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IN RE : CITY TILES LIMITED

2016 (7) TMI 32 - GUJARAT HIGH COURT

Scheme of Arrangement in the nature of Demerger and Transfer of the demerged Undertaking - Held that:- The observations made by the Regional Director, Ministry of Corporate Affairs, have been suitably addressed and hence do not survive. This court has come to the conclusion that the present scheme of arrangement is in the interest of its shareholders and creditors as well as in the public interest and the same deserves to be sanctioned. - Prayers in terms of paragraph 23(a), and (b) of the C .....

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187 of 2016 In COMPANY APPLICATION NO. 111 of 2016 - Dated:- 23-6-2016 - MR. R.M.CHHAYA, J. FOR THE PETITONER : MRS SWATI SOPARKAR, ADVOCATE FOR THE RESPONDENT : MR KSHITIJ AMIN, CENTRAL GOVERNMENT STANDING COUNSEL for MR DEVANG VYAS, ASSISTANT SOLICITOR GENERAL COMMON ORAL JUDGMENT 1. These are the petitions filed by two companies viz. City Tiles Limited and Airona Tiles Limited, for the purpose of obtaining the sanction of this court to a Scheme of Arrangement in the nature of Demerger and Tr .....

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ed, the Petitioner Resulting Company has been incorporated recently with the objects of carrying on the business of manufacturing ceramic tiles. It is envisaged that the Resulting Company shall undertake the commercial activities of the Demerged Undertaking of City Tiles Limited, upon the scheme being effective. The proposed Scheme of Arrangement is proposed in order to segregate activities of the Demerged Company pertaining to different products. It has been realized that the two operating divi .....

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the Demerged Company is envisaged in form of Utilisation of the Securities Premium Account for the purpose of adjusting the net asset value of the demerged undertaking. The said proposal is covered under the provisions of Sec. 78 read with Sec. 100 to 103 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013. However, the same being consequential in nature is proposed as an integral part of the proposed scheme. The proposal does not involve any reduction in the Issued and Subscrib .....

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rder dated 23rd March 2016 passed in Company Application No. 112 of 2016, separate meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Demerged Company were directed to be convened for the purpose of obtaining their approval to the proposed scheme. Pursuant to the directions, separate meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Demerged Company were duly convened and held on 28th April 2016 and the Scheme was approved un .....

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olders of the company was dispensed with in view of the consent letters placed on record. There are no Secured and/or Unsecured Creditors of the Resulting Company. 6. The substantive petitions for the sanction of the scheme were filed by the Demerged Company and Resulting Company which were admitted on 5th May 2016. The notice for the hearing of the petitions were duly advertised in the newspapers Indian Express , English daily and Sandesh , Gujarati daily both Ahmedabad editions of 18th May 201 .....

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learned Assistant Solicitor General. An affidavit dt. 9th June 2016 has been filed by Mr. Shambhu Kumar Agarwal, the Regional Director, NorthWestern Region, Ministry of Corporate Affairs, whereby some observations are made. 8. Attention of this court is drawn to the Additional Affidavit dated 21st June 2016, filed by Mr. Rameshbhai L. Patel, Director of the Demerged Company whereby all the above issues have been dealt with. I have further heard submissions made by the learned counsel appearing f .....

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ny has placed on record the Divisional Financial Statement of the Demerged Company with the petition itself as ExhibitB1. Perusal of the same makes it clear that there is a clear columnar bifurcation with regard to the Demerged Undertaking, viz. Ceramic Division which is proposed to be demerged and transferred to the Resulting Company. (iii)Vide Para 2(d) of the affidavit, it has been observed by the Regional Director that the clause 7.3 of the Scheme dealing with the proposed Accounting Treatme .....

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the practice adopted for such accounting entry, varies from the said standard, necessary disclosure should be made in the financial statements. The said issue is already settled by several decisions of various High Courts, including the Gujarat High Court. The petitioner has undertaken and it is hereby directed that in case of deviation from the applicable accounting standard or practice, the Resulting Company shall make necessary disclosures in its first financial statements after the scheme i .....

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ions are required to be issued to the Petitioner Companies. (iv) The observation of the Regional Director made vide para 2(e) pertains to the letter dated 18th May 2016 sent by the Regional Director to the Income Tax Department to invite their objections, if any. Since no response is received from the said department and the statutory period of 15 days as envisaged by the relevant circular of the Ministry of Corporate Affairs is over, it can be presumed that the Income Tax dept. has no objection .....

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ering all the facts and circumstances and taking into account all the contentions raised by the affidavits and reply affidavits, undertakings provided vide the additional affidavit dated 21st June 2016, I am satisfied that the observations made by the Regional Director, Ministry of Corporate Affairs, have been suitably addressed and hence do not survive. This court has come to the conclusion that the present scheme of arrangement is in the interest of its shareholders and creditors as well as in .....

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