2020 (1) TMI 1238 - Tri - Companies Law

Tribunal approves demerger scheme enhancing consumer goods presence and generating synergies

In Re: Tata Global Beverages Limited

The Tribunal sanctioned the Scheme of Arrangement for the demerger of the Consumer Products Business from Tata Chemicals Limited to Tata Global Beverages ... Approval of Scheme of Arrangement for demerger of the Consumer Products Business - Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 - HELD THAT:- Since all the requisite compliance have been fulfilled and being satisfied with the submissions made and explanations given on behalf of the petitioners, the petition for sanction of the scheme is allowed - The Scheme of Arrangement being Annexure 'A' to the petition is sanctioned by this Hon'ble Tribunal to be binding with effect from the 1st day of April, 2019 (Appointed Date) on Tata Global Beverages Limited its shareholders, creditors and all concerned. The approved Scheme of Amalgamation is annexed with this order and marked as Annexure A. Issues Involved:1. Application under Sections 230(1) and 232(1) of the Companies Act, 2013.2. Scheme of Arrangement for Demerger.3. Approval by Board of Directors.4. Entitlement Ratio and Valuation Report.5. Accounting Treatment.6. Stock Exchange Approvals.7. Creditors’ Meeting Dispensation.8. Notices and Advertisements.9. Equity Shareholders’ Meeting.10. Final Sanction Petition.11. Observations by Regional Director.12. Objections and Responses.13. Separate Proceedings in Mumbai Bench.14. Issue of Buy-back of Shares.15. Final Judgment and Orders.Detailed Analysis:1. Application under Sections 230(1) and 232(1) of the Companies Act, 2013:The application was filed for the demerger of the Consumer Products Business of Tata Chemicals Limited (Demerged Company) to Tata Global Beverages Limited (Resulting Company) under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013.2. Scheme of Arrangement for Demerger:The object of the application was to obtain sanction for a Scheme of Arrangement to:- Expand the Resulting Company’s presence in the fast-moving consumer goods categories.- Result in revenue and cost synergies.- Enhance the financial profile of the Resulting Company.- Ensure shareholders continue to participate in the growth of both companies.3. Approval by Board of Directors:The Board of Directors of both companies approved the Scheme of Arrangement unanimously in their respective meetings held on 15/5/2019.4. Entitlement Ratio and Valuation Report:The entitlement ratio for the demerger was fixed based on a joint Valuation Report by SRBC & Co LLP and Bansi S. Mehta & Co. DSP Merrill Lynch Limited confirmed the fairness of the entitlement ratio.5. Accounting Treatment:The Auditors of both companies confirmed that the accounting treatment in the Scheme conforms to the accounting standards prescribed under Section 133 of the Companies Act, 2013.6. Stock Exchange Approvals:The shares of the Demerged Company are listed on BSE and NSE, while the Resulting Company’s shares are listed on BSE, NSE, and CSE. The Scheme received 'no adverse observation' from BSE, NSE, and CSE as per SEBI Circular.7. Creditors’ Meeting Dispensation:The Tribunal dispensed with the holding of the Creditors’ Meeting for the Resulting Company as over 90% in value of such Creditors had already consented to the Scheme.8. Notices and Advertisements:Notices were sent to the Equity Shareholders of the Resulting Company, and advertisements were published in newspapers as directed by the Tribunal.9. Equity Shareholders’ Meeting:The Equity Shareholders of the Resulting Company approved the Scheme by an overwhelming majority in a meeting held on 4/11/2019.10. Final Sanction Petition:Post compliance, the petitioner sought final sanction for the Scheme of Arrangement through CP (CAA) No. 1992 of 2019 connected with CA (CAA) No. 1147 of 2019.11. Observations by Regional Director:The Regional Director, Eastern Region, Ministry of Corporate Affairs, raised several observations including issues related to the buy-back of shares, transfer of immovable properties, and applicable government fees.12. Objections and Responses:The petitioner responded to the objections, clarifying that:- The Scheme does not contemplate any buy-back of shares.- The Resulting Company undertakes to pay applicable stamp duty and government fees.- The change of name to 'Tata Consumer Products Limited' is necessary to reflect the expanded business.13. Separate Proceedings in Mumbai Bench:The Demerged Company is pursuing similar proceedings in the National Company Law Tribunal, Mumbai Bench, which has also approved the Scheme with requisite majority.14. Issue of Buy-back of Shares:The Registrar of Companies raised an objection regarding the payment to shareholders for fractional shares amounting to buy-back under Sec.68 of the Companies Act, 2013. The Tribunal held that since no cancellation of shares is involved, it does not amount to buy-back.15. Final Judgment and Orders:The Tribunal, being satisfied with the compliance and submissions, sanctioned the Scheme of Arrangement with effect from 1st April 2019. The Scheme was ordered to be binding on Tata Global Beverages Limited, its shareholders, creditors, and all concerned. The Tribunal directed the Resulting Company to issue and allot shares to the shareholders of Tata Chemicals Limited as per the Scheme and complete all necessary formalities.Conclusion:The Scheme of Arrangement for the demerger of the Consumer Products Business from Tata Chemicals Limited to Tata Global Beverages Limited was sanctioned by the Tribunal, subject to compliance with all statutory requirements and observations addressed.