TMI Blog2018 (9) TMI 2041X X X X Extracts X X X X X X X X Extracts X X X X ..... s Private Limited (for brevity, A-2 Company) with ITW India Private Limited (for brevity, A-3 Company) under Section 230-232 of the Companies Act, 2013 (for short, to be referred hereinafter as the Act) read with Rule 3 of the Companies (Compromises, Arrangements Amalgamations) Rules, 2016 (for brevity, the Rules) for sanction of proposed Scheme of Arrangement Annexure A-1 (for short, the Scheme) of the Applicant- Companies as supported by the affidavit of Mr. Rohit Gupta, Authorised Representative of the Applicant Companies in support of the joint application for seeking appropriate orders/direction for calling and convening meetings and for dispensing with some of the meetings. The joint application is maintainable in terms of Rule 3(2) of the Rules. 2. The Board of Directors of the applicant companies unanimously approved the Scheme by passing their Board resolutions. The resolutions dated 01.08.2018 of A-1 and A-2 companies are Annexures A-11 and A-12, respectively and A-3 company approved the Scheme by resolution dated 02.08.2018 (Annexure A-13)subject to sanctioning of the same by this Tribunal. That A-1 Company has authorized Shri Rohit Gupta and Shri Mihir Gangadhar Ku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, dealers in electronic, mechanical and servo-hydraulic systems used in mechanical testing of materials and structures; digital, analog, hybrid and microprocessor based control and data acquisition equipment; Computer Software, including firmware, application software and documentation, and associated with realtime as well as off-line application etc. 7. Further as per certificate of incorporation of A-2 company which is part of the documents - Annexure A-5, the company was incorporated on the 29th January, 1992 as a private company limited by shares. Its registered office was shifted from the State of Karnataka to the State of Haryana and a fresh Certificate of Incorporation dated 20.07.2015 was issued. Its CIN is U30009HR1992PTC056008. A-2 company is stated to be a wholly owned subsidiary of Transferee Company. 8. The authorized, issued, subscribed and paid-up capital of A-2 Company as on 31.07.2018 is as under:- Particulars Amount (in ₹) Authorized Share Capital, 25,000 Equity Shares of ₹ 100/- each 25,00,000 Issued, Subscri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dated 13.10.2004. Its registered office was shifted from the State of Andhra Pradesh to the State of Haryana and a fresh Certificate of Incorporation Number U32301HR1979PLC038643 dated 29.12.2008 was issued. Vide fresh certificate of incorporation dated 16.04.2015, the company was again converted into a private limited company under its present name of ITW India Private Limited. Its CIN U32301HR1979PTC038643. A-3 company is stated to be a holding company of A-1 and A-2 Companies. 11. The Authorised and paid up capital of the Transferee Company as on 31.07.18 is as follows and there is no change till the date of filing of the present petition :- Particulars Amount (in ₹) Authorized Share Capital, 25,300 Equity Shares of ₹ 20,000/- each 50,60,00,000 Issued Share Capital 8,938 Equity Shares of ₹ 20,000/- each 17,87,60,000 Subscribed and Paid-up Share Capital 6,775 Equity Shares of ₹ 20,000/- each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting therein that the A-3 company agrees and consents unconditionally to the dispensation of meeting of shareholders of A-1 company. With regard to the nominee shareholder, i.e., Avery India Limited, a similar affidavit of no objection for dispensation has been filed by Mr. Rohit Gupta from pages 363 to 366 of the paper book. The learned counsel for the applicant-companies has represented that the resolution of Board of Directors of Avery India Limited, the nominee shareholder passed the resolution dated 13.07.2018 (as per page 373A) authorizing all its Directors, jointly and/or severally to furnish the affidavits of consent. Mr. Rohit Gupta in his affidavit has also stated that he derives his authority from the resolution dated 13.07.2018. 17. As per certificate of Suresh Surana Associates LLP, Chartered Accountants as at Annexure A-16, A-1 company has no secured creditors as on 31.07.2018. 18. There are 3 unsecured creditors of A-1 company as on 31.7.2018 as per certificate of Suresh Surana Associates LLP, Chartered Accountants Annexure A-17 and A-18. It is stated in this certificate that the list include all the unsecured creditors, i.e., unsecured loans, trade credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 13,55,00,000/- A-3 company is seeking to call and convene the meeting of equity shareholders. 23. There is only one secured creditor of A-3 company as on 31.7.2018, i.e., Sundaram Finance Limited as per certificate of Goel Mintri Associates, Chartered Accountants as per Annexure A-23. The amount of secured loan is ₹ 9,25,097.34. A-3 company is seeking to call and convene the meeting of secured creditors. 24. There are 466 unsecured creditors of A-3 company as on 31.7.2018 as per certificate of Goel Mintri Associates, Chartered Accountants at Annexure A-24. It is stated in this certificate that the list includes all the unsecured creditors, i.e., unsecured loans, trade creditors, sundry creditors and other current liabilities of A-3 company. The total amount due towards unsecured creditors as on 31.07.2018 is ₹ 18,42,52,805/-. It has been prayed that meeting of the unsecured creditors of A-3 company be convened and held. It is further prayed that meeting of unsecured creditors having a debt of less than ₹ 50,000/- as on 31.7.2018 may be dispensed with as they constitute 1.92% of the total value of unsecured creditors.. 25. The certificates of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sinesses and related assets of the Transferor Companies with the Transferee Company, leading to synergistic linkages and benefits. d. Pursuant to the Scheme, the existing multi-tiered structure would collapse, resulting in the entire business being housed in one entity only (i.e. Transferee Company). e. The Transferee Company was delisted in the year 2002. Post delisting, the equity shares of the Transferee Company could not be traded on any of the stock exchanges in India and hence, these shares have lost marketability. Subsequently, in the year 2015, the Transferee Company was converted into a private limited company, resulting in restrictions on transfer of equity shares. f. The Transferee Company is having sufficient reserves and cash and intends to reduce its paid up share capital, which is no longer required, by paying off to the Relevant Shareholders (as defined hereinafter). 28. It was represented by the learned counsel for the applicant companies that A-1 and A-2 companies are the wholly owned subsidiaries of the A-3 company. Upon sanctioning of the Scheme, the entire present issued, subscribed and paid-up capital of the A-1 and A-2 companies shall s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it would or might have been continued, prosecuted and enforced by or against the Transferor Companies. 33. In the separate affidavits Annexure A-27 (colly) dated 7.8.2018 of Mr. Rohit Gupta, the authorized representative of all the applicant-companies, it is stated that apart from the statutory authorities and the Reserve Bank of India, there is no other sectoral regulator. It is, however, stated that the Reserve Bank of India may be considered as the Sectoral Regulator on account of foreign shareholding of A-3 company and A-1 and A-2 companies being downstream investment of foreign owned and controlled company. 34. The question posed to the learned counsel for the petitioner was that other than the amalgamation of the subsidiary-companies into the transferee-company, the prayer to give exit only to the minority shareholders is an arrangement which may amount to buy back of the shares by the company to attract Section 68 of the Act. Sub-section (10) of Section 230 of the Act says that no compromise or arrangement in respect of any buyback of securities under this Section shall be sanctioned by the Tribunal unless such buy-back is in accordance with the provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed in the Judgements of Reckit Benckiser (India) Ltd. and Gujarat Ambuja Exports Ltd. (supra). We would, however, like to have the view from the Central Government or counsel for the Central Government or any of the Objectors to the aforesaid clauses in the Scheme sought to be sanctioned, before taking a final decision. Presently, we are dealing with the issue of calling and convening of meetings of the shareholders as well as secured and unsecured creditors of the three companies. 37. It would be pertinent to refer to the relevant clauses of the Scheme laying down salient features thereof. These relate to Reduction of Share Capital of the Transferee-Company as detailed below. 18.1 The subscribed and paid up share capital of the Transferee Company is ₹ 13,55,00,000 consisting of 6,775 equity shares of face value ₹ 20,000 each, fully paid up. The subscribed and paid up share capital of the Transferee Company shall stand reduced with regard to the shares held by the Relevant Shareholders by paying back the capital at a price as mentioned hereinafter. 18.2 Upon the Scheme becoming effective, the subscribed and paid up share capital of the Transferee C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. 18.7 In case of transfer requests pending as on the Record Date, the Transferee Company shall dispatch to shareholders (transferor) and to such person (transferee) from whom the Transferee Company has received any communication with respect to pending transfer of shares, a form to be duly filled in by the transferor and the transferee. Upon receipt of duly filled-in form complete in all respects, the Transferee Company shall discharge the consideration to the transferee or to the transferor, as the case may be. Pending receipt of duly filled in form, the consideration towards such shares shall be dealt in a manner provided for in the clause 18.8 below. 18.8 Where the payment pursuant to clause 18.3 and clause 18.5 above, has not been claimed by any of the Relevant Shareholders on account of cheques or demand drafts returned and / or undelivered, cheques not deposited, consideration in respect of shares pending transfer as on the Record Date, or for any other reason, for a period of 7 (seven) years, such unclaimed consideration after the said period shall be utilized in a manner as may be permitted under any law then in force or shall be transferred to the Investor E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the meeting. c) Meeting of unsecured creditors to be convened at Level 1, Lotus Plaza, 732/1, Mehrauli Gurgaon Road, Sector-14, Gurugram, Haryana 122001 on 17.11.2018 at 10.30 AM subject to the notice of meeting being issued. The quorum of the meeting shall be two in number and 60% of the value of the unsecured credit. B. In relation to A-2 Company/ Transferor Company 2: a) Meeting of the equity shareholders is dispensed with as there are two equity shareholders and the consent of both of them on affidavits have been obtained and placed on record. b) Since there is no secured creditors, there is nothing to convene the meeting. c) Meeting of unsecured creditors to be convened at Level 1, Lotus Plaza, 732/1, Mehrauli Gurgaon Road, Sector-14, Gurugram, Haryana 122001 on 17.11.2018 at 12 O clock subject to the notice of meeting being issued. The quorum of the meeting shall be 40 and 40% of the value of unsecured credit. C. In relation to A-3 Company/ Transferee Company : a) Meeting of equity shareholders to be convened at Level 1, Lotus Plaza, 732/1, Mehrauli Gurgaon Road, Sector-14, Gurugram, Haryana 122001 on 17.11.2018 at 2.30 PM subject to the notice of meeti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above meeting to be called under this order. He shall be paid fee of ₹ 70,000/- (Rupees seventy thousand only) for his services as the Scrutinizer. H. The fee of Chairperson, Alternate Chairperson and Scrutinizer along with the travelling expenses and other out of pocket expenses for them shall be borne by the Transferee-Company. I. It is further directed that individual notice of the said meeting shall be sent by the Applicant Companies to the unsecured Creditors of the A-1 and A-2 companies, Equity Shareholders, secured creditors and unsecured creditors of the A-3 Company as on 31.7.2018. Notice shall be sent through registered post or speed post or through courier or e-mail, 30 days in advance before the schedule date of meeting, indicating the day, date, the place and time as aforesaid, together with a copy of Scheme , copy of explanatory statement required to be sent under the Companies Act, 2013 and the applicable Rules along with the proxy forms and any other documents as may be prescribed under the Act shall also be duly sent with the notice. It is also directed that copy of this order be also sent with the individual notices to the equity shareholders of A-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all individually and in compliance of sub-section (5) of Section 230 and Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 send notices in Form No. CAA 3 along with a copy of the Scheme, the Explanatory Statement and the disclosures mentioned in Rule 6 of the Rules and copy of this order to (i) the Central Government through the Regional Director, Northern Region, Ministry of Corporate Affairs; (ii) Registrar of Companies, NCT of Delhi Haryana; (iii) Income Tax Department through the Nodal Officer Principal Chief Commissioner of Income Tax, NWR, Aaykar Bhawan, Sector 17-E, Chandigarh by mentioning the PAN numbers of all the companies in the notices; (iv) Official Liquidator, Punjab, Haryana and Chandigarh (v) Reserve Bank of India (vi) Director General, Council of Scientific and Industrial Research (CSIR)-cum Secretary, Department of Scientific and Industrial Research (DSIR), Room No. 14-B, Technology Bhawan, S T Block I, New Mehrauli Road, Block-C, Adchini, New Delhi-110016 and other Sectoral Regulator(s), if any, stating that representations, if any, to be made by them shall be sent to the Tribunal within a period of 30 days from the date of ..... 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