Gujarat High Court
Kalthia Investment Private Limited vs Respondent(S) on 15 July, 2016
Author: R.M.Chhaya
Bench: R.M.Chhaya
O/COMP/145/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY PETITION NO. 145 of 2016
In COMPANY APPLICATION NO. 141 of 2016
With
COMPANY PETITION NO. 146 of 2016
In
COMPANY APPLICATION NO. 142 of 2016
TO
COMPANY PETITION NO. 147 of 2016
In
COMPANY APPLICATION NO. 143 of 2016
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KALTHIA INVESTMENT PRIVATE LIMITED....Petitioner(s)
Versus
.....Respondent(s)
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Appearance:
MR TUSHAR P HEMANI, ADVOCATE for the Petitioner(s) No. 1
MS VAIBHAVI K PARIKH, ADVOCATE for the Petitioner(s) No.1
MR KSHITIJ AMIN, ADVOCATE for DEVANG VYAS, ADVOCATE for
the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE R.M.CHHAYA
Date : 15/07/2016
ORAL ORDER
1. The captioned are the petitions filed by three Companies viz. Kalthia Investment Private Limited, R. L. Kalthia Engineering And Automobiles Private Limited and Kalthia Engineering And Construction Limited, for the purpose of obtaining the sanction of this court to a Scheme of Arrangement in the nature of Amalgamation between Kalthia Investment Private Limited and R. L. Kalthia Engineering And Automobiles Private Limited viz. the Transferor Companies and Kalthia Engineering And Construction Limited viz. the Transferee Company and Restructure Page 1 of 14 HC-NIC Page 1 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER of Capital of Kalthia Engineering and Construction Limited proposed under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956.
2. All the three petitions being necessarily interconnected, they were heard together and are considered simultaneously by this common order.
3. Ms. Vaibhavi Parikh, learned advocate for the petitioner companies submitted that Kalthia Investment Private Limited (KIPL), the First Transferor Company is a private limited company and is primarily acting as a group investment company. It makes inter group investments on a long term basis. It also provides temporary financial support mainly to the group companies by way of short term/medium term loans and advances. It is, thus, basically an investment company of Kalthia Group. R. L. Kalthia Engineering and Automobiles Private Limited (RLKEAPL), the Second Transferor Company is a private limited company and had a dealership of Bajaj Scooters at Bhavnagar and Rajkot. Kalthia Engineering and Construction Limited (KECL), the Transferee Company is a public limited company and primarily engaged in the business of taking up on a contractual basis various civil construction jobs relating to building of roads, canals, industrial sheds and other miscellaneous construction projects in the infrastructure segment. KECL is specializing in taking up turnkey jobs on EPC basis. The Page 2 of 14 HC-NIC Page 2 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER principal focus of the company is in road projects. KECL is also having an SPV company, which is engaged in the business of taking up development projects on BOT/BOOT basis as a project developer under PPP (Public Private Partnership) model.
4. It has been further pointed out that since all the Companies belong to the same group of management, the Board of Directors of these companies thought it fit to amalgamate them for achieving synergic advantages. The rationale, which led the management of all the Companies to decide for amalgamation lies in several positive factors which will culminate in overall improvement in profits. KIPL and RLKEAPL are subsidiaries of KECL. Substantial equity shares of KIPL and RLKEAPL are owned and held by KECL. Merger of both the companies into KECL pursuant to this Scheme would result in streamlining the group corporate structure. The merger will further enable to reduce the number of entities within the group that requires to be administered and also help realize operational synergies which would also result in simplification of structure and operations. Consequently, amalgamation shall provide good opportunity for growth of all the Companies and a competitive edge over others. Thus, it is perceived that the proposed merger shall be advantageous and beneficial in more than one way to the Companies, their shareholders and creditors.
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5. It has been pointed that vide an order dated 11th April, 2016 passed in Company Application No. 141 of 2016, filed by Kalthia Investment Private Limited, the First Transferor Company, meeting of the Equity Shareholders, sole Unsecured Loan Creditor and sole Unsecured Trade Creditor were dispensed with in view of the written consent letters from all its shareholders and sole unsecured loan and trade creditor, approving the proposed scheme and confirmation of the same by a certified Chartered Accountant, being placed on record. There are no Secured Creditors of the First Transferor Company.
6. Similarly, in case of R. L. Kalthia Engineering and Automobiles Private Limited, the Second Transferor Company vide an order dated 11th April, 2016 passed in Company Application No. 146 of 2016, meeting of the Equity Shareholders and sole Unsecured Loan Creditor were dispensed with in view of the written consent letters from all its shareholders and sole unsecured loan creditor, approving the proposed scheme and confirmation of the same by a certified Chartered Accountant, being placed on record. There are no Secured Creditors and Unsecured Trade Creditors of the Second Transferor Company.
7. In respect of the Transferee Company, it has been pointed out that vide an order dated 11th April, 2016, passed in Company Application No. 147 of Page 4 of 14 HC-NIC Page 4 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER 2016, filed by Kalthia Engineering and Construction Limited, the Transferee Company, the meeting of the Equity Shareholders of the Company were dispensed with in view of the written consent letters from all its shareholders, approving the proposed scheme and confirmation of the same by the certified Chartered Accountant, being placed on record. The meeting of the Creditors of the Transferee Company was dispensed with, accepting the contention that rights and interests of these creditors are not being adversely affected due to the proposed scheme.
8. Attention of this Court was drawn to Clause 15 of the Scheme, where the restructure of Equity Share Capital of the Transferee Company is proposed. The proposed reduction is consequential to the cancellation of shares of the Transferee Company held by the Transferor Companies and that of the Transferor Companies held by the Transferee Company. The scheme envisages the said restructure and is proposed as an integral part of the scheme. The interests of the creditors of the Transferee Company are not in any way affected by such reduction. It has been submitted that the reduction of Equity Share Capital does not involve either diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid up share capital. Further it is also pointed out that approval granted to the present scheme by the Equity Shareholders of the Transferee Company, in Page 5 of 14 HC-NIC Page 5 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER form of the consent letters shall be treated as the Special Resolution as required under Section 100 of the Companies Act, 1956. In view of the said submission, vide above referred order dated 11th April 2015, the procedure prescribed under Section 101(2) of the Companies Act, 1956 and under Rules 46 to 65 of the Companies (Court) Rules, 1959 was dispensed with.
9. The substantive petitions for the sanction of the scheme were filed by both the Companies which were admitted on 29th April, 2016. The notice for the hearing of the petitions were duly advertised in the newspapers being 'The Indian Express' and 'Jai Hind' both Ahmedabad Editions on 16th May, 2016, and the publication in the Government Gazette was dispensed with as directed in the said orders. Affidavit dated 16th June, 2016 confirms the same. Pursuant to the said publication in the newspapers, no objections were received either by the petitioners or its advocates. The said fact has been confirmed vide an additional affidavit dated 13th July, 2016.
10. Notice of the petitions has been served upon the Official Liquidator for the two Transferor Companies. The respective reports dated 7th July, 2016 have been filed by the Official Liquidator after taking into account the respective reports of the Chartered Accountant appointed by him out of the panel.
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(i) It has been observed by the Official Liquidator that the Scheme should be applicable to "all the employees" instead of "all permanent employees". In response to the said observation, the learned counsel for the Transferor Companies submitted that the employees other than permanent employees that are employed by the Transferor Companies are as per the contractual obligations and therefore cannot be absorbed by the Transferee Company as the validity of the contract is for a specific period. In any case, the employees other than the permanent employees are automatically covered under the scheme as all the contracts entered into by the Transferor Companies which are valid as on the effective date shall be binding on the Transferee Company and therefore this becomes an automatic absorption of all the employees other than permanent employees by the Transferee Company. The Clauses 4.10(b) and 10 of the Scheme clearly envisages that all the agreement/contracts shall continue in full force and effect in favour of the Transferee Company and therefore, it is not required to amend Clause 12 of the Scheme. It is further clarified that the Transferee Company agrees to absorb all the employees of the Transferor Companies upon scheme Page 7 of 14 HC-NIC Page 7 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER coming into effect and therefore no directions are required to be issued.
(ii) It has been observed by the Official Liquidator that the affairs of the Transferor Companies have not been conducted in a manner prejudicial to the interest of its members or to the public interest in terms of second proviso of Section 394(1) of the Act, hence the Transferor Companies may be dissolved without following the process of winding up. However, the Official Liquidator has sought directions to be issued to preserve the books of accounts, papers and records and not to dispose of the same without prior permission of the Central Government as per the provisions of Section 396(A) of the Companies Act, 1956.
Accordingly, the Transferee Company is hereby directed to preserve the books of accounts, papers and records of the Transferor Companies and not to dispose of the same without prior permission of the Central Government. It is hereby further directed that even after the scheme is sanctioned, the Transferor Companies shall comply with all the applicable provisions of law and shall not be absolved from any of its statutory liability.
11.Notice of the petitions have been served upon the Page 8 of 14 HC-NIC Page 8 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER Central Government and Shri Kshitij Amin, learned Central Government Standing Counsel has appeared for Shri Devang Vyas, learned Assistant Solicitor General of India on behalf of the Central Government. An affidavit dated 7th July, 2016 has been filed by Shri Shambhu Kumar Agarwal, the Regional Director, Ministry of Corporate Affairs, NorthWestern Region. In that common affidavit, the said authority made certain comments and observations.
12.The attention of this court is drawn to the Additional Affidavit dated 13th July, 2016, filed by Shri Hitesh Kalthia, Director of all the three Companies, whereby the observations raised by the Regional Director have been dealt with. This Court has heard submissions advanced by Mr. Kshitij Amin, learned counsel appearing for the Central Government and Ms. Vaibhavi Parikh, learned advocate appearing for the Petitioners on the said observations;
(i) The observation made vide paragraph nos. 2(a) and 2(b) of the affidavit of the Regional Director refers to the factual position and requires no response.
(ii) The observation of the Regional Director made vide paragraph no. 2(c) pertains to the circular dated 15th January, 2014 issued by Ministry of Corporate Affairs with respect to inviting objections, if any from the Income Tax Page 9 of 14 HC-NIC Page 9 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER Department. A letter dated 18th May, 2016 was sent to the Chief Commissioner of Income Tax, Ahmedabad, Gujarat inviting specific comments of the Income Tax Department about the proposed scheme. Pursuant to the letter by the Directorate, the Income Tax Officer, Ward3(1) (3), Ahmedabad vide letter dated 17th June, 2016 stated that as per the record of the Incometax Department an amount of Rs. 9,67,661/ has to be recovered from the Transferor Company No. 2 viz. R. L. Kalthia Engineering and Automobiles Private Limited and therefore the Incometax Department has sought direction that the Transferee Company to create provision of Rs. 15 lakhs towards income tax liabilities which also include the liability of interest on the late payment of the above mentioned demand and recast the accounts accordingly. In response to the said observation, the learned counsel for the Petitioner Companies submitted that the Second Transferor Company has vide letter dated 29th June, 2016 justified that there is an anomaly in the order passed by the Incometax Department raising demand to the tune of Rs. 9,67,661/. Therefore it has preferred a Miscellaneous Application under Section 154 of the Income Tax Act, 1961 for rectification of the mistake, which is pending for process at Central Processing Cell (CPC), Bangalore. Thus once the said anomaly is rectified then there will be no demand against the Second Transferor Company. A copy of the said letter dated 29th June, 2016 is Page 10 of 14 HC-NIC Page 10 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER placed on record as Annexure - 1 along with the Additional Affidavit dated 13th July, 2016. It is further pointed out that a Clause 7 has been incorporated in the Scheme to that effect and the Transferee Company viz. Kalthia Engineering and Construction Limited has agreed to assume any liability towards the statutory dues including the Incometax dues of the Second Transferor Company in case if it arises in future. The Petitioner Companies have agreed to comply with the applicable provisions of the Income Tax Act, 1961 and Income Tax Rules, 1962. In view of the same, no further directions are required to be issued to the Petitioner Companies in this regard.
(iii) Vide observation made in paragraph 2(d), it has been observed by the Regional Director there are no complaints against the Petitioner Companies including any complaint/representation against the Scheme of Amalgamation.
13.Considering all the facts and circumstances and taking into account all the contentions raised in the affidavits and reply affidavits and the submissions made during the course of hearing, on behalf of the parties, this Court is of the view that the observations made by the Official Liquidator and the Regional Director, Ministry of Corporate Affairs, do not survive. No directions are required to be issued to the Petitioner Page 11 of 14 HC-NIC Page 11 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER Companies. This Court is of the view that based on the material on record it can be concluded that the present Scheme of Arrangement in the nature of Amalgamation is in the interest of the Shareholders and Creditors of all the three companies as well as in the public interest, therefore, the same deserves to be sanctioned and the same is hereby sanctioned.
14.The Reduction of Issued, Subscribed and Paid up share capital of the Transferee Company viz. Kalthia Engineering and Construction Limited as envisaged under Clause 15 of the Scheme is specifically granted. Prayers in terms of Paragraph No. 15(a) of the Company Petition Nos. 145 and 146 of 2016 for the Transferor Companies viz. Kalthia Investment Private Limited and R. L. Kalthia Engineering and Automobiles Private Limited and prayers made in terms of Paragraph Nos. 17(a) and 17(b) as well as the Minutes under Section 103(1) of the Companies Act, 1956 in terms of Paragraph 14 of the Company Petition No. 147 of 2016 for the Transferee Company viz. Kalthia Engineering and Construction Limited are hereby granted.
15.The petitions are disposed off accordingly. So far as the costs to be paid to the Central Government Standing Counsel are concerned, I quantify the same at Rs. 7,500/ for each Transferor Company and Rs.7,500/ for the Transferee Company. The same may be paid to the learned Standing Counsel appearing for the Central Government. Cost to be paid to the Page 12 of 14 HC-NIC Page 12 of 14 Created On Wed Jul 20 01:34:12 IST 2016 O/COMP/145/2016 ORDER Office of the Official Liquidator is quantified at Rs.7,500/ per petition payable only by the Transferor Companies. The same may be paid to the Office of the Official Liquidator.
16.The Petitioner Companies are further directed to lodge a copy of this order, the schedule of immovable assets of the Transferor Companies, 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.
17.The Petitioner companies are directed to file a copy of this order along with a copy of the scheme with the concerned Registrar of Companies, electronically, along with INC 28 in addition to physical copy as per relevant provisions of the Act.
18.Filing and issuance of drawn up order is hereby dispensed with.
19.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 Scheme as expeditiously as possible.
(R.M.CHHAYA, J.)
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