Allowed

M/s Simhadri Power Limited v. -

Telangana HC18 Nov 2014CP/209/2014

Case brief

AI extract

What is this about?

This order sanctions the proposed scheme of amalgamation between M/s. Simhadri Power Limited and M/s. Steel Exchange India Limited. The Court relied on reports from the Official Liquidator and Regional Director, dismissing the Income Tax Department's objection regarding tax liability transfer. The sanction is conditional upon the applicants complying with SEBI directives concerning shareholder vot

What did the court decide?

The proposed scheme of amalgamation is sanctioned with effect from 01.04.2013, subject to compliance with SEBI objections; the petitioner companies are ordered to pay fees to counsel.

M/s Simhadri Power Limited Vs - — Company and Corporate | Telangana HC (2014)

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HON’BLE SRI JUSTICE A.RAJASHEKER REDDY COMPANY PETITION Nos.209 and 210 of 2014

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COMMON ORDER:

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Company Petition No.209 of 2014 is filed by M/s.Simhadri Power Limited (Transferor Company) and CP.No.210 of 2014 is filed by M/s.Steel Exchange India Limited (Transferee Company), for sanction of this Court to the proposed scheme of amalgamation of transferor company with the transferee company.

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In CP.No.209 of 2014, the transferor company has pleaded that it was incorporated on 13.08.2009, that its authorized share capital is Rs.99,00,00,000/- divided into 9,90,00,000 equity shares of Rs.10/- each and that the subscribed and paid-up capital is Rs.90,00,00,000/- divided into 9,00,00,000 equity shares of Rs.10/- each. That its main objects are to generate, harness, accumulate, distribute and supply electricity by setting up power plants by use of liquid, gaseous or solid fuels for the purpose of light, heat, motive power and for all other purposes which generate electric energy can be employed and to carry or and generate power supply either by hydro, thermal, biomass, gas, diesel oil, oils or through renewable energy sources such as solar, photo voltaic, wind mill etc. That its Board of Directors in the meeting held on 03.07.2013 has approved the proposed scheme of arrangement by fixing 01.04.2013 as the appointed date.

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In CP.No.210 of 2014, the transferee company has pleaded that it was incorporated on 24.02.1999, that its authorized share capital is Rs.2,33,00,00,000/- divided into 15,90,00,000 equity shares of 10/- each, 7,30,00,000 of redeemable cumulative optionally convertible preference shares of 10/- each and 10,00,000 redeemable preference shares of Rs.10/- each and that

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the issued, subscribed and paid-up capital is Rs.51,95,00,000/divided into 5,19,50,000 equity shares of Rs.10/- each fully paid up. That its main objects are to carry on business of running rerolling mill for the manufacture of steel, steel plates, sheets, angles, bars, rods, wire drawings of different sizes and specifications of all types of mild, high carbon special steels alloy steels and other metals and also to erect roughing mill for manufacturing billets from ingots to be used in the rolling mill. That its Board of Directors in the meeting held on 03.07.2013 has approved the proposed scheme of arrangement by fixing 01.04.2013 as the appointed date.

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It is also stated that the proposed amalgamation will help the Transferee Company to compete better in the market due to uninterrupted supply of power to the units. It will also enhance the scale of operations thereby providing significant impetus to the growth of both the companies, since they are engaged in line of business that could draw upon synergies of both the companies. By the proposed Amalgamation, the Transferee Company’s new units will also get uninterrupted supply of power as the Transferee Company is planning to utilize the 100% of the power generated by the Transferor Company in the future. Further, the amalgamation will also result in improved shareholder’s value of both the companies by way of improved financial structure, cash flows, increased assets base, consolidated revenues and profitability. Moreover, the Transferee Company being a listed company which also benefits the shareholders of the Transferor Company.

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The transferor company has filed Company Application No.904 of 2014 to appoint Chairperson to convene the meetings of the equity shareholders, secured creditors and unsecured

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creditors of the applicant company for the purpose of considering the proposed scheme of amalgamation and this Court, by Order dated 30.07.2014, appointed Ms.Tejaswini, Advocate as Chairperson to hold the meetings of equity shareholders and secured creditors and Mr.Gopanaboina Karuna Rao, Advocate as Chairperson to hold the meeting of unsecured creditors and fixed the quorum for the meeting of Equity shareholders as ‘15’, for the meeting of the secured creditors as ‘3’ and for the meeting of unsecured creditors as ‘10’. This Court further directed the applicant to cause publication of notices of the meetings in Business Standard (English) and Andhra Bhoomi (Telugu) of Hyderabad Editions as per the statutory provisions. Accordingly, the transferor company got published the notices of the meeting of the equity shareholders, secured and unsecured creditors in the said newspapers on 14-08-2014.

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The Chairperson appointed to conduct meeting for Equity shareholders creditors submitted a report on 12-09-2014, wherein she has stated that the meeting of the Equity Shareholders of the transferor Company was attended by 14 Equity shareholders in person 4 Equity shareholders through proxies and that all the Equity shareholders present in person and through proxies voted in favour of the proposed resolution.

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The Chairperson appointed to conduct meeting for Secured Creditors submitted a report on 12.09.2014 wherein she has stated that the meeting of the Secured creditors of the transferor Company was attended by 5 Secured creditors in person and that all of them voted in favour of the proposed resolution.

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The Chairperson appointed to conduct meeting for

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Unsecured Creditors submitted a report on 12.09.2014 wherein he has stated that the meeting of the unsecured creditors of the transferor Company was attended by 4 unsecured creditors in person and 7 unsecured Creditors through proxies and that all the unsecured creditors present in person and through proxies voted in favour of the proposed resolution.

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The transferee company has filed Company Application No.905 of 2014 to appoint Chairperson to convene the meetings of the equity shareholders, secured creditors and unsecured creditors of the applicant company for the purpose of considering the proposed scheme of amalgamation and this Court by Order, dated 30.07.2014, appointed Mr.N.Madhava Rao, Advocate as Chairperson to hold the meetings of equity shareholders, secured creditors and unsecured creditors and fixed the quorum for the meeting of Equity shareholders as ‘50’, for the meeting of the secured creditors as ‘3’ and for the meeting of unsecured creditors as ‘10’. This Court further directed the applicant to cause publication of notices of the meetings in Business Standard (English) and Andhra Bhoomi (Telugu) of Hyderabad Editions as per the statutory provisions. Accordingly, the transferee company got published the notices of the meeting of the equity shareholders, secured and unsecured creditors in the said newspapers on 14-08-2014.

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The Chairperson appointed to conduct meeting for Equity shareholders submitted a report on 12-09-2014, wherein he has stated that the meeting of the Equity Shareholders of the transfer Company was attended by 53 Equity shareholders in person and 6 Equity shareholders through proxies and that except three all the Equity shareholders present in person and through proxies voted

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in favour of the proposed resolution.

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The Chairperson appointed to conduct meeting for Unsecured Creditors submitted a report on 12.09.2014 wherein he has stated that the meeting of the Unsecured creditors of the transferee Company was attended by 11 Unsecured creditors in person and 3 Unsecured Creditors through proxies and that all of them voted in favour of the proposed resolution.

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The Chairperson appointed to conduct meeting for Secured Creditors submitted a report on 12.09.2014 wherein he has stated that the meeting of the secured creditors of the transferee Company was attended by 7 Secured creditors in person and that all of them voted in favour of the proposed resolution.

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In CP.No.209 of 2014, this Court on 08.10.2014, ordered notices to the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad, and to the Official Liquidator, High Court of A.P., and in CP.No.210 of 2014 on 08.10.2014, this Court ordered notice to the Regional director only, besides publication of notices in Business Standard (English Daily) and Andhra Bhoomi (Telugu Daily) of Hyderabad editions. Learned counsel for the petitioner has filed copies of proof of publication in the newspapers and stated that he has not received any claims or objections to the proposed scheme.

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

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Heard learned counsel for petitioner, learned Assistant Solicitor General appearing for the Regional Director and learned

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counsel for Official Liquidator.

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The Official Liquidator filed report stating that basing on the information made available by the transferor company, he is of the opinion that the affairs of the transferor company appear to have not been conducted in a manner prejudicial to the interests of the members or to public interest. Counsel for Official Liquidator also stated that Official Liquidator has no objection for approving this scheme.

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The Regional Director in his report dated 11.11.2014, stated that in pursuance to the General Circular No.1/2014, dated 15.01.2014 issued by the Ministry of Corporate Affairs, New Delhi, comments of the Income Tax Department were sought and that the Income Tax Department submitted its comments/remarks vide letters dated 05.11.2014 to the proposed scheme of arrangement wherein it has stated that “the proposed scheme of amalgamation is intended to reduce the payment of taxes by claiming the huge depreciation and other losses of M/s.Simhadri Power Limited (Transferor Company) with the profit making company M/s.Steel Exchange India Limited (Transferee Company). Hence, we strongly object the proposed scheme of amalgamation.

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For the objection raised by the Income-Tax Department, learned counsel for the petitioner submits that as per Clause 5.4 of the Scheme any liabilities of the transferor company shall be transferred to and vest in the Transferee Company from the appointed date and the petitioner will be abide by the same. As such, the objection raised by the Income-Tax Department cannot be a hindrance for sanction of the proposed scheme of arrangement. In view of the same the objection raised cannot

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come in the way of approving the scheme.

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The Regional Direction also submits that the Bombay Stock Exchange Limited (for short ‘BSE’) vide their letter dated 05.11.2014 has forwarded the Scheme of amalgamation to the Securities Exchange Board of India (for short ‘SEBI’) at draft stage. The matter was examined by SEBI vide letter dated 15.07.2014 and issued comments on the draft scheme to the BSE as detailed below:-

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i. The company shall disclose in the scheme regarding provisions for voting by public shareholders through postal ballot and e-voting as confirmed vide letter dated January, 23^rd , 2014 in terms of para-7, SEBI circular CIR/CFD/DIL/8/2013, dated 21.05.2013.

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ii. The Company shall ensure that various developments/changes proposed to the draft scheme vide their letter dated June 12 & 13, 2014 and July 3^rd , 2014 including changes in pre scheme shareholding of SPL and post scheme shareholding pattern of SEIL are uploaded on the websites of the stock exchanges.

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iii. The company shall make necessary amendments in the scheme of Arrangement to give effect to various submission given vide letter dated 12.06.2014 & 13.06.2014 regarding issuance of redeemable preference share issued to two promoters of SPL, terms of preference shares, etc.

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iv. The company shall also make necessary amendments in the scheme to give effect to various undertaking given vide letter dated 03.07.2014 regarding lock-in of equity shares of SPL issued to the shareholder of SPL, non-convertibility of redeemable preference shares issued to two promoters of SPL, etc.

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For the objections raised by the SEBI, learned counsel for the petitioner submits that the petitioner will abide by the conditions of the SEBI and the proposed scheme of arrangement may be sanctioned.

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In view of the above facts and circumstances and in view of the reports submitted by the Official Liquidator and Regional Director, I do not find any legally sustainable objection for not approving the proposed scheme of amalgamation. Accordingly, the proposed scheme of amalgamation is sanctioned with effect from the appointed date i.e., 01.04.2013, and the petitioner shall comply the objections raised by the SEBI. The petitioner/Transferor Company shall stand dissolved and merge with the Transferee Company without going through the process of winding up. The petitioner in CP.No.210 of 2014 (Transferee Company) within thirty (30) days from the date of receipt of a copy of this order, cause a certified copy of the same to be delivered to the Registrar of Companies for the State of Telangana and the State of Andhra Pradesh at Hyderabad and take all other consequential steps in pursuance of the approval of the scheme of amalgamation.

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Accordingly, Company Petitions are allowed.

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The petitioner company in CP.No.209 of 2014 shall also pay a sum of Rs.5,000/- to the learned Assistant Solicitor General appearing for the Regional Director and to Sri M.Anil Kumar, learned counsel for the Official Liquidator each and the petitioner in Company Petition No.210 of 2014 is to pay Rs.5,000/- to the learned Assistant Solicitor General towards fee in these petitions.

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____________________________ A.RAJASHEKER REDDY, J

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18.11.2014 tk

M/s Simhadri Power Limited v. -

Case brief

What is this about?

What did the court decide?

M/s Simhadri Power Limited v. -

Case brief

What is this about?

What did the court decide?

What the court decided

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