Allowed

Karanj Textiles Private Limited v. ..

Gujarat HC3 Aug 2015COMP/13/2015

Case brief

AI extract

What is this about?

The High Court sanctioned a scheme of amalgamation in five company applications pending disposal together. Addressing queries from the Official Liquidator and Regional Director, the court permitted a name correction and accepted justifications for share ratios and entity separation. Directions were issued for record preservation and filing.

What did the court decide?

Scheme of amalgamation sanctioned; petitions allowed on modifications with name correction; cost awarded to Liquidator and ASG.

Karanj Textiles Private Limited Vs .. — Specific Performance | Gujarat HC (2015)

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O/COMP/11/2015 ORDER

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

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COMPANY PETITION NO. 11 of 2015

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In COMPANY APPLICATION NO. 1 of 2015 TO COMPANY PETITION NO. 16 of 2015

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COMPANY APPLICATION NO. 6 of 2015

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==========================================================

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JAY AMBE RAYON PRIVATE LIMITED....Petitioner(s)

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Versus

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......Respondent(s)

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Appearance:

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MR PAVAN S GODIAWALA, ADVOCATE for the Petitioner(s) No. 1 MR DEVANG VYAS, ASSISTANT SOLICITOR GENERAL OF INDIA for the Respondent(s) No. 1

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==========================================================

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CORAM: HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI

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Date : 03/08/2015

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ORAL ORDER

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1.Heard learned advocate Mr.Pavan S Godiawala and
learned advocate for the Central Government and Official
Liquidator.

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2.The present petitions are filed for
sanctioning the scheme of arrangement in the
nature of amalgamation of Transferor Companies
with the Transferee Companies. The Scheme is
annexed at Exhibit `C’ to the petitions.

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Page 1 of 10

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O/COMP/11/2015 ORDER

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3.Thepetitionersfiledthecompany
applications for dispensation of the meetings of
the respective classes of members and creditors
for considering and if thought fit with or
without modification the scheme of arrangement in
the nature of amalgamation.

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4.Upon considering the contentions and
documents as produced with the applications, this
Hon’ble Court vide separate order passed by the
order dispensing with the meetings of different
classes of members. The respective copy of the
order is produced at Exhibit `D’ to the
petitions.

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5.The petitioners thereafter filed the
petitions for sanctioning of the scheme. This
Court passed separate orders in all the
petitions, admitting the petitions and gave
necessary directions for publication of notice of
petitions in two newspapers, one English daily
and another Gujarati daily and dispensed from
publication in Government Gazetee and further
issued notice to the Official Liquidator in the
matter of petitions filed by the Transferor
Companies and notice to the Regional Director in
all the petitions.

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6.The petitioners complied with the order and

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Page 2 of 10

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O/COMP/11/2015 ORDER

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published the advertisements and served the
notice to the Official Liquidator and Regional
Director.

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7.Pursuant to the notice, the Regional Director
and Official Liquidator filed the common
affidavit and individual reports respectively.

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8.The Official Liquidator raised certain
queries so also the Regional Director also raised
certain queries. There is a typographical error
made by the petitioners and the name of the
Transferee Company came to be wrongly typed as
“Jay Ambe” instead of “Jay Ambey”. There is an
another company with the name started with “Jay
Ambe” and upon seeking clarification, the
petitioners clarified about the correct name and
also the affidavit clarifying the said issue came
to be filed by the Transferee Company and hence
as per the scheme the modification is hereby
permitted and the name of the Transferee Company
shall be read as “Jay Ambey Filaments Pvt.Ltd.”

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9.The other queries as raised by the Official
Liquidator are as stated in the reports as
separately filed in the petitions of transferor
companies viz. 1. Clarification in respect of
name of Transferee Company, 2. Reasons for
establishing separate unit, 3. Share exchange

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Page 3 of 10

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O/COMP/11/2015 ORDER

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ratio justification, 4. Reasons sought for not
carrying out its business as per objects
mentioned in its MOA and clarification sought by
CharteredAccountantswithregardto
determination of share exchange ratio.

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10.The Transferre Company clarified the issues
by filing the affidavit. As far as the name of
the Transferee Company is concerned the
Transferee Company clarified that due to
typographical error the name is incorrectly
stated and hence as stated above, the name is
accordingly ordered to be modified. As far as
other queries raised by Official Liquidator, the
petitioner gave following clarifications on
affidavit: “reason for establishing separate
units under a separate company was COMMERCIAL
VIABILITY. Establishment of Units under a
separate company was commercially viable as
compared to a large unit and therefore separate
companies were floated to achieve the desired
level of commercial success.

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The SHARE EXCHANGE RATIO was duly approved by the
shareholders and upon considering the scheme
necessary consent letters came to be tendered and
pursuant to the consent letters which are duly
certified, the order came to be passed for
dispensation of the meetings for considering and

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Page 4 of 10

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O/COMP/11/2015 ORDER

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if thought fit with or without modification the
scheme of arrangement in the nature of
amalgamation. Hence with immense respect the
issue raised pertaining to the share exchange
ratio is misplaced one and further it’s a
prerogative of the shareholders and within the
domain of the shareholders. It is further
respectfully submitted there is no public
interest affected. All the Shareholders and
Creditors had given their consent to the scheme
and agreed to Share Exchange Ratio calculated on
the basis of book value of assets. Considering
the above, the share exchange ratio does not need
interference.

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It is respectfully submitted that, Karanj
Textiles Pvt.Ltd. had not installed machinery of
its own but have invested in the companies which
are in similar line of business. According to
Clause 6 of PART III(B) of the Memorandum of
Association of the company, the company is
allowed to invest any money not immediately
required for the purpose of its business in such
investments or securities as may be thought
expedient including securities issued and/or
guaranteed by Central or State Government,
Corporation, Trusts and Financial Institutions.
As and when funds were needed by a particular
company, the same were arranged through fresh

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Page 5 of 10

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O/COMP/11/2015 ORDER

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allotment of shares. The investors, in
expectation of good business, had made
investments by subscribing shares at premium. Due
to recessionary trend and tough market
competition the investors started losing faith in
the business so they offered their shareholding
to be repurchased. Now if the INVESTORS later
opted to withdraw, the shares were forcibly
purchased in the group companies. This cannot be
termed as modus operandi but action as the time
demanded. The merger was not planned at that
point of time. As per articles of the company “No
share shall be transferred to the person who is
not member unless such person selected by the
transferor is approved by the Board of Directors
unanimously as one of whom it is desirable in the
interest of the company to admit to membership.”
The pricing of the shares was based on mutual
discussion and prevailing conditions.

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It is respectfully submitted, that the loans and
advances given to group companies are short term
loans given to the group companies. These are not
permanent funds. Interest is not being charged on
these short term temporary advances.

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M/s Jay Laxmi Filaments P Ltd (5th Transferor
Company) has acquired leasehold LAN & SHED in
Farideal Textile Park Pvt. Ltd., which is an

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Page 6 of 10

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O/COMP/11/2015 ORDER

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approved TEXTILE PARK under Textile Park Scheme
of Central Government. The Industrial LAND is
compulsorily given on 99 years LEASE as per the
declared scheme of the government. No Lease
premium or otherwise was given to the lessor. As
per Share subscription agreement M/s Jay Laxmi
Filament P.Ltd. had subscribed to the Shares of
Fairdeal Textile Park P Ltd which was duly
reflected in the audit report of the company as
INVESTMENT. Therefore amortisation is not
required. The report of the valuation was already
provided to the Regional Director’s office and
the same is once again reproduced as Exhibit “I”
to the present affidavit.”

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11.The petitioner while replying to the query as
raised by the Regional Director placed on record
today with the affidavit a valuation report
giving justification of share exchange ratio
which was already provided to the authorities.
The additional query as raised by the Regional
Director is pertaining to non-following of
Accounting Standard – 14, for which the
Transferee Company undertake to follow the same
and filed the affidavit today.

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12.As far as Share Exchange ratio is concerned,
it is a prerogative of the shareholders and all
the companies are closely held and family concern

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Page 7 of 10

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O/COMP/11/2015 ORDER

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companies and hence there is no public interest
involved. Further the justification already
tendered pertaining to valuation report and hence
the query as raised pertaining to the share
exchange ratio is misplaced one. Further the
petitioners have explained about the businesses
and clarified also in the affidavit about the
business of a particular company and hence the
queries as raised by the Official Liquidator are
duly answered. As stated in the affidavit the
issues pertaining to loans and advances are also
properly explained and there is no illegality
found in the transaction and it is within the
powers of the companies to undertake the
transactions.

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13.The Transferee Company filed two separate
affidavits and clarified the issued as raised by
both the authorities. Further both the
authorities specifically stated in their reports
and common affidavit stated that, affairs of the
companies have been conducted in a manner which
are not prejudicial to the interest of the
members of the companies, its creditors or public
at large. The Official Liquidator also urged
that, the petitioner Transferor companies to
preserve its books of accounts, papers and
records and not to dispose of the records without
prior permission of Central Government as per the

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Page 8 of 10

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O/COMP/11/2015 ORDER

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provision of Section 396(A) of the Companies Act,
1956 and ensure for statutory compliance. It is
accordingly ordered that, the Transferor
Companies shall preserve its books of accounts,
papers and records and shall not dispose off the
records without prior permission of Central
Government and shall ensure statutory compliance.
Further this Court is satisfied with the reply to
the queries raised by the Official Liquidator and
Regional Director.

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14.Hence, it is ordered that, the scheme is
sanctioned and the prayers as prayed in the
petitions are allowed. The petitioners of
petitions filed by the Transferor Companies are
directed to pay the cost of Rs.5,000/- each to
the Official Liquidator and the petitioners are
directed to pay the cost of Rs.5,000/- each to
Shri Devang Vyas, Additional Solicitor General
for the Central Government. The petitions are
disposed of.

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15.The drawn up orders are dispensed with. The
petitioners are permitted to tender the modified
scheme modifying the name of the Transferee
Company for approval.

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16.The petitioner companies shall lodge a copy
of this order, the schedule of immovable assets

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Page 9 of 10

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O/COMP/11/2015 ORDER

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of the petitioner-companies as on the date of
this order and the scheme duly authenticated by
the Registrar, High Court of Gujarat, with the
concerned Superintendent of Stamps, for the
purpose of adjudication of stamp duty, if any, on
the same within 60 days from the date of the
order.

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21.The petitioners are directed to file a copy
of this order along with a copy of the Scheme
with the concerned Registrar of Companies,
electronically, along with requisite Form in
addition to physical copy as per relevant
provisions of the Act.

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22.Filing and issuance of drawn up order is
hereby dispensed with and all the authorities to
act on a copy of this order along with the Scheme
duly authenticated by the Registrar, High Court
of Gujarat. The Registrar, High Court of Gujarat
shall issue the authenticated copy of this order
along with Scheme as expeditiously as possible.

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(VIPUL M. PANCHOLI, J.)

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Srilatha

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Page 10 of 10

Karanj Textiles Private Limited v. ..

Case brief

What is this about?

What did the court decide?

Karanj Textiles Private Limited v. ..

Case brief

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What did the court decide?

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