Hariomkar Food Products vs Haldiram Foods International

This court is convened through video conferencing today (16.02.2021).

Learned Counsel for the Applicant Companies submits that the present Scheme is a Scheme of Amalgamation between Hariomkar Food Products Private Limited (Transferor Company) and Haldiram Foods International Private Limited (Transferee Company) and their respective shareholders and creditors.

Learned Counsel for the Applicant Companies further submits that the First Applicant Company is a wholly owned subsidiary of the Second Applicant Company and the entire share capital of the First Applicant Company is owned and controlled by the Second Applicant Company and its nominees.

Learned Counsel for the Applicant Companies submit that the First Applicant Company is, inter-alia, engaged in the business of business of production, processing, marketing, import & export, consultants, advisors, contractors, developers, designers, planner of Bakery Products, biscuits, breads, confectionery, dairy products, frozen foods, packed foods, sweetmeats, sweets, mithai, khara, farsan, papad edible foods packed or loose, vegetable products, milk food and milk products, preserved fruits & foods, all kinds of juices, sauces, ketchup, jams, fruit pulp, tit-bits, concentrates, soft drinks, cold storage, analysis, research & development of various foods and farming products, by products and open, run, manage, and give franchisee to others for open outlets, food court, and food stall in India and the Second Applicant engaged in manufacture, buy, sell, import, export and to deal in all kinds of food products, including sweetmeats, vegetable or non-vegetable products, milk food and milk products, preserved fruits & foods, all kinds of juices, sauces, ketchup, jams, fruit pulp, tit-bits, concentrates, soft drinks, liquors, dairy products, biscuits, bakeries, confectionary and all other kinds of processed or frozen foods, canned/bottled or otherwise packed or not.

Learned Counsel for the Applicant Companies further states that the management of the Transferor Company with the Transferee Company would, inter alia, entail the following benefits:

a. To achieve ease of management and operations through simplification of corporate structure and reducing multiple layer inefficiencies;

b. Post-Amalgamation of Transferor Company with the Transferee Company, Transferor Company will stand dissolved. Consequently, it will result in a reduction in the multiplicity of legal and regulatory compliance obligations including accounting, reporting requirements, statutory and internal audit requirements, tax filing, company law requirements, etc. and therefore reduction in administrative costs;

c. This will provide for pooling of the managerial, technical and financial resources of the Transferor Company and result in economies of scale reduction in overheads including administrative, managerial and other expenditure, operational rationalization, organizational efficiency and optimal utilization of resources. The Scheme is in the interest of the shareholders, creditors, lenders and various other stakeholders of the respective companies, it is not prejudicial to the interests of shareholders, creditors, lenders and various other stakeholders of the respective companies.

Learned Counsel for the Applicant Companies further submits that the Scheme has been approved by the Board of Directors of the Applicant Companies videBoard Resolutions dated 15thDecember 2020. The Appointed Date for the Scheme is 1st April 2021.

Upon the Scheme becoming effective, the shares held by the Second Applicant Company shall be cancelled and extinguished and no share shall be issued by the Second Applicant Company in consideration for this Scheme of Amalgamation since the entire share capital of the FirstApplicant Company is held by the Second Applicant Company.

Learned Counsel for the Applicant Companies further submits that in the First Applicant Company there are 2 (Two) Equity shareholders being the Second Applicant Company and its nominee shareholder. Both the equity shareholders have given their consent affidavits which are annexed as Exhibit I1 - I2 to the Application.In view of the fact that the equity shareholders of the First Applicant Company have given their consent to the Scheme by way of affidavits, the meeting of the equity shareholders of the First Applicant Company is herebydispensed with.

Learned Counsel for Applicant Companies submits that subsequent to the filing of the Company Scheme Application the First Applicant Company has 1 (One) Secured Creditor and the First Applicant Company has obtained No Objection Certificate from the said Secured Creditor which is annexed as'Annexure B' to the Additional Affidavit filed with this Tribunal dated 9February 2021.

Learned Counsel for the Applicant Companies submits that there was 1 (One) Secured Creditor in the Second Applicant Company and the same has been repaid as on date. Therefore, there are no Secured Creditors in the Second Applicant Company. The Chartered Accountant's certificate to that effect is annexed as Annexure D to the Additional Affidavit filed with this Tribunal dated 9 February 2021.

Learned Counsel for the Applicant Companies submit that the present Scheme is an arrangement between the Applicant Companies ascontemplated under section 230(1)(b) of the Companies Act, 2013 and not in accordance with the provisions of section 230(1)(a) of the Companies Act, 2013 as there is no compromise or arrangement with or diminution of liability of any of the unsecured creditors. The rights of unsecured creditors are not affected, and all the unsecured creditors of the First Applicant Company would be paid off in the ordinary course of business. Therefore, while the meeting of the unsecured creditors of the First Applicant Company is dispensed with, this Tribunal hereby directs that notice of the proposed Scheme be given to the unsecured creditors of the First Applicant Company via Post / Courier / E-mail / Hand Delivery, with instructions that they may submit their representations, if any, to the Tribunal within a period of 30 days from the date of receipt of such notice, and copy of such representations shall simultaneously be served upon the First Applicant Company, failing which, it shall be presumed that they have no representations to make on the proposed Scheme.

Learned Counsel for the Applicant Companies respectfully submits that:

a. Being a merger of wholly owned subsidiary company into its holding company, no shares would be issued or allotted as consideration pursuant to the merger. Accordingly, the rights of members of the Second Applicant Company / the Transferee Company are not affected since there will be no issue of shares pursuant to the Scheme and there would be absolutely no change in the equity share capital of the Second Applicant Company / the Transferee Company. Also, the present Scheme will not result in any dilution in shareholding of the shareholders of the Second Applicant Company / the Transferee Company;

b. The rights of the creditors of the Second Applicant Company / the Transferee Company are not affected since there will be no reduction in their claims and the assets of the Second Applicant Company / the Transferee Company, post amalgamation, will be more than sufficient to discharge their claims. Also, the net worth of the Second Applicant Company / the Transferee Company is and will continue to remain highly positive post- merger;

c. No undertaking of the Second Applicant Company / the Transferee Company is being parted away or being disposed- off and hence provisions of Section 180 of the Companies Act, 2013 are also not applicable.

Learned Counsel for the Applicant Companies submits that in view of above, no reconstruction or arrangement happens with its shareholders or creditors and thus, it does not require to hold either shareholders' meeting or creditors' meeting for approval of the proposed Scheme, in view of the ratio laid down by the Hon'ble High Court of Judicature at Bombay in the case of Mahaamba Investments Limited V/s. IDI Limited (2001) 105 Company Cases page 16 to 18 inter-alia observed and held that if the Scheme of Amalgamation provides for no issue of equity shares to the members of the Transferor Companies, being a wholly owned subsidiary of the Transferee Company and the creditors of the Transferee Company, are not likely to be affected by the Scheme, a separate Petition by the Transferee Company was not necessary. Similar view has been taken by NCLT, Mumbai bench in CSA No 243 of 2017 in the matter of Housing Development Finance Corporation Limited. Further, the Hon'ble High Court of Bombay in an unreported judgement of Bon Limited dated March 12, 2010 in Company Scheme Petition No. 123 of 2010, reiterated that a separate petition by the Transferee Company would not be necessary, if the Scheme, by way of transfer of undertaking, does not (a) involve the re-organization of the capital of the Transferee Company; and (b) affect the rights of the members or creditors of the Transferee Company, as between themselves and the Company.

The said observations are squarely applicable to the proposed Scheme wherein the Transferor Company is merged into The Transferee Company and the Transferor Company is a wholly owned subsidiary of The Transferee Company. Similar view has also been taken by the Delhi High Court in the case of Sharat Hardware Industries P. Ltd., in re (1978) 48 Com Cas 23, Hon'ble High Court of Madras in the case of Santhanalakshmi Investments (P) Ltd., In re (2005) 129 Company Cases page 789 to 792 and the Hon'ble High Court of Andhra Pradesh in the case of Nebula Motors Ltd., In re 45 SCL 143. This Hon'ble Tribunal in CSA No 243 of 2017 in the matter of Housing Development Finance Corporation Limited and in CSA No 899 of 2017 in the matter of Mahindra Gears and Transmissions Private Limited have taken similar view.

This Hon'ble Tribunal in CSA No 243 of 2017 in the matter of Housing Development Finance Corporation Limited, in CSA No. 915 of 2017 in the matter of Godrej Consumer Products Limited, in CSA No. 899 of 2017 in case of Mahindra CIE Automotive Limited, in CSA No. 1019 of 2017 in case of Godrej Properties Limited, in CSA No. 1615 of 2018 in case of Dolvi Minerals and Metals Private Limited, in CSA No. 396 of 2019 in case of JSW Logistics Infrastructure Private Limited, in CSA No. 3123 of 2019 in case of Jai Realty Ventures Limited. The Counsel for the Applicant Companies submits that the facts in the present case are similar to the facts of above case therefore, no meetings of the Shareholders and Creditors of the Transferee Company is required.

The Counsel for the Applicant Companies submits that the facts in the present case are similar to the facts of above cases and therefore, no meeting of shareholders and creditors of the Second Applicant Company / the Transferee Company is required to be convened. This Bench is of the view that the meeting of the equity shareholders and creditors of the Second Applicant Company / the Transferee Company is hereby dispensed with since the First Applicant Company / Transferor Company is a wholly-owned subsidiary of the Second Applicant Company / the Transferee Company.

The Applicant Companies are directed to serve notice of the present Application along with its enclosures on - (i) the Central Government through the office of Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai; (ii) Registrar of Companies, Mumbai; (iii) Income Tax Authority within whose jurisdiction the respective Applicant Companies are assessed to tax, clearly indicating the PAN of the concerned company (PAN of First Applicant Company: AADCH2012B and PAN of Second Applicant Company: AAACH3628L) (iv) concerned GST department and any other applicable regulatory authority pursuant to section 230(5) of the Companies Act, 2013 and Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, with a direction that they may submit their representations, if any, within a period of 30 days from the date of receipt of such notice to the Tribunal with copy of such representations shall simultaneously be served upon the Applicant Companies, failing which, it shall be presumed that the authorities have no representations to make on the proposed Scheme.

The Applicant Companies shall file compliance report with the registry in regard to the directions given in this Order in lieu of customary affidavit of service, due to lockdown situation prevailing now, proving dispatch of notices to unsecured creditors of the First Applicant Company and service of notice to the regulatory authorities as stated above and do report to this Tribunal that the directions regarding the issue of notices have been duly complied with.

Order accordingly.