Gujarat High Court
Lesha Industries Ltd vs Respondent(S) on 19 September, 2014
Author: N.V.Anjaria
Bench: N.V.Anjaria
O/COMP/167/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY PETITION NO. 167 of 2014
In
COMPANY APPLICATION NO. 137 of 2014
With
COMPANY PETITION NO. 168 of 2014
In
COMPANY APPLICATION NO. 138 of 2014
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LESHA INDUSTRIES LTD....Petitioner(s)
Versus
.....Respondent(s)
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Appearance:
MR NAVIN PAHWA FOR MRS SANGEETA N PAHWA, ADVOCATE for the
Petitioner(s) No. 1
MR DEVANG VYAS, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE N.V.ANJARIA
Date : 19/09/2014
ORAL ORDER
A Scheme of Arrangement in the nature of De- merger of I.T. Division of Lesha Industries Limited into ECS Biztech Private Limited is proposed and mooted. Lesha Industries is the De-merged company and petitioner in Company Petition No.167 of 2014. ECS Biztech Private Limited is the Resulting company, which has filed Company Petition No.168 of 2014.
2. Both these petitions are filed by the respective companies seeking sanction of this Court Page 1 of 11 O/COMP/167/2014 ORDER for the said Scheme of Arrangement in the nature of De-merger under Sections 391 to 394 read with other relevant provisions of the Companies Act, 1956. A copy of the Scheme is produced at Annexure-C (page-52 to
75).
2.1 The two petitions being necessarily interconnected, they were heard together and are being considered simultaneously by this common order.
3. The basic details relating to above two Companies, as stated in the respective captioned petitions, are as under.
3.1 The De-merged company, was originally incorporated in the name of Lesha Finstock Private Limited, subsequently its name was changed to Lesha Finstock Limited and it was further changed to Ashini Finance Limited, thereafter to Technocrop Infosystems Limited. The company stands registered in the name of Lesha Industries Limited since 31.08.2009 and a Certificate of Incorporation in the said name is issued by the Assistant Registrar of the Companies, Gujarat.
3.1.1 The Resulting company was incorporated originally in the name of SAC Infosystems Private Limited, subsequently the name was changed to ECS Biztech Private Limited. A Certificate of Incorporation in the said name with effect from 08.12.2011 is issued by the Assistant Registrar of Companies, Gujarat.
Page 2 of 11O/COMP/167/2014 ORDER 3.2 The objects of the ECS Biztech Limited-the resulting company are inter alia to manufacture,
develop, import, export, distribute etc. all kinds of hardware required in Information Technology Enabled Services and the objects incidental and ancillary to the main object. The De-merged company was also engaged in similar business having objects relating to Information Technology and related data processing, enabled services etc. 3.3 The registered office of the demerged Company Lesha Industries is 7th floor, Ashoka Chambers, Mithakhali Six Roads, Ahmedabad-380006. The address of the registered office of the Resulting Company is Block-I, Safal Mondel Park, Nr. Iscon Mall, Nr. Rajpath Club, Nr. Rangoli Farm, S.G. Highway, Bodakdev, Ahmedabad-380054, which are as mentioned in the cause titles of the respective petitions. Thus, both the companies having their registered office in State of Gujarat.
3.4 As per the figures available in the balance- sheet of the De-merged company as on 31.03.2013, the authorised share capital is 19,00,00,000 equity shares comprised in 1,90,00,000 equity shares of Rs.10/- each. The issued, subscribed and paid-up share capital is 17,46,97,000 comprising of 1,74,69,700 equity shares of Rs.10/- each. These are the details stated in paragraph 4 of the petition filed by it.
3.4.1 Similarly, the Resulting company has, as on 31.03.2013, the authorised share capital is 40,00,000 Page 3 of 11 O/COMP/167/2014 ORDER equity shares comprising in 4,00,000 equity shares of Rs.10/- each. Its issued, subscribed and paid-up share capital is 30,48,00,000 comprised of 3,04,80,000 equity shares of Rs.10/- each. The petitioner company has allotted 3,28,796 further equity shares on 24.07.2013, making the total issued, subscribed and paid-up equity share capital to Rs.30,80,87,960/- as on 31.03.2013.
3.5 The Board of Directors of both the companies passed Resolution approving the Scheme of demerger.
4. Heard learned advocate Mr.Navin K. Pahwa for the petitioner company in both the petitions, learned Assistant Solicitor General Mr.Devang Vyas for the Regional Director in both the petitions.
5. It was pointed out that the De-merged company had filed Company Application No.137 of 2014. By virtue of order dated 09.05.2014 passed in the said Application, this Court ordered of holding of meeting of the equity shareholders and the unsecured creditors for considering and if deemed fit, approving with or without modifications, the Scheme. Necessary advertisements in two dailies in English language and in vernacular language were published. The meetings of equity shareholders and unsecured creditors were convened and held on 23.06.2014 as per the directions of the Court and in compliance of the relevant Rules. The Chairman was appointed. T he Chairman filed report in respect of meeting of equity shareholders as well as in respect of meeting of unsecured creditors along Page 4 of 11 O/COMP/167/2014 ORDER with affidavit dated 02.07.2014 filed in the said Company Petition. There are no secured creditors, hence the holding of meeting of secured creditor was not required, observed the Court in the aforesaid order dated 09.05.2014.
5.1 The Resulting company ECS Biztech Private Limited had filed Company Application No.138 of 2014. By virtue of order dated 09.05.2014 passed in the said Application, this Court ordered of holding of meeting of equity shareholders and the unsecured creditors for considering and if thought fit, approving with or without modifications the Scheme proposed. Necessary advertisements in two dailies in English language and in vernacular language were published. The meeting of equity shareholders and unsecured creditors was convened and held on 23.06.2014 as per the directions of the Court and in compliance of the relevant Rules. The Chairman was appointed who filed report in respect of meeting of equity shareholders as well as in respect of meeting of unsecured creditors along with affidavit dated 02.07.2014 filed in the said Company Petition. The company being Resulting company, holding of meeting of secured creditors was not called for.
6. After undergoing the aforesaid legal and procedural requirements, present Company Petitions were filed, and the Scheme of Demerger was placed for consideration before this court with a prayer to sanction the same. This Court by separate orders dated 14.07.2014, admitted both the petitions. Two separate Notices of hearing of the petitions came to be Page 5 of 11 O/COMP/167/2014 ORDER published in the Indian Express-English Daily and Loksatta Jansatta-Gujarati Daily, both Ahmedabad Editions. The respective companies filed affidavit of publication in both the matters. As required under section 394A OF THE Companies Act, 1956, notice was issued to the Central Government to be served through the Regional Director in case of both the companies. The Central Government was served with the Notices. The affidavit of service dated 19.07.2014 came to be filed by the petitioner companies in both the petitions separately.
6.1.1 One Shambhukumar Agrawal, the Regional Director, North-Western Region, Ministry of Corporate Affairs, filed a common affidavit dated 02.09.2014 offering his observations and comments on the proposed Scheme. The petitioner company filed its common affidavit dated 16.09.2014 through one Mr.Vijay Mansinh Mandora, the Managing Director of the Resulting company, responding to the Report of the Regional Director.
7. Proceeding to consider the observations and comments of the Regional Director and the response/ reply of the petitioner companies.
7.1 The first observation of the Regional Director is with regard to the duty of the company to comply with the provisions of the Circulars and in particular Circulars dated 04.02.2013 and 21.05.2013 issued by Security & Exchange Board of India (SEBI). The De-merged company is listed with the Mumbai Stock Page 6 of 11 O/COMP/167/2014 ORDER Exchange (BSE) and it submitted a letter to the BSE. It was revealed that the company was required to comply with the said SEBI Circulars. Therefore the office of the Regional Director in his affidavit expressed that the company should comply with the Circulars of SEBI.
7.1.1 Responding to the aforesaid observation, in its affidavit, the Resulting company has stated in its affidavit that it undertakes to comply with the circulars of the SEBI and/or Stock Exchanges.
7.2 The second observation of Regional Director in paragraph 2(d) of its affidavit was that clauses No. 17.1.4 and 17.2.3 of the Scheme are not in accordance wit the accounting principles. It was stated that the excess of assets or liabilities is required to be credited to capital reserve account and the shortfall should be debited to goodwill account only, but the petitioners companies have proposed in the Scheme to transfer the excess of Net Assets Value to the General Reserve Account of the resulting company. The Regional Director has stated that the petitioner companies are required to be directed to comply with the accounting principles and amend the relevant clause of the Scheme.
7.2.2 In this regard, in its affidavit, the Resulting company has stated that it undertakes to comply with the requirements of Accounting Standard 14 upon the Scheme being effective. It has stated that the Scheme provides for crediting of excess of net Page 7 of 11 O/COMP/167/2014 ORDER asset value to the General Reserve Account. It is further stated that even otherwise the company is obliged to make all necessary disclosures in its Financial Statements as enumerated under Section 211(3)(B) of the Companies Act.
7.3 The third observation in the Report of the Regional Director is that the company has not attached the list of assets and liabilities which are proposed to be De-merged and transferred to the Resulting company.
7.3.1 The Resulting company in its affidavit has stated that the said details have already been provided and the report of the Director itself mentions the same. The assets and liabilities to be transferred to the Resulting company are (i) computer worth Rs.04,38,000/- and (ii) I.T. equipments worth Rs.01,35,24,000/-, totaling Rs.01,39,62,000/-.
7.4 The next observation of the Regional Director is that the appointed date mentioned in the Scheme is 01.10.2013 and it is commented by the Regional Director that it ought to be 01.04.2013 marking the end of the Financial Year.
7.4.1 In this regard, the company has stated in its affidavit that it is within its right to fix the appointed date.
7.5 The last observation is with regard to the compliance by the Resulting company in respect of the requirements of the Income Tax Department. The Page 8 of 11 O/COMP/167/2014 ORDER Regional Director stated that it addressed letter dated 22.07.2014 inviting specific comments from the Income Tax Department and the objections if any in relation to the proposed Scheme, but no reply is received from the Income Tax Department.
7.5.1 In this connection the company has stated on affidavit that it undertakes to comply with the Income Tax Act and the Rules and the requirements of Income Tax Department in that regard.
8. The Regional Director in his affidavit stated that there are no complaints against the petitioner companies including any complaint/representation in respect of the proposed Scheme of De-merger between the two companies. It is also stated that the Regional Director has no other objection except the observations and comments mentioned above.
9. Thus, (a) the Resulting company having undertaken to comply with the SEBI Circulars; (b) the Resulting company having agreed to comply with Accounting Standard 14; (c) even otherwise, Section 211(3)(B) mandates the disclosure of all Financial Statements; (d) the Resulting company having and undertaken to satisfy all the Income Tax Law requirements, and that the Resulting Company is hereby directed to abide by all the undertakings and commitments given as above, the querries, comments and observations of the Regional Director with regard to the Scheme under consideration have been satisfied. It Page 9 of 11 O/COMP/167/2014 ORDER shall abide by the same.
9.1 The observations of the Regional Director with regard to selection of particular date as the appointed date and its comment that the appointed date has to be 01.04.2013 is not justified. It is within the domain of the company to select the appointed date as held by this Court in O.J. Appeal No.66 of 2009. Any alteration in the appointed date would have contrary effect and have financial implications. Hence the said objection of the Regional Director is not sustainable.
9.2 There is no complaint against the company including any complaint/objection against the Scheme in question, as stated by the Regional Director in his affidavit It is also opined by the Regional Director, the affairs of the petitioner companies are not carried on in the manner prejudicial to the shareholders or the public at large in any way;
9.3 The De-merger is expected to bring about better utilization of resources, profitable use of assets and properties with higher returns on capital which would in larger commercial and public interest.
9.4 It is directed that the resulting company shall abide by the undertaking given in respect of the queries of the Regional Director.
10. From the facts and aspects manifested hereinabove, the Court is satisfied that the prayer for sanctioning the proposed Scheme of Arrangement in Page 10 of 11 O/COMP/167/2014 ORDER the nature of De-merger between the two companies which is deserves to be granted.
11. Accordingly, the prayers in both the petitions are granted and the Scheme of Arrangement in the nature of de-merger of IT Division of Lesha Industries Limited into ECS Biztech Private Limited, produced at Annexure-C to the petition(pages 52 to 75) is hereby accorded sanction.
12. It is further ordered that as required under Section 396-A of the Companies Act, 1956, the transferor companies shall not dispose of or destroy its books of accounts and other connected papers without the prior consent of the Central Government and shall preserve the same.
13. Both the petitioners shall pay fees of Rs.07,500/-(Rupees Seven Thousand Five Hundred Only) in each of the petition to learned advocate for Central Government by drawing Pay Order/Account Payee Cheque in the name of learned advocate.
14. Both the petitions are allowed and disposed of accordingly.
(N.V.ANJARIA, J.) Anup Page 11 of 11