Gujarat High Court
Irm Properties Private ... vs .....Respondent(S) on 20 November, 2013
Author: R.M.Chhaya
Bench: R.M.Chhaya
IRM PROPERTIES PRIVATE LIMITED....Petitioner(s)V/S.....Respondent(s) O/COMP/197/2013 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY PETITION NO. 197 of 2013 In COMPANY APPLICATION NO. 192 of 2013 With COMPANY PETITION NO. 198 of 2013 In COMPANY APPLICATION NO. 193 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE R.M.CHHAYA ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge? ================================================================ IRM PROPERTIES PRIVATE LIMITED....Petitioner(s) Versus .....Respondent(s) ================================================================ Appearance: MRS SWATI SAURABH SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MR M IQBAL A SHAIKH, SENIOR CENTRAL GOVERNMENT COUNSEL for the Central Government MR MISHRA, DEPUTY OFFICIAL LIQUIDATOR ================================================================ CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA Date : 20/11/2013 COMMON ORAL JUDGMENT
These are the petitions filed by the petitioner companies for sanction of a Scheme of Arrangement in the nature of Amalgamation of IRM Properties Private Limited with Cadila Pharmaceuticals Limited, under Section 391 to 394 of the Companies Act, 1956. It has been contended that the both the companies belong to the same group of management. The amalgamation is proposed in order to achieve synergic benefits and consolidation of the activities for the rapid growth of the Transferee Company. The petitions give in details the benefits envisaged due to the scheme.
It has been pointed out that vide the order dated 4th July 2013 passed in the Company Application no. 192 of 2013, the meetings of the Equity Shareholders and the Unsecured Creditors of the Transferor company were dispensed with in view of the written consent letters from all of them being placed on record and there being no Secured Creditors. Similarly vide the order dated 4th July 2013 passed in the Company Application no. 193 of 2013, the meeting of the Equity Shareholders of the Transferee Company was also dispensed with in view of the written consent letters from all of them being placed on record. The meetings of the creditors of the Transferee Company were dispensed with accepting the contention that the rights and interests of the creditors are no affected in view of the strong financial position of the Transferee Company.
The substantive petitions were admitted vide order dated 22nd July 2013. The public notices for the same were duly advertised in the newspapers Indian Express English daily, and Gujarat Samachar Gujarati Daily, dt. 3rd August 2013, both Ahmedabad editions.
The publication in the Government gazette was dispensed with. Affidavits dt. 6th September 2013 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 additional affidavit dated 21st September 2013.
Notice of the petitions of the Transferor Company was served upon the Official Liquidator attached to Gujarat High Court. Vide the report dated 17th September 2013, filed by the Official Liquidator, it is observed that the affairs of the Transferor company have not been conducted in a manner prejudicial to the interest of their members or to the public interest. However, the Official Liquidator has requested this court to direct the Transferor Company to maintain its books of accounts and records for a period of 8 years from the date of sanctioning the scheme and not to dispose off the same without prior permission of the Central Govt. The Petitioner companies are accordingly directed to keep the books and records of the Transferor Company for a period of 8 years from the date of sanctioning the scheme and not to dispose of the same without prior permission of the Central Govt.
Notice of the petitions have been served upon the Central Govt. and Mr. M. Iqbal A. Shaikh, learned Senior Central Government Counsel appears for the Central Govt. An affidavit dt. 2nd September 2013 has been filed by Mr. Kashmir Lal Kamboj, the Regional Director, North-Western Region, Ministry of Corporate Affairs, whereby several observations were made.
The attention of this court is drawn to the Additional Affidavit dated 21st September 2013, as filed by Mr. Shreyas Parikh on behalf of the petitioner Transferee Company provides detailed explanations for the issues raised by the Regional Director.
the first observation of the Regional Director pertains to absence of rationale, objects and reasons in the Scheme, and an amendment in the scheme is sought by the said observation. In this regard, it has been submitted vide the Additional Affidavit that the petitioner Company has provided the same in detail in their petitions for the consideration of the Hon ble court. There is no legal provision requiring the same in the Scheme. It has been further explained that under the SEBI guidelines, in case of listed companies, having large public shareholding, the said rationale is required to be included in the scheme as they do not have access to the court proceedings. However, in the present case, the Transferor is a private limited company and the Transferee is a closely held limited company, and there is no public interest in any of these companies. Considering the aforesaid submissions, I am satisfied that no directions are required to be issued for the amendment of the scheme to include the rationale, object and/or reasons for the scheme.
the second observation of the Regional Director pertains to the apprehension with regard to the real intent of the petitioner company. It is apprehended that the scheme is proposed only to avoid the stamp duty on the transfer of the assets of the Transferor Company. It has been clarified vide the Additional Affidavit by the Petitioner Company that since both the companies belong to the same group of management, the object of the scheme is simply to achieve synergic advantages and rapid growth by consolidation of the commercial activities of these companies. It has been further clarified that scheme envisages the transfer of the whole undertaking, viz. assets and corresponding liabilities of the running business. It has been specifically asserted that there is no purported avoidance of stamp duty and the Transferee Company would pay the stamp duty in accordance with the applicable provisions of the Gujarat Stamp Act.
(iii)the next observation pertains to the proposed issue of Preference Share in the Transferee Company to the Equity shareholders of the Transferor Company. The Regional Director has shown concern about there being no obligation of the company to pay dividend to such Preference Shareholders. In this regard, it is once again pointed out that both the Petitioner Companies belong to the same group of management and there is no public interest involved. The form of consideration for the said Transfer of Undertaking of the Transferor Company is a subject matter of the commercial wisdom of the shareholders of both the companies. The proposed exchange ratio has been duly considered and approved by the concerned shareholders and is not found to be unfair or unreasonable to anybody. The obligation and ability to pay dividend on the said preference shares at a future date or the present market value of the fixed assets of the Transferor Company are not the relevant factors today for considering the sanction of the said scheme. Further, it is clarified that the petitioner companies have already placed on record all material facts and documents required under law for consideration of this Court.
the next observation pertains to the compliance with the Accounting standard AS-14 by the Transferee Company while passing the necessary accounting entries. In this regard, it has been submitted that, under Section 211, the legislature has conferred a prerogative right on companies with respect to compliance with accounting standards while preparing financial statements. Section 211(3A) provides for compliance with accounting standards and Sec. 211(3 B) provides for situation where deviation from the said accounting standards is permitted subject to necessary disclosures. Since the issue is already settled by a large number of decisions of several High Courts including the Gujarat High Court. The petitioner hereby undertakes that upon scheme being effective, the Transferee Company shall make requisite disclosures in its first financial statements. It is hereby submitted that in view of the said undertaking, it is not necessary to issue any further directions in this regard.
Heard Smt. Swati Saurabh Soparkar, learned advocate for the petitioner company, Mr. M. Iqbal A. Shaikh, learned Senior Central Government Counsel appearing for the Central Government and Mr. Mishra, learned Deputy Official Liquidator. Having gone through the petitions, and having considered the submissions made in this regard and being satisfied that amalgamation under the proposed scheme would be in the interest of the companies and their members and creditors. The Scheme is hereby sanctioned. Prayers in terms of paragraph 15 (a) of the Company Petition No. 197 of 2013 and paragraph 16 (a) of the Company Petition No. 198 of 2013 are hereby granted.
The petitions are disposed of accordingly. So far as the costs to be paid to the Central Govt. Standing Counsel is concerned, the same are quantified at Rs. 7,500/- per petition. The same may be paid to the counsel appearing for the Central Govt. Cost of Rs. 7,500/- be paid to the Office of the Official Liquidator towards cost for the Transferor Company.
The petitioner companies are further directed to lodge a copy 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.
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 E-Form 21 in addition to physical copy as per relevant provisions of the Act.
11. Filing and issuance of drawn up order is hereby dispensed with.
12. 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.
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