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2016 (1) TMI 548 - PUNJAB AND HARYANA HIGH COURT

2016 (1) TMI 548 - PUNJAB AND HARYANA HIGH COURT - TMI - Sanction of Amalgamation and Arrangement - composite scheme - Held that:- In terms of provisions of Section 394 of the Act, there could be amalgamation of any number of companies in one company but not that part of business of one company 'A' is to be merged in company 'B' and other companies are sought to be merged with Company-A. Both the schemes independently have no connection whatsoever as these are independent schemes. Balance-sheets .....

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the company can even be ordered to be wound up. If a composite scheme involving different companies with different objects is presented before the Court, it will not be possible for the Court to examine as to whether the object sought to be achieved by the first part in the scheme has, in fact, been achieved or not. After the implementation of part one of the scheme, shareholding pattern, the business, the profits etc. of the transferor and the transferee company will certainly have a change. Th .....

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f a composite petition is to be filed, it should be arrangement between two or more companies not different arrangements involving different companies. No doubt, the Court will not examine the business principles or commercial wisdom of the members of the companies at the time of sanctioning of scheme, but still compliance of procedural requirement is within the domain and this would fall in that. It is the duty of the Company Court to ensure presentation of correct facts, numbers, figures befor .....

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es, Mr. Deepak Suri, Advocate, Ms. Salina Chalana, Advocate. Mr. Deepak Aggarwal, Advocate with Mr. D. K. Singh, Official Liquidator. Rajesh Bindal, J. 1. This order will dispose of CP Nos. 29, 112, 113 and 157 of 2015, as common questions of law and facts are involved therein. 2. These are second motion petitions filed for seeking approval of Scheme of Arrangement/ Amalgamation (Annexure P-1 in all the petitions). 3. During the course of hearing the issue arose as to whether a single petition c .....

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Private Limited into Demerged Company i.e. QH Talbros Limited. 6. Meaning thereby in first part of the Scheme, QH Talbros Limited is the Transferor Company and Talwar Steering & Suspension Limited is the Transferee Company, whereas in the second part of the Scheme, Talbros International Limited, AAB Enterprises Private Limited and Blaustern India Sales Private Limited are the Transferor Companies, whereas QH Talbros Limited is the Transferee Company. 7. As a consequence of the aforesaid deme .....

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Undertaking-I) of Quatrro Business Support Services Private Limited (Petitioner Company I / Demerged Company 1) into Quatrro Global Services Private Limited (First Resulting Company/ Demerged Company 2/ Petitioner Company II). This is one part of the Scheme. 9. The second part provides for demerger of QGS FPO Business (Demerged Undertaking-II) of Quatrro Global Services Private Limited (First Resulting Company/ Demerged Company 2/ Petitioner Company II) into Quatrro Business Support Solutions P .....

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een filed for approval of the Scheme vide which merger of Scope E-Knowledge Center Private Limited (Transferor Company/ Petitioner Company I) into Quatrro Global Services Private Limited (Transferee Company/ First Resulting Company/ Demerged Company 2/ Petitioner Company III). This is one part of the Scheme. 12. The second part provides for demerger of Intellectual and Patents Analytics Business (Demerged Undertaking-1) of Quatrro Legal Solutions Private Limited ( Demerged Company 1/ Petitioner .....

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eme, Scope EKnowledge Center Private Limited is the Transferor Company and Quatrro Global Services Private Limited is the Transferee Company, whereas in the second part of the Scheme, Quatrro Legal Solutions Private Limited is the Transferor company and Quatrro Global Services Private Limited is the Transferee Company, and in the third part Quatrro Global Services Private Limited is the Transferor Company and Scope E-Knowledge Solutions Private Limited is the Transferee Company. CP No. 157 of 20 .....

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emerger of Investment Business Undertaking of Kajaria Securities Private Limited (Petitioner Company 4/ Amalgamated Company / Demerged Company) into Kajaria Portfolio Private Limited (Petitioner Company 5/ Resulting Company). 16. Meaning thereby in first part of the Scheme, Kajaria Exports Private Limited, Pearl Tile Marketing Private Limited and Cheri Ceramics Private Limited are the Transferor Companies and Kajaria Securities Private Limited is the Transferee Company, whereas in the second par .....

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on the ground of maintainability that a composite petition was not maintainable. 18. While referring to the provisions of Section 394 of the Companies Act, 1956 (for short, 'the 1956 Act'), it was submitted that the words used therein are not in singular rather in plural. Hence, it cannot be opined that a composite petition was not maintainable. The provision provides that a petition for sanctioning of a compromise or arrangement between a company and any such persons, can be filed. Refe .....

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heme as sanctioned by the Shareholders/ creditors as they are the best judge to see the commercial angle thereof. There can always be two facets in merger/demerger/ arrangement between two or more companies. Certainly, if the Scheme offends any law, the Court can always examine that aspect. Even the issue that resultant effect of merger/ demerger may be avoidance of tax liability, has also been opined in favour of the companies as this is no ground for rejection of the scheme. In support of his .....

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and Ahmedabad Manufacturing Company Limited 819, and CP Nos. 9 and 10 of 2006, Core Healthcare Limited vs Nirma Limited,decided on 1.3.2007, and Vodafone Essar Gujarat Limited vs Department of Income Tax (2013) 176 Comp Cas 7 (Guj). 19. In response to the contentions raised by learned counsel for the petitioners, learned counsel for Official Liquidator submitted that the provisions of the Act envisage that approval of a scheme of amalgamation between A-company may be with number of companies. Th .....

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therein providing for guidelines as what is to be examined by the Company Court for the purpose of approval of a Scheme as sanctioned by the shareholders/ creditors. He further submitted that in none of the judgments cited by the petitioners, the Schemes were such as are sought to be approved by the petitioners. As in all cases only two or more companies were involved, which were part of one scheme and not different schemes. 20. In terms of provisions of Section 394 of the Act, there could be a .....

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Court to see as to whether the process followed can be approved or not. 21. Heard learned counsel for the parties and perused the paperbook. 22. Section 391 of the Act provides that where a compromise or arrangement is proposed between 'A Company' and its creditors or any class of them, or between 'A company' and its members or any class of them, the Company Court may on the application of the company or any of the creditor or member of the company, etc. order that a meeting of t .....

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ithout modifications and the Company court is satisfied, it can even order winding up of the Company either suo-moto or on an application filed by any person. 24. Section 394 of the Act provides for different aspects to be considered while sanctioning the Scheme. 25. Hon'ble the Supreme Court in Miheer H. Mafatlal's case (supra), opined on the scope and ambit of jurisdiction of the Company Court in the cases of merger/ demerger. The relevant para is extracted below:- The broad contours o .....

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rs or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as whole so as to legitimately blind even the dissenting members of that class. 4. That all necessary material indicated by Section 393(1)(a) is placed before the voters at the meetings as contemplated by Section 391 sub-Section (1). 5. That all the requis .....

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if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7. That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising of the same class whom they purported to represent. 8. That the scheme as a whole is al .....

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approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction....... The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a scheme o .....

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d below:- 8. The transferor -Company MFL is proposed to be amalgamated with the respondent-Company MIL under the following circumstances and for the following reasons: 28. In Hindusthan Commercial Bank Limited's case (supra) the Scheme presented before the Company Court for sanction was pertaining to one company providing for re-arrangement of its share-capital. Relevant para of the Scheme of arrangement between several classes of shareholders, as noticed in the judgment is extracted below:- .....

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cancellation of the paid up capital to the extent of ₹ 70/- for every preference share of ₹ 100/- each to the extent of ₹ 8/- for every ordinary share of ₹ 10/- each and to the extent of ₹ 4/- each for every deferred share of ₹ 5/- each (c) for consolidation of the shares and for issue of fully paid up ordinary shares of ₹ 10/- each in lieu of preference, ordinary and deferred shares and for allotment of 3 fully paid up ordinary shares of ₹ 10/- ea .....

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action of their dues from the company to the extent of ₹ 12 lacs, 66, 858 ordinary shares are to be offered to the existing shareholders of the company and the remaining 96,284 ordinary shares are to be disposed of by the Directors in such manner as they deem fit. The explanatory circular pointed out that by the proposed cancellation of capital a sum of ₹ 22,5l,720/- would become available for wiping out the debit balance in the Profit and Loss Account and that on making such adjustm .....

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nting to over ₹ 10½ lacs and had also fore-gone their monthly allowance amounting to ₹ 3,75,000/-. 29. In Core Healthcare Limited's case (supra), the Scheme of arrangement presented before the Company Court for approval was amongst two companies, namely, Core Healthcare Limited vs Nirma Limited, only. 30. In Maneckchowk and Ahmedabad Manufacturing Company Limited 's case (supra), the Scheme presented for approval before the Company Court was a compromise between the cr .....

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ease of share capital by issue of shares to the unsecured creditors of the company excluding the workers to the tune of 50% of the verified claim of each unsecured creditor. The scheme envisages dismantling and scrapping of Unit No.II of the mills of the company and the sale proceeds to be utilised towards the payment to the secured creditors, namely, Union Bank of India and the Regional Provident Fund Commissioner. After Unit No.II is scrapped, the open land is to be let out to the intending le .....

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considering the objections raised by those contesting the scheme. 31. In Vodafone Essar Gujarat Limited's case (supra), the Scheme envisaged demerger of part of business of A company and merger thereof with other. It provided for demerger of passive infrastructure assets of the transferor companies and vesting with transferee companies. 32. In Hindustan Lever's case (supra), as well, the scheme provided for arrangement between two companies only. 33. In PMP Auto Industries Limited's .....

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erger of different companies, was placed before the Court for sanction by filing single petition. 35. If the scheme of the kind, as has been placed before the Court in the case in hand is to be considered, the exact figure, numbers, financial of the companies sought to be merged /demerged will not be available before the Court as well as for presentation before the members and creditors of the companies in the meetings. What will be the status of the company after implementation of the first par .....

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