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2016 DIGILAW 1212 (GUJ)

In Re: Akshar Estates Private Limited v. .

2016-06-30

R.M.CHHAYA

body2016
JUDGMENT : R.M. Chhaya, J. 1. These are the petitions filed for the purpose of obtaining the sanction of this court to a Composite Scheme of Arrangement involving Demerger and Transfer of Real Estate Undertakings of Two De-merged/Transferor companies viz. Mas Chemicals Industries Private Limited, Samurai Holdings Private Limited to the Resulting Company viz. Arris Estates Private Limited and De-merger and Transfer of Portfolio Investment Undertakings of Four De-merged/Transferor companies viz. Akshar Estates Private Limited, Bar Magnet Investment Private Limited, Mas Chemicals Industries Private Limited, Samurai Holdings Private Limited to Resulting Company viz. Opel Securities Private Limited, Amalgamation of the Residue Undertakings of the Four De-merged Companies and 28 other Transferor Companies viz. Akshat Consultancy Limited, Alokik Agri Farms Private Limited, Anahat Buildcon Private Limited, Atik Land Developers Private Limited, Atire Land Developers Private Limited, Auxin Buildcon Private Limited, Bar Magnate Holdings Private Limited, Billet Estates Private Limited, Brahma Farms & Cultivators Private Limited, Camet Buildcon Private Limited, Clariant Buildcon Private Limited, Cony Realty Private Limited, Corbel Developers Private Limited, Croma Financial Services Private Limited, Denis Trades And Investments Private Limited, Epistyle Propcon Private Limited, Euroknit International Limited, Fillet Realty Private Limited, Fuji Finance Private Limited, Gabriel Trading Private Limited, Gama Fabric Sales Private Limited, Khadayata Decor Limited, Lovely Consultants Private Limited, Parpen Propcon Private Limited, Pratham Textiles Private Limited, Quilon Chemicals Private Limited, Saumya Textiles Private Limited, Stolon Fincon Services Private Limited with Sixvents Power & Engineering Limited, the Transferee Company as well as Restructure of Share Capital of the Four De-merged Companies in form of Utilisation of Security Premium Reserve Accounts, proposed under section 391 to 394 read with Sections 78, 100 to 103 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013 of the Companies Act, 1956. 2. It has been submitted that all these companies belong to the same group of management. The Board of Directors of these Companies thought it appropriate to propose a Composite Scheme whereby overall restructure of the business of all these companies is envisaged. This involves streamlining in accordance with the activities, minimizing the number of entities in order to avoid duplication of operative and administrative costs and amalgamate them for synergic benefits. The petitions provide the details of the benefits envisaged due to the proposed Composite Scheme. 3. This involves streamlining in accordance with the activities, minimizing the number of entities in order to avoid duplication of operative and administrative costs and amalgamate them for synergic benefits. The petitions provide the details of the benefits envisaged due to the proposed Composite Scheme. 3. It has been submitted that vide orders dated 21st April 2016 passed in Company Applications No. 152 to 185 of 2016, the meetings of the Equity Shareholders and Unsecured Creditors of all the De-merged, Resulting as well as Transferor Companies were dispensed with in view of the written consent letters from all of them, approving the proposed scheme, being placed on record. There are no Secured Creditors of these companies, except one viz. Khadayata Decor Limited who had placed on record the consent letter of the said Secured Creditor and hence dispensation of the meeting of the creditors was granted vide the abovereferred order. It has been pointed out that in case of four de-merged companies, proposing the restructure of Capital in form of the Utilisation of Securities Premium Account, dispensation was granted from the procedure prescribed under Section 101(2) of the Companies Act, 1956 as well as the procedure prescribed under rule 48 to 65 of the Companies (Court) Rules 1959. 4. In case of the Transferee Company, vide the order dated 21st April 2016, passed in Company Application No. 186 of 2016, meetings of the Equity Shareholders as well as Unsecured Creditors of the company were dispensed with in view of the written consent letters from all of them, approving the proposed scheme, being placed on record. The meeting of the Sole Secured creditor was dispensed with accepting the contention that the rights and interest of the Secured Creditor are not affected due to the Scheme. However, it was undertaken in compliance with the contractual terms with the said Secured Creditor, his approval shall be obtained and placed on record before the final sanction of the Scheme. The said consent letter of the sole Secured creditor was placed on record alongwith the Petition. Vide a further order dated 22nd June 2016, passed in the Company Application No. 278 of 2016, the meeting of the Preference Shareholders of the Transferee was dispensed with as the consent letters of the sole Preference Shareholder had also been placed on record alongwith the Company Application No. 186 of 2016. 5. Vide a further order dated 22nd June 2016, passed in the Company Application No. 278 of 2016, the meeting of the Preference Shareholders of the Transferee was dispensed with as the consent letters of the sole Preference Shareholder had also been placed on record alongwith the Company Application No. 186 of 2016. 5. The substantive petitions for the sanction of the scheme were filed by these companies which were admitted on 6th May 2016. The notice for the hearing of the petitions were duly advertised in the newspapers being 'Indian Express', English daily and 'Sandesh', Gujarati daily both Ahmedabad editions of 29th May 2016 and the publication in the Government gazette was dispensed with as directed in the said orders. Affidavits dt. 7th June 2016 and/or 8th June 2016 confirm the same. No one has come forward with any objections to the said petitions even after the publication and the same has been further confirmed by the common additional affidavit dated 28th June 2016. 6. Notice of the petitions has been served upon the Office of the Official Liquidator for the Transferor companies. The reports dated 27th June 2016 have been filed by the Official Liquidator after taking into account the respective reports of the Chartered Accountant appointed by him out of the panel. It has been observed by the Official Liquidator that the affairs of all the Transferor Companies have been conducted within their respective object clauses and they have not been conducted in any manner prejudicial to the interest of the members or public interest, hence the petitioner transferor companies 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 all the Transferor Companies 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 companies shall comply with all the applicable provisions of law and shall not be absolved from any of their statutory liabilities. 7. Notice of the petitions have been served upon the Central Govt. It is hereby further directed that even after the scheme is sanctioned, the Transferor companies shall comply with all the applicable provisions of law and shall not be absolved from any of their statutory liabilities. 7. Notice of the petitions have been served upon the Central Govt. and Mr. Kshitij Amin, learned Central Government Standing Counsel has appeared for Mr. Devang Vyas, learned Assistant Solicitor General. An affidavit dated 14th 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. 8. The attention of this Court is drawn to the Additional Affidavit dated 28th June 2016 filed by Mr. Sankalchand G. Patel, the Director and Authorised Signatory of the Petitioner Transferee Company, whereby all the above 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) The observation of the Regional Director made vide para 2(c) pertains to the non disclosure of the assets and liabilities of the De-merged Undertakings of the four de-merged companies being de-merged and transferred to two Resulting Companies in the Scheme. In this regard, it has been pointed out that all the four petitioner De-merged Companies have already placed on record the relevant details in form of the Divisional Balance Sheets of the De-merged Companies clearly indicating the assets and liabilities of the respective Demerged Undertakings being transferred to respective Resulting Companies as well as the Residue Undertakings being amalgamated with the Transferee Company as Exhibit - B-1 to the respective petitions. In view of the same, it will not be necessary to issue any further directions in this regard. (iii) The observation of the Regional Director made vide para 2(d) pertains to the proposed Accounting Treatment vide clauses 11.4, 20.4 and 32.5 of the Scheme. It has been pointed out by the Regional Director that the same is not in accordance with the Accounting Principles and the excess of assets over liabilities cannot be credited to General Reserve Account and has to be treated as Capital Reserve Account. It has been pointed out by the Regional Director that the same is not in accordance with the Accounting Principles and the excess of assets over liabilities cannot be credited to General Reserve Account and has to be treated as Capital Reserve Account. In this regard, it has been submitted on behalf of the Petitioners that Clauses 11.4 and 20.4 of the Scheme pertains to the Accounting Treatment in books of Resulting Companies, where the undertakings are being transferred under the De-merger proposal of the scheme, where AS-14 is not applicable. However, Clause 32.5 pertains to the undertakings being transferred under the proposed Amalgamation. It has been further submitted that as per settled legal position by several decisions of various High Courts, including the Gujarat High Court, the petitioner has undertaken that in case of deviation from the aforesaid accounting standard or practice, the Resulting Companies as well as the Transferee Company shall make necessary disclosures in their respective first financial statements after the scheme is made effective. Further, with regard to restriction over such reserve to be made available for distribution of dividend, reliance is placed on the decision of the Hon'ble Division Bench of the Gujarat High Court 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. (iv) The observation made vide para 2(e) of the said affidavit pertains to the absence of the working sheets for calculation of Share Exchange Ratio as worked out by M/s. R. Chaudhary Associates, Chartered Accountants. It has been pointed out on behalf of the petitioner that all the companies involved in the proposed Scheme are either private limited companies or closely held limited companies and all of them belong to the same group of management. The shares of all the companies are largely held inter se between the companies and the residue by the same set of shareholders. The proposed ratio is equitable and since no public interest is involved, it is not relevant to have the working sheets for the same. The concerned shareholders of all the companies have accepted the same and no one has raised any objection with regard to the fairness of the said ratio. (v) The next observation made vide para 2(f) pertains to the investment activity undertaken by the Petitioner Resulting Company-2. The concerned shareholders of all the companies have accepted the same and no one has raised any objection with regard to the fairness of the said ratio. (v) The next observation made vide para 2(f) pertains to the investment activity undertaken by the Petitioner Resulting Company-2. It has been observed by the Regional Director that since the company is registered with RBI as NBFC, copy of NOC from RBI should be submitted and further the petitioner company be directed to comply with the guidelines issued by RBI. In this regard, it has been submitted by the Petitioner that under the applicable RBI guidelines, the prior approval to the Scheme is not required. It has been undertaken on behalf of the Resulting Company-2 that upon Scheme being effective it shall comply with all applicable guidelines issued by RBI. (vi) The observation made vide para 2(g) pertains to the discrepancy in the address of the Registered Office of one of the petitioner Transferor companies, viz. Fuji Finance Private Limited, as mentioned in the Scheme and the petition vis a vis the said information on MCA Portal. It is hereby respectfully submitted that the same is result of an unintentional error. Since the address as mentioned in the scheme and the petition is the correct one, the petitioner company has already initiated the process to update the information on MCA portal. (vii) The observation made vide para 2(h) pertains to the approval of the Preference Shareholders of the Transferee Company by convening a meeting. As recorded hereinabove, the dispensation of such meeting of the sole Preference Shareholder of the Petitioner Transferee Company was sought and has been granted vide an order dated 22nd June 2016. (viii) The observation of the Regional Director made vide para 2(i) pertains to the letter dated 18th May 2016 sent by the Regional Director to the Income Tax Department to invite their objections, if any. Since no response is received during the statutory period of 15 days as envisaged by the relevant circular of the Ministry of Corporate Affairs, it can be presumed that the Income Tax dept. has no objection to the proposed scheme of arrangement. The petitioner companies have agreed to comply with the applicable provisions of the Income Tax Act and rules. In view of the same, no further directions are required to be issued to the petitioner company in this regard. has no objection to the proposed scheme of arrangement. The petitioner companies have agreed to comply with the applicable provisions of the Income Tax Act and rules. In view of the same, no further directions are required to be issued to the petitioner company in this regard. (ix) It has been further submitted that there are no complaints received by the Registrar of Companies as confirmed by para 2 (j). The Regional Director has vide the observation 2 (k) confirmed that it has no other objection except the above." 9. Considering all the facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits, undertakings provided vide the additional affidavit dated 28th June 2016, and considering the Judgment relied upon, I am satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, have been addressed satisfactorily and hence do not survive. I have come to the conclusion that the present Composite Scheme of Arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. The Scheme is hereby sanctioned. 10. Prayers in terms of paragraph 17 (a) and (b) of the Company Petitions No. 190, 191, 192 and 193 of 2016 are hereby granted. Prayers in terms of Paragraph 16 (a) of the Company Petitions No. 194 to 224 of 2016 are hereby granted. 11. The petitions are disposed of accordingly. So far as the costs to be paid to the learned Central Govt. Standing Counsel is concerned, I quantify the same at Rs. 2,500/- 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. 2,500/- per petition payable only by the Transferor Companies. The same may be paid to the Office of the Official Liquidator. 12. 2,500/- 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. 2,500/- per petition payable only by the Transferor Companies. The same may be paid to the Office of the Official Liquidator. 12. The petitioner companies are further directed to lodge a copy of this order, the detailed schedule of immovable assets of the respective De-merged Undertakings of the De-merged Companies being transferred to respective Resulting Companies as well as the respective Undertakings of the Transferor Companies being transferred to the Transferee Company as on the date of the 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. 13. 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. 14. Filing and issuance of drawn up order is hereby dispensed with. 15. 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.