Allowed

Fiat India Pvt. Ltd. v. ---------------------------------------------

Bombay HC8 Aug 2008CP/359/2008

Case brief

AI extract

What is this about?

The High Court of Bombay sanctioned a scheme of arrangement and amalgamation under sections 391 and 394 of the Companies Act, 1956. The Court held that disputed debts do not hinder the scheme and the financial position of the company was adequate.

What did the court decide?

The proposed scheme of arrangement and amalgamation is sanctioned; the petition is made absolute.

Fiat India Pvt. Ltd. Vs… — Company and Corporate | Bombay HC (2008)

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 -: 1 :-

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 IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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 ORDINARY ORIGINAL CIVIL JURISDICTION

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 COMPANY PETITION NO.359 OF 2008

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 CONNECTED WITH

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 COMPANY APPLICATION NO.440 OF 2008

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 In the matter of Scheme of Arrangement

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 and Amalgamation between New Holland

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 Tractors (India) Private Limited with

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 Fiat India Private Limited and their

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 respective shareholders.

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 Fiat India Private Limited : Petitioner

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 Mr.Hemant Sethi i/b. Hemant Sethi & Co., for the

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 petitioner.

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 Mr.Joy Bhattacharya i/b. Prism Juris for objector.

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 Mr.C.J.Joy i/b. S.K.Mohapatra for Regional Director.

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CORAM : S.A.BOBDE, J.

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 DATE : AUGUST 08, 2008.
P.C.

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 1. The petitioner - Fiat India Private Limited - seeks

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 approval of the Scheme of Arrangement and Amalgamation
 between New Holland Tractors (India) Private Limited with
 Fiat India Private Limited under sections 391 and 394 of
 the Companies Act, 1956, hereinafter referred to as "the
 Act". A meeting of the shareholders and creditors was

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 -: 2 :-

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 dispensed with by an order dated 4.4.2008. The

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 requirement of obtaining the consent of the creditors has
 also been dispensed with on the undertaking that the
 company has issued individual notices to all creditors.
 An affidavit of service pointing out that individual

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 notices have been issued to all the creditors by
 registered post A/D. has been filed. In pursuance of the
 notices, an objection has been raised by one of the
 objectors i.e. Divesh Goyal, partner of M/s.Kalyan Auto
 Sales, who claims to an unsecured creditor of the
 petitioner company in the sum of Rs.1,23,62,436/-
 inclusive of interest at 24% thereon. The extent of
 liability is denied by the respondent. According to the
 learned counsel for the objector, the principal amount
 that is due is about Rs.25 lakhs. According to the

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 learned counsel for the company, the amount that is due is
 Rs.11,931/- which the company claims to have already paid.

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 2. Equity and preference shareholders of the company have
 given their consent to the arrangement.

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 3. The learned counsel for the objector pointed out from
 the balance-sheet of the company that the company has
 outstanding unsecured loans of Rs.1,155,000,000/- and
 current liabilities are Rs.1,387,788,745/-. The learned
 counsel also points out from the auditor’s report that the

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 -: 3 :-

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 company has not deposited certain amounts before various
 authorities as follows:-

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 "............ excise duty of
 Rs.3,918,276,129/- (pending before Supreme
 Court (Rs.3,111,649,260/-)/ Central Excise
 and Service-tax Tribunal (Rs.154,906,052/-)/
 Commissioner (Rs.647,636,502/-)/Commissioner
 (Appeals) (Rs.3,953,528/-)/ Assistant
 Commissioner (Rs.130,787/-)/ sales-tax of
 Rs.714,141,288/- (pending before the

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 Sales-tax Tribunal (Rs.32,690/-)/
 Commissioner (Appeals) (Rs.8,853,863/-)/
 Deputy Commissioner (Appeals)

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 (Rs.704,837,180/-)/ Deputy Commissioner
 (Rs.356,245/-)/ Assistant Commissioner
 (Rs.61,310/-) and income-tax of
 Rs.825,058,524/- (pending before Income-tax

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 Appellate Tribunal)."

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 It is the contention of the objector that the company is
 in financial doldrums. It is difficult to see why the
 merger should be refused on those grounds.

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 4. It may, however, be noted that there is no submission
 made on behalf of the objector which may lead to the

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 -: 4 :-

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 conclusion that the financial position of the company

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 would, in any way, deteriorate as a result of the merger.
 It appears that the financial position is likely to

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 improve and the company has referred to the position of

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 the share capital before and after the merger as

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 follows:-

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 "Share Capital of Fiat India Private Limited pre
 merger

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 Particulars Amount (In Rs.)

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 ------------- ---------------

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Authorised Capital

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 15,00,00,000 Equity shares of 15,000,000,000
 Rs.100 each

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 5,00,00,000 9% Preference Shares 5,000,000,000
 of Rs.100 each.

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 ---------------

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Issued, Subscribed and Paid-up
capital

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 381,56,864 Equity Shares of 3,815,686,400
 Rs.100 each.

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 6,86,472 9% Preference Shares 68,647,200
 of Rs.100 each.

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 ---------------

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 Total 3,884,333,600

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 ----------------

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 Share Capital of Fiat India Private Limited
 post merger.

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 Particulars Amount (In Rs.)
 ------------- ---------------

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Authorised Capital

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 3,00,00,000 Class "A" equity
 shares of Rs.100 each 3,000,000,000

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 -: 5 :-

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 12,00,00,000 Class "B" equity
 shares of Rs.100 each. 12,000,000,000

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 5,00,00,000 9% Preference
 Shares of Rs.100 each. 5,000,000,000
 ----------------
 Total 20,000,000,000
 ----------------
Issued, Subscribed and Paid-up
capital

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 74,45,916 Class "A" equity
 shares of Rs.100 each. 744,591,600
 11,67,23,086 Class "B" equity
 shares of Rs.100 each. 11,672,308,600
 6,86,472 9% Preference Shares
 of Rs.100 each. 68,647,200
 ---------------
 Total 12,485,547,400"
 ----------------

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 5. It was further argued by the learned counsel for the
 objector that the proposal should not be allowed because
 the company proposes to cancel 90.04 per cent of its
 equity capital. Though the proposal by the company is to
 cancel 90.04 per cent of its equity capital by paying
 0.48 paise per share, the position of the share capital
 pre-merger and post-merger will be as given above. The
 merger appears to be beneficial to the
 transferee-company, in view of the financial position of
 the transferor company which shows the net current assets
 of the transferee company to be Rs.316,29,82,000/- for
 the year ending 31.12.2007 which is an improvement over
 its net current assets of the year ending 31.12.2006
 which is Rs.241,57,54,000/-. The transferee company

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 -: 6 :-

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 seems to be making substantial profits. In any case,
 while considering such an objection, it is important to
 see how the interest of the objectors could be adversely
 affected. There is nothing brought on record to show how
 the interest of the objectors would be adversely
 affected. Only some negative financial aspects of the
 transferee company has been pointed out without showing
 how the merger would make the financial position of the
 company worse.

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 6. In Emco Ltd. in Re, reported in (2004) 3 Comp. LJ
 411 (Bom), this Court observed:-

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 "Considering overall view of the scheme of
 the arrangement in question as well as the
 affidavits filed to oppose the scheme by
 objections, as raised by the respective
 creditors, and after considering the merits
 of the objections by the creditors, it is
 clear that such creditors cannot object to
 the sanctioning of the arrangement in
 question. If liabilities or dues are in
 dispute, unless those disputes or
 liabilities are settled in appropriate
 court or forum in appropriate proceedings,
 sanction of such scheme or arrangement

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 -: 7 :-

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 cannot be halted or stopped or delayed.

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 All creditors or parties are free to take
 appropriate steps to recover those amounts,

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 to have those amounts settled or
 crystallised by appropriate forum or court.
 The Company Court at this stage is not
 considering the case of any undisputed
 amount between the creditors and company.
 In the present case, petitioner’s affidavit
 as well as material placed on record are
 sufficient to demonstrate that the
 petitioner company has not admitted the
 said amount and in fact is disputing
 vehemently the said exaggerated amount.
 The financial position of the company is
 sufficient to cover those liabilities or
 dues, if any. At this stage, therefore,
 this, by itself, cannot be the reason to
 halt sanction of the scheme of

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 arrangement."

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 The above observations apply in equal force to the
 present case.

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 7. In this view of the matter, the objection is rejected
 and the proposed scheme is sanctioned. The Company

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 -: 8 :-

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 Petition is made absolute in terms of prayer clauses (a)

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 to (c).

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 8. The petitioner company to lodge a copy of this order
 and the Scheme with the concerned Superintendent of
 Stamps for the purpose of adjudication of stamp duty
 payable, if any, on the same within 30 days of obtaining

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 the authenticated and/or certified copy of this order.

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 9. The petitioner to pay costs of Rs.7,500/- to the
 Regional Director. Costs to be paid within four weeks
 from today.

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

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 11. All authorities to act on a copy of this order duly
 authenticated by the Company Registrar of this Court.

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 S.A. BOBDE, J.

Fiat India Pvt. Ltd. v. ---------------------------------------------

Case brief

What is this about?

What did the court decide?

Fiat India Pvt. Ltd. v. ---------------------------------------------

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Cases cited

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