Allowed

M/s. Decatrend Technologies Private Limited v. -

Telangana HC8 Oct 2013CP/182/2013

Case brief

AI extract

What is this about?

A petition under Sections 391 and 394 of the Companies Act, 1956 filed by a subsidiary for amalgamation with its holding company was allowed. The Court approved the Scheme of Amalgamation as the subsidiary had positive net worth and creditor objections were non-material.

What did the court decide?

Scheme of Amalgamation is hereby approved; Scheme to come into effect on 01.04.2012; Petitioner to file certified copy before Registrar.

M/s. Decatrend Technologies Private Limited Vs - — Company and Corporate | Telangana HC (2013)

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IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction)

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MONDAY, THE FOURTH DAY OF NOVEMBER TWO THOUSAND AND THIRTEEN PRESENT

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THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR

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COMPANY PETITION No.182 of 2013

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M/s. Decatrend Technologies Private Limited.

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... PETITIONER/ TRANSFEROR COMPANY

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Counsel for the Petitioner: MR. V.S. RAJU

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Counsel for Central Government: MR. PONNAM ASHOK GOUD MR. M. ANIL KUMAR (OFFICIAL LIQUIDATOR)

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The Court made the following:

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ORDER:

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This is a petition under Sections 391 and 394 of the Companies Act, 1956, filed by the transferor company. It is stated that the said transferor company proposes amalgamation with its holding company M/s. Serve All Enterprise Solutions Limited. It is stated that the said transferor company is a 100% subsidiary of the transferee company.

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2. While the petitioner’s company is incorporated on 19.06.2003 as a private limited company with the main objects, which are as follows:

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“i) To undertake and execute the business process outsourcing activities from any part of the world.

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ii) To carry on the business of system software’s, application software’s and other computer software’s for use in any computerized environment.”

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3. The present authorized share capital of the transferor company is Rs.1,00,000/- divided into 10,000 equity shares of Rs.10/- each. The present issued, subscribed and paid up capital of the transferor company is Rs.1,00,000/- divided into 10,000 equity shares of Rs.10/- each fully paid up.

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4. The reasons mentioned in support of the proposed Scheme of Amalgamation vide para 12 of the petition are as follows:

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“It is respectfully submitted that the Transferee Company is engaged in the business of Software Development. The Transferor Company is also engaged in the business of Software Development. It is submitted that to achieve synergistic integration and consolidation of the businesses presently being carried on by the Transferor Company and Transferee Company as such, amalgamation would create greater synergies between the businesses of the two companies and would enable them to have access to better financial resources as well as increase the managerial efficiencies, while effectively pooling the technical, distribution and marketing skills of each other. It is further submitted that the proposed Scheme of Amalgamation would consolidate and integrate the financial strength and flexibility which maximize overall shareholder value and improve the competitive position of the combined entity. It is further submitted that amalgamation shall result in greater efficiency of cash management and unfettered access to cash flows generated by the combined business which can be deployed more effectively to fund organic or inorganic growth opportunities. Therefore the proposed Scheme of Amalgamation shall be beneficial to the shareholders, creditors and employees of both companies.”

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5. It is also stated that the entire share capital of the transferor company is held by the transferee company and its nominees and the present Scheme of Amalgamation does not, in any way, affect the interest of the transferee company and does not involve a reorganization of the share capital of the transferee company.

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The shareholders as well as the creditors of the transferee company, therefore, remain unaffected by the proposed Scheme of Amalgamation. It

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is also stated that as on 31.03.2012, the transferor company has a positive net worth and as such, the amalgamation with the holding company would be advantageous as net worth of the holding company would substantially improve. The Scheme of Amalgamation is annexed as Annexure-A5, which is consented to by the Board of the holding company vide resolution of the Board vide Annexure-A8. The Scheme of Amalgamation was also consented to by all the shareholders of the petitioner’s company. Petitioner company filed Company Application No.815 of 2013 seeking to dispense with the convening of meeting of the shareholders. By order dated 23.07.2013,

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this Court found that there are only three shareholders and no secured or unsecured creditors so far as petitioner company is concerned. Since all the three shareholders filed affidavits in Annexure-A6 giving consent and no objection for the proposed scheme of amalgamation, this Court dispensed with the meeting of the shareholders. Para 18 of the present company petition also reiterates that the petitioner company has not availed any secured loans or unsecured loans.

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6. The notice of this petition was served on the Official Liquidator as well as the Central Government, who have filed their reports. According to the report filed by the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad, on behalf of the Central Government, both the companies are regular in filing statutory returns and no complaints, no investigations and no inspection are pending against them and the Scheme of Amalgamation, as proposed, is not found objectionable on any ground. The Official Liquidator has also examined the records of the company and has analysed the Scheme of Amalgamation proposed and has given a report that the affairs of the company have not been conducted in any manner prejudicial to the interest of the members or public interest.

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The report of the Official Liquidator under paragraph 3(g) points out that out of the current liabilities of Rs.2,62,43,925/- mostly comprising of trade

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payables, the No Objection/Consent letters are limited only with respect to creditors for a value of Rs.1,21,24,994.94.

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7. An additional affidavit is filed on behalf of the petitioner and in paragraph 6, it is specifically stated that out of current liabilities excluding short term provisions amounting to Rs.1,94,68,577/-,

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the petitioner’s company has no objection/consent letters/repaid/adjusted to the extent of Rs.1,53,27,164/-, which accounts for 78.72% of the total creditors. Letter endorsing no objection for the Scheme of Amalgamation from another creditor, claiming Rs.1,21,24,994.94, viz., CES USA Inc., dated 13.09.2013,

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as well as duly signed statement of account showing current liabilities as on 31.03.2012 is also annexed to the said affidavit. In view of that, there is no impediment for approval of the Scheme of Amalgamation of the transferor company with the transferee company in the present case.

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8. So far as the transferee company, which is the holding company of the transferor company, no application under Sections 391 and 394 of the Companies Act, 1956, is filed by them in view of the legal position settled by decisions of this Court in Company Petition No.132 of 2007, dated 19.06.2008, wherein similar issue was considered by this Court noticing two other decisions on the same point i.e.,

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[1] IN RE NEBULA MOTORS LIMITED and MAGNAQUEST SOLUTIONS [2] PVT. LTD . .

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9. Since the present case clearly establishes that the transferor company, i.e., subsidiary of the holding company, is a profit making company having positive net worth, on the principle of law, as is clear from the decisions referred above that there is no impediment for the approval of the Scheme of Amalgamation as it is not necessary on the facts of this case for the transferee company to seek relief by a separate application under

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Sections 391 and 394 of the Companies Act, 1956.

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Accordingly, the Company Petition is allowed and the Scheme of Amalgamation is hereby approved. The Scheme shall come into effect on appointed date as per the Scheme i.e., 01.04.2012. The petitioner’s company shall take appropriate steps by filing the certified copy of this order before the Registrar of Companies within 30 days and shall pay the requisite stamp duty, if any, as per law. The petitioner’s company shall also pay a sum of Rs.5,000/- (Rupees five thousand only) each to the learned Assistant Solicitor General as well as to Mr. Anil Kumar, learned counsel for the Official Liquidator. There shall be no order as to costs. Miscellaneous applications pending in this company petition, if any, shall stand closed.

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_____________________ VILAS V.AFZULPURKAR, J

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November 4, 2013 DSK

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[1] 2003(5) ALD 327

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[2] 2007 CLC 1889

M/s. Decatrend Technologies Private Limited v. -

Case brief

What is this about?

What did the court decide?

M/s. Decatrend Technologies Private Limited v. -

Case brief

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What did the court decide?

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