Partly allowed

Kumud Mody Securities Private Limited v. -----

Bombay HC12 Apr 2013CSP/105/2013

Case brief

AI extract

What is this about?

The court considered petitions seeking sanction for a Scheme of Arrangement involving a demerger of business activities between two private limited companies. After satisfying concerns regarding regulatory compliance and accounting treatment raised by the Regional Director, the court made the petitions absolute.

What did the court decide?

Petitions were made absolute seeking sanction for the Scheme of Arrangement with conditions regarding RBI registration and capital reserve treatment.

Kumud Mody Securities Private Limited Vs ----- — Company and Corporate | Bombay HC (2013)

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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 SCHEME PETITION NO. 105 OF 2013. CONNECTED WITH COMPANY SUMMONS FOR DIRECTION NO. 69 OF 2013.

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KUMUD MODY SECURITIES PRIVATE LIMITED

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....Petitioner/ the Demerged Company.

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WITH

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COMPANY SCHEME PETITION NO.106 OF 2013. CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO.70 OF 2013.

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KUMUD MODY VENTURES PRIVATE LIMITED

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....Petitioner/ the Resulting Company.

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In the matter of the Companies Act, 1 of 1956;

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AND

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In the matter of Sections 391 to 394 of the Companies Act, 1956;

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AND

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In the matter of Scheme of Arrangement between Kumud Mody Securities Private Limited (“the Demerged Company”); AND

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Kumud Mody Ventures Private Limited (“the Resulting Company”);

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AND

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Their Respective Shareholders

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Called for hearing

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Mr. Rajesh Shah with Mr. Chandrakant Mhadeshwar i/b Rajesh Shah & Co., Advocate for the Petitioners in both Petitions.

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Ms. Rutuja Ambekar i/b Mr. H. P. Chaturvedi for Regional Director in both Petitions.

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CORAM: Ranjit More, J.

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DATE : 12^th April, 2013

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PC:

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Heard counsel for the parties.

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No objector has come before the court to oppose the Scheme and nor any party has contravened any averments made in the Petition.

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Learned Counsel for the Petitioners states that the Demerged Company and the Resulting Company are in the business of investment and trading activities respectively. The proposed Scheme of Arrangement will have the benefit of to achieve efficient holding structure and focussed management orientation which best suit the investment strategies and risks profiles of the management. The demerger will enable better and more efficient management, control and running of the Investment Undertaking and insulate the Remaining Business of the Demerged Company from the risk involved in the Investment Undertaking. The demerged and the resulting companies both approved the said Scheme of Arrangement by passing the Board Resolution which are annexed to the respective Company Scheme Petitions. The learned Advocate for the Petitioner further states that, Petitioner companies have complied with all the directions passed in Company Summons for Direction and that the Company Scheme Petition have been filed in consonance with the orders passed in respective

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Summons for Directions and seeks sanction to the said proposed Scheme of Arrangement.

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The sanction of the Court is sought to a Scheme of Arrangement between Kumud Mody Securities Private Limited, the Demerged Company and Kumud Mody Ventures Private Limited, the Resulting Company and their Respective Shareholders, under Sections 391 to 394 of the Companies Act, 1956.

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Counsel appearing on behalf of the Petitioners has stated that the Petitioners have complied with all requirements as per directions of this Court and that the Petitioners have filed necessary Affidavits of compliance in the Court. Moreover, Petitioner Companies undertake to comply with all statutory requirements, if any, as required under the Companies Act, 1956 and the Rules made thereunder. The said undertaking is accepted.

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The Regional Director has filed an Affidavit dated 05/04/2013 stating therein that save and except as stated in paragraph 6, it appears that the Scheme does not appear to be prejudicial to the interest of shareholders and public. In paragraph 6 (a) to (d) of the affidavit, the Regional Director has stated as under:

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a) Clause 16.3 of the Scheme states that the deficit/surplus arising on account of recording of Assets and Liabilities in

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the books of the Resulting Company less than the face value of shares issued by the Resulting Company to the members of the Demerged Company, shall be either debited to Goodwill Account or credited to General Reserve Account as on the Appointed Date. In this regard, it is submitted that the Reserve, if any arising out of this Scheme of Arrangement, is due to transfer of Capital assets from Demerged Company to Resulting Company and hence, such Reserve cannot be treated as Free Reserve, the reserve arising out of this Scheme, be credited to Capital Reserve Account instead of General Reserve Account.

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b) Clause 17.3 of the Scheme states that pursuant to the Scheme of Arrangement the Demerged Company shall no longer be categorized as a NBFC as per the provisions of Reserve Bank of India Act, 1943, in this regard, Demerged Company shall surrender its Registration Certificate with RBI and file a copy of the order of this Hon’ble Court approving the Scheme, with RBI.

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c) The Demerged Company shall undertake that it will not do the NBFC activity on the Scheme becoming effective.

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d) The Resulting Company shall undertake to comply with all the Regulatory norms as are applicable to NBFC company including maintaining net owned fund of Rs.2 crores and get registered itself with RBI as NBFC company.

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In response to the above concerns raised by the Regional Director, the counsel for the Demerged Company and Resulting Company has tendered affidavit of the respective companies, in reply dated 10/4/2013 of Mr. Mayur C. Mehta, Authorised Signatory of the Demerged Company and Resulting Company, which is taken on record.

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So far as paragraph 6 (a) of the affidavit of the Regional Director is concerned, in paragraph 3 (i) of the said affidavit the Resulting Company undertakes that the reserve arising out of

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the Scheme shall be styled as “Capital Reserve Account” instead of General Reserve Account.

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So far as paragraph 6 (b) of the affidavit of the Regional Director is concerned, in paragraph 3 (i) of the said affidavit the Demerged Company undertakes that it will surrender its NBFC Registration Certificate with RBI and will file a copy of the order of this Hon’ble Court approving the Scheme, with RBI.

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So far as paragraph 6 (c) of the affidavit of the Regional Director is concerned, in paragraph 3 (ii) of the said affidavit the Demerged Company undertakes that it will only carry on the activities permissible to Core Investment Companies and will not do any other NBFC activity on the Scheme becoming effective.

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So far as paragraph 6 (d) of the affidavit of the Regional Director is concerned, in paragraph 3 (ii) of the said affidavit the Resulting Company undertakes that if the resulting company falls within the definition of NBFC as per applicable rules, it shall comply with all the NBFC Regulatory norms, including maintaining net owned fund of Rs. 2 crores and get registered itself with RBI as NBFC.

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The Learned Counsel for Regional Director on instructions of Mr. M. Chandanamuthu, Joint Director in the office of the Regional

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Director, Ministry of Corporate Affairs, Western Region, Mumbai states that they are satisfied with undertaking given by the Petitioner Company and also agreed with proposed amendment sought by the Advocate for the Petitioner Companies as mentioned hereinabove.

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From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. None of the parties concerned has come forward to oppose the Scheme in the court.

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Since all the requisite statutory compliances have been fulfilled, both Company Scheme Petition No. 105 of 2013 and 106 of 2013 are made absolute in terms of prayer clauses (a) and (c).

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The Petitioner Companies to lodge a copy of this order and the Scheme duly authenticated by the Company Registrar, High Court (O.S.), Bombay, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of the order.

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Petitioners are directed to file a copy of this order alongwith a copy of the Scheme with the concerned Registrar of Companies, electronically, along with E-Form 21 in addition to physical copy as per provision of the Companies Act.

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The Petitioners in both the Petitions to pay costs of Rs.10,000/each to the Regional Director, Western Region, Mumbai. Costs to be paid within four weeks from the date of the order.

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

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All authorities concerned to act on a copy of this order along with Scheme duly authenticated by the Company Registrar, High Court (O. S.), Bombay.

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(Ranjit More, J.)

Kumud Mody Securities Private Limited v. -----

Case brief

What is this about?

What did the court decide?

Kumud Mody Securities Private Limited v. -----

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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