In Re: Suner Marbles and Granites Pvt. Ltd. and Others

Sangeet Lodha, J.

This Company Petition under Section 391(2) and 394 of the Companies Act, 1956 (for short "Act") has been filed seeking sanction of proposed Scheme of Arrangement for De-merger of Real Estate Divisions of Suner Marbles and Granites Private Limited into Resultant Company No. 1-Suryagrah Infra Pvt. Ltd. and Resultant Company No. 2-Savitri Buildestate Pvt. Ltd. and under Section 100 to 104 of the Act for reduction of capital thereof.

The Petitioner Company-Suner Marbles and Granites Pvt. Ltd. was incorporated under the provisions of the Act, as a private limited company vide Certification of Incorporation dated 1.2.1984 issued by the Registrar of Companies, Jaipur, with a capital of Rs. 70,00,000/- (Rupees Seventy lakhs) divided into 70,000 equity shares of Rs. 100/- each. Issued, Subscribed and Paid-Up Share Capital of the Company was Rs. 54,68,000/-divided into 54680 Equity Shares of Rs. 100/- each.

The Petitioner Company having its registered office at Udhyog Vihar Industrial Area, Village Sukher, Udaipur, is engaged in business of mining, cutting, processing, trading and exporting all types of marbles and other natural stones and other related activities.

As per Scheme of Arrangement which is proposed to implement family arrangement/understanding, marble and granite processing and trading business activities will be retained in Suner Marbles and Granites Marbles Pvt. Ltd. alongwith the land and Factory Building appurtenant thereto and surplus land will be hived of/demerged into Resultant Company No. 1 and 2 to be used for various business activities.

The circumstances which justify and/or necessitate the proposed Scheme of Arrangement for De-merger are set out as follows:

"a. The proposed Scheme of Arrangement is being proposed to implement the family arrangement/understanding and will help in maintaining cordial relationships and harmony in the extended Promoters'' family. The Scheme will also prevent undue disputes and differences in future.

b. The proposed Scheme of Arrangement will provide focused attention and independent management control in each Resultant Company. The proposed de-merger will provide flexibility in dealing with each Resultant Company differently and to enter into different business models in various projects in future.

c. The proposed de-merger will enable the Resultant Companies to adopt capital structure and other financial policies appropriate to their operational and strategic objectives.

d. The de-merger will provide scope for independent expansion without committing the existing organization in its entirety.

e. With a view to achieve greater management focus and keeping in mind the paramount and overall interest of the shareholders, the Board of Directors of the Demerged and the Resultant Companies considered that a Scheme for Demerger would be the most appropriate methodology.

f. The said Scheme of De-merger will have beneficial impact on the Demerged Company and the Resultant Companies, their employees, shareholders and other stakeholders and all concerned."

The terms of the Arrangement are proposed as under:

"a. All assets and liabilities including Income tax and all other statutory liabilities, if any, of Real Estate Division of the Demerged Company will be transferred to and vest in the Resultant Companies No. 1 and 2. As on the appointed date the existing liabilities in Real Estate Divisions is nil.

b. The Remaining Business (other than Real Estate Division) of the Demerged Company and for all the assets, liabilities and obligations pertaining thereto shall continue to belong to and be vested in and be managed by the Demerged Company.

c. All the employees of the Demerged Company employed in the activities relating to Real Estate Division, in service on the Effective Date, if any, shall become the employees of the Respect Companies No. 1 and 2 respectively on and from such date without any break or interruption in service and upon terms and conditions not less favorable than those applicable to them in the Real Estate Divisions of the Demerged Company, on the Effective Date.

d. Appointed Date for the Scheme will be 1st April, 2013, or such other date, as the Hon''ble High Court(s) may approve.

e. Share exchange ratio for the proposed de-merger will be as below:

i. The Resultant Company No. 1-Suryagarh Infra Private Limited will issue 46(forty six) 10% Non Cumulative Reedemable Preference Shares of Rs. 10 each, credited as fully paid-up, to the shareholders of the Demerged Company for every 10(ten) Equity Shares of Rs. 100 each held in the Demerged Company.

ii. The Resultant Company No. 2-Savitri Buildestate Pvt. Ltd. will issue 106(one Hundred and six) 10% Non Cumulative Redeemable Preference Shares of Rs. 10 each, credited as fully paid-up, to the shareholders of the Demerged Company for every 10 (ten) Equity Shares of Rs. 100 each held in the Demerged Company."

The Board of Directors of the Company in its meeting held on 3.10.13 considered and unanimously approved proposed Scheme of Arrangement for De-merger of Real Estate Division of Suner Marble and Granites Pvt. Ltd.

The Petitioner Company had filed a Company Application registered as Company Application No. 1/2014, seeking directions for convening, holding and conducting separate meetings of its Equity Shareholders, Secured Creditors and Unsecured Creditors. Vide order dated 4.3.14 passed in the said Company Application, this court issued directions to convene and hold separate meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Petitioner Company on the date and time specified, for the purpose of considering and if thought fit, approving with or without modifications the Scheme of Arrangement.

The Court appointed Mr. Tabrez Malawat, Advocate and failing him Mr. Bhagirath Patel, Advocate, to be the Chairperson of the meeting of Equity Shareholders of the Petitioner Company. Mr. Bhagirath Patel, Advocate and failing him Mr. Rajat Arora, Advocate was appointed to be the Chairperson of the meeting of the Unsecured Creditors of the Petitioner Company. Mr. Rajat Arora, Advocate and failing him Mr. Tabrez Malawat, Advocate was appointed as Chairperson of the meeting of the Unsecured Creditors of the Petitioner Company.

Pursuant to order dated 4.3.14 passed by this court as aforesaid and in conformity with the provisions of the Companies (Court) Rules, 1959 (for short "the Rules"), the notices of the meetings were published in ''Times of India'' (English, Rajasthan Edition) and ''Pratahkal'' (Hindi, Udaipur Edition), on 20.3.14 for the meetings scheduled to be held on 12.4.14 at 11 a.m. at the registered office of the De-merged Company. That apart, notices alongwith Scheme of Arrangements were sent individually to the Equity Shareholders, Secured Creditors and Unsecured Creditors by Speed Post.

The total 11 Equity Shareholders attended the meeting in person and 22 attended in proxy. All the Equity Shareholders voted in favour of the Scheme of Arrangement being adopted and carried out into effect. All 18 Unsecured Creditors attending the meeting either personally or by proxy voted in favour of the Scheme of Arrangement. Out of 5 Secured Creditors of the Petitioner Company, one Secured Creditor representing 83% of Secured Debt of Rs. 3,80,31,970/- attended the meeting in person and voted in favour of Scheme of Arrangement. In this regard, the reports submitted by the Chairpersons of the meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors placed on record are self explanatory.

Vide order dated 27.5.14 passed by this court, notice of the petition was directed to be issued to the Registrar of the Companies, Rajasthan and the Regional Director, Ministry of Corporate Affairs, North West Region, Ahmedabad as also to the Official Liquidator attached to this court. Thereafter, vide order dated 20.2.15, notice of hearing of the petition was also directed to be advertised in the newspapers in which the notices of meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors were advertised. The notices were duly published in the ''Pratahkal'' (Hindi, Udaipur Edition) and ''Times of India'' (English, Rajasthan Edition) daily newspapers on 14.3.15 for the date of hearing 26.3.15.

In response to the notice, the Regional Director, North Western Region, has filed affidavit inter alia stating that as per the Scheme, two sets of plots of De-merged Company are proposed to be transferred to both the Resulting Companies, however, the De-merged Company does not have any real estate undertaking as per its Balance Sheet as on 31.3.13 and the Company has shown the land under the head of "Fixed Assets" and no inventory of land is shown. It is submitted that there appears some discrepancy in the proposed share capital and actual share capital of the Resulting Companies as per the datas available at MCA Website. It is submitted that the Petitioner Company has not filed the relevant Form GNL-1 pursuant to the Rule 12 (2) of the Companies (Registration Offices and Fees) Rules, 2014. It is further submitted that the financial position of the Petitioner Company has been mentioned in the petition as well as in its Scheme of Arrangement on the basis of the audited Balance Sheet as on 31.3.13, however, both the Resulting Companies are incorporated newly on 7.7.14 and 19.8.14 and has not filed any Balance Sheets/Annual Accounts till date with the Registrar of Companies Rajasthan. Accordingly, it is submitted that there is no justification in keeping the ''Appointed Date'' as 1.4.13 when the Resulting Companies were not even in existence. Besides, it is prayed on behalf of the Regional Director that the Companies may be directed to pay the applicable Capital Gain Tax and Stamp Duty arising out of transfer of two plots to Resulting Companies and further, to comply with the relevant provisions of Income Tax Act and pay the applicable tax. It is stated that two clauses of the Scheme with identical numbers 4.0.0 are not in accordance with accounting principles as required inasmuch as, as per the accounting principles, the excess of the assets over liability should be credited to Capital Reserve Account and the shortfall, if any, should be debited to Goodwill Account only, whereas, under the Scheme of Arrangement, it is proposed to transfer the excess of Net Asset Value to Reserve and Surplus Account/Securities Premium Account of Resulting Companies. Lastly, it is submitted that the Ministry of Corporate Affairs vide its Circular No. 2/1/2014 dated 15.1.14 has directed that the Regional Director concerned shall invite specific comments from the Income Tax Department giving 15 days time to the Income Tax Department to inform objections, if any, to the proposed Scheme under Section 391 or 394, as the case may be and file the report on behalf of the Central Government. It is stated that the Directorate vide letter dated 24.6.14 requested the Chief Commissioner of Income Tax, Rajasthan, to give specific comments of the Income Tax Department about the proposed Scheme, however, no reply has been received from the Income Tax Department in this regard. It is stated that as per the report of the Office of Registrar of Companies, there are no complaints against the Petitioner Company including any complaint/representation against the Scheme of Arrangement of the Company.

The Petitioner Company has filed a counter affidavit to the affidavit filed on behalf of the Regional Director, North Western Region, Ministry of Corporate Affairs, Ahmedabad stating that the Scheme of Arrangement is in nature of demerger of two real estate divisions of Suner Marbles and Granite Pvt. Ltd. into two Resulting Companies and thus, the Regional Director has erred in stating it as demerger of two plots of land. It is submitted that the De-merged Company had real estate business and the Company has identified two different types of projects for both the real estate divisions. It is submitted that the Petitioner Company proposed to develop one plot of land under real estate division-1 into residential apartment and second plot in the real estate division-2 into a budget hotel and the process in this regard has been initiated about three years back. It is submitted as the land under real estate divisions are not purported to be sold, there is no requirement for transfer of the said lands into inventory and therefore, as per the Balance Sheet of De-merged Company as on 31.3.14, both the lands under two real estate divisions are shown under the head of Fixed Assets.

Responding the objection raised by the Regional Director, North Western Region, Ministry of Corporate Affairs, regarding discrepancy in the Proposed Share Capital and Actual Share Capital of both the Resulting Companies, the Petitioner Company has proposed to amend the Scheme of Arrangement and include the clauses 1.15.2 and 1.15.3 as under:--

"1.15.2 The resultant company No. 1 is incorporated with Authorised Share Capital of Rs. 30,00,000 divided into 10,000 equity shares of Rs. 10 each and 2,90,000 10% Non Cumulative Redeemable Preference Share of Rs. 10 each. The issued, subscribed and paid up share capital of the company shall be Rs. 1,00,000 divided into 10,000 equity shares of Rs. 10 each."

"1.15.3 The resultant company No. 2 is incorporated with Authorised Share Capital of Rs. 60,00,000 divided into 10,000 equity shares of Rs. 10 each and 5,90,000 10% Non Cumulative Redeemable Preference Share of Rs. 10 each. The issued, subscribed and paid up share capital of the company shall be Rs. 1,00,000 divided into 10,000 equity shares of Rs. 10 each."

Regarding non filing of Form GNL-1, it is submitted that it is not applicable to the Petitioner Company inasmuch as, requirement is created only after 1st April, 2014 after coming into force of the Companies Act, 2013 and the relevant provision of Companies Act, 2013 for amalgamation is not notified as yet. However, Form GNL-1 has been filed alongwith counter affidavit as Annexure-A.

Replying the objection raised by the Regional Director regarding justification of the ''Appointed Date'' as 1.4.13, it is submitted that as per Rule 67 to 87 of the Rules, every Scheme of De-merger has to necessarily provide a date with effect from which the de-merger/transfer shall take place and that apart, the date is also required for determining share exchange ratio and identification/quantification of assets and liabilities of the existing Company and the Resultant Companies. Referring to Para 1.15 of Part I of the Scheme, it is submitted that the effective date shall be the date on which transfer and vesting of entire undertakings of the De-merged Company shall take effect, being the date on which the certified copies of the order sanctioning the Scheme of Arrangement are filed with the concerned Registrar of Companies and thus, the implementation of the Demerger shall be prospective date and not 1.4.13 for the purpose of giving effect to the Scheme of Arrangement.

It is further submitted that the Company is agreeable to pay Capital Gain Tax as also Stamp Duty as applicable on Demerger of the real estate divisions of the Petitioner De-merged Company. The Company is also agreeable to comply with the relevant provisions of the Income Tax Act applicable on the Petitioner Company in regard to the Arrangement and also to implement the Scheme as per the accepted accounting principles as per the law.

No other objection whatsoever against the grant of the sanction to the proposed Scheme of Arrangement has been received from any other party till this date.

Learned counsel appearing for the Petitioner Company confirms that neither the Petitioner Company nor its counsel has received any objection.

Mr. A.K. Rajvanshy, Assistant Solicitor General, appearing for the Regional Director has submitted that in view of the clarification furnished and categorical undertaking given by the Petitioner Company by way of counter to the affidavit filed, the Directorate, Corporate Affairs has no objection against the sanction of the Scheme of Arrangement.

Thus, keeping in view, the aforesaid facts and the no objection given by the by the Regional Director, North-Western Region, Ministry of Corporate Affairs, being satisfied with the reply to the objection raised and undertaking given on behalf of the Petitioner Company, this court considers it appropriate to sanction the Scheme of Arrangement.

Accordingly, the Company Petition is allowed. The Scheme of Arrangement for De-merger, with the amendment of clauses 1.15.2 and 1.15.3 thereof, proposed as aforesaid, is hereby sanctioned. The Scheme of Arrangement shall form part of this order. The Petitioner Company shall abide by the undertaking given before this court noticed as above and shall comply with the statutory requirements, as prescribed. It is further clarified that the stamp duty and taxes payable shall be paid by the Petitioner Company in accordance with law.

The parties to the Scheme of Arrangement or other persons interested shall be at liberty to apply to the Court for any directions that may be necessary in regard to working of the arrangement.

The Petitioner Company shall file certified copy of the order with the Registrar of Companies within a period of 14 days from the date of receipt of the same.

The Petitioner Company shall pay costs quantified at Rs. 25,000/- to the Regional Director, North Western Region and shall deposit a sum of Rs. 50,000/- in the Common Pool Fund of the Official Liquidator attached to this court, within a period of four weeks from the date of receipt of certified copy of this order.