Habitat Royale Land Investments Pvt. Ltd. vs Jain Floriculture Ltd.

B.S.V. Prakash Kumar, J

This 1st motion Application under Sections 230 & 232 of the Companies Act, 2013 (herein after referred to as the "Act") read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (herein after referred to as "the Rules") is filed by the Applicants Numbers 1 & 2 Companies seeking directions of this Tribunal to convene separate meetings of Shareholders of the Transferor Company and the Transferee Company, to consider and, if deem fit, to approve the proposed Scheme of Arrangement; and to dispense with the requirement of convening meetings of Un-secured Creditors of the Transferor Company and the Transferee Company. The Applicant No. 1 Company is the Transferor Company, whereas the Applicant No. 2 is the Transferee Company as stated in the proposed Scheme of Arrangement and in the Application.

In the Application, it is stated that the Transferor Company is a private limited company registered under the provisions of the Companies Act, 1956. The Authorized Share Capital of the Transferor Company is Rs. 2,00,00,000 divided into 20,00,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 22,00,000 divided into 2,20,000 Equity Shares of Rs. 10 each.

Presently, the Transferor Company is engaged in purchase, sale and investment in real estate and other related activities.

In the Application, it is stated that the Transferee Company is a public limited company registered under the provisions of the Companies Act, 1956. The Authorized Share Capital of the Transferee Company is Rs. 1,00,00,000 divided into 10,00,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 80,64,000 divided into 8,06,400 Equity Shares of Rs. 10 each.

Presently, the Transferee Company is engaged in purchase, sale and investment in real estate, mutual funds and other related activities.

The material placed on record discloses that the Transferor Company is closely held private limited company. The Transferee Company is a subsidiary of the Transferor Company. Around 96.74% of the total paid-up share capital of the Transferee Company is held by the Transferor Company. Both the Transferor Company and the Transferee Company are Group Companies under common management and control. The registered office of both the Companies are situated at 606, PP City Center, Road No. 44, Pitampura, Delhi-110 034.

The Board of Directors of both the Applicant Companies in the meetings held on 11th January, 2020, considered and unanimously approved the proposed Scheme of Arrangement.

The Applicant Companies have filed the Audited Financial Statements for the financial year ended 31st March, 2019 and un-audited Financial Statements (provisional) for the period ended 30th September, 2019.

The Board of Directors and management of the Transferor Company and the Transferee Company have proposed the Scheme of Arrangement of Habitat Royale Land Investments Pvt. Ltd. and Jain Floriculture Ltd. for the following reasons:

a. The Transferor Company is closely held private limited company. The Transferee Company is a subsidiary of the Transferor Company. Around 96.74% of the total paid-up share capital of the Transferee Company is held by the Transferor Company. Both the Transferor Company and the Transferee Company are Group Companies under common management and control. The proposed arrangement of the Transferor Company with the Transferee Company would result in business synergy, consolidation of these Group Companies and pooling of their resources into a single entity.

b. The proposed Arrangement will simplify and streamline the shareholding structure of the Transferee Company by eliminating multiple layers of the shareholding in tune with the global practices.

c. The proposed Arrangement would result in pooling of physical, financial and human resource of these Companies for the most beneficial utilization of these factors in the combined entity.

d. The proposed Arrangement will result in usual economies of a centralized and a large company including elimination of duplicate work, reduction in overheads, better and more productive utilization of financial, human and other resource and enhancement of overall business efficiency. The proposed Scheme will enable these Companies to combine their managerial and operating strength, to build a wider capital and financial base and to promote and secure overall growth.

e. The proposed Arrangement will result in significant reduction in multiplicity of legal and regulatory compliances and will enhance the management efficiency.

f. Some of the paid-up share capital and reserves & surplus of the Transferee Company are not required in the near future for the business purpose of the Company. Accordingly, the Transferee Company is proposing to reduce its post-merger issued and paid-up share capital by way of buy-back of 1,55,000 Equity Shares of (???) 10 each at a buy-back price of (???) 513.14 per share from its shareholders, on a proportionate basis.

g. It may be noted that the reduction of capital will be on proportionate basis and the percentage shareholding of the shareholders will remain the same even after the reduction of capital.

h. The proposed Scheme would enhance the shareholders' value of the Transferor Company and the Transferee Company.

i. The said Scheme of Arrangement will have beneficial impact on Transferor Company and the Transferee Company, their shareholders, employees and other stakeholders and all concerned.

j. The Scheme of Arrangement is proposed for the aforesaid reasons. The Board of Directors and Management of the Transferor Company and the Transferee Company is of the opinion that the proposed Scheme is in the best interest of these Companies, their Shareholders and other stakeholders.

It is stated that no proceeding for inspection, inquiry or investigation under the provisions of the Companies Act, 2013, or under the provisions of the Companies Act, 1956 is pending against the Applicant Companies.

It is stated by the Applicant Companies that the proposed Scheme of Arrangement does not envisage any buy back of shares.

The learned Counsel for the Applicant Companies filed details of Shareholders, Secured Creditors and Un-secured Creditors detailed below:

i) The Transferor Company has 3 (three) Shareholders.

ii) The Transferee Company has 7 (seven) Shareholders.

iii) The Transferor Company has no Secured Creditors.

iv) The Transferee Company has no Secured Creditors.

v) The Transferor Company has 4 (four) Un-secured Creditors and all have given their consents by way of deposing individual affidavits.

vi) The Transferee Company has 3 (three) Un-secured Creditors and all have given their consents by way of deposing individual affidavits.

The Applicants have stated that the accounting treatment proposed in the Scheme of Arrangement is inconformity with the accounting standards prescribed under Section 133 of the Companies Act, 2013. Certificates from the respective Statutory Auditors of both the Applicant Companies have been filed along with the Application.

Learned Counsel- Mr. Rajeev K Goel, appearing for the Applicants, made the following contentions with respect to the dispensation of the requirement of convening meetings of the following persons:

A. Since there are no Secured Creditors in the Transferor Company and in the Transferee Company, the requirement of convening meetings of the Secured Creditors of the Transferor Company and the Transferee Company does not arise.

B. All the Un-secured Creditors of the Transferor Company and the Transferee Company have given their written consents by way of affidavits. Therefore, the requirement of convening meeting of the Unsecured Creditors of the Applicant Companies may be dispensed with.

Further, Learned Counsel- Mr. Rajeev K. Goel, appearing for the Applicants, requested to convene the following meetings under the supervision of this Tribunal, for the purpose of considering and if deem fit, approving the proposed Scheme of Arrangement:

a. To convene a meeting of Shareholders of the Transferor Company.

b. To convene a meeting of Shareholders of the Transferee Company.

As stated, there is no Secured Creditor in the Transferor Company and the Transferee Company, accordingly, the requirement of convening the meetings of the Secured Creditors of the Transferor Company and the Transferee Company, for the purpose of considering and if thought fit approving the proposed Scheme of Arrangement, is dispensed with.

This Tribunal directs that, in view of consent affidavits given by all the Unsecured Creditors of the Transferor Company and the Transferee Company, the requirement of convening meetings of the Un-secured Creditors of the Transferor Company and the Transferee Company, for the purpose of considering and if thought fit approving the proposed Scheme of Arrangement, is dispensed with.

Further as prayed by the learned Counsel of the Applicants, a meeting of the Shareholders of the Transferor Company will be held on 22nd July, 2020, at 606, PP City Center, Road No. 44, Pitampura, Delhi-110 034 at 3:00 P.M. for the purpose of considering and if, thought fit, approving, with or without modification(s), the Scheme of Arrangement.

Further as prayed, a meeting of the Shareholders of the Transferee Company will be held on 22nd July, 2020, at 606, PP City Center, Road No. 44, Pitampura, Delhi-110 034 at 4:00 P.M. for the purpose of considering and if, thought fit, approving, with or without modification(s), the Scheme of Arrangement.

The Applicants shall publish advertisement with a gap of at least 30 days before the aforesaid meetings, indicating the day, date and time as aforesaid, to be published in "The Business Standard" (English, Delhi Edition) and "Business Standard" (Hindi, Delhi Edition) Newspapers which are circulated in the District in which the respective registered office of the Applicant Companies is situated.

At least one month before the date of the meetings to be held as aforesaid, a notice in Form No. CAA 2 convening the said meetings, indicating the day, date, place and time aforesaid, together with a copy of the Scheme of Arrangement, a copy of statement required to be furnished pursuant to Sections 230 & 232 read with Section 102 of the Companies Act, 2019, and Rule 6 of the Companies (CAA) Rules, 2016 and the prescribed form of proxy shall be sent by Registered Post or by Speed Post or by Courier or by E-Mail or Hand Delivery, addressed to each of the Shareholders of the Transferor Company and of the Transferee Company, as the case may be, at their respective registered or last known addresses or e-mail addresses as per the records of the Applicant Companies. The Notice shall be sent to all the Shareholders of the Transferor Company and of the Transferee Company with reference to the list of the persons appearing on the record of the Applicant Companies as on the date not preceding the date of the meeting by a period of more than 6 months. The aforesaid date would be the date determining the eligibility to vote by the Shareholders.

Mr. B.S. Ahuja, Advocate [Mobile No. 9810066743] shall be the common Chairperson for the above said meetings to be held on Wednesday, 22 July, 2020 or in respect of any adjournment thereof. The fees of the Chairperson would be Rs. 1,00,000/- in addition to meeting any incidental expenses. The Chairperson will file the report within two weeks from the date of holding of the above said meeting.

Mr. Rahul Malhotra, Advocate [Mobile No. 9899218215] shall be the common Alternate Chairperson for the above said meetings to be held on Wednesday, 22 July, 2020 or in respect of any adjournment thereof. Fees of the alternate chairperson would be Rs. 75,000/- in addition to meeting any incidental expenses. The Alternate Chairperson will file the report within two weeks from the date of holding of the above said meeting.

Ms. Aditi Gupta, Company Secretary in practice [Mobile No. : 9871433338] is appointed as the common Scrutinizer for the above said meetings to be held on Wednesday, 22nd July, 2020 or in respect of any adjournment thereof. Fees of the scrutinizer would be Rs. 75,000/- in addition to meeting any incidental expenses. The Scrutinizer will file the report within two weeks from the date of holding of the above said meeting."

The quorum for the aforesaid meetings of the Shareholders of the Transferor Company and of the Transferee Company shall be 25% of total value of each of these categories/stakeholders present in person. Valid Proxies and Authorised Representatives shall be counted for the purpose of quorum.

In case the quorum as noted above for the meetings of the Applicant Companies are not present in the meetings, then the meetings shall be adjourned for half an hour and thereafter the person present shall be deemed to constitute the quorum.

The number and value of the Shareholders shall be in accordance with the records or registers of the Applicant Companies and where the entries in the records or registers are disputed, the Chairperson of the meetings shall determine the number or value, as the case may be for purpose of the meetings.

The Chairperson appointed for the aforesaid meetings shall send out the notices of the meetings referred to above. The Chairperson is free to avail the services of the Applicant Companies or any agency for carrying out the aforesaid directions. The Chairperson shall have all the powers under the Articles of Association of the Applicant Companies and also under the Rules in relation to the conduct of the meetings, including for deciding any procedural questions that may arise at the meetings or adjournment(s) to the aforesaid scheme or resolution, if any, proposed at the aforesaid meetings by any person(s) and to ascertain the decision of the sense of the meetings of the Shareholders by ballot/polling paper at the venue of the meetings.

Voting by proxy/authorized representatives is permitted provided that the proxy in the prescribed form duly signed by the person entitled to attend and vote at the aforesaid meetings is filed with the Applicant Companies at their Registered Office, not later than 48 hours before the meeting vide Rule 10 of the Companies (CAA) Rules, 2016 read with Section 105 of the Act. Valid Proxies and Authorised Representatives shall be counted for the purpose of quorum.

The Chairperson to file an Affidavit not less than 7 (seven) days before the date fixed for the holding of the meetings and to report to this Tribunal that the directions regarding issuance of notices and advertisement of the meetings have been duly complied with as per Rule 12 of the Companies (CAA) Rules, 2016.

It is further ordered that the Chairperson shall report to this Tribunal on the result of the meeting in Form No. CAA-4, duly verified by his affidavit, as per Rule 14 of the Companies (CAA) Rules, 2016 within 7 (seven) working days from the date of conclusion of the aforesaid meetings.

In compliance of sub section (5) of Section 230 of the Act and Rule 8 of the Companies (CAA) Rules, 2016, the Applicant Companies shall send notice under sub section (3) of Section 230 read with Rule 6 of the Rules with a copy of the Scheme of Arrangement, the explanatory statement and the disclosures mentioned in Rule 6 to (a) the Central Government through the office of the Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi; (b) the Registrar of Companies, NCT of Delhi and Haryana, New Delhi; (c) The Official Liquidator, New Delhi; and (d) the Income Tax Department. The said notices be sent either by Registered Post or by Speed Post or by Courier or by Hand Delivery or by e-mail at the Offices of the authorities as required by sub rule (2) of Rule 8 of the Rules. The aforesaid authorities, who desire to make any representation under sub section (5) of section 230 shall send the same to this Tribunal within a period of 30 (thirty) days from the date of receipt of such notice, failing which it shall be deemed that they have no representation to make on the proposed Scheme.

The Petition stands disposed of in the above terms.