TMI Blog2020 (9) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... /Pb/2019 - - - Dated:- 26-2-2020 - Ajay Kumar Vatsavayi, Member (J) and Pradeep R. Sethi, Member (T) For the Appellant : Sanjeev Puri, Senior Advocate, Ankit Tandon, Vatsala Rai, Rohit Khanna, Tanmay Sharma, Raghav Kapoor, For the Respondent : Yogesh Putney, Harveet Singh Sehgal, Advs., O.P. Sharma, Official Liquidator, Vibhor Sharma, Shyam Sunder, Registrar of Companies, Labh Singh Sandhu and Shashi Bhushan Gulav, Advocates JUDGMENT Ajay Kumar Vatsavayi, Member (J) 1. This is a petition filed by GlaxoSmithKline Consumer Healthcare Limited ( Transferor Company or Petitioner Company ) under Sections 230 to 232 of the Companies Act, 2013 ( Act ) and in terms of Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 ( Rules ) for the approval of the Scheme of Amalgamation and Arrangement (for brevity, Scheme ) between the Petitioner Company and Hindustan Unilever Limited ( Transferee Company ). The joint petition is maintainable in terms of Rule 3 (2) of the Rules. 2. The Petitioner Company filed First Motion Application bearing CA (CAA) No. 4/Chd/Pb/2019 ( First Motion Application ) before this Tribunal for seeking direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame date as the Effective Date or such other date i.e. mutually agreed in writing between the Transferor and the Transferee Company. The effective date, as stated in the Scheme is as below:- Effective Date means the date of the Board meetings of the Transferor Company and the Transferee Company held to declare this Scheme effective, which will be no later than 5 (Five) days (unless extended by mutual written agreement between the Transferor Company and the Transferee Company), following satisfaction or waiver (to the extent possible under Applicable Law) of the conditions set out in Clause 26 (other than those conditions that by their nature are to be satisfied on the Effective Date); Reference in this Scheme to the date of coming into effect of this Scheme or effectiveness of this Scheme shall mean the Effective Date; 11. The Share Exchange Ratio under the Scheme has been determined in accordance with the report of SRBC Co. LLP dated 02.12.2018 (Annexure A-23 of the petition). The Share Exchange Ratio is as follows:- 439 (four hundred and thirty nine) equity shares of HUL (of INR 1/- each fully paid up) for 100 (hundred) equity shares held in GSK CH (o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e affidavit at least two days before the date fixed to the effect that no objections to the Scheme have been received by the petitioner-companies. 12. The Petitioner Transferor Company shall at least two days before the date of hearing of the petition file an affidavit of service regarding paper publication as well as service of notices on the authorities specified above including the sectoral regulator as well as to objectors, if any. 13. Learned counsel for the petitioner company filed compliance affidavit of Mr. Devdas Baliga, Authorized Signatory of the petitioner company dated 09.01.2020 (Diary No. 255 dated 10.01.2020). Copies of newspaper publications in 'Financial Express' (English), Punjab Edition and 'Punjbai Tribune' (Punjabi), Chandigarh Edition, both dated 06.01.2020 annexed as Annexure-2 Colly of Diary 255. Copies of speed post receipt alongwith tracking reports and courier receipts evidencing service of notices by the petitioner company through courier to all the above mentioned statutory authorities are also a part of Diary No. 255. 14. It is also submitted in this affidavit that as on the date of affidavit, the petitioner company has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y No. 254 dated 10.01.2020. It is submitted that Clause 20 of Part III of the Scheme is in consonance and compliance with the relevant law, in particular, Section 232(3)(i) of the Act and reiterates the statutory prescription that the Transferee Company shall be entitled to a merger of the Authorized Share Capital of the Transferor Company, along with a credit of statutory fees paid to the ROC by the Transferor Company in this regard. With respect to the second observation made by in the Reports, it is further submitted that Clause 15 of Part II of the Scheme is in consonance and compliance with the relevant law, and all Tax assessment proceedings and appeals of whatsoever nature by or against the Transferor Company, pending or arising as at the Effective Date, shall be continued and/or enforced by or against the Transferee Company in the same manner and to the same extent as would or might have been continued and enforced by or against the Transferor Company. 19. Mr. O.P. Sharma, Official Liquidator (OL) has submitted that they have filed their report vide Diary No. 6000 dated 31.10.2019 and the same may be considered as report to this Second Motion Petition as well. In its rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a noting to this effect in the order of Amalgamation. 22. Learned counsel for the Income Tax Department also submitted that the applicant companies may be directed to submit an undertaking in respect of the observations made in the Income Tax Reports and also may be directed to comply with the provisions of the law. 23. Learned Senior Counsel appearing for the petitioner company submits that they have already filed affidavit vide Diary No. 7343 dated 23.12.2019 and Diary No. 281 dated 13.01.2020 and a reply vide Diary No. 791 dated 29.01.2020 along with an affidavit of the Transferee Company dated 09.01.2020 undertaking that they will honour and remain bound by the liabilities in respect of any current, pending or future income tax demands placed on the Transferee Company. 24. National Stock Exchange of India Limited (NSE) has forwarded an observation letter dated 15.02.2019 (Annexure A11 of petition). It is submitted that the company shall ensure that additional information, if any, submitted by the company, after filing the Scheme with Stock Exchange and from the date of receipt of this letter is displayed on the website of the listed company. It is also stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon coming effect of this Scheme, all the Transferor Company Employees shall become the employees of the Transferee Company, subject to the provisions hereof without any break in their service and on basis of continuity of service and, on terms and conditions no less favourable than those on which they are engaged by the Transferor Company and without any interruption of service as a result of the Amalgamation. 30. Mr. Labh Singh Sandhu, the learned counsel appearing for the Milk Food Workers Union ( Union ) filed its objections vide Diary No. 287/2020 dated 13.01.2020, which are as under:- (a)(i) The Workers Union was not consulted while preparing the Scheme. The employees of the Transferor Company cannot be transferred to another company without indicating and specifying the effect of the Scheme on the service conditions of its employees vis- -vis the service conditions of the Transferee Company. (ii) A dispute between the Workers Union and the Transferor Company is pending adjudication before the competent Labour Commissioner at SAS Nagar, Mohali, Punjab and the said fact was not only concealed in the Scheme but also not explained how the same will be dealt with afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transferred to such Employee Benefit Funds nominated by the Transferee Company and/or such new Employee Benefit Funds to be established and caused to be recognized by appropriate Governmental Authorities, by the Transferee Company. (iii) In relation to those Transferor Company Employees who are not covered under the provident fund trust of the Transferor Company or who do not enjoy the benefit of any other provident fund trust, and for whom the Transferor Company is make contributions to the government provident fund, the Transferee Company shall stand substituted for the Transferor Company, for all purposes whatsoever, including relating to the obligation to make contributions to the said fund in accordance with the provisions of such fund, bye laws, etc. in respect of such employees, such that all the rights, duties, powers and obligations of the Transferor Company in relation to such provident fund trust shall become those of the Transferee Company. (iv) Pending the transfer as aforesaid, the Employee Benefit Fund dues of the Transferor Company Employees would be continued to be deposited in the existing Employee Benefit Funds of the Transferor Company. It is clarified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hree years was alarming for the workers. It cannot be said that after the amalgamation they will be in a worse position than they Were before the amalgamation. 80. We do not find that the amalgamation has caused any prejudice to the workers of TOMCO. The stand of the employees of HLL is equally incomprehensible. It has been stated that if the TOMCO employees continue to enjoy the terms and conditions of their service as before, then two classes of employees will come into existence, Terms and conditions of HLL employees were much worse than that of TOMCO employees. If there are two sets of terms and conditions under the same company, then a case of discrimination will arise against the HLL employees. 81. We do not find any substance in this contention. The TOMCO employees will continue to remain on the same terms and conditions as before. Because of this arrangement, it cannot be said that a prejudice has been caused to HLL employees. They will still be getting what they were getting earlier. TOMCO employees who were working under better terms and conditions, will continue to enjoy their old service conditions under the new management. Xxx xxx xxx xxx 83. No one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground of potential liability, sanction cannot be refused. In this connection, Mr. Raval drew my attention to the decision of the Supreme Court in the case of Union of India v. Alembic Sarabhai Enterprise, reported in 55 Company Cases 623 and of the Karnataka High Court in the case of Mysore Electrical Works Ltd. v. I.T.O., Bangalore, reported in 52 Company Cases 32. In the latter case, it was specifically held by the High Court of Karnataka that the direction by the Company Court cannot relate to matters outside the scheme and obviously it is so. When the Company Court exercises jurisdiction under the Act, it has to decide the matter in accordance with the provisions of that Act. It is neither deciding any question nor expressing any opinion on the points which do not strictly fall within the preview of the Scheme of amalgamation. Therefore, if the employees of the transferee Company feel aggrieved in connection with payment of wages or other conditions of service, it is always open to them to approach an appropriate forum in accordance with law and all those questions will be decided in those proceedings. Granting of sanction of amalgamation of companies by this court would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny for all estate and interest of the Transferor Company therein but subject nevertheless to all charges now affecting the same; and ii) That all the liabilities and duties of the Transferor Company be transferred without further act or deed, to the Transferee Company and accordingly, the same shall, pursuant to Section 230 to 232 of the Act, be transferred to and become the liabilities of the Transferee Company; and iii) That all the proceedings now pending by or against the Transferor Company be continued by or against the Transferee Company; and iv) That all the employees of the Transferor Company shall be transferred to the Transferee Company in terms of the 'Scheme'; and v) The authorized share capital of the Transferee Company shall stand increased and that of Transferor Company shall stand cancelled and extinguished as provided in the Scheme; and vi) That the fee, if any, paid by the Transferor Company on its authorized capital shall be set off against any fees payable by the Transferee Company on its authorized capital subsequent to the sanction of the 'Scheme'; and vii) That the Petitioner Company do, within 30 days after the date of recei ..... 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