Vipin Sanghi, J.@mdashThis is an application u/s 391(1) read with of the Companies Act, 1956 (hereinafter referred to as the Act) by applicant The Jay Engineering Works Ltd (Transferee Company) seeking directions from the Court for convening, holding and conducting separate meetings of the equity and preference shareholders, secured and unsecured creditors, which are statutorily required for sanctioning the scheme of amalgamation of Usha International Ltd. (Transferor Company No. 1) and Shriram Fuel Injection Industries Ltd. (Transferor company No. 2) with applicant The Jay Engineering Works Ltd. (Transferee company).
2. The registered office of the Transferor company No. 1, Transferor company No. 2 and the applicant/Transferee company are situated at 19, Kasturba Gandhi Marg, New Delhi 110001, that is, within the jurisdiction of this Court.
3. The Board of Directors of the Transferor companies and the Transferee company have passed separate resolutions approving the scheme of the amalgamation of the Transferor companies and he Transferee company on 22nd December, 2007, copies of which have been filed on record.
4. The two Transferor companies and the Transferee company have filed their respective Memorandums and Articles of Association along with the application. The audited balance sheets of the two Transferor companies and the Transferee company as on 31.3.2007 have been filed on record.
5. The two Transferor companies and the applicant/Transferee company have also filed the scheme of amalgamation and salient features of the amalgamation have been incorporated and detailed in the application.
6. The applicant company has stated that no proceedings under Sections 235 to 251 of the Act are pending against the two Transferor companies and Transferee company.
7. The Transferor company No. 1 was incorporated on 03.04.1954 and the authorized share capital of the Transferor company No. 1 is Rs. 5 crores, divided into 50 lakh equity shares of Rs. 10/-each. The issued, subscribed and paid up share capital of the applicant/Transferor company No. 1 is Rs. 2,27,60,000/-divided into 22,76,000/- equity shares of Rs. 10/- each.
8. The Transferor company No. 2 was incorporated on 22.10.2003 and the authorized share capital of the Transferor company No. 2 is Rs. 10 crores, divided into 1 crore equity shares of Rs. 10/-each. The issued, subscribed and paid up share capital of the Transferor company No. 2 is Rs. 9 crores divided into 90 lakh equity shares of Rs. 10/- each.
9. The applicant/Transferee company was incorporated on 08.11.1935 and the authorized share capital of the Transferee company is Rs. 35 crores, divided into 2.5 crores equity shares of Rs. 10/- each, 1 lakh 10% redeemable cumulative preference shares of Rs. 100/-each and 9 lakh 10% redeemable cumulative optionally convertible preference shares of Rs. 100/-each. The issued, subscribed and paid up share capital of the Transferee company is Rs. 28,56,38,750/-divided into 2,10,63,875 equity shares of Rs. 10/-each, 7 lakh 10% redeemable cumulative preference shares of Rs. 100/-each and 50,000 10% redeemable cumulative optionally convertible preference shares of Rs. 100/- each.
10. As far as the share exchange ratio as per the scheme is concerned, the transferee company, upon coming into effect of this scheme which also postulates reduction of equity share capital, shall issue and allot to the equity shareholders of the two Transferor companies and Transferee company, equity shares mentioned hereunder of Rs. 10/-each in the Transferee company as fully paid up
a) 44 equity shares of the Transferee company of Rs. 10/-each for every 1 equity share of Rs. 10/-each of the Transferor company No. 1 held by the shareholders of the Transferor company No. 1.
b) 31 equity shares of the Transferee company of Rs. 10/-each for every 10 equity shares of Rs. 10/-each of the Transferor company No. 2 held by the shareholders of the Transferor company No. 2.
c) The equity shares of the Transferee Company held by the two Transferor companies shall be cancelled and no exchange shares entitlement shall arise on these shares.
11. Under the scheme, it is proposed that the resultant equity share capital of the transferee company after cancellation of cross holding of equity shares but including the exchange share entitlement on such equity holding as aforesaid, which shall become Rs. 110,74,31,930 comprising of 11,07,43,193 equity shares of Rs. 10/-each as fully paid up, shall be reduced to Rs. 11,07,43,190 comprising of 1,10,74,319 equity shares of Rs. 10/-each as fully paid up. Consequently, the entitlement of shareholders of the two transferor companies to the shares in the transferee company shall also correspondingly reduce.
12. Consequently, it is proposed that upon coming into effect of the proposed scheme and reduction of equity capital, the transferee company shall issue and allot to the equity shareholders of the two transferor companies and the transferee company to the shareholders whose names appear in the Register of members of the said three companies as on the record date, new equity shares mentioned hereunder of the face value of Rs. 10/-each in the transferee company as fully paid up in the following ratio:
a) 44 (Forty four) New Equity Shares of Rs. 10/-each fully paid up of Transferee Company for every 10 (ten) Equity Shares of Rs. 10/-each fully paid up held in Transferor Company No. 1, i.e. UIL.
b) 31 (thirty one) New Equity Shares of Rs. 10/-each full paid up of Transferee Company for every 100 (one hundred) Equity Shares of Rs. 10/-each fully paid up held in Transferor Company No. 2, i.e. SFIL.
c) 1 (One) New Equity Share of Rs. 10/-each fully paid up of Transferee Company for every 10 (ten) Equity Shares of Rs. 10/-each fully paid up held in Transferee Company i.e. JEW.
d) The fractional entitlement of the shareholders of the Transferor and the Transferee Company to the New Equity Shares shall not be issued to the respective shareholders but will be issued and allotted to a Director or an officer of the Transferee Company or such other person (s) as the Board of Directors of the Transferee Company shall appoint in this regard who shall hold the same for the benefit of the shareholders entitled to fractional new shares in terms of Clause 6.5(f) of the present scheme.
The reduction of Equity Share Capital of the Transferee Company pursuant to the scheme shall be given effect as an integral part of the scheme and the consent given to the scheme by the shareholders and the creditors of the Transferee Company shall be deemed to be their consent under the provisions of Section 100 and all other applicable provisions of the Act to such reduction of Equity Share Capital of the Transferee Company and the Transferee Company shall not be required to convene any separate meeting for that purpose. The order of the Hon''ble High Court sanctioning the scheme shall be deemed to be an order u/s 102 of the Act.
13. The applicant/Transferee company has 3435 shareholders. The applicant has sought that the meeting of the equity shareholders of the transferee company for approving the scheme of arrangement and amalgamation be held. Considering the facts and circumstances of the case, the meeting of the equity shareholders of the Transferee company, The Jay Engineering Works Ltd, be held on 26.03.2008 at 11:00 a.m. at the venue "Shriram Bhartiya Kala Kendra, 1, Copernicus Marg, New Delhi-110001. appoint Mr. Arvind Sah, Advocate, Mobile No. 9811555076 as the Chairperson and Ms. Shreya Arora, Mobile No. 9891068004 as the Alternate Chairperson for the meeting of the equity shareholders of the Transferee company. The quorum for the said meeting will be 25 equity shareholders. The Chairperson and the Alternate Chairperson will ensure that the notices convening the meeting of equity shareholders of the Transferee company along with copies of scheme and statement u/s 393 of the Companies Act, 1956, shall be sent to the equity shareholders of the Transferee company by recorded post at their registered or last known addresses at least 21 days before the date appointed for meeting, in their presence or in the presence of their authorized representatives. Considering the facts and circumstances, and keeping in view the submission of the applicant, the sending of individual notices to the equity shareholders holding upto 100 shares is dispensed with, as they represent only 0.59% of the total shareholding of such equity shareholders. However, all equity shareholders will be entitled to attend the meeting of the equity shareholders to consider and if thought fit, to approve the scheme of arrangement and amalgamation. The notice convening the aforesaid meeting should state that the copies of the proposed scheme of arrangement and amalgamation and the statement u/s 393 of the Companies Act, 1956 can be obtained free of charge from the registered office of the Transferee company. The same shall be published in newspapers ''The Statesman'' & ''Indian Express'' (English edition) and ''Navbharat Times'' (Hindi edition) in terms of the Companies (Court) Rules, 1959, at least 21 days before the day appointed for the meeting.
14. The Transferee company has 1 secured creditor and 2 preference shareholders. Both the preference shareholders and the secured creditor of the applicant company have given their consent in writing to the scheme of amalgamation, which have been filed for record. Therefore, it is just and appropriate to dispense with convening the meeting of the secured creditors and preference shareholders of the applicant company to consider the scheme of amalgamation.
15. The applicant/Transferee company has 402 unsecured creditors in all. The applicant has sought the holding of the meeting of the unsecured creditors for considering and if thought fit, approving the scheme. Considering the facts and circumstances, the meeting of the unsecured shareholders of the transferee company, The Jay Engineering Works Ltd, be held on 26.03.2008 at 2:45 p.m. at the venue "Shriram Bhartiya Kala Kendra, 1, Copernicus Marg, New Delhi-110001. I appoint Ms. Mohini Bhat, Advocate, Mobile No. 9910155009, as the Chairperson and Mr. K. Parmeshwar, Advocate, Mobile No. 9818113824, as the alternate Chairperson for the meeting of the unsecured creditors of the Transferee company. The quorum for the said meeting will be 25 unsecured creditors. The Chairperson and the alternate Chairperson will ensure that the notices convening the meeting of unsecured creditors of the applicant company along with copies of scheme and statement u/s 393 of the Companies Act, 1956, shall be sent to the unsecured creditors of the Transferee company by UPC at their registered or last known addresses at least 21 days before the date appointed for meeting, in their presence or in the presence of their authorized representatives. The counsel for the applicant submits that considering the facts and circumstances, the sending of individual notices to the unsecured creditors falling under the category of upto Rs. 25,000/-be dispensed with, as they represent less than 0.7% of the total amount due. Considering the facts and circumstances, I am of the view that all the unsecured creditors should be sent the notices of the proposed meeting to consider the scheme. However, in respect of the unsecured creditors of the value upto Rs. 25,000/-, the detailed scheme and explanatory statement need not accompany the notice. The notice should, however, state that the copies of the proposed scheme of arrangement and amalgamation and the statement u/s 393 of the Companies Act, 1956 can be obtained free of charge from the registered office of the applicant company. The notice shall be published in newspapers ''The Statesman'' & ''Indian Express'' (English edition) and ''Navbharat Times'' (Hindi edition) in terms of the Companies (Court) Rules, 1959, at least 21 days before the day appointed for the meeting.
16. In all the aforesaid meetings, voting by proxy shall be permitted, if prescribed form duly signed by the person entitled to attend and vote at the meeting is filed with the registered office of the applicant company at least forty eight hours before the meeting. The chairperson and the alternate chairperson shall also ensure that the proxy registers are properly maintained and they shall inspect the same from time to time.
17. The fees of each of the Chairpersons for all the meetings aforesaid shall be Rs. 35,000/-and the fees of each of the Alternate Chairpersons shall be Rs. 25,000/-in addition to meeting their incidental expenses. The Chairpersons appointed by this Court shall file their respective reports within two weeks from the date of holding of the respective meetings. The Alternate Chairpersons shall also attend the respective meetings and assist the respective Chairpersons in conducting the meeting and in filing the report.
18. The Chairpersons and the Alternate Chairpersons shall be at the liberty to issue directions to the management of the Transferee company so that meetings of the shareholders and the unsecured creditors are conducted in a just, free and fair manner.
19. In light of the observation of this Court with regard to reduction of share capital by 10 times, it is directed that all the aforesaid notices shall specifically state that the scheme envisages the reduction of share capital of the transferee company by ten times. It is further directed that in compliance with Rule 85 of the Companies Court Rules,at the stage of second motion,the applicant company shall file formal application for seeking sanction of the court for the reduction in the share capital of the transferee company post amalgamation.
20. The application is allowed in terms of the above order.
