In Re: Sun Metals and Alloys P. Ltd.; In Re: Sunmet Holdings India P. Ltd.

S. Rajeswaran, J.—C.P. No. 189 of 2007 has been filed by the demerged company under Sections 391 to 394 of the Companies Act,

1956 read with Rules 11(a)(10) and 79 of the Companies (Court) Rules, 1959, to sanction the scheme of arrangement as approved unanimously

by the shareholders of the petitioner-company so as to be binding on the petitioner-company and on all the members and creditors of the

petitioner-company.

C.P. No. 190 of 2007 has been filed by the resulting company under. Sections 391 to 394 of the Companies Act, 1956 read with Rules 11(a)(10)

and 79 of the Companies (Court) Rules, 1959 to sanction the scheme of arrangement as approved unanimously by the shareholders of the

petitioner-company so as to be binding on the petitioner-company and on all the members and creditors of the petitioner-company.

C.P. No. 189 of 2007:

The petition averments are as under:

The petitioner is Sun Metals and Alloys P. Ltd., a company incorporated under the Companies Act, 1956, having its registered office at ""Indsil

House"", Door Nos. 103-107, Thiruvenkataswamy Road, R.S. Puram, Coimbatore-641 002, Tamil Nadu. Initially, the registered office of the

company was at Plot No. 31, Industrial Development Area, Kanjikode West, Palakkad-678 623. With effect from May 7, 2003, the registered

office of the company was changed to 49, Avanashi Road, Coimbatore-641 037, Tamil Nadu. Later on April 17, 2006, the registered office of

the company was again changed to ""Indsil House"" Door Nos. 103-107, Thiruvenkataswamy Road, West R.S. Puram, Coimbatore-641 002.

The object of this petition is to obtain sanction of this Court to the scheme of arrangement for demerger of the undertaking of the smelter division of

Sun Metals and Alloys P. Ltd. (hereinafter called the ""demerged company"") for being transferred to and vested in Sunmet Holdings India P. Ltd.

(hereinafter called the ""resulting company"").

The demerged company was incorporated under the provisions of the Companies Act, 1956 on August 21, 1980, as a private limited company

under the name and style of Sun Metals and Alloys P. Ltd. The status of the company was changed to public company and consequently a fresh

certificate of incorporation was issued with the name ""Sun Metals and Alloys Ltd."" by virtue of deletion of the word ""Private"" from its name.

Subsequently, on April 27,1998, the status of the company was again changed to a private company with the name ""Sun Metals and Alloys P.

Ltd."" by f virtue of addition of the word ""Private"" to its name.

The authorised share capital of the demerged company as per the balance-sheet as at March 31, 2007, is Rs. 1,50,00,000 divided into

15,00,000 equity shares of Rs. 10 each. The issued subscribed and paid-up capital of the demerged company on the said date is Rs. 1,21,25,000

divided into 12,12,500 equity shares of Rs. 10 each. The demerged company has engaged in the business of manufacture and to act as exporters,

distributors and dealers of ferro silicon and all iron, steel and foundry materials including structural beams, tubes and agricultural implements. The

applicant-company has 7 (seven) shareholders as on date.

The main objects of the demerged company are set out in the memorandum of association. The demerged company has powers to do the business

as mentioned in paragraph 6 above.

The petitioner states that the resulting company was incorporated under the provisions of the Companies Act, 1956 on July 13, 2007, under the

name and style of Sunmet Holdings India P. Ltd. The registered office of the resulting company is situated at ""Indsil House"", T.V. Swamy Road,

West R.S. Puram, Coimbatore-641 002.

The authorised share capital of the resulting company as on the date of incorporation is Rs. 5,00,000 divided into 50,000 equity shares of Rs.

10 each. The issued, subscribed and paid-up capital of the resulting company on the said date is Rs. 1,00,000 divided into 10,000 equity shares of

Rs. 10 each. The resulting company has been incorporated with the specific objective of carrying on the business of the manufacturers of ferro

silicon and silicon manganese after obtaining the sanction of scheme of arrangement. The resulting company has 7 (seven) shareholders as on date.

The demerged company has two divisions, viz., investments and holdings division and the smelter division. The smelter division has its own

supporting and processing machinery with a capacity for the manufacture of 1,750 M.T. of ferro silicon per annum or 2,800 M.T. of silico

manganese per annum with all facilities, human and other resources.

The board of directors of the demerged company and the resulting company have at their meetings held on July 16, 2007, considered and

approved the scheme of arrangement for demerger of the undertaking of the smelter division of the demerger company for being transferred to and

vested in the resulting company.

The petitioner states that the said demerger is a scheme of arrangement between the demerged and the resulting company and their respective

shareholders and the demerger is being effected in accordance with the provisions of Sections 391 to 394 of the Companies Act, 1956, read with

and in compliance of the conditions of Section 2(19AA) of the Income Tax Act, 1961.

The petitioner states that the board of directors of the resulting company and the demerged company has decided, subject to necessary

approvals and sanctions, to demerge the undertakings of the demerged company with the resulting company. The board of directors of both the

companies envisage the following objectives and benefits arising from this demerger.

In order to achieve synergies and core competitiveness, a restructuring -exercise is being undertaken as part of which the investments and

holdings division will be retained with the demerged company and the smelter division will be hived off and transferred and vested in the resulting

company.

The manufacturing is crucial to the economy and therefore cost reduction and competitiveness will be essential. Similarly, investments in

securities and properties would also require a lot of planning, strategy and split second decisions, without which treasury operations may not be

meaningful. Moreover, it is always essential to ensure that the holdings of the promoters are properly structured so as to maintain the fabric of faith,

in different situations.

The demerger is intended, to bring focus and address larger issues that are material and essential in the interest of the shareholders, creditors

and all those who deal with the respective divisions of the demerged company and will not affect the status of any person in any manner.

The proposed segregation of investments and holdings division and -smelter division into two separate companies will create enhanced value

for respective shareholders and allow the independent board of both the companies to focus their attention at all the times in strategizing

operations, which would be in the best interests of the shareholders, creditors and all persons connected with the demerged company and the

resulting company.

The demerger creates larger scope for modernisation, expansion and independent value addition without committing the existing organization in

its entirety.

It enables to carry out the manufacturing and treasuring operations effectively.

The demerger would benefit the shareholders, employees and other stakeholders of the demerged company.

A copy of the scheme of arrangement is filed along with the petition as annexure 4 and the salient features of the scheme are also narrated in

the scheme.

The petitioner states that pursuant to the decision of its board at its meeting held on July 16, 2007, approving the scheme, the petitioner-

company obtained consent affidavits from its shareholders consenting to the scheme and filed Company Application No. 2385 of 2007 before this

Court for dispensing with the convening and conducting of meeting of its shareholders and for suitable directions to the petitioner-company to file

the company petition for sanctioning the scheme of arrangement. By virtue of an order made on September 6, 2007, in Company Application No.

2385 of 2007, this Court dispensed with the convening of the shareholders meeting of the petitioner-company and directed the petitioner-company

to file the company petition within two weeks from September 6, 2007. The petitioner is, therefore, filing this company petition.

The petitioner states that the demerged company is doing well. The demerged company has made pre-tax profits of Rs. 133.16 lakhs in the

financial year 2006-07. As per the balance-sheet as at March 31, 2007, and the profit and loss account for the period ended on that date the

demerged company has reserves and surplus of Rs. 7,37,37,160. The resulting company is a newly incorporated company.

The petitioner states that the assets of the demerged company are more than adequate to meet its liabilities. On sanction of the scheme of

arrangement, the assets of the resulting company will be more than adequate to meet all liabilities including contingent liabilities, if any, forming part

of the undertaking of smelter division.

The petitioner states that the resulting company will be in a position to discharge all the binding obligations of the demerged company to the

extent they pertain to the undertaking of smelter division and no prejudice will be caused to the creditors of the demerged company and the

resulting company.

It is submitted that the sanctioning of the scheme of arrangement will be-for the benefit of both the demerged company and the resulting

company and their shareholders. The resulting company already filed the company petition in this Court for obtaining a sanction for the scheme of

arrangement. Notice of this petition need not be served on any person. It is further submitted that the arrangement is not against public interest.

It is submitted that no investigation proceedings are pending against either of the companies under Sections 235 to 251 or any other provisions

of the Companies Act, 1956.

It is submitted that neither the demerged company nor the resulting company are registered under the provisions of the MRTP Act.

Hence, the above petition has been filed for the aforesaid reliefs.

C.P. No. 190 of 2007:

The petition averments are as under:

The petitioner is Sunmet Holdings India P. Ltd., a company incorporated under the provisions of the Companies Act, 1956, having its registered

office at ""Indsil House"", T.V. Swamy Road, West R.S. Puram, Coimbatore-641 002.

The object of this petition is to obtain sanction of this Court to the scheme of arrangement for demerger of the undertaking of the smelter division of

Sun Metals and Alloys P. Ltd. (hereinafter called the ""demerged company"") for being transferred to and vested in Sunmet Holdings India P. Ltd.

(hereinafter called the ""resulting company"").

The petitioner has also filed a copy of the very same scheme of arrangement marked as annexure 4 and the salient features of the scheme are

narrated in this scheme also.

The petitioner states that pursuant to the decision of its board at its. meeting held on July 16, 2007, approving the scheme, the petitioner-

company obtained consent affidavits from its shareholders consenting to the scheme and filed Company Application No. 2386 of 2007 before this

Court for dispensing with the convening and conducting of meeting of its shareholders and for suitable directions to the petitioner-company to file

the company petition for sanctioning the scheme of arrangement for demerger. By virtue of an order made on September 6, 2007, in Company

Application No. 2386 of 2007, this Court dispensed with the convening of the shareholders of the petitioner-company and directed the petitioner-

company to file the company petition within two weeks from September 6, 2007. The petitioner is therefore filing this company petition.

The petitioner states that the undertaking of smelter division of the demerged company has been a part of the demerged company which has

sufficient profits and its assets are adequate to meet its liabilities. The demerged company has made pre-tax profits of Rs. 133.16 lakhs in the

financial year 2006,-07. As per the balance-sheet as at March 31, 2007, and profit and loss account for the period ended on that date, the

demerged company has reserves and surplus of Rs. 7,37,37,160.

The petitioner further states that the resulting company will be in a position to discharge all the binding obligations including contingent liabilities

pertaining to the undertaking of the smelter division and no prejudice will be caused to the creditors of the demerged company and the resulting

company. There are no creditors for the resulting company at all.

It is submitted that the sanctioning of the scheme of arrangement will be for the benefit of both the demerged company and the resulting

company and their shareholders. The demerged company already filed the company petition in this Court for obtaining a sanction for the scheme of

arrangement. Notice of this petition need not be served on any person. It is further submitted that the arrangement is not against the public interest.

Hence, the above petition has been filed for the aforesaid reliefs.

Notice has been sent as per law and the service has been completed.

The Regional Director, Ministry of Corporate Affairs, filed an affidavit on behalf of the Central Government, wherein he has raised the

following objections:

I further submit that it is stated in Clause 13 of the scheme that the present name of the demerged company is transferred to and vested in the

resulting company as if the said name were part and parcel of the undertaking hereby transferred and vested in the resulting company as a result of

the scheme. It is also stated that simultaneously the name of the demerged company shall be changed to ''Sunmet Holdings India P. Ltd.'' which is

presently the name of the resulting company. The change of names proposed in the scheme cannot be given effect to without obtaining necessary

approvals from the Registrar of Companies as required u/s 21 of the Companies Act, 1956. Hence, both the companies have to comply with the

requirements of Sections 21 and 23 of the Companies Act, 1956, for giving effect to the change of name proposed.

Heard learned Counsel for the petitioners and learned senior panel counsel for the Regional Director. I have also gone through the documents and

records submitted in support of their submissions.

Learned Counsel for the petitioners submitted that the objections of the Regional Director are only formal in nature and even otherwise Sections 21

and 23 of the Companies Act could be complied with after sanctioning the scheme of arrangement and these objections could not be held against

the petitioners.

I find force in the submissions of learned Counsel for the petitioners as objections of this nature could not be put against the petitioners at the

time of considering the sanctioning of the scheme of arrangement. Further, as rightly contended by learned Counsel for the petitioners, the petitions

filed under Sections 391 to 394 of the Companies Act are like a single window system and the petitioners could not be burdened with taking out

various applications which are cumbersome in nature. Further, learned Counsel for the petitioners, has rightly pointed out that, if necessary, the

petitioners could always go before the Registrar of Companies for obtaining the necessary approval even after the scheme of arrangement is

sanctioned by this court.

The objections of the Regional Director are rightly met by learned coun-1 sel for the petitioners and accordingly, I am of the considered view

that the proposed scheme of arrangement is for both the companies and for their shareholders. Hence, both the petitions are to be allowed as

prayed for.

In the result, the C.P. Nos. 189 and 190 of 2007, are allowed as prayed for. No costs.

Learned senior panel counsel is entitled to a fee of Rs. 2,500 from each of the petitioner-companies.