Savita Polymers Limited Vs

Anuradha Sanjay Bhatia, Member (Technical)

Heard Learned Counsel appearing for the Petitioners and the representative of the Regional Director (Western Region). Neither objector has come before this Tribunal to oppose the Scheme, nor has any party controverted any averments made in the Petition.

The sanction is sought under Sections 230 to 232 read with Section 66 and other applicable provisions of the Companies Act, 2013 by Savita Polymers Limited (hereinafter referred to as the “Transferor Company” or the “Petitioner No. 1”) and Savita Oil Technologies Limited (hereinafter referred to as the “Transferee Company” or the “Petitioner No. 2”) for sanctioning the Scheme of Arrangement and Amalgamation between the Transferor Company and the Transferee Company and their respective shareholders (hereinafter referred to as the “Scheme”), pursuant to the provisions of Sections 230-232 read with Section 66, and other relevant provisions of the Companies Act, 2013 (hereinafter referred to as the “Act”).

The Learned Counsel for the Petitioners states that the Scheme, inter alia, provides for the amalgamation of the Transferor Company into the Transferee Company with effect from the Appointed Date (as defined in the Scheme), and the consequent dissolution of the Transferor Company without being wound up.

The Learned Counsel for the Petitioners states that the Transferor Company is a wholly-owned subsidiary of the Transferee Company and that the entire paid-up share capital of the Transferor Company is owned and controlled by the Transferee Company.

The Learned Counsel for the Petitioners states that the Transferor Company is primarily engaged in the business of manufacturing and marketing of inter alia petroleum jellies, chain greases, waxes, oxidised waxes, compressor lubricants, optic fibre and cabin filling compounds, transformer fluids, sanitisers, etc.

The Learned Counsel for the Petitioners states that the Transferee Company is in the business of manufacturing and marketing of petroleum specialty products including transformer oil, lubricating oil, liquid paraffin, greases, jellies, waxes and it is also engaged in generation of electricity through wind generating machines.

The Learned Counsel for the Petitioners states that the rationale and benefits of the Scheme are as under:

a. The amalgamation of Transferor Company into the Transferee Company, as contemplated under the Scheme, intends to achieve restructuring, consolidation and effective management of the petroleum specialty products and related businesses of the Transferor Company and the Transferee Company in a single entity which will provide synergy benefits, attain efficiencies, and cost competitiveness, as the Transferor Company and the Transferee Company are engaged into complementary business.

b. Streamlining operations, efforts, employees, costs and enable better and more efficient management, control and day to day operations and reducing overheads, administrative, and other expenditure and achieving operational rationalization, organizational efficiency, combining synergies and optimal utilization of resources and manufacturing facilities which will be in the interest of shareholders, employees, creditors, and other stakeholders, post the implementation of the Scheme;

c. Since the Transferor and the Transferee are in similar and/or complementary lines of business, achieving larger and diversified product portfolio, economies of scale, efficiency, optimization of logistics and distribution network and other related economies by consolidating the business operations, post the implementation of the Scheme including enabling the Transferor and Transferee as one combined entity to be a manufacturer of all three types of transformer oils viz. mineral oil, natural ester and synthetic ester and to access the plants and manufacturing facilities post the implementation of the Scheme;

d. Broadening the product portfolio and addition of value added products in one entity and facilitate rapid entry into the emerging areas of alternate transformer fluids, which is being driven by safety and environmental concerns and in addition to the combining of synergies, post the implementation of the Scheme;

e. Enhancing shareholder value including that of the public shareholders of the Transferee by consolidating entities engaged in similar and/or complementary business and also having inter-se contracts between them, post the implementation of the Scheme;

f. Eliminating multiple accounting, multiple compliances and multiple auditing resulting in reduction of costs, post the implementation of the Scheme;

g. Pooling in administrative synergies and know-how of the holding company and its wholly owned subsidiary, post the implementation of the Scheme.

The Learned Counsel for the Petitioners states that the Board of Directors of the Transferor Company and the Transferee Company in their respective meetings held on May 30, 2022 have approved the proposed Scheme.

The Company Scheme Petition is filed in consonance with Sections 230 to 232 of the Act along with the order dated July 08, 2022 passed in CA(CAA) No.175/MB/2022 by this Tribunal.

The Learned Counsel for the Petitioners states that the Petitioners have complied with all the requirements as per the directions of this Tribunal and have filed the necessary affidavit(s) with this Tribunal showing compliance.

The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, has filed his Report dated March 15, 2023 setting out his observations on the Scheme as stated in Paragraph 2(a) to 2(h) of the Report. In response to the observations made by the Regional Director, the Petitioner Companies have given necessary clarifications and undertakings by way of a Joint Affidavit dated March 23, 2023. The observations made by the Regional Director and the clarifications and undertakings given by the Petitioner Companies are summarized in the table below:

Para

Observations in the Report

Response   of   the   Petitioner Companies

(a)

(i)

On examination of the report of the   Registrar   of   Companies, Mumbai dated 20/01/2023 for Petitioner  Companies  that  the Petitioner     Companies     falls within  the  jurisdiction  of  ROC, Mumbai. It is submitted that no complaint            and/            or representation   regarding   the proposed          scheme          of Amalgamation       has       been received  against  the  Petitioner Companies.       Further,       the Petitioner  Companies  has filed Financial   Statements   up   to 31/03/2021.   The   ROC   has further  submitted  that  in  his report     dated     20/01/2023 which are as under:-

i.        That the RoC Mumbai in his  report  dated  20/01/2023 has also stated that No Inquiry, Inspection,          Investigations, Prosecution    and    Complaints under   CA,   2013   have   been pending  against  the  Petitioner Companies.

(a) ii (a)

Further ROC has mentioned as follows:

Form  GNL-1  not  filed  by  the Petitioner Companies.

Form GNL-1 has been filed  with the  Registrar  of  Companies  on 21st   March  2023  for  both,  the Transferor as well as Transferee Companies.     Copies     of     the challans issued in that regard are annexed as Exhibits “A” and “B” to the Affidavit.

(a) ii (b)

Paid  up  share  capital  of  the Transferee  company  does  not match  with  the  scheme  and master data.

The  amount  of  authorised  and paid-up   share   capital   of   the Transferee  Company  set  out  in the Scheme is as on the date of approval  of  the  Scheme  by  the Board     of     Directors     of     the Petitioner   Companies   i.e.   30th May  2022.   Subsequent  to   the approving   the   Scheme   by   the Board  of  Directors  and  filing  of the    same    with    the    Hon’ble Tribunal, the Board of Directors of the  Transferee  Company  at  its meeting held on 21st  June 2022 approved    the    sub-division    of equity  shares  of  the  Transferee Company in the ratio of 1:5 i.e. 1 equity  share  of  the  Transferee Company  of  INR  10  each  into  5 equity  shares  of  the  Transferee company  of  INR  2  each.  During the  pendency  of  the  captioned matter,  the  corporate  action  of sub-division   has taken place. It is  pertinent  to  note  that  (i)  such sub-division does not change the overall  share  capital  position  of the  Transferee  Company  and  is merely  in  the  nature  of  a  sub- division,   ,   and   (ii)   such   sub- division   does   not   impact   the proposed  amalgamation  in  any manner   given   that   since   the Transferor Company is a wholly owned      subsidiary      of      the Transferee   Company   and    as such,  no  shares  or  securities  of the  Transferee  Company  are  to be issued as part of the proposed amalgamation.

(a)  ii (c)

Form  CAA-2  and  explanatory statement   not   enclosed   with Form CAA-3.

Vide  order  dated  8th  July  2022, this     Hon’ble     Tribunal     had dispensed  with  the  requirement of holding meetings of the Equity Shareholders,  Secured  Creditors and  Unsecured  Creditors  of  the Petitioner       Companies,       the  question    of    enclosing    CAA-2 along with Form CAA-3 does not arise.

(a) ii (d)

Transferee is a listed company, hence, NOC from BSE and NSE to be obtained.

Since the Scheme provides for an amalgamation    of    the    wholly owned subsidiary i.e. Transferor Company,     into     the     parent company    i.e.    the    Transferee Company,  no  prior  permissions and/  or  NOC  of  Securities  and Exchange Board of India and/ or Bombay Stock Exchange [“BSE”] or    National    Stock    Exchange [“NSE”]   is   required.   However, pursuant  to  Regulation  37(6)  of the SEBI (Listing Obligations and Disclosure              Requirements) Regulations,  2015,  as  amended from time to time, the Transferee Company  has  by  way  of  two separate letters dated 30th May 2022 addressed to BSE and NSE has disclosed and informed that the   Board   of   Directors   of   the Transferee       Company       has approved  the  Scheme  in  respect of the proposed amalgamation of the Transferor Company and the Transferee       Company.       The Transferee Company’s aforesaid letter,  dated  30th  May  2022  is annexed  at  Exhibit  “R”  to  the Company Scheme Petition.

(a) ii (e)

Form      PAS-6      cannot      be accessed in the MCA Portal.

the Transferor Company has filed the  necessary  Form  PAS-6  vide SRN  No.  F39860861  dated  4th November      2022      with      the Registrar    of     Companies    for submitting       the       Transferor Company’s     Reconciliation     of Share Capital Audit Report as on 30th          September          2022.

Furthermore,    the    inability    to access  Form  PAS-6  on  the  MCA Portal is a technical issue and the same shall have no effect on the proposed  Scheme.  Copy  of  the said filed Form PAS-6 dated 4th November  2022  is  annexed  as Exhibit “C” to the Affidavit.

(a) ii (f)

As per the provision of  section 232 (3)(i) of CA, 2013 where the transferor         company         is dissolved, the fee, if any, paid by  the  transferor  company  on its  authorized  capital  shall  be set off against any fees payable by  the  transferee  company  on its         authorized         capital subsequent            to            the amalgamation.          Therefore, remaining   fee,   if   any   after setting off the fees already paid by  the  transferor  company  on its authorized capital, must be paid by the transferee company on   the   increased   authorized capital    subsequent    to    the amalgamation.

The       Petitioner       Companies undertake  to  pay  the  applicable fee on the increase of authorised share capital, if any.

(a) ii (g)

Interest of  creditors  should  be protected.

Hence,          the          Petitioner Companies  shall  undertake  to provide   detail   reply   against observations mentioned above.

The Scheme does not contemplate any  arrangement  or  compromise with  the  creditors  of  any  of  the Petitioner       Companies.       The liabilities towards the creditors of any  of  the  Petitioner  Companies are   neither   being   reduced   nor being     extinguished.     In     the circumstances,   it   is   submitted that the interest of the creditors of each of the Petitioner Companies are protected under the Scheme.

(b)

Transferee    company    should undertake  to  comply  with  the provisions of section 232(3)(i) of the    Companies    Act,    2013 through appropriate affirmation in  respect  of  fees  payable  by Transferee       Company       for increase   of   share   capital   on account of merger of transfer of companies.

The       Petitioner       Companies undertake  to  pay  the  applicable fee on the increase of authorised share capital, if any.

(c)

In   compliance   of   Accounting Standard-14 or IND-AS 103, as may      be      applicable,      the transferee company shall pass such  accounting  entries  which are   necessary   in   connection with the scheme to comply with other    applicable    Accounting Standards   including   AS-5  or IND AS-8 etc.

The        Transferee        Company undertake      to      pass      such accounting    entries    which    are necessary in connection with the Scheme to comply with the other applicable Accounting Standards such as AS-5 or IND AS-8), etc.

(d)

The    Hon'ble    Tribunal    may kindly    direct    the    Petitioner Companies to file an affidavit to the   extent   that   the   Scheme enclosed    to    the    Company Application     and     Company Petition are one and same and there  is  no  discrepancy,  or  no change is made.

The  copies  the  Scheme  annexed to  Company  Scheme  Application No.  175  of  2022  and  Company Scheme  Petition  No.232  of  2022 are  one  and  the  same  and  that there  is  no  discrepancy,  or  any change    being    made    to    the Scheme.

(e)

The      Petitioner      Companies under   provisions   of   section 230(5)  of  the  Companies  Act 2013  have  to  serve  notices  to concerned   authorities   which are likely to be affected by the Amalgamation or arrangement. Further,   the   approval  of   the scheme by the Hon'ble Tribunal may not deter such authorities to deal with any of the issues arising after giving effect to the scheme.  The  decision  of  such authorities shall be binding on the      petitioner      companies concerned.

Each of the Petitioner Companies have     served     notices     under Section 230 (5) of the Companies Act,    2013    to    the    concerned authorities  as  directed  by  this Hon’ble  Tribunal  by  way  of  its order dated July 8, 2022 passed in     the     captioned     Company Scheme        Application.        The Petitioner Companies have jointly filed Affidavit of Service showing compliance    of    the    directions issued by this Hon’ble Tribunal. Rest   of   the   contents   of   the paragraph     under     reply     are general and does not require any comments.

(f)

As per Definition of the Scheme,

"Appointed  Date”  means  start

of  business  hours  in  Mumbai, India  on  April  1,  2022  or  any other     date     as     may     be determined   by   the   Board   of Directors   of   the   Parties   and approved by the hon’ble NCLT:

"Effective  Date"  means  a  date on   which   all   the   conditions (taken together) specified under Clause   18.1   of   this   Scheme stands satisfied;

It    is    submitted    that    the Petitioners  may  be  asked  to comply  with  the  requirements as clarified vide circular no. F. No.    7/12/2019/CL-1    dated 21.08.2019    issued    by    the Ministry of Corporate Affairs.

The    present    Scheme    is    in compliance with the requirements of circular no.F.No.7/12/2019/CL-1   dated 21.08.2019     issued     by     the Ministry of Corporate Affairs and that   the   Petitioner   Companies undertake   to   comply   with   the same.

(g)

Petitioner     Companies     shall undertake  to  comply  with  the directions     of     Income     tax department, if any.

The       Petitioner       Companies undertake   to   comply   with   the directions   of   the   Income   Tax Department, if any.

(h)

Petitioner     Companies     shall undertake  to  comply  with  the directions   of   the   concerned sectoral Regulatory, if any.

The       Petitioner       Companies undertake   to   comply   with   the directions,     if     any,     of     the concerned sectoral regulatory,  in accordance with law.

Ms. Rupa Sutar, Authorised representative of the Regional Director, MCA (WR), Mumbai, who was present at the time of Final hearing has submitted that the clarifications, submissions and undertakings given by the Petitioner Companies are hereby accepted and that they have no objection for approving the scheme by the Tribunal.

The Learned Counsel for the Petitioner Companies states that the Official Liquidator has filed its report dated 28th February 2023 inter alia stating therein that the affairs of the Transferor Company have been conducted in a proper manner and not prejudicial to the interest of the shareholders of the Transferor Company.

From the material on record, the Scheme annexed as Exhibit M to the Company Scheme Petition appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy.

Since all the requisite statutory compliances have been fulfilled, C.P. (CAA) 232/MB/2022 is made absolute in terms of prayer made therein. Hence ordered.

The Petitioners are directed to lodge a copy of this Order and Scheme duly certified by the Deputy Registrar or Assistant Registrar, National Company Law Tribunal, Mumbai Bench, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable on the same, if any, within 60 (sixty) days from the date of receipt of the certified copy of the Order and Scheme.

The Petitioners are further directed to file a copy of this Order along with a copy of the Scheme with the concerned Registrar of Companies electronically along with E-Form INC 28 as per the relevant provisions of the Companies Act, 2013 within 30 days from the date of receipt of certified copy of this Order.

All concerned regulatory authorities to act on a copy of this Order along with the Scheme duly authenticated by the Deputy Registrar, National Company Law Tribunal, Mumbai Bench.

Ordered accordingly.