CP-205-2013 (O&M) :1: IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Company Petition No.205 of 2013 (O&M) Date of Decision :
24. 03.2014 In the matter of amalgamation Kool Breweries Limited ...Petitioner Amalgamating Company with Carlsberg India Private Limited ...Amalgamated Company Present : Mr.Arun Kathpalia, Advocate with Mr.Anirudh Das, Advocate and Mr.Rohit Khanna, Advocate for the petitioner company. Mr.D.P.Ojha, Official Liquidator 1. To be referred to the Reporters or not?.
2. Whether the judgment should be reported in the Digest?. RAJIV NARAIN RAINA, J.
This second motion petition has been filed under sections 391 to 394 of the Companies Act, 1956 (for short the 'Act') by Kool Breweries Limited (petitioner amalgamating company) seeking sanction of the scheme of amalgamation of the petitioner company with Carlsberg India Private Limited (amalgamated company-'Carlsberg' for short) and their respective share holders.
2. The registered office of the petitioner company is at Dharuhera, District Rewari, Haryana within the jurisdiction of this Court. The registered office of Carlsberg is at New Delhi, outside the jurisdiction of this Court. It may be noted that initially, the petitioner amalgamating company (for short 'Kool Breweries') was incorporated in Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :2: the State of Delhi under the provisions of the Act on 1st December, 1993. Subsequently, the registered office of the petitioner amalgamating company was changed to the State of Haryana pursuant to an order passed by the Company Law Board, Northern Region Bench passed in CP No.67/17/2001-CLB and was duly registered on 3rd January, 2002 by the Registrar of Companies, NCT of Delhi and Haryana. Its registered office is now at Plot No.2, Industrial Estate, Dharuhera, District Rewari, Haryana-123106. It has been stated in para. 3 of the petition that the petitioner amalgamating company is a wholly owned subsidiary of Carlsberg. The petitioner Kool Breweries is authorised and primarily engaged in the business of brewing, bottling, marketing and selling beer. The Memorandum and Articles of Association of the petitioner Kool Breweries are appended as Annexure P-2. The share capital structure of the petitioner Kool Breweries as on 30th September, 2013 and its issued, subscribed and paid-up capital is tabulated in para. 5 of the petition. A certified copy of the latest audited accounts report of the petitioner amalgamating company as on 31st December, 2012 is appended as Annexure P-3. Carlsberg was incorporated under the provisions of the Act on 3rd May, 2006 under the name South Asia Breweries Private Limited. The name was changed to its present form by the Registrar of Companies, NCT of Delhi and Haryana by issuing a certificate of incorporation. The Memorandum and Articles of Association of Carlsberg is at Annexure P-4. The details of the share capital structure of Carlsberg as on 30th September, 2013 has been spelt out in para. 8 of the petition. Carlsberg is also primarily engaged in the business of brewing, bottling, marketing and selling beer. Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :3:
3. Learned counsel for the companies submits that the scheme of amalgamation when allowed by this Court through this second motion petition would result in consolidation of the business of both the companies and it would be in the best beneficial interest of the share holders, creditors and the employees of both the companies. The Board of Directors of the both the companies have approved and adopted this scheme through a Board Resolution dated 12th August, 2013 of the petitioner amalgamating company and the Board Resolution dated 27th June, 2013 of the amalgamated company. The appointed date under the scheme is 1st April, 2013 being the date with effect from which the scheme shall upon sanction of the Company Court be operative. The net result of the resolutions is that the petitioner amalgamating company together with all its assets and liabilities and the entire business shall be transferred to and be vested in the amalgamated company as a going concern. The text of the scheme is appended with this petition.
4. The first motion petition was filed in this Court in CP No.172 of 2013. On 11th December, 2013, the first motion petition was disposed of. A copy of the first motion order dated 11th December, 2013 is stated to be not available with the petitioner amalgamating company and keeping in view the urgency of the matter, the second motion petition has been moved with an undertaking that a copy of the order dated 11th December, 2013 would be placed on record as soon as it is made available. By the first motion order, the meetings of the share holders of all classes of creditors etc. was dispensed with by this Court. Similarly, the amalgamated company-Carlsberg moved the High Court of Delhi to dispense with the requirement of convening of the meetings of the equity Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :4: share holders, preference shareholders and secured creditors of the amalgamated company in order to consider the scheme of amalgamation in view of the written consent to the Scheme. Such meetings were dispensed with upon an undertaking given by the amalgamated company to the Court that upon issuance of notice on the company petition filed for sanction of the scheme, it would publish a notice in two newspapers inviting objections of the unsecured creditors, if any, to the scheme. A copy of the order dated 19th November, 2013 passed by the Company Court at Delhi is at Annexure P-8.
5. It has been clearly stated in para. 15 of the present petition that the petitioner amalgamating company is a wholly owned subsidiary of the amalgamated company and pursuant to the scheme becoming effective, no consideration or equity shares shall be issued by the amalgamated company and there shall be no change in the share holding structure of the amalgamated company upon the scheme becoming effective from the designated date in case sanctioned by this Court.
6. It has been averred that no investigation proceedings have been instituted and/or are pending under Sections 235 to 251 of the Act against the petitioner amalgamating company. It is further submitted that the shares of the petitioner amalgamating company and the amalgamated company are not listed on any Stock Exchange of India. It is stated that upon an approval by both Delhi High Court and this Court, only then financial sanction and approval can be given effect to. The company petition filed by the amalgamated company is pending in the High Court of Delhi. Vide order dated 20th December, 2013, this Court issued notice to the Regional Director, Ministry of Corporate Affairs, Noida and the Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :5: Official Liquidator attached to this Court for 20th February, 2014. It was ordered that notice be also published in the Financial Express (English) and Dainik Tribune (Vernacular) both Delhi Edition as well as in the Official Gazette of Haryana Government. The compliances have been made and publications duly effected. It has been prayed that the requisite directions be given for notice of the petition to be issued to the Central Government through Regional Director pursuant to Section 394 A of the Act in order to enable the Regional Director to make his representation and objections, if any, to the scheme of amalgamation. Similar directions were sought to the Official Liquidator.
7. Both the respective officials have filed their representations. The report of the Regional Director has been filed by way of affidavit dated 21st February, 2014. The objections of the Regional Director against the scheme of amalgamation are contained in para. 4 and 5 of the affidavit dated 21st February, 2014 and the same read as follows : -
“4. That the Deponent further craves leave to submit on perusal of the shareholding pattern of M/s Carlsberg India Pvt. Ltd. (Transferee Company), it has been observed that 100% shares are held by M/s South Asian Breweries Pte. Ltd., Singapore along with M/s Carlsberg Asia Pte. Ltd., a foreign Company in Transferee Company. It is submitted that the Petitioner Transferee Company may be asked to give an undertaking for all compliances from Reserve Bank of India as required under FEMA for above transactions involving foreign banks/entities, if deemed fit & proper by the Hon'ble Court.
5. That the Deponent further craves leave to submit that the Transferor Company has moved compounding application for violation of the provisions of section 211 (3A) and 211 of the Companies Act, 1956 before the Registrar of Companies, Delhi. In regard to violation of Kumar Paritosh provisions of section 297 and 295 of the Companies Act, 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :6:
1956. the Company has given undertaking for filing the compounding Application.”. 8. Mr.Kathpalia would point out to para. 3 and 4 of the report which reads as follows : -
“3. In reply to para 4 of the Representation Affidavit, I state that the paid up equity share capital of the Transferee Company is held by the following entities : - Name of No.of Share % shareholding shareholder M/s South 5,48,55,972 99.99999 Asian Breweries Pte Ltd., Singapore M/s 1 0.00001 Carlsberg Asia Pte Limited Total 5,48,55,973 100 I state that the Transferee Company has filed Affidavit dated 04 March 2014 before the High Court of Delhi at New Delhi stating inter alia, that the said Company is in compliance with applicable laws including under the Foreign Exchange Management Act, 1999 (“FEMA”.) and the Regulations of the Reserve Bank of India (“RBI”.) with respect to the shares held by the aforesaid two entities. The said Affidavit filed by the Transferee Company further states that the Transferee Company shall continue to adhere to and be bound by the applicable rules and regulations issued by the RBI as also the provisions of the FEMA with respect to the foreign shareholding in its issued and paid up equity share capital. A copy of the Affidavit dated 04 March 2014 as filed by the Transferee Company before the High Court of Delhi at New Delhi is annexed hereto and marked as Annexure “A”..
4. In reply to para 5 of the Representation Affidavit, it is stated and submitted that the former Managing Director of the Petitioner/Amalgamating Company has filed applications for compounding of offences under Section 211 (3A) read with Section 621A and Section 211 read with Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :7: Section 621 A of the Companies Act, 1956 (“Act”.). It is further submitted that the Petitioner/Amalgamating Company has also filed application for compounding offences under Section 297 and 295 read with Section 621A of the Act. All the aforesaid four proceedings would continue post the sanction of the Scheme. In so far as the compounding application filed by the Petitioner/Amalgamating Company is concerned, in terms of Clause 3.2 (vi) of Part-III of the Scheme of Amalgamation (“Scheme”.), these proceedings would be continued by the Transferee Company subject to the sanction of the Scheme by this Hon'ble Court. It is submitted that the pendency of the application for compounding of offences under the Act is not an impediment to the sanction of the Scheme and the Petitioner/Amalgamating Company craves leave to refer and rely upon judicial pronouncements at the time of hearing of the present Company Petition. A copy of the aforesaid four applications are annexed hereto and marked as Annexure “B”., Annexure “C”., Annexure “D”. and Annexure “E”..”. 9. Learned counsel has drawn attention of this Court to the affidavit dated 4th March, 2014 of the amalgamated company-Carlsberg filed in Company Petition No.648 of 2013 before the High Court of Delhi of which para. 3 is relevant and is reproduced : -
“3. In reply to para 4 of the Representation Affidavit, I state that the paid up equity share capital of the Petitioner Company is held by the following entities : - Name of No.of Share % shareholding shareholder M/s South 5,48,55,972 99.99999 Asian Breweries Pte Ltd., Singapore M/s 1 0.00001 Carlsberg Asia Pte Limited Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :8: Name of No.of Share % shareholding shareholder Total 5,48,55,973 100 I state that the Petitioner Company is in compliance with the applicable laws including under the Foreign Exchange Management Act, 1999 (“FEMA”.) and the Regulations of the Reserve Bank of India (“RBI”.) with respect to the shares held by the aforesaid two entities. I further state that the Transferor Company i.e. Kool Breweries Limited is a 100% subsidiary company of the Transferee Company and therefore upon the Scheme of Amalgamation becoming effective, the Transferee Company shall not be required to issue any Equity Shares and the entire paid up capital of the Transferor Company shall stand cancelled. The Petitioner Company shall continue to adhere to and be bound by the applicable rules and regulations issued by the Reserve Bank of India as also the provisions of the FEMA with respect to the foreign shareholding in its issued and paid up equity share capital.”. 10. Two words of caution have been entered by the Regional Director which are not in the nature of objections to the scheme but in the nature of suggestions since insofar as 100% shares being held by M/s South Asian Breweries Pte. Ltd., Singapore and Carlsberg, the amalgamated company should be asked to give an undertaking to ensure all necessary compliances from Reserve Bank of India as required under the Foreign Exchange Management Act for above transactions involving foreign banks, entities and therefore directions are sought from this Court to guard against any violation of the law. The other word of caution is that the petitioner amalgamating company has preferred compounding applications for violation of the provisions of Section 211 (3A) and 211 of the Act before the Registrar of Companies, Delhi. Besides, as regards Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :9: violation of the provisions of Section 297 and 295 of the Act is concerned, the Company has given an undertaking for filing the requisite compounding applications.
11. Mr.Kathpalia submits that the compounding applications under Section 394(1)(b)(iii) have been filed. Attention of this Court has been drawn to Part-III para. 3.2 (vi) that the scheme itself takes care of the objection. Clause 3.2(vi) reads as follows : - “(vi) any pending suits/appeals or other proceedings of whatsoever nature relating to the Amalgamating Company, whether by or against such Amalgamating Company, shall not abate, be discontinued or in any way prejudicially affected by reason of the amalgamation of the Amalgamating Company or of anything contained in this Scheme, but the proceedings shall continue and any prosecution shall be enforced by or against the Amalgamated Company in the same manner and to the same extent as would or might have been continued, prosecuted and/or enforced by or against the Amalgamating Company, as if this Scheme had not been implemented.”. 12. Mr.Kathpalia relies on a judgment of the High Court of Delhi in Abhineet Pesticides (P.) Ltd./Craftsilver Jewels (P.) Ltd./Fern Healthcare (P.) Ltd. (2013) 112 CLA208to submit that a scheme can always be sanctioned subject to and without prejudice to liability, if any, in the civil and criminal proceedings in respect of past transactions and the liability, if any, of the Board of Directors in such proceedings would continue and thus, the objection raised by the Regional Director to the scheme of amalgamation deserves to be rejected finding no impediment to grant of sanction. He relies on para. 13 of the judgment which reads as follows :
“13. Moreover the counsel for the petitioner-companies Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :
10. : placed reliance on the judgment of this hon'ble court in the matter of Sail Industries Ltd. in CP No.149/2010, para 17 : 'In support of the above submission, learned counsel relied on the judgment of Single Judge of the Gujarat High Court in the matter of Core Healthcare Ltd., In re./Nirma Ltd. [2007]. 138 Comp Cas 204 wherein the court has held that “the scheme can always be sanctioned subject to and without prejudice to the liability, if any, in the civil and criminal proceedings in respect of past transactions and the liability, if any, of the Board, directors, management, etc., in civil and criminal proceedings would continue.' In view of the submissions made at the bar and the settled law on the subject, the objection raised by the Regional Director is rejected and the scheme is sanctioned subject to and without prejudice to the liability, if any, in the civil and criminal proceedings in respect of past transactions. It is further clarified that the proceedings pending before the ACMM, Tis Hazari, Delhi against the transferor-company and/or its Board, directors and management, etc., shall continue and the liability, if any, of the Board, directors, management, etc., in the said proceedings would continue as if the scheme has not been made.”. 13. Learned counsel further relies on a decision of the Company Court of the High Court of Gujarat in Nova Polyyarn Ltd. (2010) 94 CLA121and para. 12 thereof which rules as follows : -
“12. Further in view of the aforesaid explanation, as such the issue would not get concluded for the alleged contravention and will have to be kept open as per the decisions of this court in the case Norfolk Infotech (P.) Ltd. (supra) and allied matters. Only observations deserves to be made is that the aspects of alleged contravention as per the competent authority and of available defence as permissible to the company or its officers shall remain open and the sanction granted by this court to the scheme shall not operate as a bar for initiation, continuation and conclusion of such proceedings in accordance with law. Hence, said clarification would operate accordingly.”
. Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :
11. :
14. The compounding applications are on record.
15. The Official Liquidator attached to this Court has filed his report dated 5th March, 2014 under Section 394 of the Act. He has placed the observations of the Chartered Accountant i.e. M/s Naresh K. Singla and Associates with his report as an Annexure. The Chartered Accountant has reported that the petitioner amalgamating company-Kool Breweries has not conducted the affairs of the Company in a manner prejudicial to the interest of its members, creditors or against public interest. The Chartered Accountant has also pointed out that on the basis of the auditor's report, compounding applications (E Form 61) under Section 211(3A) read with Section 621A of the Act have been filed at ROC, NCT of Delhi. It has been noted that the Company is in the process of filing compounding applications under Section 297 read with Section 621A pertaining to taking on rent certain moveable properties from the proprietor firm from the then Managing Director Mr.Damanjit Singh of the petitioner amalgamating company.
16. Mr.Kathpalia would submit that these advisories have been answered in reply to the report of the Regional Director and submits that the compounding applications would continue to their logical end, in case the scheme of amalgamation is approved and sanctioned by this Court in the present petition. This is he says enough to set at rest.
17. Learned counsel would next point out to Serial No.5 at page 274 of the paperbook being reply to the query whether valuation of assets of the petitioner company including stock-in-trade, stores etc. (inventories) in the past was made according to the accepted principles of accounting. In response, it has been stated by Kool Breweries that the Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :
12. : valuation of the assets of the company including stock-in-trade, stores etc. in the past were made according to Accounting Standard-2.
18. The further word of caution issued by the Chartered Accountant is in para. 10.5 at page 275 of the paperbook. The CA's report points out that as per the petition, the registered office of the petitioner amalgamating company has been shifted from NCT of Delhi and Haryana to the State of Haryana. However, even at present, two Corporate Identification Numbers (CIN) are appearing on the portal of the Ministry of Corporate Affairs- one having registered office at New Delhi and another in Haryana. Although no charges exist in the index of charges of the transferor company having Haryana as the registered office, yet the one bearing Delhi as the registered office has 6 charges registered against the company which are required to be vacated. This has been explained by the petitioner amalgamating company in reply to the report filed by the Official Liquidator dated 5th March, 2014. In para. 8 of the response with reference to Note 10.5 raised by the Chartered Accountant, it has been submitted that post shifting of the registered office from the NCT of Delhi to the State of Haryana, the office of the Registrar of Companies, NCT of Delhi and Haryana have allotted a fresh CIN pertaining to the State of Haryana and thereafter, the CIN of NCT of Delhi should stand repealed automatically but the present MCA-21 system of the Ministry of Corporate Affairs does not take care of the same automatically. For all practical purposes, the old CIN has become redundant as the e-filing on the said CIN is not permissible by the system and MCA-21 system which also shows the same as “not available for e- filing”.. The downloaded screen shot from the official website of the Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :
13. : Ministry of Corporate Affairs, Government of India has been placed at page 396 of the paperbook, in which, the Companies/LLP status of Kool Breweries Limited is reflected as not available for e-filing. For all practical purposes, the CIN stands de-activated. The petitioner has got Nil secured creditors and a certificate of the Chartered Accountant is already on record to this effect. Thus, it is explained that this objection is not sustainable since it is in the realm of a system failure and beyond the control of the petitioner. In order to get this problem/issue redressed, it has been stated that the petitioner has filed Form 61 with ROC, NCT of Delhi and Haryana with a request to cancel the old CIN and a copy of Form 61 is placed at Annexure E.
19. Still further, from the report of the Official Liquidator together with the report of the Chartered Accountant, attention has been drawn to note 26(a) of the financial statement of the petitioner dated 31st March, 2013 which explains the company's position regarding non- fulfillment of the export obligation in respect of which the Company has approached the authorities concerned for extension of time. This is pointed out at Serial No.4 of the questionnaire. Mr.Kathpalia points out to page 253-254 of the petition that suitable reply has been filed which should allay any doubts harbored by this Court. It has been stated that due to financial crisis faced by the petitioner amalgamating company, it was unable to discharge his export obligations. However, after stepping in of the new management and with infusion of equity, the new management approached the authorities for seeking time to extend the period for discharging the export obligation. The Management is hopeful that considering the new lease of life the company has found from Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :
14. : infusion of funds, the authorities would consider the application favourably. Mr.Kathpalia at this juncture points out that the liability of the petitioner amalgamating company will be transferred to the amalgamated company and if the scheme of amalgamation is sanctioned, there would be sufficient funds to meet out the liability under this head. Other than objections, words of caution and advisories given in the reports/objections filed by the Regional Director and the Official Liquidator, no other person has filed objection in response to the publications in the Press inviting objections, if any.
20. Keeping in view the overall facts and circumstances, in the considered opinion of this Court, the objections have been suitably explained and to the satisfaction of this Court. The compounding applications will remain pending before and after the scheme of amalgamation is sanctioned and they would be taken to their logical end at the hands of the amalgamated company and the rights and liabilities of the petitioner company on amalgamation will continue to be the responsibility of the amalgamated company.
21. As far as dual identification is concerned, an application has been moved before the competent authority in the prescribed form to remove the error in the download. However, in case, any liability arises with respect to CIN, that will also remain the responsibility of the amalgamated company in the event the scheme is sanctioned.
22. In view of the approval accorded by the shareholders of the petitioner company and Carlsberg, the proposed amalgamated company by giving consent to the scheme in writing and the fact that this Court waived convening of meeting/s of the shareholders etc. in the first Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :
15. : motion petition and taking into account the reports filed by the Regional Director and OL to the proposed scheme and the reply affidavits filed in response to those representations, there appears to this Court to be no impediment to the grant of sanction to the scheme of amalgamation.
23. Consequently, sanction is hereby granted to the scheme under sections 391 and 394 of the Act. The petitioner amalgamating company and Carlsberg India Private Limited would comply with all the statutory requirements in accordance with law.
24. Resultantly, in terms of sections 391 and 394 of the Act and in terms of the recitals in the Scheme, the entire undertaking, banks, properties, assets, rights and powers of the petitioner company shall stand transferred to and vest in Carlsberg India Private Limited as a going concern without any further act or deed. Similarly, in terms of the Scheme and the minor impediments pointed out in the reports, all the liabilities, dues and the obligations of the petitioner company would stand transferred to and vest in Carlsberg India Private Limited without any further act or deed. Upon the Scheme becoming effective, the amalgamated company unconditionally and irrevocably agrees and undertakes to pay, discharge and satisfy all liabilities and obligations of the amalgamating company with effect from the appointed date in order to give effect to the Scheme. The petitioner amalgamating company shall stand dissolved without winding up.
25. This order granting sanction to the scheme of amalgamation shall, however, not be construed as an order granting exemption from payment of any stamp duty or taxes or any other charges, if payable in accordance with any law, or permission/compliance with any other Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document CP-205-2013 (O&M) :
16. : requirements which may be specifically required under any law in force.
26. The Scheme shall be binding on both the Amalgamating and Amalgamated Companies.
27. Let formal order of sanction of the Scheme of Amalgamation be drawn in accordance with law and its certified copy be filed with the Registrar of Companies within 30 days from the date of receipt of such certified copy.
28. A notice of the orders be published in the daily 'Financial Express' (English) and 'Dainik Tribune' (Hindi) both Delhi edition and in the Official Gazette of the Government of Haryana.
29. Any person interested shall be at liberty to apply to the Court for any direction(s) as per law.
30. The second motion petition is allowed in the above terms. Order Dasti. (RAJIV NARAIN RAINA) JUDGE March 24, 2014 Paritosh Kumar Kumar Paritosh 2014.03.26 15:57 I attest to the accuracy and integrity of this document