V.R.B. Foods Private Limited & Others v. Dr. Oetker India Private Limited

Delhi High Court · 12 May 2014 · 2014:DHC:2525

Sanjeev Sachdeva

CO.PET. 633/2013

2014:DHC:2525

corporate petition_allowed

AI Summary

The Delhi High Court sanctioned the scheme of amalgamation between petitioner companies under Sections 391 and 394 of the Companies Act, 1956 after ensuring compliance with statutory requirements and addressing valuation concerns.

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CO.PET. 633/2013 1
HIGH COURT OF DELHI
CO.PET. 633/2013
V.R.B. FOODS PRIVATE LIMITED & Others ........Petitioners
Through Ms. Beena Rani Panday with Mr. Rohit Aggarwal, Advocates for the Petitioners
Mr. Atma Sah, Assisstant Registrar of Companies for the Regional
Director Mr. Rajiv Bahl, senior standing counsel for the Official Liquidator

CORAM:

HON'BLE MR. JUSTICE SANJEEV SACHDEVA O R D E R
12.05.2014 SANJEEV SACHDEVA, J (ORAL)

JUDGMENT

1. This second motion joint petition has been filed under section 391 & 394 of the companies Act, 1956 (“Act”) by the Petitioner Transferor companies and Transferee company seeking sanction of the scheme of Amalgamation of V.R.B. FOODS PRIVATE LIMITED (hereinafter referred to as „Petitioner/Transferor Company No 1), FUN FOODS PRIVATE LIMITED (hereinafter referred to as „Petitioner/Transferor Company No 2) (hereinafter collectively referred to as „Petitioner/Transferor Companies‟) with DR.

OETKER INDIA PRIVATE LIMITED (hereinafter 2014:DHC:2525 CO.PET. 633/2013 2 referred to as „Petitioner/Transferee Company‟) [hereinafter collectively referred to as „Petitioner Companies‟]. A copy of the proposed Scheme has been filed along with the Petition.

2. The Registered Office of petitioner Transferor companies and Transferee Company are situated at New Delhi, within the jurisdiction of this court.

3. The details of the respective dates of incorporation of Transferor and Transferee companies, their authorized, issued, subscribed and paid up capital have been set out in the petition.

4. The copies of Memorandum and Articles of Association as well as the latest Annual Account for the year ended 31st March, 2013 of the petitioners companies have also been set out in petition.

5. The copies of the resolution passed by the Board of Director (BOD) of the petitioner companies approving the Scheme of Amalgamation have also set out in petition.

6. Learned Counsel for the Petitioner Companies submit that no proceeding under section 235 to 251 of the Companies Act, 1956 is pending against the petitioner companies.

7. The petitioner companies had earlier filed CA (M) No 161/2013 seeking direction of this Court for dispensation of the requirement of convening the meetings of Equity CO.PET. 633/2013 3 shareholders, Secured and Unsecured Creditors of the Petitioner Companies. By Order dated 26.11.2013, this court allowed application and dispensed with the requirement of convening meeting of the equity shareholders, secured creditors and unsecured creditors of the Petitioner companies.

8. The petitioner companies have thereafter filed the present petition seeking sanction of the scheme of the amalgamation. By order dated 09.12.2013, a notice in the petition was directed to be issued to the to the Registrar of Companies (RoC), and to the Central Government / Regional Director (RD), Northern Region and Official Liquidator (OL). Citations were also directed to be published in „Business Standard‟ (English and Hindi). Affidavit of service and publication dated 12.02.2014 has been filed showing compliance regarding service of the petition on RD, Northern Region, the RoC and the OL and also regarding publication of citation in the aforesaid newspapers. Copies of the newspaper cutting, in original, containing the publication have been filed along with the affidavit of service.

9. In response to the notice issued, the Official Liquidator sought information from the petitioner companies. Based on the information received, the Official Liquidator has filed report dated 24.03.2014. It has been stated in the said report that OL has not received any complaint against the proposed Scheme in any manner and that the affair of the transferor CO.PET. 633/2013 4 companies do not appear to have been conducted in a manner prejudicial to the interest of its members, creditors or to the public interest as per the second proviso of section 394(1) of the Act.

10. In response to the notice issued in the petition, Regional Director, Northern Region, Ministry of corporate Affairs has filed his Affidavit/report Dated 27.03.2014. Relying on clause 7.[1] of Part III of the scheme of Amalgamation, he has stated that, upon sanction of the scheme of the Amalgamation by the Hon‟ble Court, all employees of the company shall become the employees of the Transferee Company without any break or interruption in their service. Further, the RD has made the following observations: “4. That the Deponent further craves leave to submit that on perusal of the shareholding pattern of the Transferee Company, it has been observed that all shares are held by the foreign Company in the Transferee Company. It is submitted that the Petitioner Transferee Company may be asked to give an undertaking for all compliances from Reserve Bank of India as required under FEMA for above transactions involving foreign banks/entities, if deemed fit and proper by the Hon‟ble Court.

5. That the Deponent further craves leave to submit that on perusal of the Petition as well as Balance Sheet as at 31.03.2013 of the Transferee Company it has been observed that the Transferee Company has made Investments of 20,000 equity shares of Rs.100/- each in M/s CO.PET. 633/2013 5 Fun Foods Pvt. Ltd. (Transferor Company No.2) at Rs.52,568/- per share i.e. in aggregate Rs.105,13,70,686/- which is unimaginable of a Company which is now incurring losses. The funds for this Investments has been received from foreign sources. It is observed from the Annual Return for the year 2009 of the Transferor Company namely M/s. Fun Foods Pvt. Ltd. that 11 individuals are the actual recipient/beneficiary of Rs.105.14 crores which is not justifiable as per the Balance Sheet and Profit & Loss Account. Petition under section 391/394 of the Companies Act, 1956 is thus filed to wipe out such abnormal transactions. In this process only Rs.20,00,000/- will knocked out in the merged Balance Sheet but remaining amount of Rs.104,93,70,686/- may be shown as fictitious assets i.e. Goodwill (in post-merger Balance Sheet of the Transferee Company), which itself justify that such transactions are fictitious.”

11. In response to the aforesaid observations, the Transferee company has filed its reply affidavit dated 30th April 2014, wherein, it has been submitted:-

“4. In response to the aforesaid observation, I

hereby confirm and undertake:-

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(i) That the Transferee Company shall comply with all the applicable compliances and regulations relating to the RBI and under FEMA.

(ii) That the Transferee Company is subsidiary of Dr. Oetker India Holding GmbH of Germany. The Dr. Oetker Group, an EURO

CO.PET. 633/2013 6 11 billion group is based in Germany and having presence in more than 50 countries worldwide. On 18th December 2008 Transferee company acquired 100% equity Shares of Fun Foods Pvt. Ltd. (Transferor Company No.2) in an arm‟s length transaction from unrelated parties i.e. the existing promoters of the transferor companies. The Transferor Company also sought FIPB approval for purchase of shares of the Transferor Company No.2 which was granted on 16/12/2008. Copy of FIPB Approval is annexed and marker as Annexure-A[1]. The value of a business and/or shares of a company is combination of tangible and intangible assets like brand value (Goodwill), distribution network etc. In the Balance Sheet of the company the tangible assets are reflected at their purchased cost whereas the self-generated intangible assets are not recorded. The Transferor Company No.2 whose shares were acquired was engaged into branded western food and has been in operation since 1983 with an established brand, high reputation, experience and expertise in product development that suits Indian tastes and preferences and a distribution network throughout India (together referred to as intangible assets). Thus, the consideration paid by Transferee Company per shares for the Transferor Company No.2 took into account the value of these intangible assets as well. The valuation of the Transferor Company No.2 was conducted and the business was valued on these methodologies: a) Discounted Cash Flow: Rs.110 Crores to Rs.130 crores. b) Comparable Transactions: Rs.58 CO.PET. 633/2013 7 Crores to Rs.125 Crores. c) Comparable Traded Companies: Rs.100 crores to Rs.150 Crores. The transaction was agreed at Rs.105.14 crores which was within range of valuation. While the business has incurred some accounting losses in Financial Year 2012-13, the management is confident of the underlying business and its potential for earning profits in the future. Further, no goodwill will be shown in the postmerger balance sheet of the Transferee company and same shall be set off from the security premium account as contained in the para 12.[6] of the scheme.

12. Learned counsel for the petitioner has further contended that no goodwill would be shown in the post merger balancesheet of the transferee company and the same shall be set off from the Security Premium Account of the transferee company. Learned counsel for the petitioner submits that the scheme in paragraph 12.[6] already postulates this transaction. Learned counsel for the petitioner submits that though the amount of goodwill is far less than what has been stated by the Regional Director but even if assuming the figure of Regional Director is taken as correct then the balance sheet of the transferee company as on 31.03.2013 shows that the securities premium reserve is Rs.128,98,19,645/- as against which the goodwill that is said to be set off is Rs.104,93,70,686/-. The goodwill amount post the merger is stipulated to be set off against the CO.PET. 633/2013 8 securities premium reserve of the transferee company.

13. In view of the aforesaid clarifications and undertakings given by the Petitioners,the observations of the regional director are addressed.

14. No objection has been received to the scheme from any other party. Mr. Oliver Mirza, Authorised Signatory of the Petitioner companies, has filed an affidavit dated 30.04.2014, confirming that neither the petitioner companies nor their Legal Counsel has received any objection pursuant to citations published in the newspapers.

15. In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Section 391 and 394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law.

16. A Certified copy of the order be filed with the Registrar of Companies within 30 days from the date of receipt of the same. The sanction order of this court shall be binding on the shareholders and creditors of the Petitioner Companies. Upon CO.PET. 633/2013 9 the scheme becoming effective in terms of the scheme, Transferor Company No.1 And Transferor Company No.2 shall stand dissolved without the process of winding up.

17. In terms of the provisions of Section 391 and Section 394 of the Companies Act, 1956, and in terms of the Scheme, the whole or part of the undertaking,the property, rights and powers of the Transferor companies be transferred to and vest in the Transferee Company without any further act or deed. Similarly, in terms of the Scheme, all the liabilities and duties of the Transferor Companies be transferred to the Transferee Company without any further act or deed.

18. It is, however, clarified that this order will not be construed as an order granting exemption from payment of stamp duty or taxes or any other charges, if payable in accordance with any law; or permission/compliance with any other requirement which may be specifically required under any law.

19. Learned Counsel for the Petitioners states that the Petitioner Companies would voluntarily deposit a sum of Rs. 1,00,000/in the Common Pool fund of the Official Liquidator within three weeks from today. The statement is accepted.

20. The Petition is allowed in the above terms.

SANJEEV SACHDEVA, J MAY 12, 2014

V.R.B. Foods Private Limited & Others v. Dr. Oetker India Private Limited

AI Summary

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JUDGMENT

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