Allowed

M/s. Axis Clinicals Limited v. -

Telangana HC4 Aug 2014CP/27/2014

Case brief

AI extract

What is this about?

An authorized signatory of the Central Government, a director of the transferor company, a director of the transferee company, and a legal practitioner seeking sanction for a scheme of amalgamation between two companies under the Companies Act, 1956. The petitioners sought to amalgamate M/s. Sacha Chemphar Private Limited with M/s. Axis Clinicals Limited. The proposal was challenged by the Regiona

What did the court decide?

Sanctioned the proposed scheme of amalgamation from 01.04.2013; ordered the transferor company to be dissolved without winding up; directed the transferee company to deliver certified copies to the Re

M/s. Axis Clinicals Limited Vs - — Company and Corporate | Telangana HC (2014)

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

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COMPANY PETITION Nos.26 and 27 of 2014

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Dated: 04.08.2014

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COMPANY PETITION No.26 of 2014

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M/s. Sacha Chemphar Private Limited, A company incorporated under the Companies Act, 1956, having its registered office at 5^th Floor, 1-121/1, Sy.Nos.66 (Part) & 67 (Part), Miyapur, Serilingampally, Hyderabad-500050, A.P., India, Rep. By its Director Penaka Rohit Reddy

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.. Petitioner

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COMPANY PETITION No.27 of 2014

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M/s. Axis Clinicals Limited, A company registered under the Companies Act, 1956, having its registered office at Sy.No.66 (Part) & 67 (Part), Miyapur, Serilingampally, Hyderabad, in the State of Andhra Pradesh Rep. By its Director Bonga Pani Bhushan Reddy .. 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.26 of 2014 is filed by M/s. Sacha Chemphar Private Limited (transferor company) and C.P.No.27 of 2014 is filed by M/s. Axis Clinicals 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 C.P.No.26 of 2014, the transferor company has pleaded that it was incorporated on 30.09.2011, that its authorized share capital as on 31.03.2013 is Rs.1,00,000/- divided into 10,000 equity shares of Rs.10/- each and that the entire share capital has been issued, subscribed and fully paid up. That its main objects are to trade, manufacture, buy, sell, import, export, and to represent as agents, stockists, distributors, dealers, indentors and to deal in all kinds of bulk drugs, intermediates, formulations, pharmaceuticals, chemicals, excipients, speciality products and also to trade in all kinds of Lab Consumables etc. That its Board of Directors, by resolution dated 03.12.2013, has approved the proposed scheme of amalgamation, by fixing 01.04.2013 as the appointed date. It has further pleaded that it has two shareholders, that they have submitted their consent affidavits for the proposed scheme of amalgamation in Company Application No.80 of 2014, wherein this Court has dispensed with the requirement of holding their meeting vide its order dated 22.01.2014, and that its secured and unsecured creditors have also given their consent for the proposed scheme.

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It is the pleaded case of the transferee company, petitioner in C.P.No.27 of 2014, that it was incorporated on 17.02.2007, that its authorized share capital as on 31.03.2013 is Rs.20,00,00,000/- divided into 2,00,00,000 equity shares of Rs.10/- each and that the entire share capital has been issued, subscribed and fully paid up. That its main objects are to establish, conduct, undertake, develop, improve, carry on research in both basic and applied branches of science in relation to all kinds of basic drugs, bulk drugs, pharmaceuticals and formulations, health care and bio-technology and services to develop new products and provide support services for developing new products/molecules and substitutes for imported products etc. That its Board of Directors, by resolution dated 03.12.2013, has approved the proposed scheme of amalgamation, by fixing 01.04.2013 as the appointed date. It has further pleaded that its seven shareholders have submitted their consent affidavits for the proposed scheme of amalgamation in Company Application No.81 of 2014, wherein this Court has dispensed with the requirement of holding their meeting vide its order dated 22.01.2014, that it has not availed any unsecured loans and that its secured creditors have given their consent for the proposed scheme of amalgamation.

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In both these petitions, this Court, on 24.10.2013, directed the petitioners to issue notices to the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad, and the Official Liquidator of this Court, besides publication of 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 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 Deputy Official Liquidator have filed their respective reports.

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In his report, the Regional Director, South East Region, Ministry of Corporate Affairs, has raised the following objections:

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1) That as many as four prosecutions have been launched against the transferee company for alleged violation of various provisions of the Companies Act, 1956, and that the same are pending;

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2) that as per the scheme, the consolidated authorized share capital, after amalgamation, will be Rs.20,04,00,000/- as against the existing share capital of both companies together of Rs.20,01,00,000/- and that, therefore, the transferee company has to increase its authorized share capital by Rs.3,00,000/- by following procedure under Section 64 read with Section 61 of the Companies Act, 2013;

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3) that the petitioners have not provided the valuation report for determining the exchange ratio;

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4) that the transferor company may be directed to submit consent letters from all the unsecured creditors as per the direction issued by this Court in Company Application No.80 of 2014;

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5) that the transferee company may be directed to produce no objection certificates from its secured creditors as per the direction issued by this Court in Company Application No.81

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of 2014;

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6) that this Court may direct the transferee company to strictly follow the Accounting Standard 14 issued by the Institute of Chartered Accountants for accounting treatment of the amalgamation scheme and in terms of Section 2(43) of the Companies Act, 2013, upon the scheme becoming effective and credit the difference amount, if any, that may arise on account of value of assets over the value of liabilities at Para 10.1.1 (ii) to the “capital reserve”; and

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7) that as per the balance sheet of the transferee company, as at 31.03.2013, the transferee company has unsecured creditors in the form of trade payables of Rs.1,92,93,169/and the liabilities in the form of statutory liabilities of Rs.3,80,28,974/- and other liabilities of Rs.1,05,37,540/- and that, however, in the order dated 22.01.2014 made in Company Application No.81 of 2014, it was stated that the company does not have unsecured creditors.

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In his report, the Deputy Official Liquidator has also raised certain aspects. In view of the submissions made by Mr. M. Anil Kumar, learned counsel for the Official Liquidator, at the hearing, it is not necessary to refer to all those aspects. He has fairly stated that the main objections were in relation to non-filing of consent letters by the secured and unsecured creditors of the companies, that they have since been filed and that in view of the same, the Official Liquidator can have no objection for approval of the proposed scheme of amalgamation.

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Coming to the first objection raised by the Regional Director, South East Region, Ministry of Corporate Affairs, as rightly submitted

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Mr. V.S. Raju, learned counsel for the petitioners, even after amalgamation, the prosecution against the transferee company will continue. Inasmuch as there are no prosecutions pending against the transferor company, pendency of prosecutions against the transferee company has no relevance and it cannot be a ground to reject the proposed scheme of amalgamation.

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With respect to the objection relating to the consolidated share capital, in his affidavit, Mr. Penaka Sarath Chandra Reddy, the Director of the transferee company, has stated that the company will comply with the requirement of Sections 61 and 64 of the Companies Act, 2013, by increasing its authorized share capital by Rs.3,00,000/-. Further, under clause 9.1 (i) of the scheme, it is provided that the transferee company shall allot 4 equity shares of Rs.10/- each to every equity shareholder of the transferor company for every 1 equity share held in the transferor company. Mr. V.S. Raju, learned counsel for the petitioners, stated that compliance of this condition will automatically increase the consolidated share capital to Rs.20,04,00,000/- from Rs.20,01,00,000/-.

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With regard to the objection regarding non-provision of valuation report, the Managing Director of the transferor company has submitted fairness report dated 23.05.2014 of Agarwal Sruthi & Co., Chartered Accountants. The Regional Director has himself referred to this fairness report in his report. A perusal of the fairness report shows that the Chartered Accountant has evaluated the shares of the transferor and transferee companies by indicating the share swap ratio of four equity shares of face value of Rs.10/- each held in the transferee company for every one share of face value of Rs.10/- each

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held in the transferor company and it has certified the same as fair and reasonable in the current context.

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As regards the objection relating to no objection letters of secured and unsecured creditors, both the learned counsel appearing for the Regional Director and the Official Liquidator have fairly submitted that the same have been filed along with the respective affidavits dated 31.07.2014 of the Directors of the transferor and transferee companies.

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With regard to the Accounting Standard, the learned counsel for the petitioners stated that his clients will scrupulously follow the Accounting Standard as pointed out by the Regional Director in paragraph 10 of his report.

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For the above-mentioned reasons, I do not find any legally sustainable reason for not approving the proposed scheme of amalgamation.

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Accordingly, the proposed scheme of amalgamation is sanctioned with effect from the appointed date i.e. 01.04.2013. The petitioner in C.P.No.26 of 2014 is ordered to be dissolved without going through the process of winding up. The petitioner in C.P.No.27 of 2014 shall, within thirty days from the date of receipt 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 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 4^th August, 2014 IBL

M/s. Axis Clinicals Limited v. -

Case brief

What is this about?

What did the court decide?

M/s. Axis Clinicals Limited v. -

Case brief

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