Allowed

M/s Galven Techno Solutions Private Limited v. -

Telangana HC2 Jun 2016CP/73/2016

Case brief

AI extract

What is this about?

The Company Court sanctioned the scheme of demerger between Galven Techno Solutions Private Limited and Lakshmi Technosolutions Private Limited under Sections 391 and 394 of the Companies Act, 1956, finding it compliant with statutory requirements and in public interest.

What did the court decide?

Scheme of demerger between petitioner and demerged company sanctioned with effect from 01.04.2015; direction to notify Registrar of Companies.

M/s Galven Techno Solutions Private Limited Vs - — Company and Corporate | Telangana HC (2016)

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HON’BLE SRI JUSTICE S.V.BHATT COMPANY PETITION No.73 OF 2016

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ORDER:

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Heard learned counsel for the petitioner.

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Galven Techno Solutions Private Limited (resulting company) filed this petition under Sections 391 and 394 of the Companies Act, 1956 (for short ‘the Act’) praying for sanction of scheme of demerger between petitioner company and Lakshmi Technosolutions Private Limited (demerged company).

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These corporate entities are called, for convenience, resulting company and demerged company respectively.

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Learned counsel for the petitioner has placed reliance upon MIHEER H.MAFATLAL V. MAFATLAL INDUSTRIES LIMITED^[1] , NEBULA MOTORS LIMITED^[2] and ANDHRA BANK HOUSING FINANCE LIMITED V. M/S ANDHRA BANK^[3] to explain the jurisdiction of this Court under Sections 391 and 394 of the Act.

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The gist of the case is as follows:

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The resulting company was incorporated for carrying on the business i.e. to undertake the designing and development of systems and application software either for its own use or for sale in India or for export outside India and to design and develop such systems and application software for or on behalf of manufacturers, owners and users of computer systems and digital/electronic equipment in India or elsewhere in the world and to manufacture either for its own use or for sale in India or for export outside

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India, computer systems, computer peripherals and accessories, computer consumables like floppy disks/diskettes, hard disks, ribbons, continuous and noncontinuous stationery and such other products or things which be considered as an integral part of a computer system or as an optional attachment of supplement thereto etc.

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The demerged company has substantially same and similar business objectivities and activities. The Memorandum and Articles of Association of the resulting company is filed as Ex.No.I. The audited balance sheet of resulting company as on 31.03.2015 is annexed to Ex.II. Ex.III is the Memorandum and Articles of Association of demerged company and the audited balance sheet of the demerged company as on 31.03.2015 is annexed to Ex.IV. On 08.01.2016, the Board of Directors of resulting company approved the scheme of demerger. The Board of Directors of demerged company, having regard to the advantages perceived with the demerger, approved the scheme of demerger. The effective date of demerger is 01.04.2015. The resulting company has set out the salient features of the scheme of demerger and with the assistance of learned counsel appearing for the petitioner, I have perused the exhibits.

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The resulting company filed C.A. No.107 of 2016 under Sections 391 and 394 of the Act to dispense with the requirement of convening the meeting of shareholders of the resulting company. On 10.02.2016, the application was allowed and the requirement of convening the meeting of shareholders was dispensed with. On 17.03.2016, this Court, in the instant company petition, ordered notice to

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the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad. The petitioner was directed to cause publication of notice of scheme of demerger in ‘Business Standard’ (English Daily) and ‘Andhra Bhoomi’ (Telugu Dailiy), Vizianagaram editions. The petitioner submits that notice on the statutory authority was served and the advertisement was published in the newspapers on 21.03.2016. On 22.04.2016, the Regional Director, South East Region, Ministry of Corporate Affairs, Hyderabad filed his report.

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Learned counsel for the petitioner submits that the resulting and demerged companies are wholly subsidiary and holding companies respectively. The jurisdiction of this Court, while approving the scheme of demerger, according to Miheer H.Mafatlal’s (1 supra) case, is as follows:

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"(1) The sanctioning Court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with and that the requisite meetings as contemplated by Section 391(1)(a) have been held.

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(2) That the scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391(2).

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(3) That the concerned meetings of the creditors or members or any class of them had the relevant material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of the class.

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(4) That all necessary material indicated by Sect ion 393(1)(a) is placed before the voters at the concerned meetings as contemplated by Section 391(1).

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(5) That all the requisite material contemplated by the proviso to sub-section (2) of Section 391 of the Act is placed before the Court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same.

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(6) That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the Court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously x-ray the same.

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(7) That the Company Court has also to satisfy itself that members or class of members or creditors or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter compromising the same class whom they purported to represent. (8) That the scheme as a whole is also found to be just, fair and reasonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant.

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(9) Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the Court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there could be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would

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otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction."

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Learned counsel appearing for the statutory authority has reported no objection for the proposed scheme of demerger.

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I have considered the material available on record, the principles of law enunciated by the Apex Court in Miheer H.Mafatlal's case (1 supra) and the conclusions/ recommendations of the statutory authority through his report dated 15.04.2016.

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Having regard to the above material/reports, this Court is of the opinion that the proposed scheme of demerger is in conformity with the provisions of the Act. The scheme does not affect the interest of stakeholders and the public or public interest and is intended to further the business interests of resulting and demerged companies for more profit and maximum utilization

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of available resources. Therefore, the scheme of demerger approved in the meeting of Board of Directors of demerged company on 08.01.2016 is sanctioned with effect from the date appointed i.e., 01.04.2015. The resulting and the demerged companies are directed to communicate certified copy of this order to the Registrar of Companies for the State of Telangana and the State of Andhra Pradesh, Hyderabad within 30 days from the date of receipt of a copy of this order. They are further directed to take all consequential and statutory steps required in pursuance of the approved scheme of demerger and the Act.

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Company petition is ordered accordingly.

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S.V.BHATT, J

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Date:02.06.2016 Stp

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[1] 1996(87) Company Cases 792,

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[2] 2003(5) ALD 327

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[3] 2002(3) ALD 654

M/s Galven Techno Solutions Private Limited v. -

Case brief

What is this about?

What did the court decide?

M/s Galven Techno Solutions Private Limited v. -

Case brief

What is this about?

What did the court decide?

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