Karnataka High Court
Polo Paints Private Limited vs Nil on 17 January, 2014
Author: Anand Byrareddy
Bench: Anand Byrareddy
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 17TH DAY OF JANUARY 2014
BEFORE
THE HON'BLE MR.JUSTICE ANAND BYRAREDDY
COMPANY PETITION NO. 275 OF 2012
CONNECTED WITH
COMPANY PETITION NO. 276 OF 2012
BETWEEN:
POLO PAINTS PRIVATE LIMITED
REGD. OFFICE B-225,
5TH ROAD, 2ND STAGE,
PEENYA INDUSTRIAL AREA,
2ND STAGE, BANGALORE 560058
... PETITIONER IN COP 275/12
APOLLO PAINTS PRIVATE LIMITED
REGD. OFFICE: PLOT NO. 51
3RD PHASE PEENYA INDUSTRIAL AREA
BANGALORE-560058
... PETITIONER IN COP 276/12
(BY SRI. A MURALI. ADVOCATE FOR J SAGAR ASSOCIATES)
AND
NIL
... RESPONDENT (COMMON)
(BY SRI. K S MAHADEVAN, ADVOCATE FOR OL
SMT. SOWBHAGYA N.A.M CGC FOR ROC)
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THESE COMPANY PETITIONS ARE FILED UNDER
SECTIONS 391 TO 394 OF THE COMPANIES ACT, 1956 PRAYING
THAT THE SCHEME OF AMALGAMATION ANNEXURE-A HERETO
BE SANCTIONED SO AS TO BE BINDING ON THE PETITIONERS,
ITS SHAREHOLDERS AND CREDITORS; AND ETC.
THESE COMPANY PETITIONS COMING ON FOR ORDERS
THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Heard the learned counsel for the parties.
2. The petitioner in COP No. 275/12 is said to have been incorporated under the name and style "Polo Paints Private Limited" with the Registrar of Companies, Karnataka. The registered office of the petitioner is situated at B-225, 5th Road, 2nd Stage, Peenya Industrial Area, 2nd Stage, Bangalore. The Board of Directors of the petitioner-company approved and adopted the Scheme of Amalgamation on 27/12/2011 by virtue of which, the petitioner-company is proposed to be merged with a company known as "Apollo Paints Private Limited", hereinafter referred to as the transferee company, which is the petitioner in the connected -3- petition, COP No. 276/12, incorporated under the provisions of the Act, having its registered office also at Plot No. 51, 3rd Phase, Peenya Industrial Area, Bangalore, subject to confirmation by this court.
3. The transferee company was said to have been incorporated in the year 1994 under the name and style "Apollo Paints Private Limited".
4. In the proposed Scheme of Amalgamation, the entire assets and liabilities of the petitioner, would be taken over by the transferee company from 1/4/2012, the appointed date, as a going concern.
5. The petitioner had filed an application in C.A.No.1362/12 whereunder dispensation of meetings of shareholders, secured and unsecured creditors of the petitioner-company was sought for and was granted by an order dated 29/11/2012. It is claimed that the amalgamation would be beneficial to both the -4- companies and would result in better and more efficient operation of the amalgamated company, after such amalgamation.
6. The petitioner in the connected petition, which is the transferee company would also endorse that the Board of Directors of the said company have approved and adopted the Scheme of Amalgamation on 27/12/2011, by virtue of which the petitioner in the first of these petitions, is proposed to be merged with the present petitioner, subject to confirmation by this court and that it had filed an application seeking dispensation of meetings of shareholders, secured and unsecured creditors in C.A.No.1361/12 and which was granted by an order dated 29/11/2012.
7. Notices having been issued of the present petitions to the Registrar of Companies, as well as the Regional Director, Hyderabad, the Official Liquidator has filed his report to indicate that he has no objection -5- to the proposed amalgamation, whereas the Regional Director has made certain observations, which are answered by the petitioners.
8. The first of the observations is that the petitioner should increase its authorized capital upon the Scheme of Amalgamation sanctioned by this court, to which the transferee company undertakes to increase its authorized capital upon the Scheme of Amalgamation being sanctioned.
9. Insofar as the second observation that the method adopted to valuation of the shares as being questionable, it is stated that there are several methods by which shares are valued and that two of which are, Discounted Cash Flow (DCF) method and Net Assets Value (NAV) method. As in the opinion of the petitioners, the DCF method takes into consideration the present as well as the future free cash flows arising to the company and also the time value of money, -6- whereas NAV method is to divide the present net worth of the company by the total number of outstanding shares and that the Reserve Bank of India vide its circular dated 4/5/2010, has recommended DCF method for fair valuation of Shares of Indian Companies at the time of Foreign direct Investments from foreign entities. Therefore the petitioners seek to justify the adoption of the DVF method.
10. Thirdly, Clause 9 of the Scheme of Amalgamation states that the accounting treatment shall be in accordance with Account Standard-14, as issued by the Institute of Chartered Accountants of India, and therefore undertakes to comply with the provisions of Accounting Standard-14, once the Scheme of Amalgamation comes into effect.
11. Hence, the observations made by the Regional Director, are adequately answered in the opinion of this court. Accordingly the petitions are allowed as prayed -7- for and the Scheme of Amalgamation shall be binding on the petitioner-company, its shareholders, creditors, as also the transferee company and its shareholders and creditors.
The office to draw up the decree in terms of this order and the petitioner in the transferee company shall file a copy of the same before the Registrar of Companies within 30 days.
Sd/-
JUDGE Rd/-