Allowed

K.R.R. Drugs and Intermediates Private Limited v. -

Telangana HC9 Oct 2013COMPA/1070/2013

Case brief

AI extract

What is this about?

The court disposed of Company Applications filed by a Demerged Company and a Resulting Company seeking approval for a Scheme of Arrangement. After reviewing board resolutions, shareholder consents, and creditor no-objection letters, the court dispensed with the statutory meetings for members and unsecured creditors due to their unanimous or near-unanimous consent.

What did the court decide?

Dispensation of meetings for shareholders and unsecured creditors in the approval of the Scheme of Arrangement; petitioners ordered to produce secured creditors' consent.

K.R.R. Drugs and Intermediates Private Limited Vs - — Specific Performance | Telangana HC (2013)

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THE HON’BLE SRI JUSTICE VILAS V.AFZULPURKAR COMPANY APPLICATION Nos.1070 of 2013 & 1071 of 2013

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COMMON ORDER:

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The Company Application No.1070 of 2013 is filed on behalf of the transferor company, which is described as Demerged Company in the Company Petition. The Company Application No.1071 of 2013 is filed on behalf of the transferee company, which is described as Resulting Company in the Company Petition.

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For the sake of convenience, the same expressions are used herein as mentioned in the Company Petition.

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The Demerged Company was incorporated on 13.01.2002 as a private limited company and its authorized share capital is Rs.2,50,00,000/-, the issued, subscribed and paid up capital is Rs.2,34,24,000/- and its main objects are as follows:

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“1) To carry on business of manufacture, buy, sell import, export and generally deal in all types of chemicals, chemical compounds of Organics and Inorganics, Formulations, Surgical, Scientific Equipments, Dyestuffs, Antibiotics, Petrochemicals, Pharmaceuticals, Drugs and Intermediaries.

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2) To carry on the research and developmental activities to develop new products and substitute for imported products for own use and for others and to develop and maintain testing house and laboratory for own use and for others.

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3) To carry on the business of consultants to Chemical and Pharmaceutical Industry, Design and to Acquire the designing or Technical know-how and to deal in with such Chemicals.

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4) To carry on the business of dealers in all types of Chemicals, Drug, Pharmaceutical and Dyestuff Industries.”

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Whereas, the Resulting Company was incorporated on 02.12.2004 as a private limited company and its authorized share capital is Rs.50,00,000/-, the Issued, subscribed and paid up capital is Rs.49,50,000/- and its main objects are as follows:

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“1) To carry on the business of manufacture, buy, sell, import, export, and generally deal in all types of chemicals, chemicals compounds of Organics and In organics, formulations, Surgical, Scientific Equipments, Dyestuffs, Antibiotics, Petrochemicals, Pharmaceuticals, Drugs and Intermediaries.

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2) To carry on research and developmental activities to develop new products and substitute for imported products for own use and for others and to develop and maintain testing house and laboratory for own use and for others.

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3) To carry on the business of Consultants to Chemical and Pharmaceutical Industry, Design and to acquire and designing and Technical know-how and to deal in with such Chemicals.

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4) To carry on the business of dealers in all types of Chemicals, Drug, Pharmaceutical and Dyestuff Industries.”

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The Board of Directors of each of the companies have passed resolutions, dated 19.08.2013, which is annexed to the respective Company Applications as Exhibit-V, under which the Scheme of Arrangement is approved by both the companies. Both the companies have also filed latest audited financial statements as on 31.03.2013, which is annexed to the Company Applications as Exhibit-VI. The list of secured and unsecured creditors, so far

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as Demerged Company is concerned, is certified by the Chartered Accountants, which is annexed as Exhibit-VII. The Scheme of Arrangement is, therefore, proposed to be approved by the Board of Directors of each of the companies.

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As per the said proposed Scheme of Arrangement, the Appointed Date is notified as 01.04.2013.

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In pursuance of the Board Resolution, dated 19.08.2013, all the members of both the respective companies have filed letters of consent, dated 20.08.2013, in the shape of duly notarized affidavits, which are annexed to the Company Application from Page 132 onwards with respect to the Demerged Company and Page 140 onwards with respect to the Resulting Company. All the said affidavits unequivocally state that the respective member consents to the Scheme of Arrangement proposed and as approved in the Board Resolution.

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So far as unsecured creditors are concerned, with respect to the Demerged Company, No Objection letters in a similar manner are obtained and are annexed to that Company Application from Page 180 onwards. The said No Objection letters show that out of the unsecured creditors, 84.37% of creditors have consented to the proposed Scheme of Arrangement. With respect to the Resulting Company, No Objection letters in a similar manner are obtained and are annexed to that Company Application from Page 134 onwards. The said No Objection letters show that 100% of the unsecured creditors have consented to the proposed Scheme of Arrangement.

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So far as secured creditors are concerned, with respect to

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the Demerged Company, paragraph 17 of the Company Application states as follows:

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“The Scheme neither proposes any arrangement with Secured creditors nor unsecured creditors of the Applicant Company.

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The Applicant Company has the following secured creditors as on 16^th September 2013 as certified by M/s J B Reddy & Co., Chartered Accountants and Auditors of the Applicant Company:

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1. Term Loans from Syndicate Bank - Rs.6,31,46,115/2. Due under Hire Purchase Agreement-Rs.20,02,546/-

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The no objection in writing from the Secured Creditors of the Applicant Company shall be obtained and furnished at the time of filing Company Petition.”

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In view of that, at the moment no directions are necessary with regard to secured creditors of the Demerged Company and that aspect would be considered by the Court at a later stage.

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With respect to the Resulting Company, paragraph 18 of the Company Application states that the Resulting Company has no secured creditors. In view of that, there is no necessity with respect to any directions for securing consent of secured creditors.

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The number of shareholders of the Demerged Company is 29 and the Resulting Company is 17.

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In the facts and circumstances, the Scheme of Arrangement proposed, having been approved by all the members of both the companies and majority of unsecured creditors of the value of 84.37% with respect to the Demerged Company and 100% with

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respect to the Resulting Company, it is argued by learned counsel for petitioners that a meeting of members and unsecured creditors may not be necessary in view of the unequivocal and irrevocable consent given by them. Though, this Court was initially not inclined to order dispensing with their meetings, however, the learned counsel for the petitioner has placed reliance upon orders of this Court in Company Application Nos.369, 370 and 371 of 2011, dated 01.04.2011, wherein in a similar circumstance relating to 35 shareholders of transferee company having given No Objection affidavits and unconditionally having agreed to the Scheme, meeting of the said shareholders was dispensed with by this Court. Similarly, in Company Application No.716, similar request with regard to 26 shareholders of the applicant company was accepted by this Court vide orders, dated 29.06.2012. Following the same, therefore, the meeting of the shareholders and the unsecured creditors in the present case is not necessary to be held and is, accordingly, dispensed with. Petitioners shall however produce written consent of secured creditors at the filing of petitions for approval of scheme.

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The Company Applications are, accordingly, ordered as prayed for. There shall be no order as to costs.

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JUSTICE VILAS V.AFZULPURKAR

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Date: 9^th October, 2013

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THE HON’BLE SRI JUSTICE VILAS V.AFZULPURKAR

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COMPANY APPLICATION Nos.1070 of 2013 & 1071 of 2013

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