Hero Cycles Limited vs Registrar of Companies

,,,,,,

Subrata Kumar Dash, Member (Technical)",,,,,,

This is a joint First Motion Application filed by Applicant Companies namely; Hero Cycles Limited (for short hereinafter referred to as Applicant,,,,,,

Company No.1/Demerged Company) and Hero Motors Limited (for short hereinafter referred to as Applicant Company No.2/Resulting Company),,,,,,

under Section 230-232 of Companies Act, 2013 (the Act) and other applicable provisions of the Act read with Companies (Compromises,",,,,,,

Arrangements and Amalgamations) Rules, 2016 (the Rules) in relation to the Scheme of Arrangement between the Applicant Companies. The said",,,,,,

Scheme is attached as Annexure-1 to the Application.,,,,,,

The Applicant Companies have prayed for dispensing with the requirement for convening the meetings of the A-Class Equity Shareholders and B-,,,,,,

Class Equity Shareholders of Applicant Company No.1/Demerged Company and Equity Shareholders of Applicant Company No.2/Resulting,,,,,,

Company. It is further prayed for convening of the meetings of Secured and Unsecured Creditors of the Applicant Company No.1 and meetings of,,,,,,

Unsecured Creditors of the Applicant Company No.2.,,,,,,

The Applicant Company No.1/Demerged Company is presently engaged in the business of manufacturing cycles, bicycles, tricycles and carriages",,,,,,

of all kinds and of all articles and things used for the manufacture, maintenance and working thereof. The Applicant Company No.2/Resulting",,,,,,

Company is presently engaged in the business of developing, manufacturing, marketing distribution, sale and service engines upto 500cc and related",,,,,,

transmission and power trains throughout the world, intended primarily for two-wheel and three wheel applications.",,,,,,

It is submitted that the registered offices of the Applicant Companies are at Ludhiana, which is situated in the State of Punjab and, therefore, the",,,,,,

both applicant companies are under the territorial jurisdiction of this Bench.,,,,,,

The background of companies and rationale of the Scheme is given below:-,,,,,,

“Presently, the Demerged Company operates primarily in the Cycle Business in India and in overseas jurisdictions (including via direct exports and through",,,,,,

investment in overseas companies) and limited segregated resources are allocated towards the Auto Business thus qualifying as the non-core business of the,,,,,,

Demerged Company. Management believes that the nature of offerings and the risk and return profile of the Cycle Business of the Demerged Company, being its",,,,,,

mainstay, wherein it operates as one of the prominent market / segment player, is different vis-Ã -vis the Auto Business. It is being envisaged that the Auto Business",,,,,,

of the Demerged Company should be demerged into and consolidated with Resulting Company. It is expected that such restructuring will be beneficial for the,,,,,,

Demerged Company, the Resulting Company and their respective shareholders and creditors, as it would result in concentrated focus on the Cycle Business by",,,,,,

the Demerged Company and on the Auto Business by the Resulting Company, thus unlocking of value of the independent businesses for the stakeholder.â€​",,,,,,

It is stated that the Board of Directors of the Demerged Company/Applicant Company No.1 and Resulting Company/Applicant Company No.2 in,,,,,,

their meetings held on 27.08.2021 and 06.09.2021 respectively have considered and unanimously approved the Scheme of Arrangement subject to,,,,,,

sanctioning of the same by this Tribunal. The copy of the Board Resolutions of the Demerged Company/Applicant Company No.1 and Resulting,,,,,,

Company/Applicant Company No.2 are attached as Annexure-4 and Annexure-10, respectively of the application. The Applicant Company No.1 and",,,,,,

Applicant Company No.2 have authorized Mr. Pankaj Munjal, and Mr. Amit Gupta, and Mr. Sanjay Singh Suryavanshi, to do all acts and deeds and",,,,,,

things in relation to the sanctioning of the Scheme and for the filing of present application/affidavits/documents with statutory authorities. The affidavit,,,,,,

of Mr. Sanjay Singh Suryavanshi, Authorised Signatory of Applicant Company No.1 and Applicant Company No.2 have been filed in support of",,,,,,

contents of the application for seeking appropriate orders/directions.,,,,,,

The appointed date of the Scheme is 01.04.2021 as mentioned in the Clause 1.3 of Scheme of Arrangement is attached as Annexure-1 of the,,,,,,

application.,,,,,,

It is stated that the Demerged Company/Applicant Company No.1 and Resulting Company/Applicant Company No.2 have filed the audited,,,,,,

financial statements as on 31.03.2019, 31.03.2020 and 31.03.2021 at Annexure-3A and Annexure-9, respectively of the application. The Demerged",,,,,,

Company/Applicant Company No.1 and Resulting Company/Applicant Company No.2 have also filed unaudited balance sheets as on 30.09.2021 as,,,,,,

Annexure- A and B of Diary No.01125/2 dated 06.12.2021.,,,,,,

It is submitted that there are no proceedings pending inquiry or investigation under Section 206 to 229 of the Companies Act, 2013 against the",,,,,,

Demerged Company and the Resulting Company.,,,,,,

It is submitted that in pursuance of the proviso to Sec. 230 (7) and Section 232 (3) of the Act, the Applicant Companies have filed the certificate",,,,,,

issued by Statutory Auditors certifying that the Scheme is in compliance with the Accounting Standards under Section 133 of the Act and the same,,,,,,

are attached as Annexure 15 of the application.,,,,,,

It is further submitted by the counsel for applicant companies that as per Valuation Report dated 26.08.2021 submitted by Mr. Niranjan Kumar,",,,,,,

Registered Valuer (SFA) bearing registration No.IBBI/RV/06/2018/10137 is attached as Annexure-14. The Share Entitlement Ratio is given below:-,,,,,,

“To A-Class Equity Shareholders of HCL (Demerged Company) 81,174 (Eight-One Thousand One Hundred and Seventy-Four) equity shares of HML having",,,,,,

face value of INR 10 each fully paid up shall be issued for every 100 (Hundred) A-Class equity shares held in HCL having face value of INR 1,000 each fully paid",,,,,,

up.,,,,,,

To B-Class Equity Shareholders of HCL (Demerged Company) 1 (one) equity share of HML of INR 10 each fully paid up against all outstanding B-Class equity,,,,,,

shares of HCL.â€​,,,,,,

It is submitted by the learned counsel that the Scheme (Annexure-1) also takes care of the interests of the staff/workers and employees of the,,,,,,

Applicant Companies. By virtue of Clause 9.1, it is stated that all permanent employees of the Demerged Undertaking of the Demerged Company in",,,,,,

service as on the Effective Date shall be deemed to have become the employees of the Resulting Company with effect from the Appointed Date,,,,,,

without any interruption in their service as a result of the transfer of the Demerged Undertaking to the Resulting Company on the same terms and,,,,,,

conditions of employment as were with the Demerged Company. On the basis of continuity of service, the terms and conditions of their employment",,,,,,

with the Resulting Company shall not be less favorable than those applicable to them with reference to the Demerged Undertaking of the Demerged,,,,,,

Company as on the Effective Date.,,,,,,

The Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company have deposed by way of affidavit that both,,,,,,

the companies are unlisted companies and are not regulated by any sectoral regulators. The affidavit of the authorised signatory is attached as,,,,,,

Annexure-17 of the application.,,,,,,

The Applicant Companies has furnished the following documents:-,,,,,,

i. List of Secured and Unsecured Creditors of Applicant Company No.1 duly certified by the Statutory Auditors (Annexure-6 and 7 respectively of the application).,,,,,,

ii. List of Secured and Unsecured Creditors of Applicant Company No.2 duly certified by the Statutory Auditors (Annexure-12 and 13 respectively of the application).,,,,,,

iii. Certificates of Statutory Auditors to the effect that Accounting treatment proposed in the Scheme is inconformity with Section 133 of Companies Act, 2013",,,,,,

Name of the

Applicant

Companies",Shareholders along with their consent on affidavit,,Creditors along with their consents on affidavit,,,

,"Equity Shareholders A-Class

B-Class",Consents submitted on affidavit,Secured Creditors,"Consents

submitted on

affidavit","Unsecured

Creditors","Consents

submitted on

affidavit

Applicant

Company No.1","A-Class 13

B-Class 1","A-Class 99.26%

B-Class 100%",6,Nil,1383,Nil

Applicant

Company No.2",4340,99.22%,NIL,NA,11,Nil

of the unsecured creditors;,,,,,,

III. In case the required quorum as noted above for the meetings is not present at the commencement of the meeting, the meeting shall be adjourned",,,,,,

by 30 minutes and thereafter the persons present and voting shall be deemed to constitute the quorum.,,,,,,

IV. Mr. Justice M.S. Sullar (Retd.), address #220, Sector 25-A, Panchkula, Mobile No.7380155555, email idj:u sticemssullar@gmail.com, Â is",,,,,,

appointed as the Chairperson for the meeting to be called under this order. An amount of ₹2,00,000/- (Rupees Two Lakhs Only) be paid for his/her",,,,,,

services as the Chairperson.,,,,,,

V. Mr. Karanveer Jindal, Advocate, R/o D/990/2013, SCO 7-8, 4th Floor, Jandu Tower, Miller Ganj, GT Road, Ludhiana, Punjab - 141003, Mobile",,,,,,

No.9888972565, e-mail id: kvjindal@gmail.com, is appointed as the Alternate Chairperson for the meeting to be called under this order. An amount of",,,,,,

₹1,50,000/-(Rupees One Lakh Fifty Thousand Only) be paid for  his/her services as the Alternate Chairperson.",,,,,,

VI. Ms. Swati Saluja, Advocate address: #322A, Sector 15 Panchkula, Mobile  No.8605090031, email id: saluja1010@gmail.com,  is appointed",,,,,,

as the Scrutinizer for the above meeting to be called under this order. An amount  of ₹1,00,000/- (Rupees One Lakh Only) be paid for his/her",,,,,,

services as the  Scrutinizer.,,,,,,

VII. The fee of the Chairperson, Alternate Chairperson and Scrutinizer and  other out of pocket expenses for them shall be borne jointly by the",,,,,,

 Applicant Company No.1/Demerged Company and Applicant Company  No.2/Resulting Company.,,,,,,

VIII. It is further directed that individual notices of the said meetings shall be  sent by Applicant Company No.1/Demerged Company and Applicant,,,,,,

 Company No.2/Resulting Company through registered post or speed post  or through courier or e-mail, 30 days in advance before the schedule",,,,,,

date of meeting, indicating the day, date, the place and time as aforesaid, together with a copy of the Scheme, copy of explanatory statement with",,,,,,

Valuation Report as discussed in paras 4 of this order required to be sent under the Companies Act, 2013 and the applicable Rules and any other",,,,,,

documents as may be prescribed under the Act shall also be duly sent with the notice.,,,,,,

IX. It is further directed that along with the notices, Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company",,,,,,

shall also send, statements explaining the effect of the scheme on the creditors, key managerial personnel, promoters and non-promoter members etc.",,,,,,

along with effect of the arrangement on any material interests of the Directors of the Company or the debenture trustees, if any, as provided under",,,,,,

sub-section (3) of Section 230 of the Act.,,,,,,

X. It is also directed that the provisional accounting statement of Applicant Company No.1/Demerged Company and Applicant Company,,,,,,

No.2/Resulting Company as on 30.09.2021 or as on a subsequent date be also circulated for the aforesaid meeting in terms of Section 232 (2) (e) of,,,,,,

the Act.,,,,,,

XI. That the Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company shall publish advertisement with a gap,,,,,,

of at least 30 clear days before the aforesaid meeting, indicating the day, date and place and the time of meeting as aforesaid, to be published in",,,,,,

“Indian Express†(English, Chandigarh Edition) and “Jagbani†(Punjabi, Ludhiana Edition); It be stated in the advertisement that the copies of",,,,,,

“Schemeâ€, the Explanatory Statement required to be published pursuant to Section 230 to 232 of the Act. The Applicant Company",,,,,,

No.1/Demerged Company and Applicant Company No.2/Resulting Company shall also publish the notice on its website, if any.",,,,,,

XII. It shall be the responsibility of the Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company to ensure,,,,,,

that the notices are sent under the signature and supervision of the authorized representative of the company on the basis of Board resolutions and that,,,,,,

they shall file their affidavits in the Tribunal at least ten days before the date fixed for the meeting.,,,,,,

XIII. Voting shall be allowed on the “Scheme†through electronic means which will remain open for a period as mandated under Clause 8.3 of,,,,,,

Secretarial Standards on General Meetings to the Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company,,,,,,

under the Act and the Rules framed thereunder.,,,,,,

XIV. The Scrutinizer’s report will contain his/her findings on the compliance to the directions given in Para VIII to XIII above.,,,,,,

XV. The Chairperson shall be responsible to report the result of the meeting to the Tribunal in Form No. CAA-4, as per Rule 14 of the Companies",,,,,,

(Compromises, Arrangements and Amalgamations) Rules, 2016 within 7 (seven) days of the conclusion of the meeting. He would be fully assisted by",,,,,,

the authorized representative/Company Secretary of the Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting,,,,,,

Company, and the Scrutinizer, who will assist the Hon’ble Chairperson and Alternate Chairperson in preparing and finalizing the report.",,,,,,

XVI. The Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company shall individually and in compliance of,,,,,,

sub-section (5) of Section 230 of the Act and Rule 8 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 send notices in",,,,,,

Form No. CAA-3 along with copy of the Scheme, Explanatory Statement and the disclosures mentioned in Rule 6 of the “Rules†to (i) Central",,,,,,

Government through the Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi (ii) Registrar of Companies, Punjab and",,,,,,

Chandigarh (iii) Official Liquidator; (iv) Income Tax Department through the Nodal Officer â€" Principal Commissioner of Income Tax, NWR,",,,,,,

Aayakar Bhawan, Sector 17-E, Chandigarh by mentioning the PAN number of the Applicant Companies; and such other Sectoral Regulator(s)",,,,,,

governing the business of the Transferee Companies, if any, stating that representation, if any, to be made by them shall be sent to the Tribunal within",,,,,,

a period of 30 days from the date of receipt of such notice and copy of such representation shall be simultaneously sent to the concerned companies,",,,,,,

failing which it shall be presumed that they have no objection to the proposed Scheme.,,,,,,

XVII. The Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company shall furnish a copy of the Scheme free,,,,,,

of charge within one day of any requisition for the Scheme made by any creditor or member/shareholder entitled to attend the meeting as aforesaid.,,,,,,

XVIII. The authorized representative of the Applicant Company No.1/Demerged Company and Applicant Company No.2/Resulting Company shall,,,,,,

furnish an affidavit of service of notice of meeting and publication of advertisement and compliance of all directions contained herein at least a week,,,,,,

before the proposed meeting.,,,,,,

XIX. All the aforesaid directions are to be complied with strictly in accordance with the applicable laws including forms and formats contained in the,,,,,,

Rules as well as the provisions of the Companies Act, 2013 by the Applicant Company No.1/Demerged Company and Applicant Company",,,,,,

No.2/Resulting Company.,,,,,,

With the aforesaid directions, this First Motion Application stands disposed of. A copy of this order be supplied to the learned counsel for the",,,,,,

Applicant Companies who in turn shall supply a copy of the same to the Chairperson, Alternate Chairperson and the Scrutinizer immediately.",,,,,,