Bagrrys India Pvt Ltd Vs

Subrata Kumar Dash, Member (Technical)

1. This is a joint First Motion Application filed by Applicant Companies namely; Bagrrys India Pvt Ltd (for short hereinafter referred to as Applicant Company No. 1/ Demerged Company) and Bagrrys Pvt Ltd (for short hereinafter referred to as Applicant Company No. 2/Resulting Company) under Sections 230 & 232 of the Companies Act, 2013, read with Section 66 of the Companies Act, 2013 (the Act) and other applicable provisions of the Act read with Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 (the Rules) in relation to the Scheme of Arrangement between the Applicant Companies. The said Scheme is attached as Annexure A-4 of the Application.

2. The Applicant Companies have prayed for dispensing with the requirement of convening meetings of the Equity Shareholders of the Demerged Company and the Resulting Company. It is further prayed to convene the separate meetings of Secured Creditors and Unsecured Creditors of the Demerged Company. The Resulting Company does not have any Secured Creditor or Unsecured Creditor.

3. The Applicant Company No. 1/Demerged Company is engaged in manufacturing and retail marketing of health foods and breakfast cereals such as muesli, oats, bran, cornflakes plus, etc., under Bagrry’s brand. Further, the Company is engaged in manufacturing and processing of Maida, Suji, Bran and other products, for the wholesale market. The Company has also made investments in mutual funds and other securities. Thus, Bagrrys India Pvt Ltd has various business verticals.

4. The Applicant Company No. 2/Resulting Company is recently incorporated on 10th January, 2023, to carry on business activities of manufacturing and processing of cereals, grains, food products and other related activities.

5. It is submitted that the registered office of both the Applicant Companies are situated in the State of Himachal Pradesh and hence are under the territorial jurisdiction of this Bench.

6. The rationale of the Scheme is given below:

i. Bagrrys India Pvt Ltd (the Demerged Company) is engaged in manufacturing and retail marketing of health foods and breakfast cereals such as muesli, oats, bran, cornflakes plus, etc., under Bagrry’s brand. Further, the Company is engaged in manufacturing and processing of Maida, Suji, Bran and other products, for wholesale market. The Company has also made investments in mutual funds and other securities. Thus, Bagrrys India Pvt Ltd has the following business verticals:

a. Retail Business/ Branded Business: The Company is engaged in manufacturing and retail marketing of health foods and breakfast cereals such as muesli, oats, bran, cornflakes plus, etc., under Bagrry’s brand. Bagrry’s is a well-known brand in breakfast cereals particularly muesli and oats.

b. Wholesale Business: The Company is engaged in manufacturing and processing of Maida, Suji, Bran and other products, for the wholesale market. Wholesale Business is predominantly made-to-order (MTO) Private Label Business.

c. Investments Business: The Company is also engaged in investments in mutual funds and other securities.

ii. Retail Business and Wholesale Business are quite distinct from each other. Both these businesses require people with completely different skill sets.

iii. The Retail Business being B2C segment requires human resource with expertise in marketing and business promotion, etc. Whereas the Wholesale Business being B2B business requires technically sound people with expertise in technology and new product development, etc.

iv. The Demerged Company is making serious efforts to achieve substantial growth in both of its core-businesses. It has recently hired senior professionals for its Retail Business. It is looking to expand its retail manufacturing facilities at Baddi, Himachal Pradesh in near future.

v. Manufacturing facilities for Wholesale Business are currently situated in Newai, Rajasthan, being a wheat flour mill. The Company is expanding the same by adding facilities for manufacturing and processing of value-added wheat products.

vi. United Nations, at the behest of Government of India, has declared 2023 as the International Year of Millets. Government of India is making all out efforts to promote Millets and Millets based food products. Hon’ble Prime Minister of India aims to position India as the ‘Global Hub for Millet’.

vii. To support the efforts of Government of India and to tap new business opportunities, Bagrrys India Pvt Ltd is setting up new facilities at Alwar, Rajasthan for manufacturing and processing of Millets, Millets based products for wholesale trade. Once in operation, the new facilities at Alwar, Rajasthan will substantially enhance the Wholesale Business of the Company.

viii. To provide better management focus, facilitate administrative convenience and ensure optimum utilization of various resources, it is decided to hive off the Wholesale Business into a separate Resulting Company.

ix. The proposed Demerger will enable the Demerged Company and the Resulting Company to raise necessary funds, invite strategic investors and other stakeholders for their respective businesses.

x. The proposed Demerger will provide scope for independent expansion of both the businesses. It will strengthen, consolidate and stabilize the business of these Companies and will facilitate further expansion and growth of their business.

xi. The proposed Demerger will have beneficial impact on the Demerged Company and the Resulting Company, their shareholders, employees, and other stakeholders and all concerned.

7. It is stated that the Board of Directors of the Applicant Companies in their meetings held on 22.03.2023 have considered and unanimously approved the Scheme of Arrangement subject to sanctioning of the same by this Tribunal. The copy of the board resolutions of the Applicant Companies are attached as Annexure: A-1/5 and A-2/4 respectively, with the Application.

8. The appointed date of the Scheme is 01.04.2023 as mentioned in the Para 1.1.3 of the Scheme of Arrangement which is attached as Annexure A-4 of the application.

9. It is stated that the Applicant Company No. 1 have filed the audited financial statements as on 31.03.2022 as Annexure A-1/2 of the application. The Applicant Companies have also filed the provisional Financial Statements as on 31.01.2023 as Annexures A-1/3 and A-2/2 respectively of the application.

10. It is submitted that no corporate debt restructuring is envisaged in the proposed Scheme of Arrangement.

11. It is submitted that in pursuance of the proviso to Sec. 230 (7) and Section 232 (3) of the Act, the Applicant Companies have filed certificates, all dated 29.03.2023 and 27.03.2023 issued by Statutory Auditors of Applicant Companies certifying that the Scheme is in compliance with the Accounting Standards under Section 133 of the Act and the same are attached as Annexure-A-5 of application.

12. It is further submitted by the counsel for the Applicant Companies that as per Valuation Report/Share Entitlement Ratio Report dated 15.03.2023 submitted by Ms Mallika Goel, Registered Valuer in respect of Securities or Financial Assets, registered with the Insolvency and Bankruptcy Board of India (IBBI) vide Registration No. IBBI/RV/11/2022/14784 is attached as Annexure A-3. The Share Entitlement Ratio is given below:

“a. The Resulting Company-Bagrrys Pvt Ltd will issue 1 (one) (8%) Non-Cumulative Compulsorily Redeemable Preference Share of ₹10 each at a premium of ₹209.53 per share, credited as fully paid-up, to Equity Shareholders of the Demerged Company for every 1 (one) Equity Share of ₹10 each held in the Demerged Company-Bagrrys India Pvt Ltd.”

13. It is submitted by the learned counsel that the Scheme (Annexure A-4) also takes care of the interest of the staff/workers and employees of the Applicant Companies by virtue of Clause 8 of the Scheme.

14. The authorised signatories of Applicant Companies have deposed by way of affidavits that both the Demerged Company and the Resulting Company are closely held un-listed Group Companies and are not regulated by any sectoral regulator. The aforesaid affidavits of the authorised signatories filed at page Nos. 42-51 of the application.

15. It is deposed by the authorised representative of Applicant Companies that there are no material investigations or legal proceedings pending against any of the Applicant Companies under Section 210 to 227 of the Companies Act, 2013 and Section 235 to 251 of the Companies Act, 1956 or any other applicable law. Moreover, there are no proceedings pending under the Companies Act, 2013 before the jurisdictional Adjudicating Authority.

16. The applicant companies have furnished the following documents:-

i. Proposed Scheme of Arrangement (Annexure-A4 of the application).

ii. Certificate of Incorporation along with Memorandum and Articles of Association of the Applicant Companies (Annexure-A-1/1 and A-2/1 of the application).

iii. List of Equity Shareholders of the Demerged Company as on 31.01.2023 and of the Resulting Company as on 28.02.2023 along with consent affidavits (Annexure A-1/6 and A-2/5, respectively of the application).

iv. List of Secured and Unsecured Creditors of the Demerged Company as on 31.01.2023 duly certified by Raj Kumar Daga & Co., Chartered Accountants (Annexure A-1/7 & A- 1/8, respectively of the application).

v. list of Secured and Unsecured Creditors of the Resulting Company as on 28.02.2023 duly certified by Chartered Accountants (Annexure A-2/6 and A-2/7, respectively of the application).

vi. Certificates of Statutory Auditors to the effect that Accounting treatment proposed in the Scheme is inconformity with Section 133 of the Companies Act, 2013 (Annexure-A-5 of the application).

vii. Audited Financial Statements as on 31.03.2022 and Provisional Balance Sheets as on 31.01.2023 of the Applicant Company No. 1 (Annexure-A-½ and A-1/3 respectively of the application).

viii. Provisional Balance Sheets as on 28.02.2023 of the Applicant Company No. 2 (Annexure-A-2/2 of the application).

ix. Report on Valuation of Shares & Share Entitlement Ratio (Annexure A-3 of the application).

17. The Applicant Companies have furnished the details of the Equity Shareholders, Secured Creditors and Unsecured Creditors along with consent on affidavits which is as follow:

18. Accordingly, the directions of this Bench in the present case are as under:-

I.  In relation to the Demerged Company/Applicant Company No.1:

a) The meetings of the Equity Shareholders of Demerged Company/Applicant Company No.1 is dispensed with keeping in view the shareholding pattern, financial structure of the company and the fact that the consent has been received by way of affidavits;

b) The meeting of the Secured Creditors of the Demerged Company/Applicant Company No. 1 be convened as prayed for on 04.08.2023 (Friday) at 02:30 PM through video conferencing with facility of remote e-voting, subject to notice of the meeting being issued;

c) The meeting of the Unsecured Creditors of the Demerged Company/Applicant Company No. 1 be convened as prayed for on 04.08.2023 (Friday) at 04:00 PM through video conferencing with facility of remote e-voting, subject to notice of the meeting being issued. The quorum of the meeting of the Unsecured Creditors shall be 68 in number or 40% in value of the Unsecured Creditors;

II. In relation to the Resulting Company /Applicant Company No.2:

a) The meeting of the Equity Shareholders of Resulting Company/Applicant Company No.2 is dispensed with keeping in view the shareholding pattern, financial structure of the company and the fact that the consent by way of affidavits has been received

b) Since, there are no Secured and Unsecured Creditors in the Resulting Company/Applicant Company No.2, therefore there is no scope for any meeting.

III. In case the required quorum as noted above for the meetings is not present at the commencement of the meeting, the meeting shall be adjourned by 30 minutes and thereafter the persons present and voting shall be deemed to constitute the quorum.

IV. Mr. Pradeep Nauharia, Advocate, address: J-339, Shikhar Apartments, GH-2, Sector 5, Mansa Devi Complex, Panchkula-134114, Mobile No. 9814010915, email id: adv.pnauharia@gmail.com is appointed as the Chairperson for the meetings to be called under this order. An amount of ₹75,000/- (Rupees Seventy-Five Thousand Only) be paid for his services as the Chairperson.

V. Ms. Veenu Marwaha, Advocate, address: house no. 3540, ground floor, sector 37 D, Chandigarh, Mobile No. 8968031294, email: marwahaveenu@gmail.com is appointed as the Alternate Chairperson for the meetings to be called under this order. An amount of ₹60,000/-(Rupees Sixty Thousand Only) be paid for her services as the Alternate Chairperson.

VI. Mr. Savdesh Pal Goyal, Chartered Accountant Address: Old Power House Road, Sangrur, Mobile No. 9417031125, email id: savdeshgoyal@yahoo.co.in, is appointed as the Scrutinizer for the above meetings to be called under this order. An amount of ₹50,000/- (Rupees Fifty Thousand Only) be paid for his services as the Scrutinizer.

VII. The fee of the Chairperson, Alternate Chairperson and Scrutinizer and other out-of-pocket expenses for them shall be borne by Applicant Company No.1.

VIII. It is further directed that individual notices of the said meetings shall be sent by the Demerged Company to its respective Secured Creditors and Unsecured Creditors through registered post or speed post or through courier or e-mail, 30 days in advance before the scheduled date of the meetings, indicating the day, date and time as aforesaid, together with a copy of the Scheme, copy of the explanatory statement with Share Exchange Ratio as discussed in para 12 of this order as required to be sent under the Companies Act, 2013 and the applicable Rules and any other documents as may be prescribed under the Act shall also be duly sent with the notice.

IX. The Applicant Company No.1 shall publish an advertisement with a gap of at least 30 clear days before the aforesaid meeting, indicating the day, date and place and time of the meeting as aforesaid, to be published in “The Indian Express” (English, Chandigarh and Himachal Edition) and “Dainik Bhaskar” (Hindi, Himachal Pradesh Edition). The publication shall also indicate that the explanatory statement required to be furnished pursuant to Sections 230 & 232 read with Section 102 of the Companies Act, 2019 can be obtained free of charge at the registered office of the Applicant Companies. The Applicant Company No.1 shall also publish the notice on its website, if any.

X. It is further directed that along with the notices, Applicant Company No. 1 shall also send, statements explaining the effect of the scheme on the creditors, key managerial personnel, promoters and non-promoter members, etc. along with the effect of the scheme of amalgamation on any material interests of the Directors of the Company or the debenture trustees if any, as provided under sub-section (3) of Section 230 of the Act.

XI. Voting shall be allowed on the “Scheme” through electronic means which will remain open for a period as mandated under Clause 8.3 of Secretarial Standards on General Meetings to the Applicant Companies under the Act and the Rules framed thereunder.

XII. It is also directed that the Un-audited Financial Statements (Provisional) of the Applicant Companies not older than 6 months’ from the date of the meeting be also circulated for the aforesaid meeting(s) in terms of Section 232 (2) (e) of the Act.

XIII. The Scrutinizer’s report will contain his/her findings on compliance with the directions given in Para VII to XII above.

XIV. The Chairperson 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, Arrangements and Amalgamations) Rules, 2016 within 7 (seven) days of the conclusion of the meeting. The Chairperson would be fully assisted by the authorized representative/Company Secretary of the Applicant Companies and the Alternate Chairperson. The Scrutinizer will assist the Hon’ble Chairperson and Alternate Chairperson in preparing and finalizing the report.

XV. The Applicant Company No. 1 shall individually and in compliance with sub-section (5) of Section 230 of the Act and Rule 8 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 send notices in Form No. CAA-3 along with copy of the Scheme, Explanatory Statement and the disclosures mentioned in Rule 6 of the “Rules” to (i) Central Government through the Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi; (ii) Jurisdictional Registrar of Companies; (iii) Income Tax Department through the Nodal Officer Principal Commissioner of Income Tax, Aayakar Bhawan by mentioning the PAN number of the Applicant Companies; and to such other Sectoral Regulator(s) governing the business of the Applicant Companies, if any, stating that report on the same, if any, shall be sent to this Tribunal within a period of 30 days from the date of receipt of such notice and copy of such report shall be simultaneously sent to the applicant companies, failing which it shall be presumed that they have no objection to the proposed Scheme.

XVI. 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 creditor or member/shareholder entitled to attend the meeting as aforesaid.

XVII. The authorized representative of the Applicant Company No.1 shall furnish an affidavit of service of notice of meeting and publication of advertisement and compliance of all directions contained herein at least a week before the proposed meeting.

XVIII. 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 Companies.

19. With the aforesaid directions, this First Motion Application stands disposed of. A copy of this order be supplied to the learned counsel for the Applicant Companies who in turn shall supply a copy of the same to the Chairperson, Alternate Chairperson and the Scrutinizer immediately.