Gujarat High Court
Sun Pharmaceuticals Industries ... vs Respondent(S) on 14 November, 2014
Author: N.V.Anjaria
Bench: N.V.Anjaria
O/COMP/219/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY PETITION NO. 219 of 2014
In
COMPANY APPLICATION NO. 187 of 2014
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SUN PHARMACEUTICALS INDUSTRIES LIMITED....Petitioner(s)
Versus
.....Respondent(s)
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Appearance:
MRS SWATI SOPARKAR, ADVOCATE for the Petitioner(s) No. 1
MR DEVANG VYAS, ADVOCATE for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE N.V.ANJARIA
Date : 14/11/2014
ORAL ORDER
The present petition is filed by the petitioner- Sun Pharmaceutical Industries Limited for sanction to the Scheme of Arrangement in the nature of Amalgamation of Ranbaxy Laboratories Limited with Coromandel International Limited under Sections 391 to 394 of the Companies Act, 1956. The petitioner company is the transferee company, whereas the other company is the transferor company. It has been contended that the transferor company, having its registered office at Mohali, Punjab, has taken out the requisite proceedings at High Court of Punjab and Haryana and the Scheme is pending for final hearing.
2. Heard learned advocate Mrs. Swati Soparkar and learned Assistant Solicitor General who appeared for the Central Government upon service of notice issued at the time of admission of the petition.
Page 1 of 10O/COMP/219/2014 ORDER 3. Learned advocate for the petitioner submitted that both transferee and transferor companies are
listed public limited companies, and are leading in the pharmaceutical field. They are engaged in manufacturing, marketing and exporting pharmaceutical products on a large scale. It was submitted that the petitioner-transferee company is profit making and dividend paying company. It was pointed out that the transferor company has its built-up reserves, though currently is suffering losses.
3.1 It was submitted that the amalgamation is proposed in order to consolidate and effectively manage the pharmaceutical and related business of the transferor company and the transferee company into a single entity, which will provide synergy benefits, attain efficiencies and cost competitiveness. It is envisaged that it would lead to rapid and aggressive expansion of the business. The benefits envisaged and expected from the Scheme are highlighted in the petition.
3.2 It was pointed out that the petitioner is a listed public limited company and the shares are listed at Bombay Stock Exchange Limited as well as the National Stock Exchange of India Limited. In compliance with the terms of the Listing Agreement, the petitioner approached the said stock exchanges and obtained their clearance by letters dated 10th and 11th July, 2014 respectively. They are placed on record along with letter from SEBI dated 10th July 2014. It was further pointed out that the petitioner had Page 2 of 10 O/COMP/219/2014 ORDER submitted a certificate from a Chartered Accountant confirming the exemption from the requirement of approval through Postal Ballots and e-voting from public shareholders, as required vide SEBI circulars of 2013. The same was accompanied by an undertaking given by the petitioner company. The copies of both the documents are placed on record. In light of the same, vide order dated 16th July, 2114, the petitioner company was not directed to undertake procedure of postal ballot and e-voting for the purpose.
4. Learned advocate thereafter pointed out that the petitioner company filed Company Application No. 187 of 2014, wherein this Court passed order dated 16th July, 2014, directing to convene the meeting of the equity shareholders. The holding of the secured creditors and unsecured creditors of the petitioner company was however dispensed with considering its financial position and further having regard to the positive net worth in the pre-scheme and post scheme scenario as confirmed by the Chartered Accountants by issuing certificate. It was pointed out that though the meetings were dispensed with as above, in order to comply with the contractual terms and honour the contractual obligations with the secured creditors, the petitioner company obtained consent letters from all the secured creditors of the company. The letters are placed on record by additional affidavit dated 8th November, 2014.
4.1 Pursuant to the directions issued with regard to the conduct of the meeting, the notices were duly Page 3 of 10 O/COMP/219/2014 ORDER served to all the equity shareholders. The public notice was also given for the said meeting. A meeting of the equity shareholders was convened on 22nd August, 2014. The Scheme was considered at the said meeting and it was approved by requisite majority of 99.86% in number and 99.99% in value by the equity shareholders present at the meeting and casting the valid votes.
5. The present substantive petition was thereafter filed placing the Scheme of Arrangement for consideration and approval of this Court. Copy of the Scheme is produced at Annexure-F. 5.1 The petition came to be admitted on 10th September, 2014. The public notices in respect of admission of the petition were duly advertised in "Indian Express"-English daily, "Divya Bhaskar"- Gujarati newspaper daily, both Vadodara editions dated 29th September, 2014. The publication in the Government Gazette was dispensed with. Learned advocate for the petitioner stated that no one has come forward to lodge any objection even after publication of the notice, which is further confirmed by additional affidavit 8th November, 2014.
5.2 Upon notice of admission of the petition being served on the Central Government, learned Assistant solicitor General appeared on behalf of the Regional Director. One Mr. Shambhu Kumar Agarwal, the Regional Director, North-Western Region, Ministry of Corporate Affairs, has responded by filing affidavit dated 30th Page 4 of 10 O/COMP/219/2014 ORDER October, 2014. The said authority made certain observations and comments in its affidavit. In order to answer the observations in the affidavit of the Regional Director, additional affidavit dated 8th November, 2014 was filed by the petitioner company affirmed by one Ashok Bhuta, General Manager (Legal and Secretarial) of the petitioner-transferee company.
6. Proceeding to consider the observations by the Regional Director and explanation offered by the petitioner company in its aforesaid additional affidavit, the first observation in paragraph 2(c) of the Regional Director pertains to compliance of FEMA and RBI guidelines for the equity shares to be issued by the transferee company against the equity shares of the transferor company held by foreign institutions and individuals. It is stated and shown by the petitioner company that vide clause 18(a)(iv) of the Scheme, it has been provided that that "the Scheme is subject to approval from the Foreign Investment Promotion Board(FIPB) and/or the Reserve Bank of India, if required under the applicable laws, rules and regulations. It was stated also that the petitioner-transferee company has already applied for the requisite permission from the FIPB and RBI and the same are awaited. This implies that the Scheme being effective, the issue of new shares shall be in compliance with applicable provisions of FEMA and RBI guidelines. In view of the said clarification, no further directions are required to be issued and the observation of the Regional Director is taken care of. 6.1 The next observation made in paragraph-2(d) is Page 5 of 10 O/COMP/219/2014 ORDER about the compliance with SEBI circulars of 2013, as the petitioner is a listed public limited company. The petitioner company has not disputed the same and has already demonstrated the compliance in form of the approvals from SEBI as well as concerned Stock Exchanges.
6.2 The observation in paragraph-2(e) relates to the compliance with applicable competition laws and regulations prescribed by Competition Commission of India. The petitioner company has stated that it has already approached the Competition Commission of India and shall comply with all the applicable provisions of Competition Act, 2002 and CCI (Procedure in regard to the Transaction of Business Relating to Combinations) Regulations, 2011. In clause 18(a)(ii) of the Scheme, it is provided, in view of the said clarification that the observation of the authority is satisfied and no further directions are needed to be issued.
6.3 The next observation pertains to the response received from the Income Tax Department about the proposed Scheme. The petitioner submitted that the said demands are under dispute and appropriate litigations are undergoing for the same and that they are pending at different stages. Further, the petitioner being a transferee company is not getting dissolved under the Scheme. The Scheme does not envisage any absolution from any adjudication liabilities. The petitioner company has confirmed that it shall comply with applicable provisions of Income Tax Act and rules. It is directed that the petitioner Page 6 of 10 O/COMP/219/2014 ORDER company shall comply with and meet with Income Tax laws, the orders of courts/forum which may be passed in pending litigations.
7. Further submission was made inviting attention of the court to the aforementioned additional affidavit, wherein it is pointed out that there is a typographical error in paragraph-15.2(b) of the Scheme, where the name of the transferee company is typed as "Sky" instead of "Sun". It was clarified that this error of mentioning the wrong name/word has occurred only in the copy of the Scheme submitted and filed before this court, but the said error does not exist in the Scheme actually. The printed copy of the Scheme circulated amongst the equity shareholders along with the notice was a corrected copy in which the error was rectified and the copy which was before the shareholders while sanctioning the Scheme by them, mentioned the name duly. It was submitted that the inadvertent error which is in the copy produced may be permitted to be rectified. The error being inadvertent and innocuous, the same is permitted to be rectified and the word "Sun" in paragraph-15.2(b) in the copy of the Scheme produced here shall be replaced for wrongly mentioned word "Sky".
8. The petitioner further submitted that the petitioner-transferee company and the transferor company are involved in manufacturing pharmaceutical products and the scale of operations of manufacturing and marketing in very large for both of them. In order to ensure continuous running of operations and to Page 7 of 10 O/COMP/219/2014 ORDER avoid any disruption of business and ensure the smooth implementation of the proposed Scheme of amalgamation, it is necessary that the petitioner- transferee company is permitted to use the existing manufacturing facilities, all relevant licenses, all existing inventories of material and products at every stage(including packing materials) etc. having the name of the transferor company, till time such lincences, permits. etc are issued afresh, transferred or renewed by the respective authorities in the name of the transferee company. Considering that the clarification on the above lines would not cause any prejudice to the interest of either the transferor or the transferee company and further that such clarification is found necessary in the interest of justice, it is observed and clarified that the petitioner-transferee company is permitted to use the existing manufacturing facilities, all the relevant licenses, all existing inventories of materials and products at every stage(including packing materials etc. having the name of the transferor company, all the time such licences, permits etc. are issued afresh, transferred or renewed by the respective authorities in the name of the transferee company. It was stated that the fresh licences, permits etc. would be when issued, would be effective from the effective date of the Scheme.
9. In view of above, all the observations and comments by the Regional Director made in respect of the Scheme Page 8 of 10 O/COMP/219/2014 ORDER in question have been explained and/or met with and/or do not sustain. From the material on record and perusal of the Scheme, the Scheme appears to be fair and reasonable and is not in violation of any provisions of law and is not contrary to public policy. None of the parties concerned have come forward to oppose the Scheme except as mentioned above. All requisite statutory compliances are fulfilled.
10. This court is accordingly satisfied that the Scheme of Arrangement in the nature of Amalgamation amongst the petitioner-transferee company and the transferor company deserve to be granted. Accordingly, prayer in paragraph-32(a) in the Company Petition is hereby granted.
11. It is ordered that as required under Section 396-A of the Companies Act, 1956, the transferor company shall not dispose of or destroy its books of accounts and other connected papers without the prior consent of the Central Government and shall preserve the same.
12. The petitioner company shall pay towards professional charges to learned Additional Solicitor General Rs.7,500/- in respect of the petition.
13. The petitioner company is further directed to lodge a copy of this order, the schedules of immovable assets of the transferor 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 Page 9 of 10 O/COMP/219/2014 ORDER of stamp duty, if any, on the same within 60 days from the date of the order.
13.1 The petitioner company is directed to file a copy of this order alongwith a copy of the Scheme with the concerned Registrar of Companies, electronically, along with Employee-Form 21 in addition to physical copy as per relevant provisions of the Act.
13.2 Filing and issuance of drawn up order is hereby dispensed with. All the 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.
14. The petition is allowed and disposed of accordingly.
(N.V.ANJARIA, J.) chandrashekhar Page 10 of 10