Allowed

Blue Moon Properties Private Limited v. -

Bombay HC2 May 2014CSP/110/2014

Case brief

AI extract

What is this about?

This judgment sanctions a scheme of arrangement by Blue Moon Properties Private Limited for reduction and reorganisation of share capital, recording non-current investments at fair value, and converting preference shares into equity shares, finding it fair and compliant with the law.

What did the court decide?

Petition made absolute; petitioner to pay costs and file notices; particulars to be sent to Registrar of Companies.

Blue Moon Properties Private Limited Vs - — Company and Corporate | Bombay HC (2014)

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

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COMPANY SCHEME PETITION NO.110.OF 2014

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CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO.18 OF 2014

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In the matter of the Companies Act I of 1956.

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AND

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In the matter of Sections 391 to 394 read with Sections 100 to 105 of the Companies Act, 1956.

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AND

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In the matter of Scheme of

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Arrangement between:-

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Blue Moon Properties Private Limited.

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AND

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Its Shareholders.

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BLUE MOON PROPERTIES PRIVATE LIMITED …..PETITIONER

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Called for Hearing

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Mr. Rajesh Shah with Mr. Chandrakant Mhadeshwar i/b Rajesh Shah & Co, Advocates for the Petitioner.

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Mrs.Jyotsna Pandhi i/b Mr.H.P.Chaturvedi for Regional Director in the Petitions.

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CORAM : G. S. PATEL, J

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DATE : 2^ND MAY, 2014

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PC:

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Heard learned counsel for party. None appears before the Court to oppose the Scheme and nor party has controverted averments made in the Petition.

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The sanction of the Court is sought under Sections 391 to 394 read with Sections 100 to 105 of the Companies Act, 1956, to the Scheme of Arrangement between Blue Moon Properties Private Limited and its Shareholders for reduction and reorganisation of share capital and recording of non-current investments at their fair values and conversion of Preference Share into Equity Share.

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The learned Advocate for the Petitioner Company states that the Petitioner Company is engaged in the real estate activities. The circumstances that have necessitated or justified the Scheme of Arrangement are that the Petitioner Company has made investment in certain listed shares classified as non-current investments on long term basis. The fair value of such investments has eroded substantially and may not reach their acquisition cost in near future. In view of this, to give true picture of the financial position of the company, it is proposed to record such non-current investments at their fair value The sources of such investments were mainly Equity and Preference Share Capital. Hence, it is proposed to reduce and reorganize the share capital of the Petitioner Company.

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Page 2 of 8

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Reduction and reorganization of Preference Share Capital and Equity Share Capital has been proposed on the same basis considering that both Equity and Preference Share Capital is owned by the same group of shareholders. In view of the current market scenario, the Petitioner Company may not be able to serve and redeem the Preference Shares in near future. Further, in order to retain resource in the Petitioner Company on a permanent basis, it has been considered appropriate to convert Preference Shares into Equity Shares. The proposed restructuring is likely to enhance value for all stakeholders in long run.

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The Petitioner Company approved the said Scheme of Arrangement by passing the Board Resolution in its Board Meeting and which is annexed to the Company Scheme Petition.

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The Learned Advocate for the Petitioner states that that proposed Scheme is for reduction and reorganisation of Equity and 6% Non Cumulative Redeemable Preference Share Capital of the Petitioner Company and recording of non-current investments at their fair values and reducing the reorganised issued, subscribed and paid up 6% Non Cumulative Redeemable Preference Shares of the Petitioner Company to NIL on account of conversion of Preference Share into Equity Share and the same shall be effected as integral part of the Scheme and the same does not involve either

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Page 3 of 8

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diminution of liability in respect of unpaid share capital or payment to any shareholder of any paid up share capital and the procedure prescribed under Section 101(2) of the Companies Act, 1956 was dispensed with as per order dated 24^th January, 2014 passed in CSD No 18 of 2014.

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The learned Advocate for the Petitioner further states that, Petitioner Company has 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 Summons for Directions and seeks sanction to the said proposed Scheme of Arrangement.

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The Learned Advocate appearing on behalf of the Petitioner has stated that the Petitioner has complied with all requirements as per directions of this Court and it has filed necessary affidavits of compliance in the Court. Moreover, Petitioner Company undertake to comply with all statutory requirements, if any, as required under the Companies Act, 1956/2013 and the Rule made there under whichever is applicable. The said undertaking is accepted.

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The Regional Director has filed his Affidavit on 16^th April, 2014, interalia, stating therein that save and except as stated in paragraphs 6 (a) and (b) of the said Affidavit, it appears that the

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Page 4 of 8

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Scheme is not prejudicial to the interest of shareholders and public. In paragraphs 6 (a) and (b) of the said Affidavit, the Regional Director has stated that :

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(a) Clause 5.1 of the scheme provides that preference shareholder shall forgo right of accrued dividend till date. Whether this would amount to a deemed income or not is a matter to be considered by Income Tax Authority, Besides, the preference share capital is proposed to be converted into equity shares with premium of Rs 78/- per shares under the fact and circumstances of the case the Tax issues, if any arising out of this scheme is subject to final decision of Income Tax Authority. The approval of the scheme by this Hon 'ble High Court may not deter the rights of the Income Tax Authority to examine the returns filed by the Petitioner Company and the decision of the Income Tax authority is binding on the Petitioner Company.

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(b) It is further respectfully submitted that the petitioner company shall pass such accounting entries as may be necessary in connection with the scheme to comply with other applicable accounting standards.

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As far as the objection of the Regional Director in paragraph 6(a) of his affidavit is concerned, the Petitioner Companies submits that the Petitioner is bound to comply with all applicable provisions of the Income Tax Act and all tax issues

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Page 5 of 8

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arising out of the Scheme will be met and answered in accordance with law.

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As far as the objection of the Regional Director in paragraph 6(b) of his affidavit is concerned, the Petitioner submits that the Petitioner Company will follow the accounting treatment provided in the Scheme and the Petitioner Company will pass such accounting entries which are necessary in connection with this Scheme to comply with any other applicable Accounting Standard.

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The Learned Counsel for Regional Director on instructions of Mr. M. Chandanamuthu, Joint Director, Legal in the Office of the Regional Director, Ministry of Corporate Affairs, Western Region, Mumbai, states that they are satisfied with the undertakings and submissions made by the Petitioner Company through their advocate. The undertakings given by the Petitioner Company are 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. None of the parties concerned have come forward to oppose the Scheme.

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Page 6 of 8

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Since all the requisite statutory compliance has been fulfilled, the Company Scheme Petition No.110 of 2014 filed by the Petitioner Company is made absolute in terms of prayer clauses (a) to (f).

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The Petitioner to pay costs of Rs.10,000/- to the Regional Director, Western Region, Mumbai. Costs to be paid within four weeks from the date of the order.

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The Petitioner is directed to file a copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with E-Form 21/INC 28 in addition to physical copy as per the relevant provisions of the Companies Act, 1956/2013 whichever is applicable.

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Petitioner in Company Scheme Petition No.110 of 2014 to publish a notice of registration of order and form of minutes of reduction and reorganisation of Share Capital by Registrar of Companies once each in the two local newspaper, viz, “Free Press Journal”, in English language and translation thereof in ‘Navsahkti’ in Marathi language both circulated in Mumbai and also in the Maharashtra Government Gazette within 14 days of registration.

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

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All concerned authorities to act on a copy of this order along with Scheme and Form of Minutes (annexed as Exhibit “G” and

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Page 7 of 8

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Exhibit “H” to the Company Scheme Petition No.110 of 2014 ) duly authenticated by the Company Registrar, High Court (O. S.), Bombay.

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(G. S. PATEL, J)

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Page 8 of 8

Blue Moon Properties Private Limited v. -

Case brief

What is this about?

What did the court decide?

Blue Moon Properties Private Limited v. -

Case brief

What is this about?

What did the court decide?

What the court decided

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Statutes considered

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