Reliance New Energy Limited Vs

P.N. Deshmukh (Member Judicial)

The Bench is convened through videoconference.

Reliance New Energy Limited (hereinafter referred to as the “First Applicant Company” or “Amalgamating Company” or “RNEL”) and Reliance Industries Limited (hereinafter referred to as the “Second Applicant Company” or “Amalgamated Company” or “RIL”) and their respective shareholders are entering into a scheme of amalgamation (“Scheme”).

The said Scheme proposes that the Amalgamating Company be amalgamated with the Amalgamated Company, pursuant to which the Amalgamating Company will cease to exist as a separate legal entity as per applicable law pursuant to Sections 230 to 232 and other applicable provisions of the Companies Act, 2013. The Amalgamating Company is a wholly owned subsidiary of the Amalgamated Company and therefore there shall be no issue of shares as consideration for the amalgamation of Amalgamating Company with the Amalgamated Company.

The Amalgamating Company was incorporated on 7 June 2021, under the provisions of the Companies Act, 2013 under the name ‘Reliance New Energy Solar Limited’. The name of ‘Reliance New Energy Solar Limited’ was subsequently changed to the present name ‘Reliance New Energy Limited’ on 19 January 2022. A certificate of incorporation consequent upon name change has been issued by the Registrar of Companies, Mumbai, Maharashtra. The equity shares of the Amalgamating Company are not listed on any stock exchanges. The Amalgamating Company is engaged in the business of solar photovoltaic, cells and battery packs, developing integrated energy park for manufacturing power electronic products and other ancillaries used in renewable energy and project implementation.

The Amalgamated Company was incorporated on 8 May 1973, under the provisions of the Companies Act, 1956 under the name ‘Mynylon Limited’. This name of ‘Mynylon Limited’ was subsequently changed to ‘Reliance Textile Industries Limited’ on 11 March 1977. A certificate of incorporation consequent upon change of name has been issued by the Registrar of Companies, Karnataka, Bangalore. The registered office of the Amalgamated Company was changed from the State of Karnataka to the State of Maharashtra, and certificates of registration of the order of the Company Law Board confirming such transfer of registered office has been issued by the Registrar of Companies, Maharashtra, Bombay on 4 August 1977, and by the Registrar of Companies, Karnataka, Bangalore on 5 August 1977. The name ‘Reliance Textiles Industries Limited’ was subsequently changed to the present name, ‘Reliance Industries Limited’ on 27 June 1985. A certificate of incorporation consequent upon change of name has been issued by the Registrar of Companies, Maharashtra, Mumbai. The equity shares and non-convertible debentures of the Amalgamated Company are listed on BSE Limited and National Stock Exchange of India Limited. The global depository receipts of the Amalgamated Company are listed on Luxembourg Stock Exchange and are traded on the International Order Book (IOB) (London Stock Exchange) and amongst qualified institutional investors on the over-the-counter (OTC) market in the United States of America. The foreign currency bonds of the Amalgamated Company are listed on the Singapore Stock Exchange and Luxembourg Stock Exchange. Few series of the foreign currency bonds are also listed on the Indian International Exchange. The Amalgamated Company inter–alia has multiple undertakings viz., digital services, retail, financial services, E&P and oil-to-chemicals.

The registered offices of the Applicant Companies are situated in Mumbai, Maharashtra and hence, the subject matter of this Company Scheme Application is within the jurisdiction of the National Company Law Tribunal, Mumbai Bench.

Learned Senior Counsel for the Applicant Companies submits that the circumstances and/or reasons and/or grounds that have necessitated and/or justified the Scheme and some of the major benefits which would accrue from the Scheme are extracted from the Scheme and stated below:

“RNEL was incorporated with the object of undertaking new energy / renewable energy initiatives. RIL has since decided that these initiatives will be undertaken in RIL itself. Hence it has been decided to amalgamate RNEL with RIL.

The Scheme will result in the following benefits:

(a) Cost savings through legal entity rationalisation; and

(b) Reduction of administrative responsibilities, multiplicity of records and legal & regulatory compliances;

(c) The merger of the Amalgamating Company into the Amalgamated Company will result in operational synergies resulting in cost optimization;

(d) To provide a strong financial structure to all stakeholders of Amalgamating Company.

Thus, the Scheme is in the interest of the shareholders, creditors and all other stakeholders of the companies and is not prejudicial to the interests of the concerned shareholders, creditors or the public at large.”

The Appointed Date as mentioned in the Scheme is 7 June 2021.

The Learned Senior Counsel for the Applicant Companies submits that as on 31 May 2022, the Amalgamating Company has 7 equity shareholders holding 579,90,00,000 equity shares of the Amalgamating Company. It is further submitted that, the Amalgamating Company has received consent affidavits from all its equity shareholders, whereby they have given their consent and approval to the Scheme. The consent affidavits of the equity shareholders of the Amalgamating Company are annexed to the Company Scheme Application at Exhibit “A-10 Colly”. Accordingly, the requirement to convene and hold meeting of the equity shareholders of the Amalgamating Company is dispensed with.

The Learned Senior Counsel for the Applicant Companies submits that as on the date of hearing of the present Company Scheme Application, there are no preference shareholders of the Applicant Companies and therefore, the question of convening and holding the meeting of the preference shareholders of the Applicant Companies does not arise. The Learned Senior Counsel for the Applicant Companies submits that as on the date of hearing of the present Company Scheme Application, the Amalgamating Company does not have any secured creditors. Accordingly, the requirement of convening and holding the meeting of the secured creditors of the Amalgamating Company does not arise.

The Learned Senior Counsel for the Applicant Companies submits that as on 31 May 2022, the Amalgamating Company has 2 unsecured creditors having a value of INR 225,09,00,000. It is further submitted that, the Amalgamating Company has received consent affidavit from its unsecured creditor representing more than 90% in value, whereby such unsecured creditor has given its consent and approval to the Scheme. The consent affidavit of the unsecured creditor of the Amalgamating Company is annexed to the Company Scheme Application at Exhibit “A-14 Colly”. Accordingly, the requirement to convene and hold meeting of the unsecured creditors of the Amalgamating Company is dispensed with.

The Learned Senior Counsel of the Applicant Companies submitted that the interest of the equity shareholders of the Amalgamated Company will not be adversely affected by the proposed Scheme. The Amalgamating Company is a wholly owned subsidiary of the Amalgamated Company. Thus, the entire economic interest of the Amalgamating Company is held by the Amalgamated Company. Hence, upon the Scheme becoming effective, inter alia in recognition of the fact that the Companies Act, 2013 prohibits a company from holding its own shares, no shares of the Amalgamated Company shall be issued and allotted in lieu or exchange of the holding of Amalgamated Company in the Amalgamating Company and the entire share capital of the Amalgamating Company held by the Amalgamated Company shall stand cancelled.

The Learned Senior Counsel further submitted that the Scheme does not adversely affect the rights and interests of the members or creditors of the Amalgamated Company and does not involve a re-organization of issued and paid share capital of the Amalgamated Company. Pursuant to the Scheme, the Amalgamating Company shall stand transferred to and vested in the Amalgamated Company as a going concern and accordingly, all assets, permits, contracts, liabilities, loan, debentures, employees, duties and obligations of the Amalgamating Company would be transferred to the Amalgamated Company in the manner provided in the Scheme. As on date, the assets of the Amalgamating Company and Amalgamated Company exceed its liabilities and would be sufficient to discharge the said liabilities in future, in the ordinary course of business. The assets and liabilities of the Amalgamating Company will be transferred to the Amalgamated Company under the Scheme and the shareholding and other rights of the members of the Amalgamated Company will remain unaffected as no new shares are being issued and there is no change in the capital structure.

The Learned Senior Counsel of the Applicant Companies submitted that convening and holding of the meeting of the equity shareholders of the Amalgamated Company to consider, and if thought fit, to approve the Scheme, with or without modification(s) is not required. The Learned Senior Counsel of the Applicant Companies further submitted that the Hon’ble High Court of Judicature at Bombay had in the case of Mahaamba Investments Limited V/s. IDI Limited, reported at (2001) 105 Company Cases page 16 to 18, inter alia, observed and held that if the Scheme of Amalgamation provides for no issue of equity shares to the members of the Transferor Companies, being wholly owned subsidiaries of the Transferee Company, and the creditors of the Transferee Company are not likely to be affected by the Scheme, a separate Petition by the Transferee Company was not necessary. The Learned Senior Counsel of the Applicant Companies submitted that a similar view has also been taken by the National Company Law Appellate Tribunal in re Ambuja Cement Limited [Company Appeal (AT) No. 19 of 2021], Ericsson India Private Limited and Ericsson India Global Services Private Limited [Appeal (AT) No. 148 of 2021] and Patel Hydro Power Private Limited & others [Company Appeal (AT) No. 137 of 2021]. In fact, this Hon’ble Tribunal has in its order dated 4 September, 2017, in Company Scheme Application No. 243 of 2017 relating to amalgamation of wholly owned subsidiaries namely, Windermere Properties Private Ltd, Haddock Properties Private Ltd, Grandeur Properties Private Limited, Winchester Properties Private Limited and Pentagram Properties Private Limited with Housing Development Finance Corporation Limited, inter alia, observed and held that when transferor companies are wholly owned subsidiaries of the transferee company and the financial position of the transferee company is highly positive and merger is not affecting the rights of the applicant shareholders or creditors, allowing transferee company to obtain approval of the scheme without taking shareholders’ approval is permissible under law and held that transferee company need not hold any meeting either with its creditors or members. Accordingly, the requirement to convene and hold meeting of the equity shareholders of the Amalgamated Company is dispensed with.

The Learned Senior Counsel for the Applicant Companies submits that convening and holding of the meeting of the secured creditors of the Amalgamated Company to consider, and if thought fit, to approve the Scheme, with or without modification(s) is not required, since the fact that the present case is similar to the facts in CSA No. 243 of 2017 in the matter of Housing Development Finance Corporation Limited that the Amalgamating Company is a wholly owned subsidiary of the Amalgamated Company. The financial position of the Amalgamated Company is highly positive. The Learned Senior Counsel of the Applicant Companies submitted that the present Scheme envisages amalgamation of the Amalgamating Company with the Amalgamated Company and their shareholders as contemplated under Section 230(1)(b) of the Companies Act, 2013 and there is no compromise and/or arrangement with the secured creditors envisaged under the Scheme as contemplated under Section 230(1)(a) of the Companies Act, 2013 as no compromise is called for. The Learned Senior Counsel of the Applicant Companies submitted that this Scheme will not affect the rights of the secured creditors, since post Scheme, the assets of the Amalgamated Company will be sufficient to discharge its liabilities and further, it also does not involve any compromise or arrangement with any secured creditors of Amalgamated Company. Accordingly, the requirement to convene and hold a meeting of the secured creditors of the Amalgamated Company is dispensed with.

The Learned Senior Counsel for the Applicant Companies submits that convening and holding of the meeting of the unsecured creditors of the Amalgamated Company to consider, and if thought fit, to approve the Scheme, with or without modification(s) is not required, since the fact that the present case is similar to the facts in CSA No. 243 of 2017 in the matter of Housing Development Finance Corporation Limited that the Amalgamating Company is a wholly owned subsidiary of the Amalgamated Company. The financial position of the Amalgamated Company is highly positive. The Learned Senior Counsel of the Applicant Companies submitted that the present Scheme envisages amalgamation of the Amalgamating Company with the Amalgamated Company and their shareholders as contemplated under Section 230(1)(b) of the Companies Act, 2013 and there is no compromise and/or arrangement with the unsecured creditors envisaged under the Scheme as contemplated under Section 230(1)(a) of the Companies Act, 2013 as no compromise is called for. The Learned Senior Counsel of the Applicant Companies submitted that this Scheme will not affect the rights of the unsecured creditors, since post Scheme, the assets of the Amalgamated Company will be sufficient to discharge its liabilities and further, it also does not involve any compromise or arrangement with any unsecured creditors of Amalgamated Company. Accordingly, the requirement to convene and hold a meeting of the unsecured creditors of the Amalgamated Company is dispensed with.

The Applicant Companies shall serve notice upon: (i) the Central Government through the Regional Director, Western Region, Ministry of Corporate Affairs; (ii) the Registrar of Companies, Mumbai; (iii) the Income Tax Authorities concerned at Dy. Commissioner of Income Tax, Circle 3(3)(1), 6th Floor, Aayakar Bhavan, Maharishi Karve Road, New Marine Lines, Mumbai – 400020 (in case of Amalgamating Company having PAN: AALCR0461L) within whose jurisdiction the Amalgamating Company’s assessment is made and the Income Tax Authority concerned at Assistant Commissioner of Income Tax Circle 3(4), Mumbai (in case of Amalgamated Company having PAN: AAACR5055K) within whose jurisdiction the Amalgamated Company’s assessment is made; (iv) the Goods & Services Tax Authorities concerned at the Assistant Commissioner of state tax (D-818), Nodal division II Nariman Point, GST Bhavan Fifth floor, Mazgaon, Mumbai - 400 010 (in case of Amalgamating Company) and the Goods & Services Tax Authority at the Commissioner of Central Goods & Services Tax, Belapur Commissionerate, 1st Floor, CGO Complex, CBD Belapur, Navi Mumbai – 400 0614 (in case of Amalgamated Company); (v) BSE Limited (through BSE Listing Centre) (in case of Amalgamated Company); (vi) National Stock Exchange of India Limited (in case of Amalgamated Company); (vii) Securities and Exchange Board of India (in case of Amalgamated Company); and (viii) any sectoral regulator, as applicable, pursuant to Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. If no response is received by the Tribunal from such authorities within 30 (thirty) days of the date of receipt of the notice, it will be presumed that they have no objection to the proposed Scheme.

Additionally, the Amalgamating Company is directed to serve notice along with a copy of the Scheme upon the Official Liquidator, High Court, Bombay, pursuant to Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Official Liquidator, High Court, Bombay shall submit his report to the Tribunal within a period of 30 (thirty) days from the date of the receipt of such notice, failing which it shall be presumed that the Official Liquidator has no objection to the proposed Scheme. A copy of the report shall simultaneously be served upon the Amalgamating Company.

The Applicant Companies shall file a compliance report with the Registry in regard to the directions given in this Order in lieu of the customary affidavit of service, due to the current COVID-19 pandemic situation prevailing now.

In view of the above, the present Company Application is allowed.