Full Judgment
C.K. Buch, J.
1. Heard learned counsel for the petitioners Mrs. Swati Soparkar and Ms. P.J. Davawala learned additional standing counsel for the Central Government.
2. Ms. Davawala has tendered today the letter dated August 21, 2003, received by her from the Registrar of Companies, Gujarat, Ahmedabad, sending therewith the xerox copy of the letter dated July 3, 2003 and the letter dated August 13, 2003, of the Regional Director, Government of India, Ministry of Finance, Department of Company Affairs. These letters are taken on record.
3. These are the petitions filed by the two petitioner companies for sanction of a scheme of arrangement in the nature of demerger and transfer of the manufacturing division of United Phosperous Ltd. (the demerged/ transferor company) with Search Chern Industries Ltd. (the resulting/transferee company) under Section 391 read with Section 394 of the Companies Act, 1956.
4. Both the petitioner companies are public limited companies. The demerged/transferor company (UPL) is engaged in manufacturing of agro-chemicals. The resulting/transferee company (SCIL) is a subsidiary of the UPL. It is also engaged in the manufacturing of chlorine molecules and phosperous based products, which are the raw materials for agrochemicals. The demerger and transfer of the manufacturing division of UPL to SCIL are proposed for the synergic advantages. The petitions give details of the advantages that would flow by virtue of the arrangement between these companies.
5. Separate meetings of the equity and preference shareholders and secured and unsecured creditors of the demerged/transferor company were convened as per the directions of this court and the requisite majority at the respective meetings approved the proposed scheme.
6. Separate meetings of the equity and a class of preference shareholders of the resulting/transferee company were convened as per the directions of this court and the requisite majority at the respective meetings approved the proposed scheme.
7. After the petitions were admitted, the same were duly advertised in the newspapers. The Indian Express-Vadodara edition dated May 21, 2003 and Gujarat Mitra-Surat edition dated May 23, 2003, as directed vide the order dated May 7, 2003 and the publication in the Government Gazette was dispensed with. No one has come forward with any objections to the said petition even after the publication.
8. Notice of the petitions has been served upon the Central Government and Ms. P.J. Davawala, additional standing counsel, appearing for the Central Government. Ms. Davawala has informed the court and put on record the letter from the Registrar of Companies of Gujarat dated August 21, 2003, along with the letters of the Regional Director dated July 3, 2003 and August 13, 2003 indicating that the Central Government has made three observations. These observations are with regard to the clauses of the scheme pertaining to the change in the name of the companies, change in the objects clause of the transferee company and the pending prosecution against the demerged company.
9. I have heard Ms. Swati Saurabh Soparkar, learned advocate for the petitioner companies on these issues. It is submitted by her that the observations pertaining to the clauses of the scheme, it is an accepted position that the scheme under Sections 391 and 394 is a complete code in itself and considering the principle of 'single window clearance' it is not necessary for the petitioner-company to get separate clearances prescribed under the Companies Act, 1956. The said submission is substantiated by the decision of the Bombay High Court in the matter of PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 as also in the case of Rangkala Investments Ltd., In re [1997] 89 Comp Cas 754 (Guj). With regard to the pending prosecution against the demerged company, it is submitted that since the demerged company is going to subsist even after the sanction of the scheme and the scheme nowhere proposes to affect the same, the pending proceedings may continue in accordance with law.
10. Considering the above submissions and having gone through the petitions, I am satisfied that the observations made by the Central Government are misconceived. As held by this court in the case of Rangkala Investments Ltd., In re [1997] 89 Comp Cas 754 and Manekchanowk Mills Ltd., In re [1983] 53 Comp Cas 515 (Guj) as also the Bombay High Court in the case of PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 the scheme of proceedings under Sections 391-394 give 'single window clearance' and there is no reason to insist for a separate formality to be followed for change in the name or the objects clause of the memorandum of association of the resulting company. However, the petitioner companies are directed to file necessary forms as prescribed under law in the office of the Registrar of Companies to place on record these changes. As to the third objections in view of the fact that the demerged company continues to subsist, the pending proceedings would obviously continue in accordance with law.
11. In view of this, I am satisfied that proposed arrangement would be in the interest of the companies and their members and creditors. Prayers in terms of paragraph 26(A) of Co. Pet. No. 148 of 2003 and in terms of paragraph 28(A) of Co. Pet. No. 149 of 2003 are hereby granted.
12. The petitions are disposed of accordingly. So far as the costs to be paid to the Central Government standing counsel is concerned, I quantify the same at Rs. 3,500 per petition. The same may be paid to the learned advocate Smt. P. J. Davawala for the demerged/transferor company and Shri. D.N. Pate for the resulting/transferee company.
13. The registry is directed to keep copy of the judgment in the companion matter.