Gujarat High Court
Upl Djai Power Ltd....Petitioner(S) vs . .....Respondent(S) on 4 September, 2013
Author: K.M.Thaker
Bench: K.M.Thaker
UPL DJAI POWER LTD....Petitioner(s)V/S. .....Respondent(s) O/COMP/118/2013 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD COMPANY PETITION NO. 118 of 2013 In COMPANY APPLICATION NO. 98 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE K.M.THAKER ================================================================ 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 ? ================================================================ UPL DJAI POWER LTD....Petitioner(s) Versus . .....Respondent(s) ================================================================ Appearance: MRS SWATI SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MR YV WAGHELA, ADVOCATE for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE K.M.THAKER Date : 04/09/2013 ORAL JUDGMENT
1. This is a petition filed by the petitioner company for sanction of a Scheme of amalgamation of UPL DJAI Power Limited, the petitioner Transferor Company with Bharuch Enviro Infrastructure Limited, the Transferee Company under section 391 to Section 394 of the Companies Act, 1956.
It was pointed out that the Transferor Company is the wholly owned subsidiary of the Transferee Company.
It is also claimed that under the scheme, no new shares are required to be issued by the holding company by way of consideration for the transfer of the undertaking of the subsidiary company.
After considering the claim that the rights and interests of shareholders and creditors of the Transferee Company are not being affected by the proposed scheme, separate proceedings for the Transferee Company were dispensed with by the order dated 15th April 2013 passed in Company Application No. 109 of 2013 by this court.
2. It has emerged from the submission that the Petitioner Company is a wholly owned subsidiary of a public limited company and belongs to the same group of management. The petitioner company is incorporated for generation of power through unconventional sources. At present, it is engaged in business of management of Municipal Solid Waste. The Transferee Company has also been engaged in providing infrastructure facilities for hazardous waste treatment. The amalgamation is proposed as the activities are complimentary and the Transferee Company already has the expertise in its field. The petition gives details of the advantages that would flow by virtue of the amalgamation of these companies.
3. The proposed scheme was approved unanimously by the Equity Shareholders of the Transferor Company, as the nominees of the Transferee Company. All the Secured Creditors and the Unsecured Creditors of the Transferor Company had approved the proposed scheme through consent letters. Hence, the meetings of the shareholders and creditors were not required to be held and accordingly they were dispensed with vide the order passed on 3rd April 2013 annexed to the petition as Annex. D.
4. After the petition was admitted, the same was duly advertised in the newspapers viz. English daily, Indian Express - Vadodara edition and Gujarati daily, Sandesh - Vadodara edition dated 29th April 2013 and the publication in the Government gazette was dispensed with as directed in the order dated 15th April 2013.
No one has come forward with any objections to the said petitions even after the publication.
5. Notice of the petition of the Petitioner Transferor Company was served upon the Official Liquidator attached to Gujarat High Court. Vide the report dated 8th July 2013, filed by the Official Liquidator, it is stated and declared by Official Liquidator 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 said report reiterated and emphasized some observations of the Chartered Accountant appointed by the Official Liquidator and vide affidavit dated 24th July 2013, filed by Mr. B. D. Dalwadi, the petitioner has tendered explanations in response to the issues raised by the Chartered Accountant which make it clear that issues like the date of commencement of commercial production, the dispute with one of the suppliers, the transferred liabilities towards statutory dues, appointment of an Internal Auditor and Company Secretary, approval of the scheme by Ahmedabad Municipal Corporation etc. have been explained by the petitioner and after the said affidavit and the explanation, the Official Liquidator and the Registrar of Companies have not raised any doubt and/or not asked for further reply/explanation.
On this count, the petitioner has averred and clarified in additional affidavit dated 5.7.2013 that:-
3. The first observation pertains to the date of incorporation of the Petitioner Transferor Company. It is hereby respectfully submitted that the date of incorporation as mentioned in para 2 of the petition needs to be rectified. Due to an inadvertent typographical error the same is mentioned as 19th August 2004 instead of 9th August 2004, which is the correct date as per the Certificate of incorporation which is a part of the Memorandum of Association of the Petitioner Company annexed as Annexure-A to the said petition. The petitioner hereby seeks leave to amend the petition to this extent to rectify the said error.
4.
The second observation of the Regional Director pertains to the order passed by the Hon ble court on the application filed by the Transferee Company. It is respectfully submitted that the observation is not relevant and is based on the misinterpretation of the said order. It is respectfully submitted that the Transferee Company viz. Bharuch Enviro Infrastructure Limited is the sole holding company of the petitioner Transferor Company, which is the Wholly Owned Subsidiary. In light of number of decisions of several High Courts including this Hon ble court, the separate proceedings for the said Transferee Company was dispensed with vide the order dated 15th April 2013, passed by the Hon ble court in Co. Application No. 109 of 2013. A copy of the same is annexed herewith as Annex.-1, for immediate reference, which is self explanatory. Perusal of the same shall make it clear that the Hon ble court has granted the dispensation of the entire proceedings by the Transferee Company and not the meetings of the shareholders and secured creditors. The Applicant Company had placed the written consent of the Sole Secured Creditor as it was the contractual term with the said creditor to obtain its approval for any scheme of arrangement and dispensation of meetings was neither sought nor granted. Hence the contention of the Regional Director that the meeting of the unsecured creditors is required is baseless in view of the aforesaid order.
The petitioner has also averred in the additional affidavit dated 24.7.2013 that :-
2(i) The first observation refers to non preparation of the Profit and Loss Account for the financial year 2011-12, in spite of having commenced production. The petitioner company has submitted that the product being in the development stage, the production commenced was in the nature of trial runs only and in view of the same, the company was neither required to prepare the profit and loss account nor permitted to provide for depreciation on plant and machinery and factory building. It has been clarified that the company has commenced commercial production from 1st July 2012. In view of the same it is not true that there is any understatement of loss.
(ii) The remark about the liability of the company towards the supplier/erector of plant and machinery. It is hereby submitted that the Transferor Company had disputes with the said supplier as the assignment was not carried out satisfactorily. A short note attached herewith as Annex. A, provides the details of the nature of dispute and the course of action adopted by the Transferor Company. The said supplier has not come forward with any objections to the present scheme. Further, the Scheme envisages transfer of all the liabilities of the Transferor Company to the Transferee Company. Hence, if any legitimate claim arises out of the said transaction, the Transferee Company shall fulfill the same.
(iii) The company being in its nascent stage and having small size operations did not require the internal audit systems. However, the Transferee Company shall comply with all statutory requisites.
(iv) The Scheme envisages the transfer of all liabilities of the Transferor Company, including the liability towards statutory dues to the Transferee Company. It is hereby clarified that the Transferee Company confirms its obligation to pay all such dues in normal course of business as and when the same are due.
(v) The petitioner submits that since it had not commenced the commercial production till July 2012, the accumulated losses as referred by the auditor are Preoperative expenses pending capitalization and shall be written off during the financial years after the commencement of full- fledged operations.
(vi) The petitioner has already explained that steps are being taken to augment ling term funds for long term investments.
(vii) The petitioner is entitled to rely on its books of accounts subject to reconciliation, to be undertaken in due course of business. No discrepancy has been noticed and no claims have been made by any debtors or creditors in this regard.
(viii) It has already been explained that the consent of or approval from Ahmedabad Municipal Corporation to the scheme is not necessary as per the terms of MOU entered into between the parties. Further, in spite of the newspaper publication of notice of the petition, said AMC has not raised any objection to the scheme.
(ix) It is submitted by the Petitioner company that being in the nascent stage and small size of operations, the company did not appoint a Whole Time Company Secretary but is in the process of appointing one.
6. Notice of the petition has been served upon the Central Govt. and Shri Y. V. Waghela, learned Counsel appeared for the Central Govt. An affidavit dated 28th June 2013 has been filed by Mr. Kashmirlal Kamboj, Regional Director, Ministry of Corporate Affairs, North Western Region and several observations have been made.
7. My attention is drawn to the Additional Affidavit dated 5th July 2013 filed by Mr. B. D. Dalwadi, on behalf of the petitioner with the submissions on the issues raised by the Regional Director. It has been submitted as follows:-
(i) The inadvertent typographical error with regard to the date of incorporation of the petitioner company be permitted to be rectified.
In view of the said requests, leave to amend the petition in this regard and only to this extent is hereby granted.
(ii) Since the entire proceedings for the Holding Transferee Company have been granted vide the order dated 15th April 2013 passed in Co. Application No. 109 of 2013, the approval of the scheme by the unsecured creditors of the Transferee Company is not necessary and no further directions are required to be issued in this regard.
8. Having gone through the petitions and submissions and the explanation in the said two additional affidavits dated 5.7.2013 and 24.7.2013, I am satisfied that the observations made by the Regional Director are mostly addressed. Similarly, the observations of the Chartered Accountant as recorded in Official Liquidator's report are also mostly explained. In this background, it appears that the amalgamation would not be against the interest of the companies and their members and creditors. Prayers in terms of paragraph 15 (a) of the petition are hereby granted, however, with below mentioned clarifications and directions, viz.
(1) the petitioner shall incorporate appropriate correction/ rectification with reference to the date of incorporation of the petitioner company.
(2) the petitioner shall, in addition to and in furtherance of its additional affidavit, file an undertaking on affidavit, made by one of its directors, to pay all dues and liabilities of transferor company;
(3) all liabilities of the transferor company, as per the Scheme, are to stand transferred to the transferee company. Hence, the transferee company shall discharge, in accordance with law, all liabilities of the transferor company;
(4) the company shall place in order and operation internal audit system and machinery, without any delay;
(5) likewise, the company shall also fulfill the requirement of recruiting company secretary;
(6) the company shall immediately comply the observations by Chartered Accountant about pre-operative expenses and shall act as per observations regarding writing-off of expenses pending capitalizations;
(7) the petitioner shall also take all steps to rectify the shortfalls mentioned by the Chartered Accountant and shall also comply with the requirements which have still not complied with by the company, as mentioned by the Chartered Accountant, and intimate the compliance to the Regional Director and Official Liquidator.
(8) so far as the Regional Director's observation with reference to the meeting of unsecured creditors of the transferee company is concerned, the explanation by the transferee company is accepted, and accordingly, the said observations stand dealt with.
It is clarified that the prayer made in the petition are granted subject to compliance of above mentioned conditions which are in addition to statutory requirements.
9. The petition is disposed of accordingly. So far as the costs to be paid to the Central Government Standing Counsel is concerned, I quantify the same at Rs. 7,500/-. The same may be paid to the learned advocate appearing for the Central Government.
(K.M.THAKER, J.) kdc Page 8