, the Transferee Company is hereby directed to preserve the books of accounts, papers and records of the Transferor Company and not to dispose of the same without prior permission of the Central Govt. It is hereby further directed that even after the scheme is sanctioned, the Transferor company shall comply with all the applicable provisions of law and shall not be absolved from any of its statutory liability. 10. Notice of the petitions have been served upon the Central Govt. and Mr. Kshitij Amin, learned Central Government Standing Counsel has appeared for Shri Devang Vyas, learned Assistant Solicitor General of India, on behalf of Central Govt. 10. Notice of the petitions have been served upon the Central Govt. and Mr. Kshitij Amin, learned Central Government Standing Counsel has appeared for Shri Devang Vyas, learned Assistant Solicitor General of India, on behalf of Central Govt. A common affidavit dt. 20th May 2016 has been filed by Mr. Shambhu Kumar Agarwal, the Regional Director, North-Western Region, Ministry of Corporate Affairs, whereby some observations are made. 11. The attention of this court is drawn to the common Additional Affidavit dated 8th June 2016 filed by Mr. Kamleshbhai Patel, the Director and Authorised Signatory of the petitioner companies whereby the said issues have been dealt with. I have further heard submissions made by the learned counsel appearing for the Central Govt. and Mrs. Swati Soparkar, learned advocate appearing for the petitioners as follows: (i) It has been submitted that observations made vide para 2(a) and (b) are factual statements and do not require any response. (ii) Vide Para 2(c) of the affidavit, it has been observed by the Regional Director that the Transferee Company, being a listed public limited company, and pursuant to the Observation letters from the Bombay Stock Exchange and National Stock Exchange, issued on 15th January 2016, the Petitioner Company is required to comply with applicable provisions of the SEBI Circulars. In this regard, it has been submitted that the petitioner transferee company has already complied with the requisite provisions. The petitioner Company obtained the requisite approval to the proposed Scheme from its Shareholders at the court convened meeting. However, the company was not required to undertake the procedure for the requisite approval from the Public Shareholders through be voting and Postal Ballot, in light of the exemption available to it vide clause 5.16(a) of the SEBI Circulars. It was further pointed out that the Petitioner Company had already submitted the requisite Undertaking and the Auditor's certificate to the SEBI, copies of which are also placed on record as referred earlier. (iii) The observation of the Regional Director vide Para 2(d) of the affidavit pertains to compliance with FEMA and RBI Guidelines as a small part of the Equity Share Capital of the Transferee Company is held by FIIs/NRIs. In this regard, it has been submitted that the Transferee Company is not required to obtain any prior approval from the said authorities. In this regard, it has been submitted that the Transferee Company is not required to obtain any prior approval from the said authorities. Moreover, since no shares are being issued to these shareholders of the Transferee Company under the Scheme, no specific permission is required to be obtained from the regulatory authorities, in this regard. Notwithstanding the said contention, the Petitioner Company has undertaken to ensure compliance with applicable FEMA and RBI Guidelines. (iv) Vide Para 2(e) of the affidavit, it has been observed by the Regional Director that the clause 11.1(d) of the Scheme dealing with the proposed Accounting Treatment does not specifically mention the name or type of Reserves for such treatment and that directions should be issued in this regard. In this connection, it has been pointed out that vide clause 11.1(a), it has already been specified that the Transferee Company shall account for amalgamation in accordance with Accounting Standard-14. Further, the Regional Director has sought an undertaking that reserves so created, if any, shall not be available for distribution of dividend. In this regard, reliance has been placed on the decision of the Hon'ble Division Bench of the Gujarat High Court by the Petitioner. It is submitted that the aforesaid decision has concluded the said issue vide order passed in O.J. Appeal No. 33 of 2012 in the matter of Adishree Tradelinks Private Limited (176 Company Cases 67 Guj.) whereby it is held that such restriction is not necessary. (v) The observation of the Regional Director made vide para 2(f) pertains to letter dated 25th April 2016 sent by the Regional Director to the Income Tax Department to invite their objections, if any. Since no response has been received from the said Department in the prescribed time, it can be presumed that there are no objections. Further, the petitioner companies have agreed to comply with the applicable provisions of the Income Tax Act and rules. (vi) It has been further submitted that there are no complaints received by the Registrar of Companies as confirmed by para 2(g). The Regional Director has vide the observation 2(h) confirmed that it has no other objection except the above and further confirmed that the proposed Scheme is not prejudicial to the interest of the shareholders of the petitioner companies and the public at large. 12. The Regional Director has vide the observation 2(h) confirmed that it has no other objection except the above and further confirmed that the proposed Scheme is not prejudicial to the interest of the shareholders of the petitioner companies and the public at large. 12. Considering all the facts and circumstances and the contentions raised in the affidavits and counter affidavits, and the submissions made during the course of hearing, on behalf of the parties, this court is of the view that that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. No directions are required to be issued to the petitioner companies. This court is of the view that based on the material on record it can be concluded that the present scheme of arrangement is in the interest of the shareholders and creditors of both the companies as well as in the public interest, therefore, the same deserves to be sanctioned and the same is hereby sanctioned. Prayers in terms of paragraph 21(a) of the Co. Petition No. 107 of 2016, and paragraph 22(a) of the Co. Petition No. 108 of 2016 are hereby granted. 13. The petitions are disposed of accordingly. So far as the costs to be paid to the Central Govt. Standing Counsel is concerned, I quantify the same at Rs. 10,000/- per petition. The same may be paid to the learned Standing Counsel appearing for the Central Govt. Costs to be paid to the Office of the Official Liquidator is quantified at Rs. 10,000/- per petition payable only by the Transferor Company. The same may be paid to the Office of the Official Liquidator. 14. The petitioner companies are further directed to lodge a copy of this order, the schedule of immovable assets of the Transferor company, being transferred to Transferee Company, as on the date of this order and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order. 15. The Petitioner companies are directed to file a copy of this order alongwith a copy of the scheme with the concerned Registrar of Companies, electronically, along with INC-28 in addition to physical copy as per relevant provisions of the Act. 16. 15. The Petitioner companies are directed to file a copy of this order alongwith a copy of the scheme with the concerned Registrar of Companies, electronically, along with INC-28 in addition to physical copy as per relevant provisions of the Act. 16. Filing and issuance of drawn up order is hereby dispensed with. 17. All concerned authorities to act on a copy of this order along with the scheme duly authenticated by the Registrar, High Court of Gujarat. The Registrar, High Court of Gujarat shall issue the authenticated copy of this order alongwith Scheme as expeditiously as possible.