In Re: Pathik Infrastructure Private Limited

R.M. Chhaya, J.—These are the petitions filed by the petitioner companies for sanction of a Scheme of Arrangement in the nature of Amalgamation of Pathik Infrastructure Private Limited with Vesta Exim Private Limited, u/s 391 to 394 of the Companies Act, 1956. It has been contended that the both the companies belong to the same group of management. The amalgamation is proposed in order to achieve synergic benefits and consolidation of the activities for the rapid growth of the Transferee Company as both of them are engaged in Real Estate activities. The petitions give in details the benefits envisaged due to the scheme. It has been pointed out that vide the order dated 1st July 2013 passed in the Company Application No. 187 of 2013, the meetings of the Equity Shareholders and the Unsecured Creditors of the Transferor company were dispensed with in view of the written consent letters from all of them being placed on record and there being no Secured Creditors. Similarly vide the order dated 1st July 2013 passed in the Company Application No. 188 of 2013, the meeting of the Equity Shareholders of the Transferee Company was dispensed with in view of the written consent letters from all of them being placed on record. The meetings of the creditors of the Transferee Company were dispensed with accepting the contention that the rights and interests of the creditors are no affected as a result of the proposed scheme.

The substantive petitions were admitted vide order dated 15th July 2013. The public notices for the same were duly advertised in the newspapers ''Indian Express'' English daily, Vadodara edition, and ''Sandesh'' Gujarati Daily, Surat edition both dated 25th July 2013. The publication in the Government gazette was dispensed with. Affidavits dt. 5th August 2013 confirm the same. No one has come forward with any objections to the said petitions even after the publication and the same has been further confirmed by the additional affidavit dated 17th December 2013.

Notice of the petition of the Transferor Company was served upon the Official Liquidator attached to Gujarat High Court. Vide the report dated 19th December 2013, filed by the Official Liquidator, it is observed that the affairs of the Transferor company have not been conducted in a manner prejudicial to the interest of their members or to the public interest. However, the Official Liquidator has requested this court to direct the Transferor Company to maintain its books of accounts and records for a period of 8 years from the date of sanctioning the scheme and not to dispose off the same without prior permission of the Central Govt. The Petitioner companies are accordingly directed to keep the books and records of the Transferor Company for a period of 8 years from the date of sanctioning the scheme and not to dispose of the same without prior permission of the Central Govt.

Notice of the petitions have been served upon the Central Govt. and Mr. M. Iqbal A. Shaikh, learned Senior Central Government Counsel appears for the Central Govt. A common affidavit dt. 11th December 2013 has been filed by Mr. Shambhu Kumar Agarwal, the Regional Director, North-Western Region, Ministry of Corporate Affairs, whereby several observations were made.

The attention of this court is drawn to the Common Additional Affidavit dated 17th December 2013, as filed by Mr. Pathik Viren Shah on behalf of the Petitioner Companies provides detailed explanations for the issues raised by the Regional Director.

(i) The first observation of the Regional Director pertains to the Exchange Ratio as proposed by the Scheme based on the certificate issued by the Chartered Accountant. It has been observed that the valuer has discussed several methods and based its report on the break up value method. Further it has been observed that though the Appointed date is proposed to be 1st April 2012, the valuer has taken into account the value of net assets as on 31st January 2013. In this regard, it has been pointed out that under the settled principle of law, the working of the Exchange Ratio is not a mathematical formula and the valuer is entitled to consider several factors while recommending the fair and reasonable ratio in the interest of the shareholders of both the companies. In the present case, as pointed out in the petition, since the share capital of the Transferee Company had undergone a change in the month of January, it was necessary to base the valuation of the assets of the Transferee Company after taking into account the increased share capital so as to arrive at a realistic value. It has been further pointed out that the petitioner companies are private limited companies that belong to the same group of management. Since no public interest is involved in any of the companies and since all the shareholders of both the companies have approved the scheme as per the proposed ratio, it is absolutely irrelevant for the Regional Director to question the working of the Exchange Ratio. To substantiate the said contention, reliance is placed on the decision of the Apex Court in case of Mihir Mafatlal (87 Company Cases pg. 792). I have considered the said submissions as well as perused the decision of the Supreme Court. Since the Regional Director has not been able to point out the exchange ratio being detrimental to the interest of any of the shareholders, no directions are required to be issued to the petitioners in this regard.

(ii) With regard to second observation and recommendation of the Regional Director to change the Appointed Date to 1st April 2013, it has been submitted that there is no legal bar on the choice of the Appointed Date. It is the prerogative of the Board of Directors of the petitioner companies to select the Appointed Date for the Scheme. The same is required to be approved by the shareholders of the respective petitioner companies. Both these requisites have been complied with in the present proceedings. In view of the same, in my opinion, it is not necessary modify the Appointed Date of the proposed scheme.

(iii) The next observation of the Regional Director pertains to the apprehension with regard to the real intent of the petitioner company. It is apprehended that the scheme is proposed only to avoid the stamp duty on the transfer of the assets of the Transferor Company. It has been clarified vide the Additional Affidavit by the Petitioner Company that since both the companies belong to the same group of management, the object of the scheme is simply to achieve synergic advantages and rapid growth by consolidation of the commercial activities of these companies. It has been further clarified that scheme envisages the transfer of the whole undertaking, viz. assets and corresponding liabilities of the running business. It has been specifically asserted that there is no purported avoidance of stamp duty and the Transferee Company has undertaken to pay the stamp duty in accordance with the applicable provisions of the Gujarat Stamp Act. In light of the said submissions, the observation of the Regional Director does not survive.

I have heard Smt. Swati Saurabh Soparkar, learned advocate for the petitioner companies and Mr. M. Iqbal A. Shaikh, learned Senior Central Government Counsel for the Central Government. Having gone through the petitions, and having considered the submissions made in this regard and being satisfied that amalgamation under the proposed scheme would be in the interest of the companies and their members and creditors. The Scheme is hereby sanctioned. Prayers in terms of paragraph 16 (a) of Company Petition No. 191 of 2013 and paragraph 16 (a) of the Company Petition No. 192 of 2013 are hereby granted.

The petitions are disposed of accordingly. So far as the costs to be paid to the learned Senior Central Government Counsel is concerned, the same are quantified at Rs. 7,500/- per petition. The same may be paid to the counsel appearing for the Central Govt. Cost of Rs. 5,000/- be paid to the Office of the Official Liquidator towards cost for the Transferor Company.

The petitioner companies are further directed to lodge a copy of this order, schedule of assets of the Transferor Company and the Scheme duly authenticated by the Registrar, High Court of Gujarat, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order.

The Petitioner companies are directed to file a copy of this order alongwith a copy of the scheme with the concerned Registrar of Companies, electronically, along with E-Form 21 in addition to physical copy as per relevant provisions of the Act.

Filing and issuance of drawn up order is hereby dispensed with. All concerned authorities to act on a copy of this order along with the scheme duly authenticated by the Registrar of this Court. The Registrar of this Court shall issue the authenticated copy of this order along with Scheme as expeditiously as possible.