Allowed

Jyothy Consumer Products Limited Vs

Bombay HC12 Apr 2013CSP/27/2013

Case brief

AI extract

What is this about?

The High Court of Bombay sanctioned a Scheme of Amalgamation between Jyothy Consumer Products Limited and Jyothy Laboratories Limited under Sections 391-394 of the Companies Act, 1956, accepting undertakings regarding statutory dues and asset transfer. The court held the scheme fair, not prejudicial to public interest, and absolved petitions.

What did the court decide?

Company Scheme Petition Nos. 27 of 2013 and 28 of 2013 were made absolute in terms of prayer clauses; costs awarded to officials.

Jyothy Consumer Products Limited Vs — Company and Corporate | Bombay HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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COMPANY SCHEME PETITION NO. 27 OF 2013 CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO. 726 OF 2012

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Jyothy Consumer Products Limited ...Petitioner / Transferor Company

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WITH

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COMPANY SCHEME PETITION NO. 28 OF 2013

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CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO. 727 OF 2012

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Jyothy Laboratories Limited ...Petitioner / Transferee Company

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In the matter of:

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The Companies Act, 1956;

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AND

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In the matter of:

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Sections 391 to 394 of the Companies Act, 1956;

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In the matter of:

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The Scheme of Amalgamation of Jyothy Consumer Products Limited with Jyothy Laboratories Limited and their respective shareholders and creditors

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CALLED FOR HEARING & FINAL DISPOSAL

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Mr. Sharan Jagtiani along with Mr. Rohan Rajadhyaksha and Mr. Molla Hasan I /b. AZB

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& Partners, Advocates for both the Petitioners.

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Mrs. R. N. Sutar, Asst. Official Liquidator, present in CSP No. 27 of 2013.

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Mr. H. V. Mehta i/b H. P. Chaturvedi for Regional Director in both the Petitions.

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CORAM : Ranjit More, J.

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DATE : 12^th April, 2013

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Heard learned counsel for the parties.

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The Learned Counsel for the Petitioner/Transferee Company has tendered an Affidavit dated April 12, 2013 wherein an Affidavit of Objector, Hershey India Private Limited dated February 19, 2013 is annexed at Exhibit A & B and submits that the Affidavit dated February 19, 2013 from Hershey India Private Limited is for the claim of an amount of Rs.12,456,068/- from the Transferee Company. However, the same claim is disputed by the Transferee Company. It is further submitted that the said alleged claim is time barred. Learned Counsel for the Petitioner/Transferee Company submits that the aggregate assets of the Transferee Company are in excess of, and are more than sufficient to meet all the liabilities of the creditors of the Transferee Company and the Scheme will not adversely affect the rights and interest of any of the creditors of any company in any manner whatsoever as the notional net worth of the Transferee Company after giving effect to the Scheme would be Rs. 728.30 crores. A copy of the said Net Worth Certificate issued by Darshan Bheda & Associates, Chartered Accountant has been annexed at Exhibit “O” to the Company Scheme Petition filed by the Transferee Company. Thus, it is stated that pursuant to the amalgamation of the Transferor Company with the Transferee Company, the debt repayment capacity of the Transferee Company will in fact improve. Therefore, as far as the rights of the unsecured creditors of the Transferee Company are concerned including Hershey India Private Limited, they will not be affected adversely by the proposed Scheme

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as there is no Compromise or Arrangement with any of the Creditors and since the assets of the Transferee Company post amalgamation are far more in excess of the corresponding liabilities. The Creditor cannot use Scheme as a tool to recover debts which are disputed. It is clarified that it will be open to the said Unsecured Creditor to pursue legal remedy as may be advised for recovery of their claim amount. The Transferee Company will be the surviving entity post sanction of the merger. No other objector has come before the Court to oppose the Scheme and nor any party has contravened any averment made in the Petitions.

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The sanction of the Court is sought under Sections 391 to 394 of the Companies Act, 1956 to a Scheme of Amalgamation of Jyothy Consumer Products Limited with Jyothy Laboratories Limited and their respective shareholders and creditors.

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Learned Counsel appearing on behalf of the Petitioners states that the Petitioner Company in Company Scheme Petition No. 27 of 2013 is, inter alia , engaged in the business of manufacturing of laundry care products, dishwashing products, toiletries and personal care products. The Petitioner Company in Company Scheme Petition No. 28 of 2013 is, inter alia , engaged in the business of fabric care, household insecticide, utensil cleaners, fragrances and personal care products.

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Learned Counsel appearing on behalf of the Petitioners states that the proposed Scheme of Amalgamation will inter alia would lead to a more efficient utilization of capital and create a stronger base for future growth of the amalgamated entity. The proposed amalgamation will result in administrative and operational rationalization, organizational efficiencies, reduction in overheads and other expenses and optimal utilization of various resources. It will prevent cost duplication that can erode financial efficiencies of the holding structure and the resultant operations would be substantially cost-efficient. Consequently, the Transferee Company will offer a strong financial structure to all creditors

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including the creditors of the Transferor Company, facilitate resource mobilization and achieve better cash flows. The synergies created by the amalgamation would increase operational efficiency and integrate business functions. The proposed amalgamation will reduce managerial overlaps, which are necessarily involved in running multiple entities. The proposed amalgamation, in addition to offering a strong financial structure to all creditors including the creditors of the Transferor Company, would lead to greater cohesiveness in gaining market share, increased brand and customer recognition, a more efficient utilization of resources resulting in cost and operational efficiencies, and create a stronger base for the future growth of the amalgamated entity which will be beneficial for all its stakeholders.

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Learned Counsel for the Petitioners further states that the Board of Directors of the Petitioner Companies had at their respective meetings held on 15^th June, 2012, passed resolutions unanimously approving the said Scheme of Amalgamation. Copies of the said resolutions dated 15^th June, 2012 passed by Board of Directors of the Petitioner Companies are annexed to the Company Scheme Petition respectively.

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The learned counsel for the Petitioner Companies further states that the Petitioner Companies have complied with all the directions passed in the respective Company Summons for Directions and that the respective Company Scheme Petitions have been filed in consonance with the orders passed in the respective Company Summons for Directions.

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The Learned Counsel appearing on behalf of the Petitioner Companies has stated that they have complied with all requirements as per directions of this Hon’ble Court and they have filed necessary affidavits of compliance in this Hon’ble Court. Moreover, the Petitioner Companies undertake to comply with all the statutory

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requirements, if any, as required under the Companies Act, 1956 and the rules made thereunder. The undertaking in accepted.

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The Official Liquidator has filed the report dated 15^th , March 2013 in Company Scheme Petition No. 27 of 2013 stating that the affairs of the Petitioner/Transferor Company have been conducted in a proper manner and that the Transferor Company may be ordered to be dissolved.

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The Regional Director has filed an affidavit dated April 1, 2013, stating therein that it appears that the Scheme is not prejudicial to the interest of shareholders and public, save and except as stated in paragraphs 6(a), (b) and (c) of the said Affidavit of the Regional Director, which is reproduced below:

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“ 6. That the Deponent further submits that,

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a) Clause 15.1 of the Scheme states that the existing Clause No. 1A in the Main Object of the Memorandum of Association of the Transferee Company shall be deleted and new Object Clause 1A shall be inserted in the Main Objects Clause of the Memorandum of Association of the Transferee Company. In this connection, the Transferee Company may be directed to comply with provisions of section 40 read with section 18 of the Act and to file amended copy of Memorandum of Association alongwith Form No.21 with the Registrar of Companies.

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b) Clause 19.4 of the Scheme states that the Transferee Company shall issue the New Equity Shares at fair value. The premium on the New Equity Shares shall be credited to the Securities Premium Account of the Transferee Company. In this regard, it is suggested that the Difference in Nominal value and Fair value of the Equity Shares of Transferee Company may be transferred to Capital Reserve Account instead of Securities Premium Account of Transferee Company.

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c) The Deponent further submits that a joint representation has been received by the Company Law Board, Mumbai and the Registrar of Companies, Mumbai from Shri. K. Prabu together with 12 others claiming Employee of the Petitioner Company and the same has been forwarded to this Directorate. In the representation, they have submitted that without clearing the statutory dues of the Employees, the management has proposed the merger scheme. There are various cases pending in this regard before the Hon’ble High Court of Madras and Labour Court at Chennai. In this regard, the Transferee Company was directed by the Deponent to offer their comments vide letter dated 13/03/2013. In the said letter, the petitioner company was advised to inform the Objectors about the pendancy of the scheme petition before this Hon’ble Court of Bombay for their notice. Besides the Transferee company was further advised to endorse the copy of the reply submitted to this Deponent, to the objector also. The copy of the representation and reply given by the Advocates for the Petitioner Company are annexed hereto and marked as Exhibit 'D1 ’ & ‘D2’. In

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the said reply dated 15/03/2013, Transferee Company has undertaken to the effect that the Petitioner Company will abide by any order/directions, if any, that may be passed by the appropriate authorities with respect to the pending proceedings filed by the ex-employees against JCPL.”

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In response to the observation made in paragraph 6(a) of the said Affidavit of the Regional Director, the Counsel appearing for the Petitioners gives an undertaking on behalf of the Transferee Company that the Transferee Company will comply with the provisions of Section 40 read with Section 18 of the Companies Act, 1956 and to file an amended copy of Memorandum of Association along with Form No. 21 with the Registrar of Companies. The said undertaking is accepted.

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In response to the observation made in paragraph 6(b) of the said Affidavit of the Regional Director, the Counsel appearing for the Petitioners gives an undertaking on behalf of the Petitioners that the difference in Nominal value and Fair value of the Equity Shares to be issued by the Transferee Company pursuant to the amalgamation will not be transferred to the Securities Premium Account of the Transferee Company and will be transferred to the Capital Reserve Account of the Transferee Company. The said undertaking is accepted.

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In response to the observation made in paragraph 6(c) of the said Affidavit of the Regional Director, the Counsel appearing for the Petitioners states that the services of the objectors were terminated by the Transferor Company following the due process contemplated under the applicable provisions of law. As on date, they are not under the employment of the Transferor Company and therefore they have no locus standi to make any representation or otherwise raise any objection to the proposed merger. The cases filed by these objectors against the management of the Transferor Company before various courts are sub judice and the said cases are being legitimately contested by the Transferor Company and the alleged allegations/ claims of the ex-employees have not yet been proved or determined. The Counsel appearing for the Petitioners states that in any event, Clause 8 of the Scheme provides that all pending legal proceedings by or against the Transferor

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Company will not be abated or be discontinued or be in any way prejudicially affected by reason of the merger or anything contained in the Scheme and the same will be continued, prosecuted and enforced by or against the Transferee Company in the same manner and to the same extent as they would or might have been continued and enforced by or against the Transferor Company, in the absence of the Scheme. Therefore, the scheme does not take away the rights of the ex-employees to raise any demands or disputes and it is open for them to pursue/ continue the legal proceedings before the appropriate fora against the Transferee Company, post sanction of the scheme. The Counsel appearing for the Petitioners gives an undertaking on behalf of the Transferee Company to abide by any order/ directions, if any, that may be passed by the appropriate authorities with respect to the pending proceedings filed by the ex-employees against the Transferor Company. The said undertaking is accepted.

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The Learned Counsel of Regional Director on instructions of Mr. M. Chandanamuthu, Joint Director in the office of the Regional Director, Ministry of Corporate Affairs, Western Region, Mumbai states that they are satisfied with the aforesaid undertakings given by the Counsel for the Petitioners. The said undertaking is accepted.

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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.

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Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No. 27 of 2013 is made absolute in terms of the prayer clauses (a) to (f) and (h). The Company Scheme Petition No. 28 of 2013 is made absolute in terms of the prayer clauses (a) to (f) and (h).

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The Petitioners to lodge a copy of this Order and the Scheme duly authenticated by the Company Registrar, High Court (O. S.), Bombay, with the concerned

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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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The Petitioners are directed to file a copy of this Order along with a copy of the Scheme of Amalgamation with the concerned Registrar of Companies, electronically, along with e-Form 21 in addition to physical copy, as per the relevant provisions of the Companies Act, 1956.

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The Petitioners in both the Company Scheme Petitions to pay costs of Rs.10,000/each to the Regional Director, Western Region, Mumbai and the Petitioner in the Company Scheme Petition No. 27 of 2013 to pay costs of Rs.10,000/- to the Official Liquidator, High Court, Bombay. 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.)

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Jyothy Consumer Products Limited Vs

Case brief

What is this about?

What did the court decide?

Jyothy Consumer Products Limited Vs

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

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