Simon Electric Private Limited vs V Guard Industries Limited

The present joint Application is filed under Section 230-232 with other applicable provisions of the Companies Act, 2013 (hereinafter referred to as “the Act”) and read with of the Companies (Compromise, Arrangement, and Amalgamations) Rules, 2016. The proposed Composite Scheme of Arrangement in the nature of Amalgamation between Simon Electric Private Limited (hereinafter referred to as the “Transferor Company”) and V-Guard Industries Limited (hereinafter referred to as the “Transferee Company”) (collectively referred to as the “Applicant Companies”) and their respective Shareholders and Creditors.

Affidavits in support of the above application have been sworn by Mr Vinod Kumar on behalf of the Transferor Company and Mr. Ramachandran Venkataraman on behalf of the Transferee Company, being the duly authorized representatives of the respective Companies, vide Board resolutions dated 20.12.2021. Copies of Board Resolutions are annexed.

It is submitted that the Transferor Company is a private limited company incorporated under the Companies Act, 1956, CIN: U51101KL2006PTC072824, having its registered office at XIII/300 E-27(XXXV/565), 5th Floor, KCF Tower, Kakkanad Desom, Thrikkakara P.O, Kanayannur Taluk Vazhakkala, Ernakulam, Kerala – 682021. The authorised share capital of the Transferor Company is INR 141,50,00,000/-, divided into 14,15,00,000/- equity shares of INR 10/- each. The issued, subscribed, and paid-up share capital of the Transferor Company, as on June 1, 2022, is INR 141,29,97,570/-, which is divided into 14,12,99,757/- fully paid-up equity shares of INR 10/- each.

The Transferor Company was first incorporated under the provisions of the Companies Act, 1956, in the name of ‘Indo Asian Simon Private Limited’ (CIN : U51101DL2006PTC151476), vide certificate of incorporation dated 02.08.2006, issued by the Registrar of Companies, National Capital Territory of Delhi and Haryana. Thereafter, in terms of Section 23 of the Companies Act, 1956, the name of the Transferor Company was changed to ‘Indo Simon Electric Private Limited’ (CIN : U51101DL2006PTC151476) and a fresh certificate of incorporation was issued by the Registrar of Companies, National Capital Territory of Delhi and Haryana on 23.09.2010. Subsequently, pursuant to Rule 29 of the Companies (Incorporation) Rules, 2014, the name of the Transferor Company was changed to ‘Simon Electric Private Limited’ (CIN : U51101DL2006PTC151476) and a fresh certificate of incorporation was issued by the Registrar of Companies, Delhi on 27.07.2015. Furthermore, in terms of Section 13(5) of the Companies Act, 2013, pursuant to a change of place of the registered office of the Transferor Company from Delhi to Kerala, a fresh certificate of incorporation was issued by the Registrar of Companies, Ernakulum on 07.12.2021. All relevant certificates of incorporation by Registrar of Companies, National Capital Territory of Delhi and Registrar of Companies, Ernakulam, Kerala are annexed.

It is submitted that the Transferor Company is engaged in the business of manufacturing and trading of electrical wiring accessories, such as electrical switches, sockets, fan regulators and home automation products.

It is submitted that the Transferee Company is a public limited company incorporatedundertheCompaniesAct,1956,CIN: L31200KL1996PLC010010, having its registered office at 42/962, Vennala High School Road, Vennala Kochi Ernakulam Kerala - 682028. The equity shares of Transferee Company are listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. The authorized share capital of the Transferee Company is INR 50,00,00,000/-, which is divided into 50,00,00,000/- equity shares of INR 1/- each. The issued, subscribed, and paid-up share capital of the Transferee Company, is INR 43,15,41,934/-, which is divided into 43,15,41,934/- fully paid-up equity shares of INR 1/- each.

The Transferee Company was first incorporated as a public limited company under the provisions of the Companies Act, 1956 on 12.02.1996 vide certificate of incorporation dated 26.02.1996 issued by the Registrar of Companies Kerala. Pursuant to the change in status of the Transferee Company from a public limited company to a private limited company and change in name from ‘V-Guard Industries Limited’ to ‘V-Guard Industries Private Limited’, a fresh certificate of incorporation dated 15.11.2001 was issued by the Registrar of Companies, Kerala. Subsequently, pursuant to a change in the status of Transferee Company from a private limited company to again public limited company and change in name from ‘V-Guard Industries Private Limited’ to ‘V-Guard Industries Limited’, a fresh certificate of incorporation dated 01.08.2007 was issued by the Registrar of Companies, Kerala.

It is submitted that Transferee Company is engaged in the business of designing and manufacturing of: (a) electronic products such as stabilizers, digital UPS and batteries, and solar inverters; (b) electrical items such as house wiring cables, switchgears, modular switches, pumps; and (c) household appliances such as solar and electric water heaters, fans, air coolers, and kitchen appliances.

It is also represented that the registered offices of both the applicant companies are situated within the territorial jurisdiction of the Registrar of Companies, Kerala, which is falling under the jurisdiction of this Tribunal.

Both the Applicant Companies have filed their respective Memorandum and Articles of Association inter alia delineating their object clauses along with their audited financial statement for the year ending 31.03.2022, respectively.

It is submitted that since the equity shares of Transferee Company are listed on BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”), the Scheme along with requisite documents were submitted with the Stock Exchanges for their no-objection, in compliance with Regulation 37 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with SEBI Master Circular No. SEBI/ HO/ CFD/ DIL1/ CIR/ P/ 2021/ 0000000665 dated November 23, 2021, as amended from time to time. Both the Stock Exchanges, BSE & NSE have, vide their respective letters dated May 13, 2022, given their no-objections. Further, it is stated that while in terms of the observation/ no-objection letter dated May 13, 2022 issued by the NSE, notice is not required to be sent to it, pursuant to the provisions of Section 230(5) of the Act, however, no such exemption has been made in the observation/ no-objection letter dated May 13, 2022 issued by the BSE, and as such notice is required to be sent to BSE for representation. The Learned Counsel for the Applicant Companies submitted that as a measure of abundant caution, the Transferee Company is willing to serve notices to SEBI, as well as to both the Stock Exchanges.

The Scheme has given the proposed share exchange ratio to be implemented on sanction of the Scheme.

The Applicant Companies have placed on record Valuation Report dated 20.12.2021 prepared by the Registered valuer. A fairness opinion has been issued by IDBI Capital Markets & Securities Limited., a copy of which is placed on record.

The Board of Directors of both the applicant companies have unanimously approved the proposed scheme of amalgamation by way of the merger as contemplated above. Copies of respective board resolutions dated 20th December 2021 passed in their respective Board Meetings have been placed on record.

Both Transferor and Transferee Companies have filed the original certificates of respective statutory auditors, confirming that the accounting treatment proposed in the Scheme is in conformity with the accounting standards prescribed under Section 133 of the Act.

It is submitted that no investigations are instituted or pending in relation to the Applicant Companies under Chapter XIV of the Act or under the corresponding provisions of Sections 235 or 250A of the Companies Act, 1956. It is further stated that no proceedings are pending against the Applicant Companies under the provisions of the Companies Act, 1956 and the Companies Act, 2013.

With respect to the Transferor Company, it is stated that:

a) There are 2 Equity Shareholders and a certificate from Chartered Accountant certifying list of shareholders is annexed. Both equity shareholders have given their consent by way of affidavits, approving the Scheme. The copies of the consent affidavits of both equity shareholders are annexed with the application. Hence, the company is seeking dispensation for holding/convening the meeting of equity shareholders.

b) There is a NIL Secured Creditor and a certificate from a Chartered Accountant certifying the list of the secured creditor is annexed. In view of the same, the question of holding the meeting of creditors does not arise.

c) There are 40 Unsecured Creditors and a certificate from Chartered Accountant certifying the list of the unsecured creditors is annexed. It is stated that the consent affidavit obtained from the unsecured Creditors constitutes 80% in number (31 Numbers) and 95% in value. Hence, the company is seeking dispensation for holding/convening the meeting of the unsecured creditors. The copies of consent affidavits of consenting unsecured financial creditors are annexed.

With respect to the Transferee Company, it is stated that:

a) There are 1,36,839 Equity Shareholders and the certificate from Chartered Accountant certifying list of 72 equity shareholders, each holding more than 0.05% share capital, is annexed. No consent affidavits were received by the Company, from shareholders, hence, Transferee Company is seeking appropriate directions for convening a virtual meeting of the equity shareholders to consider, and if thought fit, approve the Scheme, with or without modification(s), through video conferencing or other audio-visual means.

b) There is NIL Secured Creditor and a certificate from a Chartered Accountant certifying the list of the secured creditor is annexed. In view of the same, the question of holding the meeting of creditors does not arise.

c) There are 8100 Unsecured Creditors, a certificate from Chartered Accountant certifying the list of the unsecured creditors is annexed. No affidavit with regard to the consent for dispensation of the meeting has been produced. Hence, the company is seeking appropriate directions for holding and convening a meeting of the unsecured creditors, whose outstanding debt is not less than Rs. 5,00,000 (i.e., 0.012% of the total outstanding debt of the Transferee Company) constituting 93.77% of the total outstanding debt, and if thought fit, approve the Scheme, with or without modification(s), through video conferencing or other audio-visual means.

It is submitted that upon sanction of the proposed Scheme, the Scheme will be effective with effect from the Appointed Date as prescribed under Clause 1.1(iii) read with the Effective Date as prescribed under Clause 1.1(ix) of the Scheme, subject to all requisite approvals, consents and sanctions in law being duly obtained.

Heard submissions, perused the documents on record, including the said Scheme, we issue the following directions:

i) In relation to Transferor Company:

a. With respect to Equity Shareholders:

Convening of the meeting of equity shareholders of the company is hereby dispensed with, in view of 100% consent affidavits on record.

b. With respect to Secured Creditors:

There are no secured creditors. Hence, the convening of the meeting of unsecured creditors is obviated.

c. With respect to Unsecured Creditors:

Convening of the meeting of unsecured creditors of the company is hereby dispensed with, in view of the consent affidavits from 31 (thirty-one) Unsecured Creditors outstanding total debt of 95% of the total outstanding debt, on record.

ii) In relation to the Transferee Company:

a. With respect to Equity Shareholders:

A virtual meeting of the Equity Shareholders of Transferee Company be convened through video conferencing or any other audio-visual means capable of being recorded, on November 14, 2022 at 11:30 am, for considering and, if thought fit, approving, with or without modification(s), the Scheme by means of remote electronic-voting;

b. With respect to Secured Creditors:

There are no secured creditors. Hence, the convening of the meeting of unsecured creditors is obviated.

c. With respect to unsecured Creditors:

A virtual meeting of the Unsecured Creditors of Transferee Company, be convened through video conferencing or any other audio-visual means capable of being recorded, on November 14, 2022 at 2:30 pm, for considering and, if thought fit, approving, with or without modification(s), the Scheme by means of remote electronic-voting;

The Transferee Company shall make appropriate arrangements for the members and/ or creditors to cast their vote only by way of e-voting. No proxy voting is allowed as per SEBI notification (SEBI/HO/CFD/CMD2/CIR/P/ 2022/62 in case of meetings held through electronic mode. The e-voting facility for the Equity Shareholders and Unsecured Creditors of the Transferee Company shall be provided in compliance with the conditions specified under the Companies (Management and Administration) Rules, 2014, Regulation 44 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Secretarial Standard on General Meetings (SS2) issued by the Institute of Company Secretaries of India, as applicable.

The quorum for the aforesaid meetings of the Equity Shareholders and Unsecured Creditors of Transferee Company shall be as prescribed under section 103 of the Act. In the event no quorum is present within 30 minutes from commencement of meeting then in such event the Equity Shareholders/ Unsecured Creditors present shall constitute the quorum.

Notice to the convening of the said meetings, indicating the day, date, place, and time, as aforesaid, shall be published in English daily, “Business Standard”, Kochi Edition and a Malayalam translation thereof in “Deepika”, Kochi Edition, 30 days prior to the date of meetings. The publication shall indicate the time within which copies of the scheme shall be made available to the concerned persons free of charge from the respective registered office of the applicant transferee company. The publication shall also indicate that the statement required to be furnished according to Section 102 of the Act read with Section 230 to 232 of the Act.

In addition, at least one month before the date of the meetings to be held as aforesaid, a notice convening the said meetings, indicating the day, date, place, and time, as aforesaid, together with a copy of the scheme, a copy of the statement required to be furnished pursuant to section 102 of the Act read with Sections 230 to 232 and Rule 6 of the Companies(CAA) Rules, shall be sent to those 72 equity shareholders, each holding more than 0.05% share capital and those unsecured creditors, whose outstanding debt is not less than Rs. 5,00,000 (five lakh) (i.e., 0.012% of the total outstanding debt of the Transferee Company constituting 93.77% of the total outstanding debt) of the transferee company at their respective registered or last known addresses either by registered post or speed post, e-mail, by courier or by hand delivery. The notices shall be sent to the equity shareholders with reference to the list of the persons appearing on the record of the company as of 03.06.2022 and unsecured creditors of the transferee company with reference to the list of the persons appearing on the record of the company as of 31.05.2022.

It is further directed that along with the notice, Applicant Company shall also send a statement explaining the effect of the Scheme on the Creditors, key managerial personnel, promoters and non-promoter members etc., along with effect of the Scheme of Arrangement and Amalgamation on any material interests of the Directors of the Company, as provided under sub-section 3 of Section 230 of the Act.

Mr. Sankar P Panicker, Advocate, having office at Panicker and Panicker Advocates, 64/768, Jaikunj, Chittoor Road, Kochi – 6822 035, Mob:9995911101, Email: [email protected], is appointed as the Chairperson for the meetings of the Equity Shareholders and Unsecured Creditors of the Transferee Company. He shall be paid fee of Rs. 75,000 for this assignment.

Mr. Sathiq Buhari, Chartered Accountant, having address at Sagreen Law Chamber, Vanchiyoor, Thiruvananthapuram, Kerala ,695035 (IP Registration No. IBBI/IPA-001/IP-P00758/2017-2018/11307, Mob: 9349422304, email: [email protected]), is appointed as the Alternate Chairperson for the meetings of the Equity Shareholders and Unsecured Creditors of the Transferee Company.

Ms. Sudha Nerukkavil Variyam, Chartered Accountant, having address at Kumarapuram Variyam, Eravimangalam, Eravimangalam Vayanasala, Thrissur, Kerala, 680751 (IP Registration No. IBBI/IPA-001/IP-P-02240/2020-2021/13512), Mob: 9846005805, Email: [email protected]) is appointed as scrutinizer for the meetings of the Equity Shareholders and Unsecured Creditors of the Transferee Company. He shall be paid fee of Rs.  50,000 for this assignment.

The Chairperson shall file an affidavit not less than 7(seven) days before the date fixed for the holding of the meetings with respect to compliances to be made as required under the law.

The Chairpersons shall be responsible to report the result of the meeting to the Tribunal in Form No. CAA 4, as per Rule 14 of the Companies (Compromises, Arrangement and Amalgamation) Rules, 2016 within 07 (seven) days of the conclusion of the meetings.

The Applicant Companies shall file affidavits regarding any penalties/punishments with regard to the pending investigations and legal proceedings and the impact thereon, in the event of the passing of adverse orders, if any, along with the Second Motion Petition since no such affidavits is placed on record by both Applicant Companies.

In compliance with Section 230(5) of the Act and Rule 8 of the CAA Rules, the Applicant Companies shall serve the notice on the following Authorities namely, (i) to the Central Government through the Regional Director, Southern Region, Ministry of Corporate Affairs; (ii) to the Registrar of Companies, Kerala, (iii) to the Income Tax Department along with full details of assessing officer and PAN numbers of all the applicant companies with the copy also to the Chief Commissioner of Income Tax Office (iv) to the Official Liquidator attached to High Court, Kerala, (v) Reserve Bank of India (RBI) (vi) BSE Limited (BSE), National Stock Exchange of India Limited (NSE) and Securities and Exchange Board of India (SEBI), and to such other Sectoral Regulatory Authorities who may govern the working of the respective companies involved in the Scheme, so that timely and proper reply may be filed. Representations, if any, to be made by them shall be sent to the Tribunal within a period of 30 days from the date of receipt of such notice, and a copy of such representation shall simultaneously be sent to the concerned company, failing which, it shall be presumed that they have no objection to the proposed Scheme.

The Applicant Companies shall furnish a copy of the Scheme free of charge within one day of any requisition for the "Scheme" made by any shareholder entitled to attend the aforesaid meetings.

All the aforesaid directions are to be complied with strictly in accordance with the applicable laws including forms and formats contained in the "Rules" as well as the provisions of the Companies Act, 2013, by the Applicant Company.

With the aforesaid directions, this First Motion Application is allowed and stands disposed of. A copy of this order be supplied to the learned Counsel for the Applicant Company, who in turn shall supply a copy of the same to the Chairperson and the Scrutinizer.