Gujarat High Court
Reliance Petroproducts Private ... vs Respondent(S) on 1 October, 2015
Author: Vipul M. Pancholi
Bench: Vipul M. Pancholi
O/COMP/209/2015 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
COMPANY PETITION NO. 209 of 2015
In COMPANY APPLICATION NO. 169 of 2015
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RELIANCE PETROPRODUCTS PRIVATE LIMITED....Petitioner(s)
Versus
......Respondent(s)
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Appearance:
MR DILIP L KANOJIYA, 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 VIPUL M. PANCHOLI
Date : 01/10/2015
ORAL ORDER
1. The petitioner company seeks sanction to the proposed Scheme of Amalgamation of Reliance Global Trading Private Limited, Reliance Petroproducts Private Limited (collectively, the 'petitioner company'), Reliance Tankages Private Limited (the "Transferor Companies") with Reliance Petro Distribution Private Limited (the "Transferee Company") under Sections 391 to 394 and other applicable provisions of the Companies Act, 1956 (the "Scheme").
2. It is stated that the Scheme provides for the amalgamation of the Transferor Companies with the Transferee Company and as an integral part thereof, the reduction in the issued, subscribed and paid up share capital of the Transferee Company and the increase and classification of Page 1 of 12 HC-NIC Page 1 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER authorised share capital of the Transferee Company in accordance with, and in the manner provided for, in the Scheme. The Transferee Company has its registered office in the State of Maharashtra and it is stated that it has filed its petition in the Hon'ble High Court of Judicature at Bombay for sanctioning the Scheme of Amalgamation.
3. The reasons and grounds that have necessitated for the Scheme of Amalgamation have been set out in the petitions. The Transferor Companies filed Company Application Nos. 168 to 170 of 2015 for directions. By orders dated 7th May 2015 directions were issued dispensing with the meetings of equity shareholders and unsecured creditors in view of the affidavits of consents given by both the equity shareholders and both the unsecured creditors for the purpose of considering the Scheme and if thought fit, approving the same with or without modification(s). None of the Transferor Companies have preference shareholders and secured creditors, therefore the meetings of preference shareholders and secured creditors were also dispensed with for the purpose of considering the Scheme and if thought fit, approving the same with or without modification(s).
4. On the facts and in the circumstances, as mentioned hereinabove, the Petitioner Company has Page 2 of 12 HC-NIC Page 2 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER filed the present Petition for sanction of the Scheme of Amalgamation.
5. On 15.06.2014, this Court passed, the order for the Petitioner Company:
"1.Upon the application of the above named company and upon hearing Mr.R.S.Sanjanwala, learned Senior Counsel with Mr.Dilip L. Kanojiya for the petitioner-Company and upon perusing and considering the contents of the petition of Mr.P.A.Soni, the authorised signatory of the petitioner company and upon perusing of relevant exhibits, Leave under Rule 21 of the Companies (Court) Rules, 1959 is granted.
2. Petition is ADMITTED.
3. Petition is fixed for hearing and disposal on 03.08.2015.
4. At least 28 clear days before the date fixed for hearing of the petition, the petitioner to serve the notice of hearing of petition on the Regional Director, Western Region, Ministry of Corporate Affairs and Registrar of Companies pursuant to Section 394A of the Companies Act, 1956.
5. At least 28 clear days before the date fixed for hearing of the petition, the petitioner to serve the notice of hearing of petition on the Official Liquidator pursuant to Section 394 (1)(b)
(iv) of the Companies Act, 1956.
6. At least 10 clear days before the date fixed for hearing of the petition, petitioner to publish the notice of hearing of petition in local newspapers, viz., "Indian Express", Ahmedabad edition, Page 3 of 12 HC-NIC Page 3 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER in English and in "Divya Bhaskar", Ahmedabad edition in Gujarati.
7. Publication of the notice of the hearing of the petition in the Gujarat Government Gazette is dispensed with.
8. Petitioner to file in the Registry an Affidavit of service as per Rule 30 of Companies (Court) Rules, 1959."
6. Accordingly, notices have been published. The petition has not been opposed by any person.
7. The Official Liquidator has filed his separate reports for all the Transferor Companies in Company Petitions Nos. 208 to 210 of 2015 all dated 10th August 2015 submitting that the affairs of the Transferor Companies have not been conducted in a manner prejudicial to the interest of its members or to public interest in terms of second proviso of Section 394(1) of the Companies Act, 1956 and that the Transferor Companies may be ordered to be dissolved without winding up and to direct the Transferor Companies to preserve its books of accounts, papers and records and not to dispose of the records without prior permissions of the Central Government.
8. The Regional Director, North Western Region, Ministry of Corporate Affairs, filed the Common Affidavit on behalf of the Central Government dated 10th September 2015. In Sub- paragraphs (c) to (f) of Para 2 of the said Common Affidavit, the Regional Director has made certain Page 4 of 12 HC-NIC Page 4 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER observations on behalf of the Central Government on the Scheme. Briefly the observations are as under:
"(c) That, the deponent submits that it is revealed from shareholding patterns of the petitioner transferor companies that all the shares of the respective transferor companies are held by other two transferor companies. The detailed statement of holding of equity shares are as under:
Total Issued Equity Shares Capital in no. of Equity Shares held by the other Transferor Companies Transferor Transferor Transferor Company No.1 Company No.2 Company No.3 Transferor - 5750 5035 Company No.1 Transferor 6050 - 5035 Company No.2 Transferor 6050 5750 -
Company No.3
Total Issued 12100 11500 10070
Capital in
number of
Equity
Shares
It is submitted that Clause 10 of the Scheme provides for cancellation of equity share capital of the Transferor Companies. It is observed from the said clause that the Scheme proposes that all the equity shares of the respective Transferor Companies are held by other two Transferor Companies and therefore no new equity shares will be issued through the Scheme. In this regard it is submitted that all the assets and liabilities of the Transferor Companies will be transferred Page 5 of 12 HC-NIC Page 5 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER to the Transferee Company through the Scheme, without any consideration paid by the Transferee Company. It is also not understood as to why such assets and liabilities are transferred to the Transferee Company only without there being any holding of the equity shares of the Transferor Companies by the Transferee Company. Therefore, there is no specific logic for said transfer of assets and liabilities to the Transferee Company without consideration. The Hon'ble Court may therefore be directed the petitioner companies to place on record all the facts in the matter.
(d) That, the business of the petitioner transferor company No.2 viz. M/s Reliance Petroproducts Private Limited is relating to petrochemicals business which is regulated by the respective regulatory authority. The deponent is however, not aware as to whether the companies have obtained any licenses, approvals and other permissions from the regulatory authority/concerned Ministry to carry on the activities of the petrochemicals business of petitioner transferor company No.2. It is therefore respectfully submitted that such licenses, approvals, NOCs and other regulatory permissions as may be required shall be obtained by the petitioner companies along with the approval of the scheme by this Hon'ble High Court. The Hon'ble Court may therefore be pleased to direct the petitioner companies to obtain licenses, approvals and other permissions, if any, from the regulatory authority/concerned Ministry to carry on the activities of petitioner transferor company no.2 and to follow all the procedures as may be required by the regulatory authorities on payment of fees, if any, for effecting Page 6 of 12 HC-NIC Page 6 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER transfer of such licenses, approvals and permissions in the name of transferee company, on sanctioning of the scheme by this Hon'ble Court.
(e) That, the deponent submits that all the petitioner transferor companies are engaged in the business of chemicals trading which are its main objects as per the Memorandum of Association of the company. It is observed that the income is mainly generated from other sources i.e. dividend income, interest income and advisory income etc. which is an investment activity of all the petitioner companies. Further, it is to be stated that as per the guidelines issued by the RBI, if more than 50% of a company's assets are financial assets and if more than 50% of its income is generated from financial assets then it falls under the category of NBFC. In this regard, the Hon'ble Court may be pleased to direct the petitioner companies to ensure compliance of guidelines issued by RBI in the matter.
(f) That, the Deponent submits that the Ministry of Corporate Affairs vide its circular no.2/1/2014 dated 15.01.2014 has directed that the Regional Director concerned shall invite specific comments from the Income Tax Department giving 15 days time to the Income Tax Department to inform objections, if any, for the proposed scheme under Section 391 or 394, as the case may be and to file the report on behalf of the Central Government accordingly. In this regard, this Directorate vide letter dated 02.07.2015 had sent letter to the Chief Commissioner of Income Tax, Ahmedabad, Gujarat with a request to give specific comments of the Income Tax Department about the proposed scheme. It is submitted that no reply has Page 7 of 12 HC-NIC Page 7 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER been received from the Income Tax Department in this regard. The Hon'ble Court may therefore be pleased to direct the petitioner companies to undertake compliance of Income Tax Act and Rules in the matter."
9. The Regional Director has further observed in sub-paragraph (h) of Paragraph 2, that he has no other objection except as stated hereinabove and that the Scheme of Amalgamation of Reliance Global Trading Private Limited, Reliance Petroproducts Private Limited, Reliance Tankages Private Limited with Reliance Petro Distribution Private Limited (the "Transferee Company") may be considered by the Hon'ble Court after considering the observations in sub-paragraphs
(c) to (f) of Paragraph 2 of the said Common Affidavit.
10. In response to the observations in sub- paragraphs (c) to (f) of Paragraph 2 of the said Common Affidavit of the Regional Director, the Petitioner Company has submitted an affidavit-in- rejoinder dated ___ September 2015. A copy of the said affidavit was also served on the Regional Director. In the Affidavit-in-rejoinder the petitioner company has submitted that:
"(i) With respect sub-paragraph (c) of Paragraph 2 of the Affidavit of the Regional Director, the Scheme is a Scheme of Amalgamation under Sections 391 to 394 of the Companies Act, 1956 and is in compliance with the requirements of those Sections. The Page 8 of 12 HC-NIC Page 8 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER amalgamation of the Transferor Companies takes place, on sanction of the Scheme by the Hon'ble Court, by virtue of operation of law.
There is no requirement for consideration to be paid by the Transferee Company for the amalgamation or transfer of assets and liabilities of the Transferee Companies to the Transferee Company. Further it is submitted that one of the objectives of the Scheme is to reduce companies with same shareholders, all carrying on similar businesses, by cancellation of cross- holdings. The rationale for the Scheme stated in the Preamble section clearly provides the present activities and businesses of all the Transferor Companies can be conveniently combined with the business of the Transferee Company and the amalgamation will reduce multiple companies by consolidating the companies into a single larger entity. It is settled law that the Company Court will not sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval of the Scheme. The present Scheme has been approved by all members of the Transferor Companies and Transferee Company. It is legally settled that where the amalgamated companies were a part of the same management, had similar objects, their activities were complimentary to each other's work and the amalgamation was conducive of more efficient management and not the least against public interest, then the Scheme should be sanctioned.
(ii) With respect to sub-paragraph (d) of Paragraph 2 of the affidavit of the Regional Director, the petitioner company is presently holding investments. The Petitioner Company's main objects relate to petrochemicals business, etc. It is submitted that the Petitioner Company undertakes to obtain, if required, necessary licenses, approvals and Page 9 of 12 HC-NIC Page 9 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER permissions from the concerned regulatory authority and concerned Ministry to carry on the said activities and to follow all procedures, as may be, required by the appropriate authorities and to pay all fees, if any, for effecting transfer of licenses, approvals and permissions, if any, obtained by the Transferor Company to the name of the Transferee Company, on sanctioning of the scheme by the Hon'ble High Court of Gujarat at Ahmedabad.
(iii) With respect to sub-paragraph (e) of Paragraph 2 of the Affidavit of the Regional Director, it is submitted that though the petitioner company's main object relates to business relating to all types petrochemicals, etc. under object clause 12 of the Incidental Objects in Part B of Clause III of the Memorandum of Association, the petitioner company is entitled to hold shares and securities of other companies. The said activity is incidental to the business of the Company and is a permissible activity. Further, I submit that the Petitioner Company is not carrying on or engaged in investment activity. The investments held by the Petitioner Company are long term and are strategic investments. Further, I submit that the company has not earned any income from investment activity. The petitioner company is therefore not carrying on the business of a "Non-Banking Financial Company" ("NBFC"). The petitioner company has not accepted and does not accept 'public deposits'. In view of the aforesaid, the Petitioner Company is not registered with RBI as a NBFC under the Reserve Bank of India Act, 1934. Accordingly, it is submitted that the Petitioner Company is not a NBFC Company and is not required to obtain NOC from RBI.
(iv)With respect to sub-paragraph (f) of Paragraph 2 of the Affidavit of the Regional Page 10 of 12 HC-NIC Page 10 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER Director, the Petitioner Company submits that the Petitioner Company is bound to comply with all applicable provisions of the Income Tax Act, and the Transferee Company shall deal with all applicable tax issues arising out of the Scheme in accordance with law."
11. In view of the above statements of the Petitioner Company, since the Petitioner Company is not registered with Reserve Bank of India, it is not required to obtain NOC from Reserve Bank of India and explanation of the Petitioner Company is accepted. The learned advocate has submitted that in any event the petitioner company shall comply with all the requirements of applicable law. There does not appear to be any legal or other impediment in sanctioning the proposed Scheme of Amalgamation, at Exhibit 'H' to the Petition at page 130.
12. Accordingly, following order is passed:
The Scheme of Amalgamation at Exhibit 'H' to the petition of the Petitioner Company at pages 130 to 165 is sanctioned. The prayers made in the petition from (a) to (j) be granted to the petitioner company.
13. The petition is disposed of in the above terms. The petitioner company is directed to pay costs of Rs.7500/- to Mr. Devang Vyas, learned Central Government Standing Counsel, appearing on Page 11 of 12 HC-NIC Page 11 of 12 Created On Wed Oct 07 01:32:57 IST 2015 O/COMP/209/2015 ORDER behalf of the Regional Director and costs of Rs.7500/- to the Official Liquidator.
(VIPUL M. PANCHOLI, J.) Jani Page 12 of 12 HC-NIC Page 12 of 12 Created On Wed Oct 07 01:32:57 IST 2015