Gujarat High Court
Olympic Laminates Private Limited vs Respondent(S) on 8 January, 2016
Author: Abhilasha Kumari
Bench: Abhilasha Kumari
O/COMP/368/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY PETITION NO. 368 of 2015
In COMPANY APPLICATION NO. 324 of 2015
With
COMPANY PETITION NO. 369 of 2015
In
COMPANY APPLICATION NO. 325 of 2015
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OLYMPIC LAMINATES PRIVATE LIMITED....Petitioner(s)
Versus
......Respondent(s)
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Appearance:
MR. JAIMIN DAVE, ADVOCATE FOR MRS SWATI SOPARKAR, ADVOCATE
for the Petitioner(s) No. 1
MR. KSHITIJ AMIN, CENTRAL GOVERNMENT STANDING COUNSEL FOR
MR DEVANG VYAS, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE SMT. JUSTICE ABHILASHA
KUMARI
Date : 08/01/2016
ORAL ORDER
1 These petitions are filed by two companies for the purpose of obtaining the sanction of this court to a Composite Scheme of Arrangement in the nature of Slump Sale of Jamnagar Windmill Undertaking of Olympic Laminates Private Limited, The Transferor Company to Sara Suppliers Private Limited, and Amalgamation of Page 1 of 14 HC-NIC Page 1 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER residue Undertaking of Olympic Laminates Private Limited with Sara Suppliers Private Limited, the Transferee Company, proposed under Section 391 to 394 of the Companies Act, 1956.
2 It is submitted that both the companies in the proposed Scheme belong to the same group of management viz. Royal Laminates group. Olympic Laminates Private Limited is engaged in the business of manufacturing and trading of decorative laminated sheets. The company is also engaged in the generation of power through its Jamnagar Windmill Undertaking. Sara Suppliers Private Limited was incorporated with the object of carrying on the business of trading in commodities, substances, articles, merchandise, goods and things whether solid or liquid or gaseous like fish nets, solar equipment, artificial reef etc. The present Scheme of Arrangement is proposed for the consolidation of operations and it is envisaged that the proposed reorganization would result into synergic benefits. The petitions provide the details of the anticipated advantages.
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3 It has been submitted that vide orders dated 29th
October 2015, passed in Company Application No. 324 and 325 of 2015, meetings of the Equity Shareholders of both the companies were dispensed with in light of the consent leters of all the shareholders being placed on record. The Secured Creditors and Unsecured Creditors of the Transferor Company had also approved the Scheme and the consent letters were placed on record. In view of the same the dispensation of the meetings of creditors was granted. It is pointed out that there are no Secured or Unsecured Creditors of the Transferee Company.
4 The substantive petitions for the sanction of the Scheme were filed by all the petitioner companies which were admitted on 02nd November 2015. The notice for the hearing of the petitions was duly advertised in Ahmedabad editions of the English daily newspaper "Indian Express" and the Gujarati daily newspaper "Sandesh" dated 18th November 2015. The publication in the Government gazette was dispensed with as directed in the said orders. Pursuant to the said publication in the newspapers, no objections were received by the Page 3 of 14 HC-NIC Page 3 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER petitioner or its advocate. The said fact has been confirmed vide the common additional affidavit dated 04th January 2016.
5 Notice of the petition has been served upon the Office of the Official Liquidator for the Transferor Company. The report dated 16th December 2015 has been filed by the Official Liquidator after taking into account the report of the Chartered Accountant appointed by him out of the panel. It has been observed by the Official Liquidator that the affairs of the Transferor Company have been conducted within its object clauses and it has not been conducted in any manner prejudicial to the interest of the members or the public interest, hence the petitioner Transferor Company may be dissolved without following the process of winding up. However, the Official Liquidator has sought direction to preserve the books of accounts, papers and records and not to dispose of the same without prior permission of the Central Govt. as per the provisions of Section 396(A) of the Companies Act, 1956.
6 Accordingly, the Transferee company is hereby
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directed to preserve the books of accounts, papers and records of the Transferor Company and not to dispose of the same without prior permission of the Central Govt. It is further directed that even after the Scheme is sanctioned, the Transferor Company shall comply with all the applicable provisions of law and shall not be absolved from any of its statutory liabilities.
7 Notice of the petitions have been served upon the Central Govt. and Mr. Kshitij Amin, learned Central Government Standing Counsel has appeared for Shri Devang Vyas, learned Assistant Solicitor General of India, on behalf of Central Govt. A common affidavit dated 17th December 2015 has been filed by Mr. Shambhu Kumar Agarwal, the Regional Director, NorthWestern Region, Ministry of Corporate Affairs, whereby some observations are made.
8 The attention of this Court is drawn to the common Additional Affidavit dated 4th January 2016 filed by Mr. Jitendra Patel, the Director of the petitioner Transferor Company whereby the said issues Page 5 of 14 HC-NIC Page 5 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER have been dealt with. This Court has heard submissions advanced by the learned counsel appearing for the Central Govt. and Mr. Jainin Dave, learned advocate appearing for Mrs. Swati Soparkar, learned advocate for the petitioners.
9 The observation made vide paragraph 2(C) , pertains to the cash consideration proposed to be paid by the Transferee Company for the transfer of the Jamnagar Windmill Undertaking in form of the Slump Sale to the Transferee Company. It has been apprehended by the Regional Director that the Transferee Company does not have the cash balance for the same. It has been submitted that upon the Scheme becoming effective, the petitioner Transferee Company shall make the requisite financial arrangements for the same. Further, it is pointed out by the Regional Director that two separate business undertakings are proposed to be transferred by the petitioner companies by way of the present single composite Scheme. He has requested this Court to direct the petitioner companies to place on record all the relevant facts of the matter. In this regard, it is submitted that the Page 6 of 14 HC-NIC Page 6 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER petitioner companies belong to the same group of management. Under the applicable provisions of law, there is no bar to the choice of arrangement between the companies, provided the proposed Scheme is not prejudicial to the interest of the shareholders or creditors or against the public interest. In order to achieve the objective of consolidation of business as proposed under the Scheme of Arrangement, the Board of Directors of both the companies thought it appropriate to propose the composite arrangement. 10 In this context learned counsel for the petitioner has relied upon a judgment of the Supreme Court in the case of Miheer H Mafatlal, reported in (1996) 4 Comp LJ 124 (c) . The relevant extract is reproduced below:
"28. However further question remains whether the Court has jurisdiction like an appellate authority to minutely scrutinise the scheme and to arrive at an independent conclusion whether the scheme should be permitted to go through or not when the majority of the creditors or members or their respective classes have approved this aspect the nature of compromise or arrangement between the company and the creditors and members has to be kept in view. It is the commercial wisdom of the parties to the scheme who have taken an informed decision about the usefulness and propriety of the scheme by supporting it by the requisite majority vote that has to be kept in Page 7 of 14 HC-NIC Page 7 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER view by the Court. The Court certainly would not act as a court of appeal and sit in judgment over the informed view of the concerned parties to the compromise as the same would be in realm of corporate and commercial wisdom of the concerned parties. The Court has neither the expertise nor the jurisdiction to delve deep into the commercial wisdom exercised by the creditors and members of the company who have ratified the Scheme by the requisite majority. Consequently the Company Court's jurisdiction to that extent is peripheral and supervisory and not appellate. The Court acts lime an umpire in a game of cricket who has to see that both the teams play their according to the rules and do not overstep the limits. But subject to that how best the game is to be played is left to the players and not to the umpire".
11 Considering the submissions advanced by learned counsel and the aspect that the proposed Scheme does not prejudicially affect the interest of its shareholders and creditors, this court does not consider it necessary to issue any directions in this regard.
12 Further, vide paragraph 2(d) of the affidavit, it has been observed by the Regional Director that the working sheet for the calculation of the Share Exchange Ratio has not been submitted by the petitioner companies. In this respect, it has been submitted that since both the companies belong to the Page 8 of 14 HC-NIC Page 8 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER same group and by and large there is the same set of shareholders, it is not necessary to provide the working sheets. It is further submitted that such an objection is beyond the purview of the Regional Director.
13 In Welspun Corp. Ltd. [Company Petition No. 270 of 2013] the Regional Director had raised precisely this objection, which was rejected by this Court with following observation:
"13(a) With regard to the submission of the working sheets as calculation of the share exchange ratio in the valuation report is concerned, it is submitted that, an independent valuer was appointed for the valuation, and such independent valuer has arrived at the share exchange ratio based on their expertise and experience. It is further submitted that the valuer has, as is relevant, given the context that all the shareholders of the Demerged Company shall receive proportionate shareholding in the Resulting Company, based on his findings and given his recommendation on the basis of the ok value of the assets and on the basis of the share capitals of the Demerged Company and the intended share capital of the Resulting Company. The share exchange ratio that has been arrived at by the valuer has been approved by more than the requisite majority of the shareholders and creditors of the Demerged Company in the court convened meeting held on 22 October,2013 nd without any questions raised.
Mr. Soparkar in support of the aforesaid submission relied on the decision of Miheer H Mafatlal, reported in (1996) 4 Comp LJ 124 (C) , and submitted that the Hon'ble Supreme Court has observed that, "It has also to be kept in view Page 9 of 14 HC-NIC Page 9 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER that which exchange ratio is better is in the realm of commercial decision of wellinformed equity shareholders.....". Therefore, the submission with regard to working sheets is unwarranted".
14 Considering the above facts and circumstances, this court does not think it necessary to direct the petitioner companies to place on record the working sheets, particularly in light of the fact that all the shareholders of both the companies have thought it appropriate to approve the Scheme with the proposed exchange ratio and no questions have been raised in this regard.
15 Vide paragraph 2(e) of the affidavit, it has been observed by the Regional Director that the Accounting Treatment under clause 7.2 of the Scheme is not in accordance with the Accounting Principles. In this regard, it has been pointed out that Accounting Standard 14is not applicable so far as the proposed transfer of the undertaking under a Slump Sale is concerned.
16 The observation made vide paragraph 2(f) pertains to obtaining approval from the regulatory body for the Page 10 of 14 HC-NIC Page 10 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER business of power generation. In this regard, it is submitted that the Transferor company had obtained the requisite permissions and licenses to carry on the said activity. However, they being general licenses, upon the Scheme becoming effective, the Transferee company shall do needful to obtain such licenses as are necessary as well as the other regulatory approvals, or amend the respective licenses, as applicable under the applicable laws from the respective regulatory authority. The power generation activity shall be undertaken by the Transferee Company, in compliance with the respective regulatory laws.
17 The observation of the Regional Director made vide paragraph 2(g) pertains to the letter dated 18th November 2015 sent by the Regional Director to the Income Tax Department, inviting their objections, if any. Since the statutory period of 15 days, as envisaged by the relevant circular of the Ministry of Corporate Affairs, is over, it can be presumed that the Income Tax Department has no objection to the proposed Scheme of arrangement. The petitioner Page 11 of 14 HC-NIC Page 11 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER companies have agreed to comply with the applicable provisions of the Income Tax Act and rules. In view of the same, no further directions are required to be issued to the petitioner companies in this regard. 18 Considering the above facts and circumstances and the contentions raised in the affidavits and counter affidavits, the judgments cited at the Bar, and the submissions on behalf of the parties, this Court is of the view that the observations made by the Regional Director, Ministry of Corporate Affairs, do not survive. This Court is of the view that based on the material on record it can be concluded that the present Scheme of Arrangement is in the interest of the shareholders and creditors of all the companies as well as in the public interest, therefore, the same deserves to be sanctioned. Hence, the following order:
Prayers in terms of paragraph 16 (a) of the Company Petition No. 368 of 2015, and paragraph 15(a) of the Company Petition No. 369 of 2015 are hereby granted.
19 The petitions are disposed of, accordingly. So Page 12 of 14 HC-NIC Page 12 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER far as the costs to be paid to the Central Govt. Standing Counsel are concerned, they are quantified at Rs.7,500/ per petition. The same may be paid to the learned Standing Counsel appearing for the Central Govt. Costs to be paid to the Office of the Official Liquidator are quantified at Rs.7,500/ per petition, payable only by the Transferor Company. The same may be paid to the Office of the Official Liquidator. 20 The petitioner companies are further directed to lodge a copy of this order, the schedule of immovable assets of the undertaking being transferred under the Slump Sale and that of the remaining undertaking of the Transferor company, being transferred to Transferee Company, as on the date 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.
21 The Petitioner Companies are directed to file a copy of this order along with a copy of the Scheme Page 13 of 14 HC-NIC Page 13 of 14 Created On Tue Jan 12 02:05:05 IST 2016 O/COMP/368/2015 ORDER with the concerned Registrar of Companies, electronically, along with INC28 in addition to physical copy as per relevant provisions of the Act. 22 Filing and issuance of drawn up order is hereby dispensed with.
23 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 along with the Scheme as expeditiously as possible.
(SMT. ABHILASHA KUMARI, J.) Bimal Page 14 of 14 HC-NIC Page 14 of 14 Created On Tue Jan 12 02:05:05 IST 2016