Yash Compostables Ltd Vs

Rajasekhar V.K. Member(Judicial)

The present Joint Company Petition is filed by Petitioner Companies under Sections 230 and 232 and other applicable provisions of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 for sanction of Scheme of Arrangement in the nature of Merger by Absorption (‘Scheme’) of Yash Compostables Ltd. (‘the Transferor Company/ Petitioner Company No. 1’) AND Yash Pakka Ltd. (‘the Transferee/ Resulting /Petitioner Company No. 2’) AND their Respective Shareholders and Creditors, whereby and where under the entire undertakings of the Transferor Company, together with all its properties, rights, claims and liabilities relating thereto as are proposed to be transferred to and vest in the Transferee Company on the terms and conditions as stated in the Scheme of Amalgamation, a copy whereof is annexed with the Company Petition and marked as "Annexure 12".

The Petition has now come up for final hearing. The Petitioner Companies submits as follows:-

(i) The proposed ‘Scheme of Amalgamation’ has previously been approved by the Board of Directors of the Transferor Company No. 1, Transferor Company No. 2 and Transferee Company in their respective Board Meetings held on 20th June 2020. The copies of the said resolutions are collectively annexed with the Company Petition and marked as "Annexure 7 & 8".

(ii) The Transferee Company, being listed entity, copy of the Scheme was forwarded to Securities and Exchange Board of India through stock exchanges and NSE and BSE issued no adverse observations letters vide their letter dated February 1st, 2021.

(iii) The factual position of the Authorized, Issued, Subscribed and Paid up Share Capital of the Petitioner Companies as on 31st March, 2021 is described in the present Company Petition.

(iv) The rationale of the proposed Scheme of Amalgamation is elaborately described in the present Company Petition which may be summarized as under:

a. YCL  and  YPL  belong  to  the  same  group  of  management  and promoters; hence it would be advantageous to combine the activities and operations in a single entity. The amalgamation would create synergies between two complementing companies with similar objective and business line.

b. Both YPL and YCL has their independent B2B customer’s and dealer networks, supply chain and logistic partners, the amalgamation will also provide synergistic linkages besides economies in costs by combining the total business functions in all segments including sales, procurement, logistic activities and the related activities and operations and thus contribute to the profitability of the amalgamated entity.

c. Economies of scale will play a bigger role as the consolidated entity’s operational efficiency will increase, which will in turn allow the merged entity to compete on a larger scale in the industry, thus benefiting the merged entity and the shareholders.

d. The merger will enable the merged entity to build up a diversified product portfolio in YPL and will assist the merged entity with faster and quicker decision making as both manufacturing and marketing activities are under the same management.

e. The merger will enable the merged entity to get direct access to customers which will give them a better understanding of the market taste and customer requirements. This will assist the merged entity to produce right quality required for different market segment

f. With YPL having a manufacturing experience of more than 40 years alongwith all the requisite technical know-how to produce in house paper pulp which is a basic input for compostable products, gives YPL an edge over other competitors and YCL a company involved in marketing will result in the merged entity to have all the necessary functions under one roof. It is considered desirable and expedient to consolidate and amalgamate the business of both YCL and YPL so as to bring both the functions will be under the same management, production planning process will become more aligned to the customer needs which will result in a stronger asset base and skills to conduct the business in the emerging environment and to rationalise the costs of business.

g. The amalgamation will increase the net worth of YPL which would enable it to capitalise upon such improved net worth to enhance the stake holders’ value.

h. The merger will increase financial strength, enhance flexibility and ability to raise larger resources, attract and retain better talent and undertake larger support services related projects.

i. The merger will result in integration and effective utilisation of resources, which is likely to result in optimising overall shareholder value and improvement in competitive position of YPL as a combined entity.

j. The merger will result in economy of scale, reduction in overheads, administrative and other expenditure, efficiency and optimal utilisation of various resources.

k. The merger will bring both the entities under one roof to portray one face to all the parties with whom the Yash Group deals.

l. The merger will result in better leveraging of facilities, infrastructure and resources.

m. Duplication of administrative functions together with the multiple record keeping will be eliminated, resulting in over-all reduction in expenditure.

n. The merger will result in significant reduction in multiplicity of legal and regulatory compliances which at present is required to be made separately by YCL as well as by the YPL.

o. This merger will provide an opportunity to leverage assets and build a stronger sustainable business. It will provide an opportunity to fully leverage stronger asset capabilities, experience, expertise and infrastructure of both the companies and thus increased ability for promotion of business activities as well as for fund raising as may be required for business development.

p. The merger would lead to synergic benefits, efficiency of operations and management, rapid growth of the entity, optimum utilization of its resources and minimization of the administrative and operative costs.

q. The merger will result in a value creation for the shareholders and stakeholders of YCL and YPL as the combined amalgamated company will have improved efficiency, market share, financial structure, larger cash flows and stronger consolidated revenue and profitability.

r. The merger of YCL with YPL would result in consolidation of business activities of both the companies and will facilitate effective management of investments and synergies in operation.

It is stated that a Registered Valuer has prepared a Report determining the number of and exchange ratio of shares in the Transferee Company, which shall be allotted to the shareholders of the Transferor Companies, upon implementation of the Scheme. The Board of Directors of the respective companies have accepted the recommendations in such report. A copy of the report has been collectively annexed under “Annexure 9" to the Company Petition.

It is further submitted that the accounting treatment proposed in the Scheme of Amalgamation is in conformity with the Accounting Standards prescribed under Section 133 of the Companies Act, 2013 as certified by the Auditors of the Petitioner Companies.

It has also been stated in the Petition that no proceedings under Sections 235 to 251 of the Companies Act, 1956 or under Sections 210 to 226 of the Companies Act, 2013 are pending against any of the Petitioner Companies.

It is stated that the Scheme is not prejudicial to the interest of the Shareholders and Creditors of the Petitioner Companies and the Petition is made bona-fide and is in the interest of all the Petitioner Companies and their respective Shareholders and Creditors as a whole and is just and equitable.

It is stated that the Transferee Company shall issue Equity Shares to the shareholders of the Transferor Companies upon the Scheme becoming effective in the manner as envisaged under the Scheme.

A perusal of the present Petition would disclose that initially the Petitioner Companies had preferred the joint Company Application No. CA (CAA) NO. 06/ALD OF 2021 (“Company Application”) before the Tribunal. That, record would show that as far as Applicant Company No. 1 is concerned, the stake holders [Equity Shareholders and Un-Secured Creditors] therein have effectively conveyed its consent to the scheme of arrangement and have filed necessary affidavits/certificates. There are NO Secured Creditors of Applicant Company No.1. This Tribunal, vide orders Dt. 09.08.2021 & 26.08.2021 has dispense-with the requirement of holding of the meetings of stake-holders [Equity Shareholders and Creditors] of Applicant Company No. 1. That, record would further show that as far as Applicant Company No. 2 is concerned, since the Company is a listed entity, it was directed that the meeting of the [Equity Shareholders and Creditors (Secured as also Unsecured], be held.

In compliance of such Orders, the notices were got published in news-papers, notices were also issued to the interested persons and meetings were convened and held as per the manner and procedure prescribed under the Companies Act, 2013 r/w Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the necessary SEBI guidelines. For the above purposes, this Tribunal has also appointed a scrutinizer.

Upon the conduct of above mentioned court convened meetings of the stake-holders of Applicant Company No. 2, under the aegis of the court appointed Chairperson, it has been reported that the stake holders have collectively conveyed their consent to the Scheme and the Court appointed Officers [Chairpersons and the Scrutinizer] have duly confirmed receiving of majority vote 99.99% (in value) and 97.06% (in number) in favor of the motion of meeting of Equity Shareholders of Applicant No. 2, thereby approving the scheme of arrangement; receiving of majority vote 100% (in value) and 100% (in number) in favor of the motion of meeting of the Secured Creditors thereby approving the scheme of arrangement and receiving of majority vote 98.55% (in value) and 94.28% (in number) in favor of the motion of meeting of Unsecured Creditors of Applicant No. 2 thereby approving the scheme of arrangement. Since the proposals have been approved by majority of the stakeholders, accordingly the Scheme deserves to be approved and sanctioned.

The  Petitioner  Companies  filed  the  Second  Motion  Petition  being  Company Petition No. CP (CAA) No. 06/ ALD / 2021. This Tribunal vide its Order dated 15th November, 2021 has admitted the Company Petition and inter-alia directed the Petitioner Companies to serve notices of Company Petition upon the following authorities: (a) Regional Director, (b) Registrar of Companies, Ministry of Corporate Affairs – Kanpur, Uttar Pradesh, (c) Income Tax Authorities, within whose jurisdiction the respective Petitioner Companies were assessed and, (e) other Sectoral Regulatory Authority. Further, the Tribunal directed the Petitioner Companies to publish the date of hearing in the newspapers namely in (a) The Times of India, in English Language and (b) Dainik Jagran, in Hindi Language having wide circulation at the place where the registered offices of the Petitioner Companies are situated.

Pursuant to the Order dated 15th November, 2021, the Petitioner Companies served notices upon the (a) Regional Director, Northern Region, Ministry of Corporate Affairs, (b) the Registrar of Companies, Ministry of Corporate Affairs – Kanpur, Uttar Pradesh, (c) Official Liquidator, Ministry of Corporate Affairs, Allahabad, Attached to High Court of Allahabad, (d) Income Tax Authorities, within whose jurisdiction the respective Petitioner Companies were assessed, (e) SEBI & BSE Limited. Further, in compliance thereof, the notice of hearing was also published in news papers (a) Times Of India and (b) Dainik Jagran. Affidavit of service of such notices and newspaper publications was filed before this Tribunal on 02.01.2022.

In response to the above stated notice, the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi received a Report from the Registrar of Companies, Uttar Pradesh, Kanpur dated 10th December, 2021 and filed its representation Dt. 02nd March, 2022 through an affidavit in which it prayed to the Tribunal to consider sanction the Scheme on its merit. The report of the Regional Director (Northern Region) and the Registrar of Companies raises no objection to the proposed Scheme and does not point out any other supervening public interest against allowing the Scheme.

Further, in response to the above stated notice, the Official Liquidator, Ministry of Corporate Affairs, Allahabad, Uttar Pradesh has also submitted its report through a representation/affidavit dated 28.12.2021 wherein it has stated that the Official Liquidator has no objection to the dissolution of the Transferor Companies without winding up pursuant to provisions of Sections 230-232 of the Companies Act, 2013 and other applicable sections and rules thereunder. Its authorised representative has also affirmed this fact during the course of hearing.

The Income-Tax Department has not filed any representation within 30 days of service of the notice of the Petition. Hence, pursuant to Section 230(5) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, it is to be presumed that the Income-Tax Department has no objection on the Scheme of Amalgamation of the Petitioner Companies.

In view of no objections having been raised by the Registrar of Companies, Kanpur, and the Regional Director (Northern Region), and all the statutory compliances having been made, this Tribunal finds that the proposed Scheme of Arrangement annexed as Annexure-1 to the Company Petition is to be sanctioned. The Court may go through the reports of the Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi, Registrar of Companies, Uttar Pradesh, Kanpur and Official Liquidator, Ministry of Corporate Affairs, Allahabad, Uttar Pradesh and after perusing the same, this Tribunal finds that there are no reservations to grant sanction to the Scheme and that the sanction of the present Scheme is not against public policy, nor it would be prejudicial to the public interest at large.

In addition to above, all the statutory compliance have been complied with by the Petitioner Companies, therefore, the present Company Petition deserves to be allowed in terms of its Prayer clause.

As a result of the aforementioned, the proposed Scheme of Amalgamation, which is annexed to the Company Petition may be approved and sanctioned. The Petitioner Companies would act upon the same as per terms and conditions of the sanctioned Scheme and the same may be made be binding on all the Shareholders, Secured Creditors and Unsecured Creditors & Sectoral Regulators of the above-named Petitioner Companies and also on the Petitioner Companies with effect from the Appointed Date, i.e.,1st day of April, 2020.

While approving the Scheme as above, it may be provided that such order may not be construed as, in any way, granting exemption from payment of stamp duty (if any, is applicable), taxes (including Income Tax, GST or any other charges, if any, are applicable) and payment in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law. Also, the Petitioner Transferor Companies shall stand dissolved without undergoing the process of winding up from the Effective Date.

The Petitioner Companies would within thirty days of the date of the receipt of order shall cause, a certified copy of it to be delivered to the Registrar of Companies, Uttar Pradesh, for registration.

All the concerned Regulatory Authorities may be directed to act on a copy of this order annexed with the Scheme duly authenticated by the Registrar of this Bench.

Leave is granted to the Petitioners to file the Schedule of Assets.

Any person interested may be given liberty to apply before this Tribunal in the above matter for such directions as may be necessary.

Accordingly, the present Company Petition bearing CP (CAA) NO. 21/ALD/2021 is hereby allowed and disposed of.