Preethi Kitchen Appliances Private Limited Vs

The Court is convened by videoconferencing today 10.12.2020.

Perused the Company Scheme Application, along with the Affidavit of Mr. Sachin Chandrakant Rawte, the Authorized Signatory of the Applicant Company in support of the Company Scheme Application, dated 15th October, 2020 and heard Advocate for the Applicant Company.

(a) The Applicant Company has filed the Company Scheme Application under Sections 230-232 of the Companies Act, 2013 (hereinafter referred to as the “Act”) and other relevant provisions of the Act, seeking directions from this Tribunal in relation to Composite Scheme of Arrangement amongst Philips India Limited (hereinafter referred to as “Demerged Company”), Preethi Kitchen Appliances Private Limited (hereinafter referred to “Applicant Company”), Philips Domestic Appliances India Limited (hereinafter referred to as the “Resulting Company”) and their respective shareholders, under Sections 230-232 read with other relevant provisions of the Companies Act, 2013 (the “Act”), (hereinafter referred to as the “Scheme”) and in terms of Rule 3 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, as more particularly set out therein.

The Scheme of Arrangement, provides for:

(i) re-organization of the share capital and securities premium reserve account of the Applicant Company involving reduction in the face value of the fully paid up equity shares and reduction of the securities premium reserve account of the Applicant Company and return of the amounts so reduced to the shareholders of the Applicant Company on a proportionate basis. Further, the remaining amount in the securities premium reserve account shall be partly adjusted against the balance in the profit and loss account of Applicant Company to inter alia write off net accumulated losses of the Applicant Company. (“Capital Reduction”);

(ii) the transfer by way of a demerger of the Demerged Undertaking (as defined in the Scheme) of the Demerged Company to the Resulting Company on a going concern basis, reduction of share capital held by the Demerged Company in the Resulting Company and issue of equity shares by the Resulting Company to the shareholders of the Demerged Company (“Demerger”);

(iii) amalgamation of the Applicant Company with the Resulting Company and dissolution of the Applicant Company without winding up and the cancellation of equity shares of Applicant Company held by the Resulting Company (“Amalgamation”); and

(iv) various other matters consequential or integrally connected therewith including the re-organisation of the share capital of the Resulting Company, pursuant to Sections 230 to 232 of the Companies Act, 2013 and other provisions of the Act, as may be applicable, in the manner provided for in this Scheme and in compliance with Sections 2(19AA) and 2(1B) and other applicable provisions of the Income Tax Act, 1961 read with Income Tax Rules, 1962.

The rationale and objectives of the proposed Scheme of Arrangement under the Scheme are as follows:

(a) The Applicant Company has more capital than it can profitably employ and the capital is in surplus to its requirements. This has given rise to the need to return the excess capital and readjust the relation between capital and assets and to accurately and fairly reflect the assets and liabilities of the Applicant Company in its books of accounts. Therefore, the Capital Reduction of the Applicant Company is being undertaken under this Scheme to give a true and fair view of the books of accounts of the Applicant Company and to reflect its assets and liabilities at their real value and maximize its business value. The Capital Reduction involves reduction in the face value of the fully paid up equity shares and reduction of the securities premium reserve account of the Applicant Company; and return of the amounts so reduced to the shareholders of the Applicant Company on a proportionate

basis. Further, the remaining amount in the securities premium reserve account shall be partly adjusted against the balance in the profit and loss account of the Applicant Company to inter alia write off the net accumulated losses of the Applicant Company;

(b) Presently, the Domestic Appliances Business (as defined in the Scheme) of the Demerged Company is housed in (i) the Demerged Undertaking of the Demerged Company and (ii) the Applicant Company. Pursuant to the coming into effect of the Scheme, the Domestic Appliances Business of the Demerged Company will be separated and transferred into the Resulting Company by way of (A) the Demerger of the Demerged Undertaking (which includes the shares held in the Applicant Company) from the Demerged Company to the Resulting Company; and (B) the subsequent amalgamation of the Applicant Company with the Resulting Company. This segregation of the Domestic Appliances Business is being undertaken in line with the global separation plan of the Philips group to improve efficiencies of the individual business divisions;

(c) The restructuring will help the Demerged Company to consolidate its Domestic Appliances Business in India into one entity (being the Resulting Company), leading to increased focus, alignment and operational efficiency. It will enable the management to position itself better to capture growth opportunities, achieve cost synergies, be closer to customers, adapt more quickly to evolving customer needs and enable decisive investments in the future of the Domestic Appliances Business;

(d) The Demerger will enable the Demerged Company to focus on and enhance its Remaining Business (as defined in the Scheme) by streamlining its operations;

(e) As independent companies with dedicated, focused and lean management structures, both, the Demerged Company as well as the Resulting Company will be able to make appropriate investments to boost growth and drive profitability, ultimately generating significantly more value for their customers, employees and shareholders;

(f) Each of the Demerged Company as well as the Resulting Company will be able to attract different sets of investors enabling them to select investments that best suit their strategies and risk profiles. This will also create an optimum structure for monetization in the future of the Domestic Appliances Business so separated and consolidated; and

(g) The Applicant Company and the Resulting Company are wholly owned subsidiaries of the Demerged Company. The Demerged Company is a subsidiary of Koninklijke Philips N.V., which holds 96.13% of the total issued and paid up share capital in the Demerged Company with the remaining 3.87% of the total issued and paid up share capital being held by minority shareholders. The economic interests of the shareholders of the Demerged Company will remain unchanged. The shareholders of the Demerged Company will continue to remain shareholders of the Demerged Company and will also become shareholders of the Resulting Company in the same proportion as their shareholding in the Demerged Company. The Scheme is therefore, expected to be in the best interests of the shareholders, employees and the creditors of each of the Demerged Company, the Applicant Company and the Resulting Company.

The share capital and the securities premium reserve account of the Applicant Company shall be reduced in accordance with the provision, set out in clause 5 of the Scheme. Further the said reduction in the share capital and the security premium reserve account of the Applicant Company shall be effected as an integral part of the Scheme and in accordance with the provisions of Sections 230 to 232 of the Act and the orders passed by this Tribunal and the National Company Law Tribunal, Kolkata Bench, sanctioning the Scheme. As stated in the Explanation to Section 230 of the Act, the provisions of Section 66 of the Act shall not apply to the aforesaid reduction, effected in pursuance of the order of this Tribunal under Sections 230- 232 of the Act.

The Senior Advocate on behalf of the Applicant has explained that the reduction of the share capital and the securities premium reserve account of the Applicant Company as proposed under the Scheme is permitted under the provisions of Section 52 and Section 66 of the Companies Act, 2013.

Further while explaining the envisaged adjustment of the accumulated losses of the Applicant Company, it is clarified that as regards the balance of the accumulated losses which are not being adjusted at this stage, would be adjusted by the Resulting Company in the ensuing year/s, as may be prudent.

The Applicant Company has only 3 (three) equity shareholders, holding the entire share capital of the Applicant Company. The Applicant Company has submitted to this Tribunal the certificate along with the list of equity shareholders certifying the names of the three equity shareholders and their respective shareholdings in the Applicant Company. The said Certificate is annexed to the Company Scheme Application as Annexure “M”. All the said three equity shareholders of the Applicant Company have given their respective Affidavits of consent and approval to the Scheme and the same are annexed to the Company Scheme Application as Annexures “N-1” to “N-3”.

The Applicant Company has only 1 (one) secured creditor as on 31st August, 2020 having an outstanding amount of INR 61,00,509/- (Rupees Sixty One Lakh, Five Hundred and Nine Only) viz. Magma Fincorp Limited (“Magma”), a Non-Banking Financial Company. The Applicant Company has lease obligations towards Magma which is secured by underlying assets (i.e. leased vehicles). Reference of the said sole secured creditor and its outstanding as on 31st August, 2020 is stated in the list annexed to the certificate of Statutory Auditors of the Applicant Company, being Annexure “O” to the Company Scheme Application.

The Applicant Company has 537 (Five Hundred and Thirty Seven) unsecured creditors as on 31st August, 2020 having an aggregate outstanding amount of INR 60,06,68,159/- (Rupees Sixty Crore, Six Lakh, Sixty Eight Thousand, One Hundred and Fifty Nine Only). The certified true copy of the report/certificate dated 25th September, 2020 issued by the Statutory Auditors of the Applicant Company along with the list of the unsecured creditors of the Applicant Company certifying that there are 537 (Five Hundred and Thirty Seven) unsecured creditors of the Applicant Company as on 31st August, 2020 having their aggregate outstanding amount of INR 60,06,68,159/- (Rupees Sixty Crore, Six Lakh, Sixty Eight Thousand, One Hundred and Fifty Nine Only) is also annexed to the Company Scheme Application as Annexure “O”.

The Applicant Company has submitted to this Tribunal that convening and holding of the meetings of the equity shareholders, sole secured creditor and unsecured creditors of the Applicant Company to seek their approval to the Scheme are not required, in view of (a) the Affidavits of Consents from all the three equity shareholders of the Applicant Company, which are annexed to the Company Scheme Application and in view of the averments made in paragraph 16 of the Company Scheme Application; and (b) in view of the averments made in paragraphs 17 to 19 of the Company Scheme Application, stating therein that being the only one secured creditor of the Applicant Company, the Applicant Company will not be able to hold its meeting to seek its approval to the Scheme and that the present Scheme is a Composite Scheme of Arrangement between the Demerged Company, the Applicant Company and the Resulting Company and respective shareholders and is in no manner prejudicial to the interests of the sole secured creditor and the unsecured creditors of the Applicant Company. Further, under the Scheme, neither any compromise is proposed with the sole secured creditor and/or with the unsecured creditors of the Applicant Company nor any liability of the said sole secured creditor or unsecured creditors of the Applicant Company is proposed to be reduced or extinguished under the Scheme and that the Scheme does not contemplate any variation in the rights of the secured and unsecured creditors of the Applicant Company in any manner whatsoever. Most of the unsecured creditors of the Applicant Company are sundry creditors and are in day to day business of the Applicant Company. In view of the foregoing and in view of the provisions of Section 230 of the Companies Act, 2013, the following directions are issued:

The convening and holding the meeting of the equity shareholders of the Applicant Company to seek their approval to the Scheme, is not required in view of the averments made in paragraph 16 of the Company Scheme Application and the Affidavits of Consent and approval to the Scheme given by all the three equity shareholders of the Applicant Company, which are annexed to the Company Scheme Application as Annexures “N-1” to

“N-3”.

The convening and holding meetings of the sole secured creditor and unsecured creditors of the Applicant Company to seek their approval to the Scheme are not required, in view of the averments made in paragraphs 17 to 19 of the Company Scheme Application. The Applicant Company is directed to issue notice of filing of the present Company Scheme Application and passing of this order upon its sole secured creditor and individually to its unsecured creditors, details of which are as under:

(a) to the sole secured creditor of the Applicant Company;

(b) to all the unsecured creditors of the Applicant Company, as on 30th November, 2020; and with a direction that they may submit their representations, if any, to this Tribunal.

The Applicant Company to serve notice of filing of the present Company Scheme Application (along with copy of the Company Scheme Application) and copy of this order, upon the Central Government of India (through the Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai, Maharashtra), stating therein that it may submit its representation in relation to the Scheme, if any, to this Tribunal within 30 (thirty) days from the date of receipt of the notice, with a copy thereof to the Applicant Company and if no response is received by the Tribunal from the Central Government (through the Regional Director) within 30 days of the date of receipt of the said notice, it will be presumed that the Central Government (through the Regional Director) has no objection to the Scheme.

The Applicant Company to serve notice of filing of the present Company Scheme Application (along with copy of the Company Scheme Application) and passing of this order, upon the Registrar of Companies, Mumbai, Maharashtra, stating therein that it may submit its representation in relation to the Scheme, if any, to this Tribunal within 30 (thirty) days from the date of receipt of the notice, with a copy thereof to the Applicant Company and if no response is received by the Tribunal from the Registrar of Companies, within 30 days of the date of receipt of the said notice, it will be presumed that the Registrar of Companies has no objection to the Scheme.

The Applicant Company (PAN: AAFCP8830K) to serve the notice of filing of the present Company Scheme Application (along with copy of the Company Scheme Application) and passing of this order, upon the concerned Income Tax Authority within whose jurisdiction their assessments are made i.e. Assistant Commissioner of Income Tax, Circle 10(3), Mumbai stating therein that it may submit representations in relation to the Scheme, if any, to this Tribunal within 30 (thirty) days from the date of receipt of the notice, with a copy thereof to the Applicant Company and if no response is received by the Tribunal from the concerned Income Tax Authority within 30 days of the date of receipt of the said notice, it will be presumed that the concerned Income Tax Authority has no objection to the Scheme.

The Applicant Company to serve notice of filing of the present Company Scheme Application (along with copy of the Company Scheme Application) and passing of this order, upon the Official Liquidator, High Court, Bombay, stating therein that he may submit its representation in relation to the Scheme, if any, to this Tribunal within 30 (thirty) days from the date of receipt of the notice, with a copy thereof to the Applicant Company and if no response is received by the Tribunal from the Official Liquidator, within 30 days from the date of receipt of the said notice, it will be presumed that the Official Liquidator has no objection to the proposed Scheme. M/s Akshay & Co., Chartered Accountant is appointed with remuneration of INR 2,00,000/- to assist the Official Liquidator to scrutinize the books of accounts of the Applicant Company. The remuneration of the said Chartered Accountant shall be paid by the Applicant Company, within period of two weeks from the date of receipt of certified copy of this order.

In view of the averments made in paragraph 22 of the Company Scheme Application, the notice of filing of the present Company Scheme Application and passing of this order, is not required to be given to the Competition Commission of India by the Applicant Company.

The Applicant Company is directed to issue notice along with a copy of the Scheme to other applicable regulators including sectoral regulators, if any.

The Applicant Company is directed to publish the notice of filing of the Company Scheme Application in Business Standard (Mumbai edition) in English language and Marathi translation thereof in Lokmat (Mumbai edition), stating therein that the present Company Scheme Application has been filed in this Tribunal, and that any person concerned with the Applicant Company, may file its representations, if any, to the Scheme in this Tribunal within 30 days from the date of publication of the said notice in the newspapers with a copy thereof to the Applicant Company. The Applicant Company is further directed to publish the notice of filing of the Company Scheme Application on its website, if any.

The Applicant Company undertakes to this Tribunal to file an Affidavit proving service of the notices of filing of the present Company Scheme Application as stated above, upon (i) the Central Government of India (through the Regional Director, Western Region, Ministry of Corporate Affairs); (ii) Registrar of Companies, Mumbai, Maharashtra; (iii) concerned Income Tax Authority (iv) the Official Liquidator, High Court, Bombay, and publication of notices in the newspapers. The Applicant Company undertakes to file Affidavit proving service of the notices of filing of the present Company Scheme Application upon the respective secured creditor and unsecured creditors as directed. The said Affidavits are to be filed within 10

(Ten) days of the date of service/ publication of the said notices.