Company Petition No. 1 / 2011 · Ble High Court · 2011

APPLICATIONS TO HIGH COURT : The Transferor Company and the Transferee Company shall with all reasonable dispatch make application under Section 391 and 394 and other applicable provisions of the Act to the Hon'ble High Court of Madhya Pradesh / National Company Law Tribunal for sanctioning this Scheme and for dissolution of the Transferor Company without winding up. Further a copy of the order of the High Court pursuant to Section 391 and 394 of the Companies Act, 1956, sanctioning the Scheme of Amalgamation shall be filed with the Office of the Registrar --- 11 --- of Companies, Madhya Pradesh, within one month from the date of the order sanctioning the Scheme is received by the Transferee Company.

SCHEME CONDITIONAL OR APPROVAL SANCTIONS : / The scheme is conditional on and subject to :

The sanction of the Hon'ble High Court of Madhya Pradesh at Indore/National Company Law Tribunal, under Section 391 and 394 of the Act, in favour of the Transferor Company and the Transferee Company and to the necessary orders under Section 394 of the Act, being obtained.

Filing of the order obtained from the Hon'ble High Court of Madhya Pradesh / National Company Law Tribunal, under Section 391 and 394 of the Companies Act, 1956 with the Registrar of Companies, Madhya Pradesh.

Any other sanction or approval of any concerned authority, as may be considered necessary and appropriate by the respective Board of directors of the Transferor Company and the Transferee Company, being obtained and granted in respect of any of the matters for which such sanction or approval is required.

If any of the said sanction or approval not being obtained and/ or the Scheme not being sanctioned by the High Court and/or the Order or Orders not being passed as aforesaid on or before or within such further period --- 12 --- or periods as may be agreed upon between the Transferor Company and Transferee Company, the Scheme shall become null and void, and each party shall bear its respective cost, charges and expenses.

RATIONALE FOR THE AMALGAMATION The Board of directors of Transferor Company and Transferee Company believe that the following factors inter-alai prompted them to approve the amalgamation of the two companies : i) The Transferor Company has been incurring losses due to inability to complete the necessary capital expenditure on up gradation and meet extreme paucity of working capital resources. The Transferor Company, as a stand alone entity, is unable to fund the requirement of the necessary capital expenditure and working capital requirements. The transferor Company in its present financial position is unable to invite fresh credit from the lenders. The manufacturing facility of the transferor company however is potentially viable. ii) The Transferee Company on the other hand is financially sound, and can successfully run the manufacturing operations of Transferor Company to achieve long term viability. Transferee Company has good market and brand name. Transferee Company already gets his job work done from the Transferor Company. iii) Majority of share holder of Transferor and Transferee Company belong to the same family and all the directors of the both the Companies are from same family. --- 13 --- iv) The amalgamation will enable the Transferee Company to infuse fresh resources for up gradation of manufacturing plant and for working capital requirements of the Transferor Company. v) The amalgamated Company will have the benefit of the combined reserves, manufacturing and other assets, and cash flows of the two companies. The combined resources of the amalgamated Company will be conducive to enhance its capability to face competition in the market place more effectively, particularly production capacity of Transferor Company would be used in most effective manner by the amalgamated Company. vi) If the two Companies are merged, there will be greater cost benefits and economics. Which accrue to the amalgamated company. Management cost, Taxation cost and other establishment cost will be reduced. The arrangement under the Scheme will be conducive to better and more efficient and economical control and conduct of the Companies.

All costs, charges and expenses, including any taxes and duties of the Transferor Company and Transferee Company respectively in relation to or in connection with this Scheme and incidental to the completion of the amalgamation of the Transferee Company in pursuance of this Scheme shall be borne and paid by the Transferee Company. 9/ That this Hon'ble Court vide order dated 9/12/2010 passed in Company Petition No. 19 / 2010 have dispensed with the --- 14 --- convening and holding of meeting of equity shareholders, secured and unsecured creditors of the transferor and transferee company and that the publication of notice of meeting in the newspapers, a copy of order dated 9/12/2010 is annexed hereto as Annexure – A. 10/ The sanctioning of compromise or arrangement would be for the benefit of the company. This Court while deciding the earlier Company Petition No. 19 / 2000 filed by the aforesaid two companies has dispensed with requirement of meeting of the shareholders, secured and unsecured creditors of the transferor company as all the shareholders of the transferee company and transferor company have consented in respect of the amalgamation.

Heard Shri Ashok Chitale, learned senior counsel with Shri Vijay Asudani, learned counsel for the petitioner, Shri Vinay Zelawat, learned Assistant Solicitor General of India for Government of India and Shri P.K. Butta, Official Liquidator present in person.

Having heard the Learned counsel for the parties and having perused the record of the case, I am inclined to grant sanction to the scheme (Annexure - A) proposed by the aforementioned Companies.

In my considered opinion, I have not been able to notice any infirmity or objectionable feature of any kind or illegality or lacking bonafide in the scheme so proposed. It also does not appear to have been framed by both companies to defeat the rights of their creditors or any class of creditors or even any class or group of minority share holder or to defeat any governmental dues or Revenue. Indeed all persons, who are directly or indirectly associated and dealing with both the companies, such as share holders, creditors, Regional Director and O.L. have not objected to the scheme in question except to the extent mentioned supra. As observed supra, the Scheme --- 19 --- in question has been unanimously approved by share holders and creditors of both companies in their meeting held on 30.01.2006.

It can not be disputed that all such schemes are essentially meant for share holders and creditors of the Companies. When the entire body of share holders and creditors do not object to it and on the other hand approves it in express terms in the specially convened meeting for the said purpose, then it has to be given effect to because wishes of share holders and creditors must be allowed to prevail in the absence of any other illegality being noticed by this Court within the meaning of Section 391 and 394 of the Companies Act.

11. In my opinion, the Scheme of amalgamation proposed by two companies appears to be more to achieve administrative excellency rather than to defeat anybody’s rights. It will enable the transferee - company to run their business more effectively and economically then what they are presently doing. It will certainly reduce their all kinds of expenses which are being incurred everyday by these companies for running their respective business. Moreover, the proposed scheme does take into consideration and safeguard the rights of shareholders of both companies as also their employees working in the transferor company. In other words, none of the liabilities of the transferor company are in --- 20 --- any way going to be adversely affected by the Scheme if allowed to be implemented. So far as the rights of the creditors are concerned, they also remain intact so too of the share holders.

12. Coming now to the sole objection raised by Regional Director in his affidavit dated 23.03.2006 as also by O.L. namely that company may be asked to ensure compliance of section 94, 97 and section 100 ibid, it does not appear to be well founded in the facts of this case. Mere perusal of section 94(1)(a)(2) would go to show that company is entitled to increase its share capital if their articles and memorandum of association empower for such increase and further if it is passed in general meeting of the company. Sub section (2) also provides that it is not necessary to seek confirmation from the court for such increase. It is not in dispute that clause 7 of articles and memorandum of association of the company in question empower the share holders to raise their capital. It is also not in dispute the companies have passed the required resolution to this effect in their general meeting as provided by section 94(1)(a)(2) ibid.

13. Keeping in view the totality of the circumstances of the case, the petition filed u/Ss. 391 – 394 deserves to be allowed and is accordingly allowed. The petitioner Company shall comply with the accounting standard 14 as required u/S. 211 (3A) of the Companies Act, 1956 by making accounting entries in their respective books of --- 21 --- accounts with respect to implementation of the present Scheme of Amalgamation.

14. The petitioner Companies to file a copy of this order and the Scheme duly authenticated by the Company Registrar, High Court, Indore Bench, with the concerned Office of the Registrar of Companies within 30 days from the date of receipt of the present order along with a list of shareholders and explanation as to the treatment of fraction, if any.

The petitioner No.1 transferee Company to pay a cost of Rs.25,000/- to the Official Liquidator for deposit in the common pool fund maintained by the Official Liquidator, cost to be paid within 4 weeks from today. Petitioner No.1 transferee Company to pay cost of Rs.5,000/- to the Advocate appearing on behalf of the Regional Director, Ahemdabad. Payment be made within 4 weeks from today.

The petitioner No.2 transferor Company shall stand dissolved without winding up.

Filing and issuance of the drawn up order is dispensed with.

All concerned authorities to act on a copy of this order along with the Scheme duly authenticated by the Company Registrar, High Court of M.P., Indore Bench. KR (S. C. SHARMA) COMPANY JUDGE --- 22 --- SCHEDULE – A SCHEME OF AMALGAMATION

1. TRANSFER AND VESTING;

1.1 Upon the scheme coming into effect from the appointed dated ( April 01st 2010), the undertaking of the Transferor Company with all assets and Habilities shall, pursuant to section 391 and 394 of the Companies Act; 1956 and without any further act or deed, be transferred to and vested in the transferee Company for all the estates, assets, rights and interests of the transferor company therein but subject nevertheless to all charges, if any, then affection the same or any part thereof and as on the transfer date, and the transferor company shall be deemed to have been amalgamated with the transferee company.

1.2 In respect of the assets of the Transferor Company as are moveable in nature, including other investments, or are otherwise capable of transfer by mutual delivery or by endorsement and delivery, the same shall be so transferred by the Transferor Company, and shall upon such transfer, become properties, estates, assets, rights , title, interests and authorities of the Transferee Company pursuant to section 394 of the Act.

1.3 In respect of such assets of the Transferor Company other than those referred to in Clause 2.2 above, the same shall, without any further act, instrument or deed, be and stand transferred to and vested in the Transferee Company on the Appointed Date pursuant to the provisions of section 394 of the Act.

1.4 The transferor Company shall comply order, if any, passed by Hon’ble High Court making provision for persons, who within stipulated time descent from the compromise and arrangement.

1.5 For the purpose of the Scheme, the undertaking of the Transferor Company shall include; --- 23 --- i) All properties and assets ( leased or otherwise), movable and immovable, real and personal, corporeal and incorporeal, in possession, present and contingent of whatsoever nature, wherever situated, as on the Appointed Date, and such additional assets pertaining to the Transferor Company acquired since the Appointed Date. ii) All permits, quotas, license, allotments including impart quotas, rights, industrial and other licenses i.e. from Drug Contrller, Industrial Health & safety, M.P. Pollution Control Board, DIC etc, tenancies, offices and depots, trade marks, patents, copy rights, formulae , privileges and benefits of all contracts including the rights of agreements and all other rights including lease, leave and licenses, and/ or other licenses, process and facilities of every Kind , nature and description whatsoever of and pertaining to the Transferor Company. iii) All registrations and entitlements ( including deposits) including electricity ( M.P.E.B.), water, gas connections, other fuel and power, leases of leasehold land from DIC and other properties, plant and machinery, vehicles etc, and Income Tax, Sales Tax, Weights and measurement Department and Excise duty licenses and also with export import authority including advance licenses, duty entitlement pass books, duty refund against export obligations there under of and pertaining to the Transferor Company. iv) All necessary records, files papers, engineering information, computer programs, manuals, data, catalogues, quotations, sales and advertising materials.

Customer credit information, customer pricing information , and other records, telephone/ facsimile/telex and other --- 24 --- communication facilities, equipments including computers, hardware, software and other electronic equipment and in instruments, systems of any kind whatsoever of the Transferor Company. v) Rights and benefits of all agreements and other interest including rights and benefits under various schemes of different taxation laws as may belong to or be available to the Transferor Company. vi) All debts, liabilities, duties and obligations of the Transferor Company ( hereinafter referred to as “ the said liabilities”) shall also be and stand transferred or deemed to be transferred, without further act, instrument or deed, to the Transferee Company, pursuant to the provisions of Sections 391 to 394 of the Act so as to become, from the Appointed Date, the debts, liabilities, duties and obligations of the Transferee Company in the same manner and on the same terms and conditions as applicable to the Transferor Company and further that it shall not be necessary to obtain the consent of any third party or other person who is a party to any contract or arrangement by virtue of which such debts, liabilities duties and obligations have arisen, in order to give effect to the provisions of this clause.

2. LEGAL PROCEEDINGS : If any suit or appeal or other legal proceedings of whatsoever nature ( hereinafter called the proceedings) by or against the Transferor Company be pending, the same shall not abate, be discontinued or be in any way prejudicially affected by reason of the transfer of the undertaking of the Transferor Company to the --- 25 --- Transferee Company or of anything contained in the scheme but the proceedings may be continued, prosecuted and enforced by or against the Transferee Company in the same manner and to the same extent as if this scheme has not been made.

3. CONTRACT, DEEDS, BONDS AND OTHER INSTRUMENTS; I) The transfer and vesting of the property and liabilities under Clause 2 hereof and the continuance of the proceedings by the Transferor Company under Clause 3 hereof shall not affect any transaction or proceedings already concluded by the Transferor Company in the ordinary course of business on or after the transfer date to the end and intent that the Transferee Company accepts on behalf of itself all acts, deeds and things done lawfully and executed by the Transferor Company. ii) Subject to the other provisions contained in this Scheme , all contracts, deeds agreements, bonds and other instruments of whatsoever nature subsisting or having effect immediately before the Effective Date to which the Transferor Company is a party, shall be in full force and effective against or in favour of the Transferee Company as if the Transferee Company had been a party thereto.

4. SAVINGS OF CONCLUDED TRANSACTIONS: The transfer of properties and liabilities under Clause 2 above and the continuance of the proceedings by or against the Transferee Company under Clause 3 above shall not effect any transaction or proceedings already concluded by the Transferor Company prior to the coming into effect of this scheme to the end and intent that the Transferee Company accepts and adopts all acts, deeds and things --- 26 --- done and executed by the Transferor Company in respect thereto as done and executed on behalf of itself.

CONDUCT OF BUSINESS BY TRANSFEROR COMPANY TILL EFFECTIVE DATE: i) As from the transfer date, the Transferor Company shall be deemed to have carried on and to be carrying on its business on behalf of and in trust for the Transferee Company until such time as the amalgamation becomes effective in terms of this scheme. ii) All the profits or incomes accruing or arising to the Transferor Company, or expenditure or losses arising or incurred ( including the effect of taxes, if any, thereon) by the Transferor Company shall, for all purposes, be treated and be deemed to be and accrue as the profits or incomes or expenditure or loses or taxes of the Transferee Company, as the case may be. iii) The Transferor Company shall carry on its business and activities with reasonable diligence and business prudence and shall not alienate, charge, mortgage or encumber or deal with the said assets or any part thereof, except in the ordinary course of business, or without the prior consent of the Transferee Company or pursuant to any pre- existing obligation undertaken by the Transferor Company prior to the Appointed Date.

TRANSFEROR COMPANY’S STAFF, WORKMEN AND EMPLOYEES : All permanent employees of the Transferor Company who are in the employment of the Transferor Company on the effective date in terms of this Scheme shall, as from such date, become the --- 27 --- employees of the Transferee Company, on the basis that their services do not stand interrupted by vesting of the undertaking of the Transferor Company in the transferee company under this scheme and the terms and conditions of service applicable to such employees on the Effective Date is in no way less favorable to them than those applicable to them immediately before the transfer date . It is made clear that services of all such employees of transferor Company up to the effective date taken into consideration for the purpose of calculation of retirement benefits and retrenchment compensation.

7. SHARE CAPITAL AND ISSUE OF SHARES BY THE TRANSFEREE COMPANY : i) The Authorized Share capital of the Transferor Company is Rs. 35,00,000/- ( Rupees Thirty Five Lacs Only) divided into 3,50,000/- ( Three Lacs Fifty Thousand) Equity Shares of Rs, 10/- ( Rupees Ten) each. The issued , subscribed and paid up capital of Transferor Company of Rs. 34,00,000/- ( Rupees Thirty Four Lacs) is divided into 3,40,000/- ( Rupees Three Lacs Forty Thousand) Equity shares of Rs. 10/- (Ten) each fully paid up. ii) The Authorised Share capital of the Transferor Company is Rs. 5,00,00,000/- ( Rupees Five Crores Only) divided into 50,00,000/- ( Fifty Lacs ) Equity Shares of Rs, 10/- ( Rupees Ten) each. The issued , subscribed and paid up capital of Transferee Company is Rs. 4,59,57,800/- ( Rupees Four Crores, Fifty Nine Lacs Fifty Seven Thousand and Eight Hundred ) divided into 45,95,780/- ( Rupees Forty Five Lacs Ninty Five Thousand Seven Hundred and Eighty) Equity shares of Rs. 10/- (Ten) each fully paid up. iii) Post merger Authorised Share capital of the Transferee --- 28 --- Company will be Rs. 8,26,77,800/- ( Rupees Eight Crores Twenty Six Lacs Seventy Seven Thousand and Eight Hundred Only) divided into 82,67,780 ( Eighty Two Lacs Sixty Seven Thousand Seven Hundred and Eighty only) Equity Shares of Rs. 10/- ( Rupees Ten) each. The issued , subscribed and paid up Capital of transferee company will be Rs. 8,26,77,800/- ( Rupees Eight Crores, Twenty Six Lacs Seventy Seven Thousand and Eight Hundred Only) divided into 82,67,780 ( Eighty Two Lacs Sixty Seven Thousand Seven Hundred and Eighty) Equity shares of Rs. 10/- ( Rupee Ten) each fully paid up. iv) Upon the transfer of the undertakings of the Transferor Company, pursuant to Clause 2 hereof and the amalgamation becoming effective in terms of this scheme , the consideration in respect of such transfer shall be subject to the provisions of this scheme as follows:

8. ACCOUNTING TREATMENT OF ASSETS, LIABILITIES AND RESERVES OF THE TRANSFEROR COMPANY : a. As on the appointed date, and subject to any corrections and adjustments as may, on amalgamation all assets and liabilities of the Transferor Company shall be recorded as per purchase method as provided in Accounting Standard – 14 issued by ICAI in the books of the Transferee Company. b. Further, in case of any difference in accounting policy between the Transferor Company and the Transferee Company, the impact of the amalgamation will be quantified and adjusted in the Profit and Loss account of the Transferee Company, at the discretion of the Transferee Company to ensure that the --- 29 --- financial statement of the Transferee Company reflects the financial position on the basis of the consistency in the accounting policy. c. In case of any differences between the amount recorded as liability, if any, held by the Transferee Company in the books of Transferor Company and corresponding amount in the books of the asset / receivables, if any, of the Transferee Company in the books of the Transferee Company, the same difference shall be transferred to or adjusted to General Reserve or as goodwill, as the case may be in the books of the Transferee Company. d.

The amalgamation reserve created, if any, out of transfer of assets and liabilities to the books of the Transferee Company shall be treated as Revenue reserve for all practical purposes. e. An amount equal to the excess of liabilities over the assets being Goodwill of the Transferor Company, if any, which would be vested in the Transferee Company shall be treated as Goodwill and shall be carried forward accordingly in the books of the Transferee Company. Such Goodwill carried in the Transferee Company shall be amortized over a period of 1 year to 5 year, out of it’s profit and loss account and/ or General Reserve at the discretion of the Transferee Company. 9) DISSOLUTION OF TRANSFEROR COMPANY : Upon this scheme being sanctioned as aforesaid the Transferor Company. --- 30 --- 10) MODIFICATION / AMENDMENT TO THE SCHEME : i. The Transferor Company and the Transferee Company though their directors my consent on behalf of all persons concerned to any modification or amendment to this scheme or any other condition which the court and/or any other concerned authority under any applicable law may deem fit to approve of or impose or which may otherwise be considered necessary or desirable for settling any question or doubt or difficulty that may arise for carrying out the Scheme and do all such acts, deeds and things s may be necessary, desirable or expedient for putting the Scheme into effect. ii.

For the purpose of giving effect to this scheme the Board of Directors of the Transferee Company are Authorized to give such directions s may be necessary or desirable and to settle, as they may deem fit, any question, doubt or difficulty that may arise in connection with or in the working of the Scheme including with regard to issue and allotment of shares under clause 6 hereof to the members of the Transferor Company and deeds and things necessary for carrying into effect this scheme.

11. APPLICATIONS TO HIGH COURT : The Transferor Company and the Transferee Company shall with all reasonable dispatch make application under Section 391 and 394 and other applicable provisions of the Act to the Hon'ble High Court of Madhya Pradesh / National Company Law Tribunal for sanctioning this Scheme and for dissolution of the Transferor Company without winding up. Further a copy of the order of the High Court pursuant to Section 391 --- 31 --- and 394 of the Companies Act, 1956, sanctioning the Scheme of Amalgamation shall be filed with the Office of the Registrar of Companies, Madhya Pradesh, within one month from the date of the order sanctioning the Scheme is received by the Transferee Company.

12. SCHEME CONDITIONAL OR APPROVAL SANCTIONS : / The scheme is conditional on and subject to :

1. The sanction of the Hon'ble High Court of Madhya Pradesh at Indore/National Company Law Tribunal, under Section 391 and 394 of the Act, in favour of the Transferor Company and the Transferee Company and to the necessary orders under Section 394 of the Act, being obtained.

2. Filing of the order obtained from the Hon'ble High Court of Madhya Pradesh / National Company Law Tribunal, under Section 391 and 394 of the Companies Act, 1956 with the Registrar of Companies, Madhya Pradesh.

3. Any other sanction or approval of any concerned authority, as may be considered necessary and appropriate by the respective Board of directors of the Transferor Company and the Transferee Company, being obtained and granted in respect of any of the matters for which such sanction or approval is required.

4. If any of the said sanction or approval not being obtained and/ or the Scheme not being sanctioned by the --- 32 --- High Court and/or the Order or Orders not being passed as aforesaid on or before or within such further period or periods as may be agreed upon between the Transferor Company and Transferee Company, the Scheme shall become null and void, and each party shall bear its respective cost, charges and expenses.

13. RATIONALE FOR THE AMALGAMATION The Board of directors of Transferor Company and Transferee Company believe that the following factors inter-alai prompted them to approve the amalgamation of the two companies : vii) The Transferor Company has been incurring losses due to inability to complete the necessary capital expenditure on up gradation and meet extreme paucity of working capital resources. The Transferor Company, as a stand alone entity, is unable to fund the requirement of the necessary capital expenditure and working capital requirements. The transferor Company in its present financial position is unable to invite fresh credit from the lenders. The manufacturing facility of the transferor company however is potentially viable. viii) The Transferee Company on the other hand is financially sound, and can successfully run the manufacturing operations of Transferor Company to achieve long term viability. Transferee Company has good market and brand name. Transferee Company already gets his job work done from the Transferor Company. ix) Majority of share holder of Transferor and Transferee --- 33 --- Company belong to the same family and all the directors of the both the Companies are from same family. x) The amalgamation will enable the Transferee Company to infuse fresh resources for up gradation of manufacturing plant and for working capital requirements of the Transferor Company. xi) The amalgamated Company will have the benefit of the combined reserves, manufacturing and other assets, and cash flows of the two companies. The combined resources of the amalgamated Company will be conducive to enhance its capability to face competition in the market place more effectively, particularly production capacity of Transferor Company would be used in most effective manner by the amalgamated Company. xii) If the two Companies are merged, there will be greater cost benefits and economics. Which accrue to the amalgamated company. Management cost, Taxation cost and other establishment cost will be reduced. The arrangement under the Scheme will be conducive to better and more efficient and economical control and conduct of the Companies.

14. All costs, charges and expenses, including any taxes and duties of the Transferor Company and Transferee Company respectively in relation to or in connection with this Scheme and incidental to the completion of the amalgamation of the Transferee Company in pursuance of this Scheme shall be borne and paid by the Transferee Company.