Karnataka High Court
Krita Engineering Private Limited vs Nil on 27 May, 2013
Author: Aravind Kumar
Bench: Aravind Kumar
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IN THE HIGH COURT OF KARNATAKA
AT BANGALORE
DATED THIS THE 27TH DAY OF MAY 2013
BEFORE
THE HON'BLE MR.JUSTICE ARAVIND KUMAR
COP NO. 89/2012
BETWEEN:
Krita Engineering Private Limited
having its registered office at
No.430/431, 12th cross,
4th phase, Peenya Industrial Area,
Bangalore-560 058. ...Petitioner
(By Sri.Uday Shankar.R.M., Advocate)
AND:
NIL ....Respondent
(By Sri.K.S.Mahadevan & V.Jayaram, Advocate for
Official Liquidator;
Sri. N.V.Vijay, CGC for ROC)
This company petition is filed under Section 391 to
394 R/w Sections 78, 100 to 103 of the Companies Act,
1956, praying that for the reasons stated therein this
Hon'ble court may be pleased to:-
That the composite Scheme of Arrangement for the
Transfer of the Northern Eastern Business Division of the
Petitioner/Transferor Company to the Transferee
Company as produced as Annexure-A hereto, may be
sanctioned by this Hon'ble High Court so as to be
binding on all shareholders and creditors of the
petitioner company; and etc.,
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This company petition coming on for Orders this
day, the Court made the following.
ORDER
The applicant/transferor company is seeking for sanction of Composite Scheme of Arrangement for transfer of its Northern Eastern Business Division of the transferor company to A to Z Infracon Private Limited - the transferee company.
2. Transferor company - M/s. Krita Engineering Private Limited was incorporated on 08.10.1990 in the State of Karnataka. Its aims and objects as per the Memorandum and Articles of Association produced at Annexure-B would indicate that it is carrying the business of manufacturers, designers, dealers, importers and exporters of machines, etc., as morefully enumerated therein. Registered office of the transferor company is situated at the address shown in the cause title of company petition and details of share capital of the petitioner company as on 31.03.2011 is as under: 3
(a) Authorised Capital is ` 1,40,00,000/- divided into 1,40,000 Equity Shares of ` 100/- each.
(b) Issued, Subscribed and Paid up Capital is `1,28,00,000/- divided into 1,28,000 Equity Shares of `100/- each.
3. The unaudited balance sheet of transferor company covering the period 01.04.2011 to 30.11.2011 is appended to the petition as per Annexure-C and audited balance sheet of transferee company made upto 31.03.2011 is at Annexure-D.
4. Board of Directors of transferor company by Resolution dated 31.10.2011 have approved and adopted the Scheme of Arrangement by virtue of which one of the divisions of transferor company namely "Northern Eastern Business Division" is being resolved to be demerged with "AtoZ Infracon Private Limited" (transferee company) and agreeing to issue and allot six equity shares of ` 10/- each of transferee Company for every equity shareholder of ` 100/- each held by the 4 shareholders of the transferor company. Said resolution dated 01.10.2011 is appended to the company petition as per Annexure-H.
5. "A to Z Infracon Private Limited" (Transferee company) was incorporated on 02.05.2001 under the Companies Act, 1956, before the Registrar of Companies, Kolkata and is having its registered office at No.16, Jamuna Lal Bajaj Street, Kolkata. Authorised and paid- up Share capital of transferee company as on 31.03.2011 is as under:
(a) Authorised Capital is ` 1,50,00,000/- divided into 1,50,000 Equity Shares of ` 10/- each.
(b) Issued, Subscribed and Paid up Capital is ` 35,70,600/- divided into 3,57,060 Equity Shares of ` 10/- each fully paid up.
6. Company Application No.99/2012 was filed by the transferee company before this Court with a prayer to dispense with the meeting of equity shareholders and unsecured creditors and for convening 5 the meeting of secured creditors. This Court by order dated 23.03.2012 allowed the said application and dispensed with the convening of meeting of equity shareholders, unsecured creditors as well as sundry creditors and directed to hold the meetings of secured creditors by appointing the Chairman for the said meeting. Pursuant to said direction the meeting of secured creditors was convened by the appointed chairman by publishing a public notice in "The Hindu"
English Daily newspaper and "Kannada Prabha"
Kannada Daily newspaper. None participated in the said meeting. Resolution approving the Composite Scheme was not placed before the meeting in view of absence of secured creditors. Report of the Chairman came to be filed before this Court as per Annexure-K appended to the present petition. A perusal of the said report would indicate that said meeting was not attended to by any of the secured creditors of the applicant-company and accordingly the Chairman has reported that Composite Scheme of Arrangement could not be placed before 6 secured creditors for their approval and no resolution was passed in this regard.
7. Notice was ordered on the Regional Director and Regional Director through Registrar of Companies has filed an affidavit on 22.02.2013 with the following observations:
(1) The company has furnished a copy of the valuation report signed by the director of the transferee company which cannot be accepted for swap ratio concerned as valuation report should be issued by Chartered Accountant without which the fairness of the share exchange ratio cannot be ascertained. The petitioner may be directed to comply.
(2) The Hon'ble High Court of Karnataka has ordered for convening the meeting of the secured creditors. However, none was participated in the said meeting as such company has not complied with mandatory provisions of Sec.391(2) i.e. if a majority in number representing three-fourth in value of the creditors, or class of creditors, or members, or class of members, as the case 7 may be present and voting either in person or, where proxies are allowed (under the rules made under section 643) by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Hon'ble Court be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company, and on this ground alone petition is required to be dismissed.
(3) It is brought to the notice of the Hon'ble High Court that the scheme may be sanctioned subject to the sanction of the scheme by the Hon'ble High Court of West Bengal as the Transferee company is situated in the state of West Bengal.
8. In reply to these observations, authorised signatory namely the Director of transferor company has filed a reply affidavit on 04.03.2013 which reads as under:
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"a. Company has furnished a copy of valuation report signed by the Director of the Transferee Company and not by chartered accountant.
This is a false statement. The Valuation Report of Chartered Accountant has already been furnished by the Company to both ROC as well as RD's office. The acknowledgement of ROC' office made on 09-11-2012 on receipt of the Valuation Report of Chartered Accountant is evident and the same is being produced as Annexure-A. Further, the Transferor Company has submitted the Valuation Report of Chartered Accountant to RD's office vide in its letter dated 11-12-2012.
copy of the letter is produced as Annexure-B.
b. Non participation of secured creditor in court convened meeting.
That this Hon'ble High Court in its order dated 23-2-2012 directed holding the meeting of the Secured Creditors and as per the direction of the Hon'ble High 9 Court the Transferor Company had issued individual notice of the meeting to each secured creditor and also given publication of notice of Meeting in "The Hindu", Bangalore Edition on 02-03-2012 and also in "Kannada Prabha", Bangalore Edition on 02-03-2012. Even though notices were served, the secured creditors did not participate in the Court Convened Meeting. Thereafter, the Chairman had submitted the report to this Hon'ble High Court on 07-04-2012. It was presumed that since they have not attended after notice has been given them is implied consent from the creditors. Once the court appointed chairman has given his report, the regional director cannot question this issue. However, the majority secured creditors have given their NOC's and the same are being produced as Annexure-C&D. c. Scheme sanctioned subject to the sanction of the Scheme by Hon'ble Court of West Bengal.
The status before the Hon'ble High Court of West Bengal is the Regional Director 10 has filed the report and Reply Affidavit is also filed. The same is pending for final adjudication by the Hon'ble High Court of West Bengal and there is no bar in sanctioning the above scheme by this Hon'ble Court.
9. Perusal of the observations made by Registrar of Companies would indicate that valuation report had been signed by the Director of transferee company and said report was not signed or issued by the Chartered Accountant. Along with the reply affidavit above referred to acknowledgement issued by the Registrar of Companies is produced at Annexure-A dated 02.11.2012. Same would indicate that valuation has now been certified by the Chartered Accountant of transferee company certifying the intrinsic value of shares of transferee company as on 31.03.2010 to be at ` 759.37. Working sheet of same is also appended to said report issued by the Chartered Accountant. Hence, first observation of Registrar of Companies stands complied. 11
10. Insofar as second observation made by Registrar of Companies which relates to convening of the meeting of secured creditors is concerned, records would indicate that as per report of the Chairman which is at Annexure-K secured creditors did not participate in the meeting convened by the Chairman appointed by this Court though public notice had been issued. Thereafter transferor company has secured 'no objection' for sanction/approval of Scheme of Arrangement and according their consent for demerger namely by secured creditors. Said 'no objection' by the two secured creditors are appended to the reply affidavit as per Annexure-B, C and D. In view of the same second observation made by Registrar of Companies would also stand complied.
11. Insofar as third observation made by Registrar of Companies relates to sanction of present Scheme by this Court to be subject to sanction of Scheme said to have been propounded by the transferee company before the Jurisdictional Company Court i.e., 12 High Court of Judicature at Kolkotta is concerned. The sanction of Scheme by this court would necessarily be subject to approval of the Scheme by the High Court of Judicature at Kolkatta.
12. In view of second observation having also stood complied, question of consideration of report of the Chairman is deemed to have been accepted.
13. The Scheme of Arrangement (Annexure-A) which is approved by the directors, shareholders, creditors of the transferor company, petitioner intends to hive off its division namely Northern Eastern Business Division to the transferee Company for the purposes of better and efficient control and running and further development of growth of business. Material on record would indicate that proposed Scheme of Arrangement has been approved by the shareholders, creditors as required under Section 391(2) of the Companies Act, 1956 and balance sheet produced at Annexure-C would also indicate the assets and liabilities of petitioner- 13 company. Audited balance sheet made upto 31.03.2011 is produced along with petition as per Annexure-D has been duly certified by the Chartered Accountant. Notice of this petition has been published in "The Hindu", English edition and "Vijaya Karnataka", Kannada Edition showing the date of hearing as 13.08.2012 and none have appeared before this Court to oppose the Scheme of Arrangement.
14. Hence, I do not find any legal impediment to refuse the sanction/approval of Scheme of Arrangement and also in view of the fact that observations made by Registrar of Companies having stood complied with. Accordingly, Scheme of Arrangement as proposed by transferor company is approved and sanctioned subject to approval of Scheme in the petition said to have been filed before the High Court of Judicature at Kolkotta by transferee company. Transferor company shall produce the copy of this Order before the High Court of Judicature at Kolkatta in the pending petition filed by transferee company.
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14. Petitioner shall file a certified copy of order / decree within 30 days from the receipt of copy of this order.
Sd/-
JUDGE DR