Allowed

Agila Specialties Private Limited, v. -

Telangana HC25 Aug 2014CP/115/2014

Case brief

AI extract

What is this about?

This court sanctioned a proposed scheme of amalgamation between two transferor companies and a transferee company. Addressing objections regarding missing fair value reports and the transferee's late statutory filings, the court directed the submission of fair value data while clearing the path for dissolution of transferors without winding up. It explicitly held that no stamp duty was payable as

What did the court decide?

The proposed scheme of amalgamation is sanctioned with effect from 06.12.2013, subject to the submission of fair value reports within thirty days.

Agila Specialties Private Limited, Vs - — Insolvency and Bankruptcy | Telangana HC (2014)

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THE HON’BLE SRI JUSTICE C.V. NAGARJUNA REDDY

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COMPANY PETITION Nos.115, 116 and 117 of 2014

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Dated: 25.08.2014

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COMPANY PETITION No.115 of 2014

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Agila Specialties Private Limited A company incorporated under the Companies Act, 1956, having its registered office at Plot No.564/A/22, Road No.92, Jubilee Hills, Hyderabad-500034, Andhra Pradesh, India, Represented by its Company Secretary Rekha Lakhotiya

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COMPANY PETITION No.116 of 2014

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Onco Therapies Limited, A company incorporated under the Companies Act, 1956, having its registered office at Plot No.564/A/22, Road No.92, Jubilee Hills, Hyderabad-500034, Andhra Pradesh, India, Represented by its Authorised Signatory Suresh Krishnamachari

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.. Petitioner

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COMPANY PETITION No.117 of 2014

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Mylan Laboratories Limited, A company incorporated under the Companies Act, 1956, having its registered office at Plot No.564/A/22, Road No.92, Jubilee Hills, Hyderabad-500034, Andhra Pradesh, India, Represented by its Company Secretary & General ManagerLegal B. Nagaraj Goud

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.. Petitioner

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Counsel for the Petitioners: Mr. V.S. Raju

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This Court made the following:

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COMMON ORDER:

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C.P.No.115 of 2014 is filed by M/s. Agila Specialties Private Limited (transferor company No.1), C.P.No.116 of 2014 is filed by M/s. Onco Therapies Limited (transferor company No.2) and C.P.No.117 of 2014 is filed by M/s. Mylan Laboratories Limited (transferee company).

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These petitions have been filed for sanction of this Court to the proposed scheme of amalgamation of the petitioners in C.P.Nos.115 and 116 of 2014 with the petitioner in C.P.No.117 of 2014.

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In their respective petitions, the petitioners pleaded that transferor company No.1 was incorporated on 03.03.2004 with the main object of carrying on the business of contract research and manufacturing all chemicals, synthetic chemicals, elements etc., that its present authorized share capital is Rs.22,00,00,000/- divided into 2,00,00,000 equity shares of Rs.10/- each and 2,00,000 0.01% redeemable preference shares of Rs.100/- each and that its issued, subscribed and paid up capital is Rs.18,31,67,830/- divided into 1,83,16,783 equity shares of Rs.10/- each fully paid up. That transferor company No.2 was incorporated on 14.08.2007 with the main object of carrying on the business of research and manufacture of all kinds of anti cancer oncology related to therapeutic pharmaceutical products and other preparations and all kinds of chemicals, synthetic chemicals, elements, chemical compound, biological, bacteriological, bio-chemicals in India or elsewhere etc., that its present authorized share capital is Rs.3,00,00,000/- divided into 30,00,000 equity shares

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of Rs.10/- each and that its issued, subscribed and paid up capital is Rs.2,40,61,870/- divided into 24,06,187 equity shares of Rs.10/- each fully paid up. That the transferee company was incorporated on 29.11.1984 with the main object of carrying on manufacture, import, export, buy, sell, distribute and deal in bulk drugs, finished drugs and pharmaceuticals etc., that its authorized share capital is Rs.40,00,00,000/- divided into 20,00,00,000 equity shares of Rs.2/each and that its issued, subscribed and paid up capital is Rs.36,95,13,716/- divided into 18,47,56,858 equity shares of Rs.2/each fully paid up.

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The petitioners further pleaded that the transferee company is a subsidiary of M.P. Laboratories, Mauritius, which is engaged in the manufacture of pharmaceutical ingredients and finished dosage formulations, that transferor company No.1 is a manufacturer and dealer of high quality generic injectable products, that transferor company No.2 is a subsidiary of transferor company No.1 and is indirectly wholly owned subsidiary of the transferee company and that the proposed amalgamation would enable the transferee company to grow injectable business.

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It is further pleaded that the Board of Directors of all the three companies have held separate meetings on 19.03.2014, approving the proposed scheme of amalgamation with effect from 06.12.2013. That as all the shareholders of the two transferor companies have submitted their consent affidavits for the proposed scheme of amalgamation, in Company Application Nos.457 and 458 of 2014 filed by the transferor companies respectively, this Court has dispensed with the requirement of holding their meetings for the purpose of considering the proposed scheme of amalgamation, vide separate orders dated 02.04.2014, while appointing chairpersons to hold the meetings of the unsecured

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creditors of the two transferor companies. That the transferee company has filed Company Application No.459 of 2014, seeking to appoint chairperson to hold the meetings of its shareholders and secured creditors, wherein this Court appointed a chairperson to hold the said meetings, by order dated 02.04.2014. That the chairpersons so appointed by this Court have held the respective meetings and submitted their reports.

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In the chairperson’s report pertaining to the meeting of the unsecured creditors of transferor company No.1, it is inter alia stated that the meeting was attended by 22 unsecured creditors in person valued at Rs.1,156,681,657/- and one unsecured creditor through proxy valued at Rs.2,378,895/-, aggregating to an amount of Rs.1,159,060,552/-, and that all of them have voted in favour of the proposed scheme of amalgamation.

¶23

In the chairperson’s report pertaining to the meeting of the unsecured creditors of transferor company No.2, it is inter alia stated that the meeting was attended by 20 unsecured creditors in person valued at Rs.730,177,678/- and that all of them have voted in favour of the proposed scheme of amalgamation.

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In his report, the chairperson, who held the meetings of the shareholders and unsecured creditors of the transferee company, has stated that the meeting of the shareholders was attended by 97 shareholders in person valued at Rs.360,953,126/- divided into 180,476,563 equity shares of Rs.2/- each and 41 shareholders through proxies holding shares valued at Rs.66,836/- divided into 33,418 equity shares of Rs.2/- each, aggregating to 180,509,981 equity shares of Rs.2/- each out of the issued paid up capital of Rs.369,513,716/divided into 184,756,858 shares of Rs.2/- each. That the meeting of the unsecured creditors was attended by 53 unsecured creditors in

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person valued at Rs.5,947,816,021/- and two unsecured creditors through proxy valued at Rs.21,403,780/-, aggregating to Rs.5,969,219,801/-. It is stated that except one shareholder and one unsecured creditor, all the other shareholders and unsecured creditors, who have attended the respective meetings, have voted in favour of the proposed scheme of amalgamation.

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The petitioners further pleaded that the transferor companies do not have secured creditors, while the transferee company has filed consent letters of its secured creditors for the proposed scheme of amalgamation. The petitioners, therefore, sought for approval of the proposed scheme of amalgamation.

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This Court ordered notices on 17.06.2014 to the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad, and the Official Liquidator of this Court, in C.P.Nos.115 and 116 of 2014, and to the Regional Director, South East Region, Ministry of Corporate Affairs, in C.P.No.117 of 2014, besides directing the petitioners to publish notices in Business Standard (English Daily) and Andhra Bhoomi (Telugu Daily), of Hyderabad editions.

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Learned counsel for the petitioners has filed copies of proof of publication in the newspapers and stated that in response to the publication, he has not received any claims or objections to the proposed scheme of amalgamation.

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In pursuance of the notices issued, the Deputy Official Liquidator and the Regional Director, South East Region, Ministry of Corporate Affairs, have filed their respective reports.

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In his report, the Regional Director, South East Region, Ministry of Corporate Affairs, has inter alia stated that in pursuance of General

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Circular No.1/2014, dated 15.01.2014, issued by the Ministry of Corporate Affairs, New Delhi, he has sent a letter to the Income Tax Department on 04.07.2014, for submitting their comments if any as regards the scheme of amalgamation, that the Income Tax Department, vide letter dated 16.07.2014 addressed to transferor company No.1 with a copy endorsed to the Regional Director, requested the company to comply with the provisions of the Income Tax Act, 1961, and Income Tax Rules, 1962, and that, however, there are no negative observations. He has further stated that the fair value of assets and liabilities has not been submitted by the transferor companies and, hence, they may submit the list of assets and liabilities at fair value to this Court. He has further stated that the Registrar of Companies for the States of Telangana and Andhra Pradesh, at Hyderabad, has reported that the transferor companies involved in the proposed scheme of amalgamation are regular in filing the statutory returns, that the transferee company has not filed the balance sheet pertaining to the year 2011-2012 and annual returns for the years 2008, 2011, 2012 and 2013 and that the Registrar of Companies has been advised to take appropriate action against the transferee company for not filing the statutory returns in accordance with law. It is further stated that the Registrar of Companies has reported that no investigations or inspections are pending against the three companies.

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The Deputy Official Liquidator, in paragraph 3(b) of his reports, has stated that the appointed date of the proposed scheme is 06.12.2013, that the transferor companies have submitted only the audited balance sheets as at 31.12.2012 and that the transferor companies, vide their letters dated 23.07.2014, informed that they have changed the current financial year from 12 months to 15 months and the current financial year will end on 31.03.2014. Further, in paragraph 3(k), he has stated that the transferor companies, vide their

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letters dated 23.07.2014, informed that they have not completed the process of obtaining valuation reports for the purpose of levy of stamp duty in respect of market value of their assets, that they are not in a position to provide the same at this juncture and that the same will be completed at the time of stamp duty adjudication process. The Deputy Official Liquidator has further stated that based on the information made available by the transferor companies, he is of the opinion that, except his observations at paragraphs 3(b) and (k), the affairs of the companies appear to have not been conducted in the manner prejudicial to the interests of the members or the public.

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At the hearing, with regard to the objection raised by the Regional Director, South East Region, Ministry of Corporate Affairs, in respect of the fair value of the assets and liabilities of the transferor companies,

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Mr. V.S. Raju, learned counsel for the petitioners, submitted that the petitioners being closely held companies, indicating the respective fair value of assets and liabilities of the companies is a mere formality and that the same will be communicated to the Registrar of Companies by strictly following the Accounting Standard as per clause 11 of Part-C of the scheme.

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As regards the observation of the Deputy Official Liquidator in paragraph 3(b) of his reports, the learned counsel for the petitioners submitted that under Section 210(4) of the Companies Act, 1956 (for short ‘the Act’), the financial year can be either 12 calendar months or 15 calendar months, that only in case where the financial year spans beyond 15 months, special permission from the Registrar of Companies is required and that in respect of the transferor companies, the financial year is only for 15 months and that, therefore, the same is permissible under the above-mentioned statutory provision.

¶37

Regarding the observation made at paragraph 3(k), the learned counsel submitted that in view of the fact that the transferee company holds the shares of transferor company No.1 and transferor company No.1 holds the shares of transferor company No.2, clause 5.1 of Part-B of the scheme provided that no shares of the transferee company shall be issued to the shareholders of the transferor companies and that, therefore, the question of valuation of the shares of the transferor companies does not arise.

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I have carefully considered the submissions of the learned counsel for the petitioners.

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Inasmuch as clause 11.1 of Part-C of the scheme itself provides for recording of the respective fair values of the assets and liabilities of the two transferor companies by the transferee company, the transferee company is directed to workout the respective fair values of the assets and liabilities of the two transferor companies and communicate the same to the Registrar of Companies within one month, along with the certified copy of this order.

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In respect of the comment made by the Deputy Official Liquidator, in paragraph 3(b) of his reports, as rightly pointed out by the learned counsel for the petitioners, under Section 210(4) of the Act, a company is entitled to fix its financial year for a period of 15 months without any permission from the Registrar of Companies. Therefore, filing of audited balance sheet as at 31.12.2012 is in consonance with the said statutory provision.

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As regards the observation regarding non-obtaining of valuation reports by the transferor companies for the purpose of levy of stamp duty, under Article 20(d) of Schedule I-A to the Indian Stamp Act, 1899,

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stamp duty is payable on conveyance following amalgamation and merger of companies under Section 394 of the Act. In view of clause 5.1 of Part-B of the scheme, which states that no shares of the transferee company shall be issued to the shareholders of the transferor companies in lieu of amalgamation, no conveyance has taken place and consequently no stamp duty is payable.

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In the light of the discussion undertaken above, I do not find any legally sustainable reason for not approving the scheme of amalgamation.

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Accordingly, the proposed scheme of amalgamation is sanctioned with effect from the appointed date i.e. 06.12.2013, subject to the condition of the transferee company submitting the fair value reports relating to the assets and liabilities of the transferor companies along with a certified copy of this order to the Registrar of Companies for the States of Telangana and Andhra Pradesh, at Hyderabad, within thirty days from the date of receipt of this order. The petitioners in C.P.Nos.115 and 116 of 2014 are ordered to be dissolved without going through the process of winding up. The petitioner in C.P.No.117 of 2014 shall take all other consequential actions in pursuance of the approval of the scheme of amalgamation.

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The company petitions are accordingly allowed.

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C.V. NAGARJUNA REDDY, J 25^th August, 2014 IBL

Agila Specialties Private Limited, v. -

Case brief

What is this about?

What did the court decide?

Agila Specialties 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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