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2016 DIGILAW 1164 (GUJ)

In Re : Advanta Limited v. .

2016-06-23

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 Amalgamation of Advanta Limited, the Petitioner Transferor Company with UPL 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 operate in same line of business, viz. Agriculture Sector, and are engaged in commercial activities which are complimentary to each other. The Transferee Company is currently engaged in business of manufacturing and marketing, trading, and export of various kinds of Crop Protection Chemicals and Post-Harvest Business. Whereas the Transferor Company is currently engaged in business of Research & Development, Production, Processing and Sales & Marketing of field crop seeds, vegetable seeds and flower seeds. The present scheme of Amalgamation is proposed for synergic benefits and thereby provide end to end agri solution through a single entity. The petitions provide the details of anticipated benefits as a result of the said scheme. 3. It has been further pointed out that both the Petitioner Companies are listed public limited companies and the shares are listed on BSE Limited and NSE Limited. In compliance with clause 24(f) of the listing agreement, and in compliance with the requirements vide SEBI circulars, the Petitioner Company had already approached the concerned stock exchanges, and the approvals/clearances obtained from the said exchanges after due clearance by SEBI, had been placed on record. 4. It has been submitted that vide order dated 17th February 2016 passed in Company Application No. 65 of 2016, separate meetings of the Equity Shareholders of the Transferor Company - (i) Resident in India and (ii) Resident outside India 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 Equity Shareholders of the Petitioner Company in both the categories as well as the public notice, the said meetings were duly convened on 30th March 2016. The proposed Scheme of Amalgamation was duly approved unanimously i.e. 100% in number and 100% in value at the respective meetings of the Equity Shareholders of the Transferor Company in each category. The proposed Scheme of Amalgamation was duly approved unanimously i.e. 100% in number and 100% in value at the respective meetings of the Equity Shareholders of the Transferor Company in each category. The result of these meetings had been placed on record in form of Chairman's reports dated 9th April 2016. Further to this, in compliance with the requirements of SEBI guidelines vide the applicable circulars, the Company also obtained the requisite approval from its Public Shareholders by following the requisite procedure for e-voting and Postal Ballot. The scheme was duly approved by majority of 99.99% of the total valid votes. The said result also has been placed on record vide the abovereferred Chairman's report. 5. Vide the abovereferred order dated 17th February 2016, the meetings of the Secured Creditors and Unsecured creditors of the Transferor Company were dispensed with, in view of the submission that their rights and interests are not likely to be prejudicially affected as a result of the Scheme. It was submitted by the Petitioner Companies that both the companies are profit making companies with substantially positive net worth. The net worth certificates issued by Chartered Accountant for the Petitioner Transferor Company as on 31st March 2015 as well as for the Transferee Company in Pre-Scheme scenario and Post Scheme scenario, which are placed on record confirm the same. In light of the same meetings of the Secured and Unsecured creditors of the Transferor Company were dispensed with. However, in compliance with the contractual terms of the agreements with the Secured Creditors, the Transferor Company had undertaken to obtain the approval from its Secured Creditors and place them on record before the final sanction of the Scheme. The Petitioner Transferor Company has now placed consent letters from all its Secured Lenders alongwith the affidavit dated 14th June 2016. 6. In case of the Transferee Company vide the order dated 17th February 2016 passed in Company Application No. 66 of 2016, meeting of the Equity Shareholders of the Transferee Company was 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 meeting, after the due service of individual notices to all the Equity Shareholders of the Transferee Company as well as the public notice, the said meeting was duly convened on 30th March 2016. Pursuant to the directions, issued with regard to the conduct of the meeting, after the due service of individual notices to all the Equity Shareholders of the Transferee Company as well as the public notice, the said meeting was duly convened on 30th March 2016. The proposed Scheme of Amalgamation was duly approved unanimously i.e. 100% in number and 100% in value at the said meeting of the Equity Shareholders of the Transferee Company. The result of these meetings had been placed on record in form of Chairman's report dated 9th April 2016. Further to this, in compliance with the requirements of SEBI guidelines vide the applicable circulars, the Company also obtained the requisite approval from its Public Shareholders by following the requisite procedure for e-voting and Postal Ballot. The scheme was duly approved by majority of 99.27% of the total valid votes. The said result also has been placed on record vide the abovereferred Chairman's report. 7. It has been submitted that vide the said order dated 17th February 2016 passed in Company Application No. 66 of 2016, meetings of the Secured Creditors and Unsecured Creditors of the Petitioner Transferee Company were dispensed with, in view of the submission that their rights and interests are not likely to be prejudicially affected as a result of the Scheme. It was submitted by the Petitioner Companies that both the companies are profit making companies with substantially positive net worth. The net worth certificates issued by Chartered Accountant for the Petitioner Transferee Company in Pre-Scheme scenario and Post Scheme scenario, which are placed on record confirm the same. In light of the same meetings of the Secured and Unsecured creditors of the Transferee Company were dispensed with. 8. The substantive petitions for the sanction of the scheme were filed by the petitioner companies which were admitted on 22nd April 2016. The notice for the hearing of the petitions were duly advertised in Ahmedabad and Vadodara editions of English daily 'Indian Express' and all Gujarat editions of Gujarati daily 'Sandesh' dated 16th May 2016. Affidavits dated 7th June 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 14th June 2016. 9. Affidavits dated 7th June 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 14th June 2016. 9. Notice of the petition has been served upon the Office of the Official Liquidator for the Transferor company. The report dated 16th 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. Further, vide Para 13 of the report, the Official Liquidator has pointed out that Clause 12(a) of the Scheme envisages only all Permanent employees of the Transferor Company to become the employees of the Transferee Company, upon Scheme being effective. It has been observed that the Scheme should be made applicable to all the employees of the Transferor Company. Vide an Additional Affidavit dated 20th June 2016 filed by Mr. It has been observed that the Scheme should be made applicable to all the employees of the Transferor Company. Vide an Additional Affidavit dated 20th June 2016 filed by Mr. Rajendrakumar A. Patel, an Authorised Signatory of the Petitioner Companies, it has been accepted by the Petitioner Companies that the scheme shall be made applicable to all the employees of the Transferor Company and leave is sought from this court to remove the words 'permanent' from the said Clause 12(a) of the Scheme and to modify the scheme to this limited extent. Considering the submissions, the said prayer is hereby granted to amend the scheme to this limited extent. 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 dated 1st June 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 14th June 2016 filed by Mr. Rajendrakumar A. Patel, an 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 2(a), (b) and (c) are factual statements and do not require any response. (ii) Vide Para 2(d) of the affidavit, it has been observed by the Regional Director that both the Petitioner Companies being the listed companies, and pursuant to the Observation letters from the Bombay Stock Exchange and National Stock Exchange, issued on 4th February 2016 and 3rd February 2016 respectively, the Petitioner Company is required to comply with applicable provisions of the SEBI Circulars viz. CIR/CFD/DIL/5/2013 dated 4th February 2013 and CIR/CFD/DIL/8/2013 21st May 2013. It has been observed by the Regional Director that the NOC from SEBI has to be obtained apart from the Stock Exchanges. CIR/CFD/DIL/5/2013 dated 4th February 2013 and CIR/CFD/DIL/8/2013 21st May 2013. It has been observed by the Regional Director that the NOC from SEBI has to be obtained apart from the Stock Exchanges. In this regard, it has been submitted that as per said SEBI circulars read with Clause 24(f) of erstwhile Listing Agreement, Petitioner Companies were required to obtain approval through the Stock Exchanges only based on comments received from SEBI and the said Stock Exchanges have actually granted the observation letter only after obtaining clearance from SEBI. It has been further submitted that the Petitioner Companies have already complied with the requisite provisions. Both the Petitioner Companies, being listed companies were required to obtain the approval of the public shareholders through Postal Ballot and E-voting as envisaged under Clause 5.16(a) of the above referred SEBI circulars. Both the Petitioner Companies had undertaken the independent procedure for obtaining the same from its Public Shareholders in addition to the court convened meetings in compliance with the applicable provisions of the Companies Act and that majority of Public Shareholders of the Petitioner Companies had also approved the Scheme of Amalgamation through Postal Ballot and E-voting as already recorded earlier hereinabove. Taking into account the same, the Petitioner Companies have complied with all the requirements of said SEBI circulars. The said Petitioner Companies have undertaken to comply with further requirements of the SEBI circulars, upon Scheme being sanctioned and in view of this, no further directions are required to be issued in this regard. (iii) The observation of the Regional Director vide Para 2(e) of the affidavit pertains to shareholding in both the Petitioner Companies by foreign shareholders and compliances with the provisions of FEMA and RBI guidelines. In this regard, it has been submitted that the details of the foreign shareholding are factual and no response is required for that. It has been further submitted that both the companies have complied with all the applicable provisions of FEMA and RBI guidelines so far. It is not necessary for Petitioner Companies to obtain any prior approval of FEMA and RBI for issuance of shares to the shareholders of the Transferor Company pursuant to scheme. The Petitioner Companies have undertaken to comply with all the applicable provisions, upon the scheme being effective and on issue of the shares to the shareholders of the Transferor Company. It is not necessary for Petitioner Companies to obtain any prior approval of FEMA and RBI for issuance of shares to the shareholders of the Transferor Company pursuant to scheme. The Petitioner Companies have undertaken to comply with all the applicable provisions, upon the scheme being effective and on issue of the shares to the shareholders of the Transferor Company. In view of the same, it is not necessary to issue any further directions to the Petitioners Companies. (iv) The observation made vide Para 2(f) pertains to obtaining approval from regulatory body for business of agriculture and chemicals. In this regard, it has been submitted that both the Petitioner Companies had obtained the requisite approvals/licenses required to conduct their business activities relating to seeds and agrochemicals. However, upon Scheme being effective, the Transferee Company shall apply, as may be applicable, to the relevant authorities for effecting transfer of the licenses, approvals and permissions of the Transferor Company and the activity by the Transferee Company shall be undertaken in compliance with the respective regulatory laws. (v) The observation of the Regional Director made vide para 2(g) pertains to letter dated 4th May 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(h). The Regional Director has vide the observation 2(i) 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, have been addressed satisfactorily and hence do not survive. No directions are required to be issued to the petitioner companies. 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 Amalgamation 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. 13. Prayers in terms of paragraph 23(a) of the Company Petition No. 127 of 2016, and paragraph 22(a) of the Company Petition No. 128 of 2016 are hereby granted. 14. The petitions are disposed of accordingly. So far as the costs to be paid to the learned Assistant Solicitor General is concerned, I quantify the same at Rs. 10,000/- per petition. The same may be paid to the learned Assistant Solicitor General 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. 15. 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. 16. 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. 17. Filing and issuance of drawn up order is hereby dispensed with. 18. 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.