In Re: Tesco Hindustan Wholesaling Private Limited

Aravind Kumar, J.—Heard learned Senior Counsel Sri Sajjan Poovayya appearing on behalf of the applicant - Company. Perused the records.

Applicant herein is Transferor company No. 2 which came to be incorporated on 09.07.2008 by Registrar of Companies, Karnataka and with effect from 25.10.2008, name of the company has been changed to the present name as indicated in the cause-title of the petition, from the earlier name i.e., "Saffron Commodities Private Limited" as per the Certificate of Incorporation issued, upon change of name vide Annexure - A.

The Registered Office of the applicant - Company is as indicated in the cause-title of the present petition. As per the averments made in paragraph 4, Authorised Signatory has stated the authorised, issued, subscribed and paid-up share capital of Transferor company No. 2. Petitioner - company is engaged in the business of wholesale trading of food and non food products etc., as indicated in the Memorandum and Articles of Association appended to the petition as at Annexure - A.

Transferor company No. 1 - M/s. Virtuous Shopping Centres Private Limited came to be incorporated on 05.05.2010 with Registrar of Companies, Mumbai pursuant to its conversion from a Private Limited Company to a Public Company and fresh Certificate of Incorporation has been issued under the name of "M/s. Virtuous Shopping Centres Limited." vide Annexure - E and its Registered Office is located in Mumbai and the authorised, issued, subscribed and paid-up share capital is indicated at para 12 and current paid-up capital of the Transferor company is indicated in paragraph 15 and 16 of the petition. It is engaged in the business of developing and managing properties for retail stores.

The Transferee company is having its registered office at Mumbai and it came to be incorporated with effect from 01.07.2008 and its authorised, subscribed paid-up share capital is indicated in para 19 of the present petition.

Petitioner i.e., Transferor company No. 1 Transferor company No. 2 are wholly owned subsidiaries of the Transferee company and all the shares of the petitioner - Transferor company No. 1 are presently held by transferee company in its own name as evidenced from Annexure-P1, namely, the certificate issued by the chartered accountant dated 11.02.2015. Transferor company Nos. 1 and 2 are proposed to be merged into the Transferee company as per the Scheme of Amalgamation - Annexure-M.

The Board of Directors of petitioner company has approved the Scheme of Amalgamation and Arrangement between Transferor company No. 2 along with Transferor company No. 1 and the Transferee company vide its resolution dated 14.01.2015 which is appended to the present petition at Annexure - D. In terms of the Scheme of Amalgamation and Arrangement, the Transferor company Nos. 1 and 2 are proposed to be merged with the Transferee company as per the Scheme of Amalgamation vide Annexure - M. All the shareholders of the company have consented to the scheme of amalgamation and the list of shareholders dated 22.01.2015 is at Annexure - P1 and same is accompanied with the consent furnished by them as at Annexures - P2 to P8.

The certificate/report of the chartered accountant dated 11.02.2015 is at Annexure - Q would indicate that petitioner company does not have any secured creditors and the unsecured debt of the company is in the nature of trade payables and written consent has been obtained from 75% of the value of the trade creditors as per Annexures - R1 to R13 and the list of trade creditors as on 11.02.2015 is at Annexure - Q.

On an application filed by petitioner company in C.A. No. 104/2015, this Court, by order dated 12.03.2015, dispensed with convening and holding of the meeting of the equity shareholders and creditors. As permitted by this Court, present company petition has been filed on 26.03.2015 and pursuant to order passed in the present petition on 16.04.2015, petitioner has taken an advertisement of the listing of this petition on 11.06.2015 by publishing the same in ''The Hindu'', English Daily newspaper and ''Udayavani'', Kannada Daily newspaper both of Bengaluru Edition. Paper publication have been filed. None have appeared pursuant to the said advertisement to oppose the Scheme of Amalgamation and Arrangement.

A memo dated nil has been filed by the learned counsel appearing for the petitioner herein, enclosing the order of High Court of Judicature at Bombay dated 24.07.2015 passed in Company Scheme Petition No. 328/2015 connected with Company Summons for Direction No. 193/2015. Perusal of the said order would indicate that the Scheme of Amalgamation and Arrangement which is at Annexure - M in the present petition has been approved and sanctioned by jurisdictional High Court.

Notice issued by this Court in the present petition to the Regional Director and Official Liquidator has been received by the respective statutory authorities and the affidavit by the Regional Director dated 24.07.2015 has been filed on 27.07.2015. Same would indicate that Regional Director has made an observation with regard to non receipt of communication from the jurisdictional Deputy Commissioner of Income Tax and it is indicated in the said affidavit that said authority had requested that, pending report from the Income Tax Department, the decision for approval of the scheme may be kept in abeyance. The said affidavit would also indicate that the petitioner herein i.e., Transferor company No. 2, by communication dated 24.06.2015 has submitted a copy of the letter of even date to the income tax authority, enclosing therewith, the copy of the present petition, its annexures and the scheme which is also duly acknowledged by the Department on 01.07.2015. No comments or objections have been received by the Regional Director from the Income Tax Department. Thus, it would indicate that no objection has been raised to the scheme by the Regional Director and in view of the fact that communication forwarded by the petitioner - Transferor company No. 2 enclosing the Scheme of Amalgamation and Arrangement to the jurisdictional Income Tax Authority having not been replied/returned, nothing further remains to be addressed on this issue.

The Official Liquidator has submitted a report - OLR 345/2015 on 28.09.2015, whereunder Official Liquidator intends to rely upon the report of the chartered accountant Sri N. Swaminathan who came to be appointed by this Court vide order dated 12.06.2015, passed in OLR 215/2015 appointing the said chartered accountant for scrutiny and verification of books of accounts of Transferor company No. 2 namely petitioner herein. The observation made by the chartered accountant reads as under:

"That N. Swaminathan, Chartered Accountants appointed by this Hon''ble Court, has concluded in his report dated 09.09.2015 as under:-

"On Examination of the Books of Accounts, Records and Documents of the Transferor Company it is reported that:

a) Transferor Company M/s. Tesco Hindustan Wholesaling Private Limited, maintains the Books of Accounts prescribed under the provisions of the Companies Act 1956 and records and documents in accordance with that Act to the extent it is applicable are in order;

b) Further it is also to be noted that the Company has been regular in paying its statutory dues, not accepted any deposits from public and the Scheme also provides for absorption and continuation of the existing employees of the transferor company without any break of employment in the Amalgamated Company;

However in view of the sustained losses and the continuous infusion of the capital by the UK based Ultimate Holding Company investing through its Mauritius based subsidiary and on the basis of the combined reading of the reports, accounts and other documents, it is unable to form opinion that prima facie the affairs of the company have not been conducted in a manner prejudicial to the interest of members of the company or public.

Detailed report is annexed."

A perusal of the said observation would indicate that chartered accountant has opined that he is unable to prima facie form any opinion with regard to the affairs of the company having not been conducted in any manner prejudicial to the interests of the members of its company or public since petitioner - Transferor company No. 2 has sustained losses and continued inclusion of the capital by the parent company namely, TESCO, a United Kingdom based company, having invested or infused capital to the petitioner - company through its Mauritius based subsidiary as a ground for non certification.

In reply, authorised signatory of petitioner Transferor company No. 2 has stated in his affidavit that petitioner company is carrying on modern wholesale business in food products and related merchandise and it is still in a nascent growth phase in India and due to various reasons including (a) unique dynamics of the Indian market for food and groceries; (b) infrastructure and regulatory challenges; (c) focus of the petitioner on presence and expansion rather than immediate profitability and (d) intense competition, it has suffered loss in the recent past though the said business is inherently profitable in the long run. It has been specifically contended in reply that the petitioner - company on being amalgamated into its parent company would enable the combined entity to operate in a manner that would not be in any way prejudicial to the public interest. In that view of the matter, this Court is of the considered view that there is no impediment to accept the reply given by the transferor company No. 2 seeking approval of the Scheme of Amalgamation and Arrangement.

At the cost of repetition it requires to be noticed that this Court while dispensing with the convening of the meeting of the shareholders, secured, unsecured and trade creditors has observed in its order dated 12.03.2015 as at Annexure - N to the following effect:

"2........The unsecured creditors have issued their consent letters as per Annexures S-1 to S12. The Creditors'' consent issued in writing amounts to 84%. Even otherwise, considering the fact that there would be variation in the list of Trade Creditors, as payments would be made as the business progress, the list would stand altered at a position when petition is taken-up for consideration by this court. Therefore, consent as provided at present would be sufficient. In any event, if any person has any grievance, they can put-forth the same before this court when the petition is advertised at a later stage."

Thus, records would indicate that the creditors'' consent issued in writing amounts to 84% of the unsecured creditors having given their consent for Scheme. This observation when read along with the Scheme of Amalgamation and Arrangement, it would indicate that in clauses 7.1 and 7.6 of the Scheme of Amalgamation and Arrangement, the Transferee company is obliged to satisfy the claim of the unsecured creditors of petitioner company and it has accepted to take over the said liabilities whether provided for or not in the books of accounts of Transferor companies. Thus, Scheme would indicate that interests of the unsecured creditors has been fully taken care of or the apprehension of such creditors is allayed and convening of meeting of creditors had been dispensed with by this Court on the ground that creditors interest is sufficiently safeguarded in the Scheme of Amalgamation and Arrangement itself. That apart, even after Advertisement of Scheme by way of publication in Newspapers, none have appeared to oppose the Scheme of Amalgamation and Arrangement. Even, employees of Transferor company No. 2 have not appeared before this Court, pursuant to the publication carried out, to oppose the Scheme of Amalgamation and Arrangement.

Scheme in question indicate that all the employees of Transferor companies in service on the Effective Date shall become the employees of the transferee company, without any break or interruption in service as a result of the transfer and on terms and conditions not less favourable than those on which they are engaged by the transferor companies immediately preceding the Effective Date.

The shareholders have approved the scheme as already noticed hereinabove. In the circumstances stated hereinabove, this Court is of the considered view that the petitioner has made out a case for sanctioning Scheme of Amalgamation and Arrangement vide Annexure - M. Hence, the following:

Company petition is hereby allowed. The Scheme of Amalgamation and Arrangement - Annexure-M proposed by the Transferor company No. 2 is hereby sanctioned and it is made clear that the same is binding on the petitioner, its shareholders, creditors, subject to the following conditions:

(a) The petitioner company shall intimate the trade creditors, whose list had been furnished at Annexure - Q, by Registered Post with Acknowledgement Due, intimating them approval of the scheme by the Board of Directors of the petitioner - company upon the scheme approved by the High Court of Judicature at Bombay on the petitions presented by Transferor company No. 1 and Transferee company in Company Scheme Petition No. 328/2015 as well as the order passed by this Court sanctioning the scheme and file an affidavit for having despatched said notices/intimations within four weeks from the date of receipt of certified copy of this order;

(b) The petitioner shall serve a copy of this order on the Registrar of Companies, State of Karnataka, within 30 days from the date of receipt of certified copy of this order.