Torrent Power Limited vs TCL Cables Private Limited

This joint Application is filed by two Applicant Companies under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 (hereinafter referred to as 'the Act') read with The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (hereinafter referred to as 'the rules'). The Scheme of Arrangement involves Transfer and vesting of the Cable Business Undertaking of Torrent Power Limited to TCL Cables Private Limited.

The registered office of both the companies are situated in the state of Gujarat, hence both of them are under the jurisdiction of this Tribunal, Bench at Ahmedabad. Both the companies are empowered by their respective Memorandum of Associations to enter into Scheme of Arrangement. Copies of Memorandum of Association of both the companies are placed on record. Similarly Audited Financial Statements of two companies as on 31st March 2019 and Provisional unaudited financial statements as on 31st December 2019 are placed on record.

Torrent Power Limited, the Applicant Transferor Company is a listed public limited company and its equity shares are listed at BSE Limited and National Stock Exchange of India Limited. The said Applicant Company had submitted the Scheme to the aforesaid stock exchanges for the requisite approval. Both the stock exchanges have vide their respective Observation letters dated 17th and 18th February 2020 approved the proposed Scheme of Arrangement. The same are placed on record as Annexure-1.

It is submitted that both these companies belong to the same group of management. The Transferee Company is the wholly owned subsidiary of the Applicant Transferor Company. The Transferor Company is primarily engaged in the business of electricity generation, transmission and distribution with operations in the states of Gujarat, Maharashtra, Uttar Pradesh and Karnataka. It also undertakes business of manufacturing and supply of power cables. The Transferee Company has been recently incorporated to undertake the manufacturing of Cables exclusively.

Rationale of this Scheme of Arrangement has been set out in the application as under:

It is envisaged by the Board of Directors that the proposed arrangement will enable the Transferor Company to provide greater business attention and focus on the business of generation, transmission and distribution of electricity. In addition, the Cable Business Undertaking will be transferred into the Transferee Company to unlock value of the Cable business. The transfer of the Cable Business undertaking from the Transferor Company to the Transferee Company would inter alia achieve the following benefits;

- Facilitate each business to be effectively integrated for achieving growth & expansion of each of the verticals independently;

- Enhances management focus and operational flexibility; and

- Attribution of appropriate risk and valuation to different businesses based on their respective risk-return profile and cash flows;

The proposed arrangement is in the interest of the shareholders, creditors, employees and other stakeholders in both of the companies.

The Valuation Report for the proposed amount of consideration to be paid by the Transferee Company to the Transferor Company for the said proposal of slump sale was obtained from Mr. Sujal A. Shah, Independent Chartered Accountant and Registered Valuer dated 5th November, 2019. It recommends the Value of the Cable Business Undertaking for the proposed Transfer under the slump sale of the said undertaking of TPL to TCPL, the Applicant Transferee Company under the present Scheme. The Fairness Opinion provided by Kotak Mahindra Capital Company Limited, Category I Merchant Banker dated 5th November, 2019 confirms the said Valuation of the Cable Business Undertaking to be fair. Copy of the said reports is placed on record as Annexure- E & F respectively. The proposed Scheme of Arrangement was placed before the Audit Committee of the Applicant Transferor Company and thereafter before the Board of Directors of respective companies on 5th November 2019.The Board of Directors of both the Applicant Companies passed a resolution by which it was resolved that the Scheme of Arrangement placed before the Board be submitted to the National Company Law Tribunal for its sanction after obtaining the approval from the concerned stock exchanges. Copies of the audit committee report and Board resolutions are annexed to the Application respectively as Annexure G and H.

The following are the reliefs prayed by the Applicant Company.

(A) THAT separate meetings of the Equity Shareholders and Secured Creditors of Torrent Power Limited, the Applicant Transferor Company be directed to be convened to obtain the approval to the Scheme;

(B) And in the alternate to (B), a meeting of all the Unsecured Creditors of Torrent Power Limited, the Applicant Transferor Company be directed to be convened to obtain the approval to the Scheme;

(C) THAT exemption be granted to send notice of meetings to small unsecured creditors of Torrent Power Limited, having individual value of debt at below Rs. 5,00,000 or below Rs. 1,00,000/-.

(D) THAT meeting of the Equity Shareholders of TCL Cables Private Limited, the Applicant Transferee Company be dispensed with.

(E) That, meetings of the Secured Creditors and Unsecured Creditors of TCL Cables Private Limited, the Applicant Transferee Company are not required to be held.

Heard the submissions in this regard by Mr. Saurabh Soparkar, Sr. Advocate appearing with Mrs. Swati Soparkar, learned advocate for the Applicant Companies.

(i) It has been submitted that Torrent Power Limited, the Applicant Transferor Company is listed public limited company with substantial size of operations. It has more than 1,00,000 Equity shareholders and 12 Secured Creditors having total value of Secured Debt of Rs. 11,048.85 crores as on 31st Januaiy 2020 as certified by the Chartered Accountant. Annexure-M provides the said details for the Shareholding pattern of Applicant Transferor Company and Annexure-N provides the details for the Secured Creditors of the Applicant Transferor Company.

(ii) It has been submitted that the Cable Business Undertaking of TPL, the Applicant Transferor Company is a very small division of the said Applicant Transferor Company. The Assets of this Division form about only 1 % of the total Assets of the said Company. The proposed Scheme shall affect the rights and interest of only the unsecured creditors of the said Undertaking being transferred. All the other Unsecured Creditors of TPL shall continue to be the creditors of TPL and their rights shall not be affected in any manner as a result of the Scheme. In support of the said submission, it is further pointed out that the Applicant Transferor Company has the excess of the value of its Assets over the value of its Liabilities to the extent of Rs. 10,096.83 crs. in Pre Scheme scenario and Rs. 10,102.49 in Post Scheme scenario. The C.A. certificate confirming the same is placed on record as Annexure-'P'. Further, since it is a proposal of slump sale of the Cable Business Undertaking, the consideration equivalent to the Net Assets value of the Cable Business Undertaking, is proposed to be paid to the Applicant Transferor Company itself and hence the Net Asset Value of the said company shall not undergo a material change. It is submitted that the rights and interests of the Unsecured Creditors of the Remaining Business of TPL shall not be in any way affected. No sacrifice is expected from the Unsecured Creditors of TPL, other than the unsecured creditors of Cables Business Undertaking. In view of the aforesaid facts and circumstances, it is submitted that a meeting of only the Unsecured Creditors of the Cables Business Undertaking, be directed to be convened and held to obtain the approval to the proposed Scheme of Arrangement from the said unsecured creditors.

(iii) In case of TCPL, the Applicant Transferee Company, it has been submitted that the said company being the wholly owned subsidiary of the Transferee Company, the approval to the proposed scheme has been placed on record as the Affidavits. Hence, the dispensation is sought for the meeting of the Equity Shareholders. The said company has no Secured and /or Unsecured Creditors, hence it will not be necessary to convene meetings of creditors of the Applicant Transferee Company.

It is stated in the Application that there are no proceedings or investigations pending against any of the Applicant Companies under sections 210-217, 219, 220, 223 to 227of the Companies Act, 2013 and/or under sections 235 to 251 of the Companies Act, 1956. There are no winding up petitions pending against any of the Applicant Companies. The Applicant Transferee Company has filed the Certificate of its Statutory Auditor conforming the compliance with the Accounting Standards vide Annexure-K.

Further, at the time of hearing, on l6th of June 2020, the oral submissions are made with regard to permitting and directing the Applicant Company to convene and conduct the proposed meetings through video conferencing and seek the approval of the concerned parties through e voting.

Having perused the entire material on record, and the submissions made during hearing, this Tribunal passes the following order;

(i) A meeting of the Equity Shareholders of TCPL, the Applicant Transferee Company is hereby dispensed with.

(ii) Meetings of the Secured and Unsecured creditors of TCPL, the Applicant Transferee Company are not necessary.

(iii) A meeting of the Equity Shareholders of Torrent Power Limited, the Applicant Transferor Company shall be convened and held on Thursday, 20stday of August 2020 at 9.30 a.m., for the purpose of considering and, if thought fit, approving the proposed Scheme of Arrangement, with or without modifications;

(iv) A meeting of the Unsecured Creditors of only the Cables Business Undertaking of Torrent Power Limited, the Applicant Transferor Company shall be convened and held on Thursday, 20thday of August2020 at 11.00 a m., for the purpose of considering and, if thought fit, approving the proposed Scheme of Arrangement, with or without modifications;

(v) A meeting of the Secured Creditors of Torrent Power Limited, the Applicant Transferor Company shall be convened and held on Thursday, 20thday of August 2020 at 2.0 p.m., for the purpose of considering and, if thought fit, approving the proposed Scheme of Arrangement, with or without modifications;

(vi) In view of the recent circulars of Ministry of Corporate Affairs; viz. Circular No. 14 of 2020 dated 8th April 2020, Circular No. 17 of 2020 : dated 13th April 2020 and Circular No. 20 of 2020 : dated 5th May 2020, all the meetings of shareholders, Secured and Unsecured creditors of Torrent Power Limited, the Applicant Transferor Company shall be convened and conducted through video conferencing or other Audio Visual Means. No physical meetings shall be convened. The Applicant Transferor Company shall appoint a Repository and other required agencies to facilitate the conduct of the meetings.

(vii) The Applicant Transferor Company being a listed public limited company, is governed by the SEBI circular No. CFD/DIL3/CIR/2017/21 : dated March 10, 2017 and in view of Sections 230 (4) of the Act as well as Rule 6(3)(xi) of the Companies (Management and Administration) Rules, 2014 and SEBI (Listing and Disclosure Requirements Regulations) 2015; it is required to provide facility for remote e voting to the Public shareholders. However, in view of the above directions for conducting the meeting through video conferencing, the Applicant Company is directed to carry out voting through remote e voting for all the Equity Shareholders, Secured Creditors as well as Unsecured Creditors.

(viii) At least one month before the date of the meetings, a notice in Form No. CAA 2 convening the said meetings indicating the day, the date, the time as aforesaid; along with instructions with regard to remote e-voting), together with a copy of the Scheme of Arrangement, copy of the Explanatory Statement required to be sent under Section 102 of the Act, read with Sections 230 and 232 of the Act and Rule 6 of the Companies (CAA) Rules, 2016 shall be sent to each of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Transferor Company; at their respective e mail. In case of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Transferor company, the notices shall be sent in reference to the list of the persons appearing on record of the Applicant Companies as on 31stMarch 2020.

(ix) It is however clarified that in view of para A (x) of the MCA Circular No. 14/2020 : dated 8th April 2020, voting through Proxy shall not be permitted. However, voting through Authorized Representative is permitted.

(x) At least one month before the date of meetings, an advertisement about convening the said meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Transferor Company, indicating the day, the date, the time and the details of modalities for the meeting through video conferencing as aforesaid, shall be published once in English Daily 'Indian Express' Ahmedabad and Vadodara Edition and Gujarati translation thereof in Gujarati daily 'Sandesh' Ahmedabad edition. The publication shall also indicate that the statement required to be furnished pursuant to Section 102 of the Act, read with Sections 230 and 232 of the Act can be obtained free of charge at the Registered Office of the Applicant Transferor Company or at the office of the Advocate, i.e. Mrs. Swati Saurabh Soparkar, 301, Shivalik-10, Opp. SBI Zonal Office, S. M. Road, Ambavadi, Ahmedabad 380 015 in accordance with second proviso to sub-section (3) of Section 230 and Rule 7 of the Companies (CAA) Rules, 2016.

(xi) Shri Mahesh C. Gupta, an independent practicing Company Secretary and failing him Shri Ullas Shah, Chartered Accountant be appointed as Chairman of all the meetings of the Applicant Transferor Company to be held on 20th August 2020 and in respect of any adjournment or adjournments thereof. Mr. Rajesh Parekh, having Certificate of Practice No. 2939, being a partner of M/s. Rajesh Parekh & Co., the practicing Company secretaries shall be as the scrutiniser for the said meetings.

(xii) The Chairman appointed for the aforesaid meetings shall issue advertisements and send out notices of the said meetings referred to above. The chairman is free to avail the services of the Applicant Company or any agency for carrying out the aforesaid directions. The Chairman of the meetings shall have all powers under the Articles of Association of the Applicant Company and also under Rules, including for deciding any procedural questions, that may arise at the meetings or adjournmen(s) thereof proposed at the said meetings, amendment(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 meetings on a poll i.e. by polling paper/ballot.

(xiii) The quorum for the meeting of Equity Shareholders of Torrent Power Limited, the Applicant Transferor Company shall be 30 (Thirty) persons present either in person or through authorized representative. For the meeting of the Secured Creditors quorum shall be 2 (Two) and the quorum for the meeting of Unsecured Creditors of the Applicant Transferor Company shall be 15 (Fifteen) person present in person or through authorized representative.

(xiv) The number and value of the vote of each Equity Shareholders, or the value of debt of the Secured and Unsecured Creditors of the Company, as the case may be, shall be in accordance with the register or records of the Applicant Company for Equity Shareholders and as per the entries in the books of accounts of the companies for the Secured and Unsecured Creditors; and where the entries in the records are disputed, the Chairman of the meetings shall determine the value for the purposes of the meetings.

(xv) The Chairman shall 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.

(xvi) It is further ordered that the Chairman shall report to this Tribunal on the result of the said meetings in Form No CAA4, verified by his affidavit, as per Rule 14 of the Companies (CAA) Rules, 2016 within 30 (Thirty) days of the conclusion of the last of the meetings.

In compliance of sub-section (5) of Section 230 of the Act and Rule 8 of the Companies (CAA) Rules, the Applicant Companies shall send a Notice of meeting in Form No. CAA 3 with a copy of the Scheme of Arrangement, the Explanatory Statement and the disclosures mentioned under Rule 6 to (1) Central Government through the Regional Director, North Western Region, (2) the Registrar of Companies, Gujarat; and (3) the Income Tax Authorities, (4) Reserve Bank of India;(5) BSE Limited (6) National Stock Exchange Limited as well as (7) Securities and Exchange Board of India; stating that representations, if any, to be made by them shall be made within a period of 30 (Thirty) days from the date of receipt of such notice, failing which it will be deemed that they have no objection to make on the proposed Scheme of Arrangement. The said notices shall be sent forthwith after the notice for the meetings are sent to the concerned Equity Shareholders, Secured and unsecured creditors of the Applicant Transferor Company, either by Registered Post or by Speed Post or by Courier or by Hand Delivery at the offices of the authorities as required by sub-rule (2) of Rule 8 of the Companies (CAA) Rules, 2016. The aforesaid authorities, who desire to make any representation under sub-section (5) of Section 230 shall send the same to this Tribunal with a copy of the same to be supplied to the Applicant Company.

This Company Application is disposed off accordingly.