Allowed

Broach Processors Private Limited v. -

Bombay HC7 Nov 2014CSP/295/2014

Case brief

AI extract

What is this about?

This order sanctions a Scheme of Amalgamation involving four companies under Sections 391-394 of the Companies Act, 1956. The court accepted undertakings on accounting adjustments and tax implications, allowed an amendment to delete a redundant clause, and declared the scheme absolute as no objection was raised.

What did the court decide?

The petioners' Company Scheme Petitions No. 295 to 298 of 2014 are made absolute. Leave to amend Scheme by deleting clause 8.4 is granted.

Broach Processors Private Limited Vs - — Company and Corporate | Bombay HC (2014)

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THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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COMPANY SCHEME PETITION NO.295 OF 2014

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CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO. 214 OF 2014

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BROACH PROCESSORS PRIVATE LIMITED,

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....Petitioner/Transferor Company No. 1

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AND

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COMPANY SCHEME PETITION NO. 296 OF 2014.

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CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO. 215 OF 2014

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PARITOSH INDUSTRIAL FINANCE LIMITED

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....Petitioner/ Transferor Company No. 2

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AND

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COMPANY SCHEME PETITION NO. 297 OF 2014

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CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO. 216 OF 2014

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TIRUPATI PRINTERS PRIVATE LIMITED

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....Petitioner/ Transferor Company No. 3

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AND

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COMPANY SCHEME PETITION NO. 298 OF 2014

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CONNECTED WITH

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COMPANY SUMMONS FOR DIRECTION NO. 217 OF 2014

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SUDARSHAN EXPORTS LIMITED

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....Petitioner/ the Transferee 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 read with Sections 100 to 103 of the Companies Act, 1956;

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AND

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In the matter of the Scheme of Amalgamation and Arrangement between Broach Processors Private Limited

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AND Paritosh Industrial Finance Limited AND Tirupati Printers Private Limited AND Sudarshan Exports Limited AND Their respective shareholders and creditors

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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 all Petitions.

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Mr. S. Ramakant Official Liquidator, present in CSP Nos. 295 to 297 of 2014.

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Mr. S. V. Bharucha with Asha Bhamwani i/b Dr. H. Chadurvedi for Regional Director in all Petitions.

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CORAM: S. J. Kathawalla, J. DATE : 7^th November, 2014

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PC:

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Heard Learned Counsel for the parties. No objector has come before the court to oppose the Scheme and nor has any party controverted any averments made in the Petitions.

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The sanction of the Court is sought to a Scheme of Amalgamation and Arrangement between Broach Processors Private Limited and Paritosh Industrial Finance Limited and Tirupati Printers Private Limited and

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Sudarshan Exports Limited and their respective shareholders and creditors, under Sections 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956.

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The Learned Counsel for the Petitioners states that Broach Processors Private Limited, Transferor No. 1 Company is engaged in the business of investment activity and Paritosh Industrial Finance Limited, Transferor No. 2 Company is engaged in the business of investment activity and Tirupati Printers Private Limited, Transferor No. 3 Company is engaged in the business of investment activity and Sudarshan Exports Limited, Transferee Company is a Non - Banking Financial Company registered with the Reserve Bank of India and is presently carrying on the business of investment activity.

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Learned Counsel for the Petitioners states that Broach Processors Private Limited and Paritosh Industrial Finance Limited and Tirupati Printers Private Limited are wholly owned subsidiaries of Sudarshan Exports Limited. The objective of the Scheme is to consolidate the Transferor Companies with the Transferee Company which would help to minimize the costs of operation and would also help to streamline its operations. The amalgamation of the Petitioner Companies will result in various benefits including being able to garner the benefits arising out of lower operating costs, pooling of the human talents in terms of manpower, management and administration which would

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result into savings of costs, combined capital resources, eliminate duplication of work in areas like accounts, company law and tax assessments, common administrative services, reduction in regulatory/procedural compliances and accordingly lead to synchronization of efforts to achieve uniform corporate policy and ease in decision making at the group level.

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Learned Counsel for the Petitioners further states that the Board of Directors of the Petitioner Companies have approved the said Scheme of Amalgamation and Arrangement by passing Board Resolutions which are annexed to the respective Company Scheme Petitions.

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The Learned Counsel for the Petitioners submit that pursuant to the Order dated 11th day of April, 2014 passed in Company Summons for Direction No. 217 of 2014 the procedure prescribed under Section 101(2) of the Companies Act, 1956 was dispensed with as reduction is an integral part of the Scheme.

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The Learned Counsel for the Petitioners further states that, 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 respective Company Summons for Directions.

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

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The Official Liquidator has filed his report on 3^rd day of November, 2014 in Company Scheme Petition Nos. 295 of 2014 and 296 of 2014 and 297 of 2014 stating that the affairs of the Transferor Companies have been conducted in a proper manner and that the Transferor Companies may be ordered to be dissolved.

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The Regional Director has filed an Affidavit on 15th day of September,2014 stating therein, save and except as stated in paragraph 6 (a) to (d) thereof, it appears that the Scheme is not prejudicial to the interest of shareholders and public. In paragraph 6 (a) to (d) of the said Affidavit, the Regional Director has stated that:-

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“6. That the Deponent further submits that :-

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(a) Clause 8.3 of the scheme states that the difference between the cost of investment of Sudarshan in the Transferor Companies over the paid up capital of Transferor Companies shall be adjusted against the Reserves, in the books of Sudarshan. In this regard, it is submitted that Reserves, if any, arising out of this

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Scheme be credited to Capital Reserve Account of the Transferee Company and debit balance, if any arising, the same shall be debited to the Goodwill account of Transferee Company.

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(b) Clause 8.4 of the Scheme states that the difference between the cost of investment of Transferor Company No. 2 in Sudarshan over the face value of equity shares of Sudarshan held by the Transferor Company no. 2, shall be adjusted against the reserves, in the books of Sudarshan. It reveals that the Transferor Company No. 2 acquired the shares of the Transferee Company over the face value of equity shares of the Transferee Company. From the Note 10 of the Financial Statement as at 31.03.2013 it is gathered that the Transferor Company No. 2 is holding 1,67,413 number of equity shares of Transferee Company and further reveals that the cost of investment is only Rs. 3,24,583/-. In view of the above, it is clear that the Transferor Company No. 2 acquired the shares of Transferee Company below the face value of the equity shares of Transferee Company and as such clause 8.4 of the Scheme is redundant and shall be deleted from the Scheme.

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(c) Clause 8.6 of the Scheme provides for adjustment for differences in the Accounting Policies between the Transferor Companies and Transferee Company. In this regard, it is submitted that in addition to compliance of Accounting Standard 14, the Transferee Company shall pass such Accounting entries which are necessary in connection with the Scheme to comply with the other applicable Accounting Standard such as AS-5, etc.

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(d) The Income Tax Departments vide their three letters dated 22/07/2014 have made some observations interalia stating therein that the Transferor Company No. 1 and Transferor Company No. 3 are having outstanding dues and their interest be protected. In this regard, the deponent submits that the tax implication, if any, arising out of the Scheme is subject to final decision of Income Tax Authorities. The Approval of the Scheme by this Hon’ble Court may not deter the Income tax Authority to scrutinize the tax returns filed by the Transferee Company after giving effect to the Scheme. The decision of the Income tax Authority is binding on the Petitioner Company.”

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So far as the observations made in paragraph 6(a) of the Affidavit of the Regional Director is concerned, the Petitioner/Transferee Company through its Counsel undertakes that the Reserves, if any, arising out of this Scheme be credited to Capital Reserve Account of

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the Transferee Company and debit balance, if any arising, the same shall be debited to the Goodwill account of Transferee Company.

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So far as the observation in paragraph 6(b) of the Affidavit of Regional Director is concerned, the Petitioner/Transferee Company through its Counsel accepts the observation made in the Affidavit of the Regional Director that clause 8.4 of this Scheme is redundant and seeks leave to amend the Scheme by deleting clause 8.4 in this Scheme and leave to amend the renumbering of clause 8 may be granted.

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So far as the observation in paragraph 6 (c) of the Affidavit of Regional Director is concerned, the Petitioner Companies through its Counsel undertake that in addition to compliance of Accounting Standard 14, the Petitioner Companies will pass such accounting entries which are necessary in connection with this Scheme to comply with any other applicable Accounting Standards.

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So far as the observation in paragraph 6 (d) of the Affidavit of Regional Director is concerned, the Learned Counsel for the Petitioner Companies submit that the Petitioner Companies are bound to comply with all applicable provisions of Income Act and all tax issues arising out of the Scheme will be met and answered in accordance with law.

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The Learned Counsel for Regional Director on instructions of Mr. M. Chandana Muthu, Joint Director Legal in the office of the Regional Director, Ministry of Corporate Affairs, Western Region, Mumbai

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states that they are satisfied with the undertakings given by the Petitioners and agree to the amendment being made in this Scheme by way of deletion of clause 8.4. All above undertakings are accepted.

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In view of acceptance of the undertaking given by Petitioners in paragraph 12 above, leave to amend this Scheme by deleting clause 8.4 of this Scheme is granted. The said Amendment to this Scheme is to be carried out within a period of two weeks from date of the order.

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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, the Company Scheme Petition No. 295 of 2014 to 298 of 2014 are made absolute in terms of the prayer made under clauses (a) to (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 receipt of the Order.

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Petitioners are directed to file a copy of this order along with a copy of the Scheme of Amalgamation and Arrangement with the concerned

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Registrar of Companies, electronically, along with E Form 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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The Petitioner Companies to pay costs of Rs.10,000/- each to the Regional Director, Western Region, Mumbai and the Petitioners in the Company Scheme Petition Nos. 295 of 2014 to 297 of 2014 to pay costs of Rs.10,000/- each 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 concerned regulatory authorities 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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(S. J. Kathawalla, J.)

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Broach Processors Private Limited v. -

Case brief

What is this about?

What did the court decide?

Broach Processors Private Limited v. -

Case brief

What is this about?

What did the court decide?

What the court decided

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Statutes considered

Parties & counsel

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