Euro Shoe Components Limited vs Calsea Footwear Private Limited And Another

B.S.V. Prakash Kumar, J

Under consideration are Two Company Petition No. 1006/CAA/2019 and CP/1007/CAA/2019 filed by the above mentioned Petitioner Companies under section 230 and 232 of the Companies Act, 2013 r/w the Companies (Compromises, Arrangements and Amalgamations) Rules 2016. The instant Company Petition in the matter of the Scheme of Amalgamation by virtue of which of Euro Shoe Components Limited (hereafter refereed as "Transferor Company") with Calsea Footwear Private Limited (hereafter referred as "Transferee Company") as a going; concern.

The Transferor Company viz., M/s. Euro Shoe Components Limited, is Public Limited Companies, it was incorporated on 21.06.2005, under the Companies Act, 1956, having its registered office at No. 60, BHEL Road, Mukundarayapuram, SIPCOT, Ranipet, Vellore-632405 in the state of Tamilnadu. The Transferor Company is engaged inter-alia to carry on the business of manufactures, exporters, importers, dealers, traders or agents of footwear and footwear components and soles of all kinds, nature and description including TPR soles, PVC Soles, TPU soles, leather soles make of all kinds of materials including rubber, plastics and polymers and footwear moulds for soles and all other kinds of moulds for shoe components, trims and inserts and all other allied products and components etc.

The Transferee Company viz., M/s. M/s. Calsea Footwear Private Limited, is a Private Limited Company, it was incorporated on 14.10.2005, under the Companies Act, 1956, having its registered office at No. B/1, Ground Floor, Yamuna Flats, 16th Street, Nanganallur, Chennai-600061 in the state of Tamilnadu. The Transferee Company is engaged inter-alia to carry on the business of import and export, trade, manufacture, design, and deal in full shoes, designer and fashion shoes, shoe-uppers and its accessories made from leather, synthetic leathers, furs, textiles and materials, and also to carry on the business of buying and selling chemicals, running of leather tanneries and processing required finished leather and semi-finished leather wet blue leather and to inter in to contractual relationships such as franchise, joint venture, technical/financial collaboration, strategic alliance association with any other persons both in India and abroad etc. The Board of Directors of the Transferor Company and Transferee Company vide their resolution dated 1st March, 2019 respectively approved the said scheme of Amalgamation.

This Bench vide its order dated 19.07.2019 passed in CA/704/CAA/2019 ordered the convening, holding and conducting meeting of the Equity Shareholders and unsecured secured creditors of Transferor Company. The chairman has convened and held the meeting of the shareholders and unsecured creditors of the Transferor Company separately and filed the result of meeting before this bench. The Transferor Company has no Secured Creditor. In respect of the Transferee Company in CA/704(A)/CAA/2019 ordered the convening, holding and conducting meeting of the Equity Shareholders Secured Creditors and unsecured secured creditors of Transferee Company. The chairman has convened and held the meeting of the shareholders Secured Creditors and unsecured creditors of the Transferee Company separately and filed the result of meeting before this bench. The Petitioner Companies have complied with all the orders passed by the Bench.

On perusal of the rationale of the scheme of Amalgamation, the Board of Directors of the Transferor Company and Transferee Company are of the view the scheme of Amalgamation is expected to yield the following benefits:

i) Since both the companies are into similar businesses, the consolidation will help to have full integration of activities; and

ii) The Scheme will achieve greater financial strength and flexibility, to maximize the shareholders' value; and

iii) The scheme will lead to greater efficiency including operational rationalization, organizational efficiency, cash flow management and access to cash flow of combined business which can be developed more efficiently, eliminate inter corporate dependencies, minimize the administrative expenses and compliances and maximize shareholders value; and

iv) The Scheme will provide for more productive and optimum utilization of various resources by pooling of the financial resources of the Transferor Company and the Transferee Company including leveraging abilities of the businesses.

There are no investigation proceedings pending against the companies under the provisions of the Companies Act, 1956 and or the Companies Act, 2013 or by the Registrar of the Companies, Tami Nadu.

The Regional Director, Southern Region (In short, 'RD') in its Report Affidavit (for brevity, 'Report') dated 26.09.2019 submitted that as per records of ROC, Channai, the Transferor and Transferee Companies are regular in filing their statutory returns and no investigation is pending against the companies. It is further submitted that as per clause 8.1 of part-II of the scheme of the Companies provide for protection of the interest of the employees of the Transferor Company. However, the RD has decided not to make any objection to the Scheme and submitted that the petition may be disposed of on merits.

The Official Liquidator (In short, 'OL') in its report dated 25.09.2019 submitted that M/s. R. Govindan & Co., Chartered Accountants appointed on the order of this Tribunal, have scrutinized the books and accounts of the Transferor Company. The Auditor observed that the Transferor Company has maintained and written up all the statutory books in accordance with normally accepted accounting principles and policies in accordance with the requirements of the Companies Act, 1956 & Companies Act, 2013 and also the affairs of the company have not been conducted in a manner prejudicial to the interest of its members, creditors or to public interest.

The OL further submitted that as per terms of the Scheme of Amalgamation, upon the scheme becoming effective the shareholder of the Transferee Company will get "1 (one) fully paid equity shares of the Transferee Company for every 1 (one only) fully paid equity shares of Rs. 10 each in the Transferor Company". The Transferor Company and Transferee Company had engaged registered valuer to determine the share entitlement ratio. The said registered valuer has carried out the valuation and provided their report dated 18.02.2019. The OL has submitted that the company petitions may be decided on merits.

Further perusal of the scheme shows that the accounting treatment is in conformity with the established accounting standards. In short, there is no apprehension that any of the creditors would lose or be prejudiced if the proposed scheme is sanctioned. The said Scheme of Amalgamation will not cast any additional burden on the stakeholders and also will not prejudicially affect the interests of any class of the creditors in any manner. The Appointed date of the said Scheme is 01st April, 2018.

The Petitioner Companies have filed Affidavits, stating that the scheme Proposed does not fall within the ambit of sections 5 and 6 of the Competition Act, 2002.

The scheme does not require any modification as it appears to be fair and reasonable, not contrary to public policy and also not violative of any provisions of law. All the statutory compliances have been made under section 230 to 232 of the Companies Act, 2013 r/w the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Scheme of Amalgamation between the Transferor Company and the Transferee Company was duly approved by the shareholders of respective companies. Taking into consideration all the above, the Company Petitions are allowed and the scheme of Amalgamation annexed with the petition is hereby sanctioned which shall be binding on all the members, creditors and shareholders.

While approving the scheme as above, we further clarify that this order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable, as per the relevant provisions of law or from any applicable permissions that may have to be obtained or, even compliances that may have to be made as per the mandate of law.

The Transferor Company shall be dissolved without winding up from the date of the filing of the certified copy of this order with the Registrar of Companies.

The Company to the said Scheme or other person interested, shall be at liberty to apply to this Bench for any direction that may be necessary with regard to the working of the said Scheme. The Petitioner Company to file with the Registrar of Companies the certified copy of this Order within 30 days of the receipt of the order.

The Transferor Company is also directed to pay Rs. 50,000/- to Official Liquidator to M/s. R. Govindan & Co., Chartered Accountants, and the Auditor who investigated into the affairs of the Transferor Company within 15 days of passing of this order.

The Order of sanction to this Scheme shall be prepared by the Registry as per the format provided under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 as has been notified on 14th December, 2016.

Accordingly, the Scheme annexed with the petitions stands sanctioned and CP/1006 & 1007/CAA/2019 stands disposed of.