TaxTMI 
TaxTMI 
2015 (4) TMI 307
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....stries Limited (Transferee-Company) is for sanctioning of the Scheme of Arrangement (Annexure P-1) between the aforesaid Transferor Company with the Transferee Company. 2. This is the second motion petition. 3. It is averred in the petition that the registered office of the Transferor Company is situated at Mohali (Punjab), and registered office of the Transferee company is situated at Vadodara (Gujarat). 4. The Board of Directors of the M/s Ranbaxy Laboratories Limited (Petitioner-Transferor-Company) and M/s Sun Pharmaceutical Industries Limited (Transferee-Company) have approved the said Scheme in their respective meetings held on 6.4.2014, vide resolutions annexed with the first motion petition as Annexures P-5 (colly) & P-14, respectively . 5. Main objects of the petitioner-Transferor Company and the Transferee Company are detailed in their respective Memorandum and Articles of Association annexed with the first motion petition. 6. Vide order dated 7.8.2014, the prayer to dispense with convening of the meetings of the secured and unsecured creditors was allowed by this Court considering the fact that the petitioner Transferor company has 18 secured creditors, out of which ....
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....oner company was given liberty to move the Second Motion Petition. 8. Notice of this Second Motion Petition was issued to the Regional Director, Ministry of Corporate Affairs, Noida as well as the Official Liquidator and was also ordered to be published in 'Financial Express' (English) and 'Dainik Bhaskar' (Hindi), both Punjab and Chandigarh editions and in the official Gazette of the State of Punjab. The aforesaid order was complied with and an affidavit to this effect has been placed on record. 9. Vide CA Nos. 963-964 of 2014 and CA No. 64 of 2015, two objections have been filed, which are being dealt with first before dealing with the case of the petitioner on merits. OBJECTIONS FILED AGAINST ACCEPTANCE OF SCHEME OF ARRANGEMENT . CA Nos. 963-964/2014 10 The present applications have been filed by Sales Promotion Employees working with the Transferor Company through the Federation of Medical and Sales Representatives' Associations of India. 11. Learned counsel for the objectors claimed the the Sales Promotion Employees are the workmen, hence, they have the locus to file objections. He further submitted that the objectors are aggrieved against clauses 13(....
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....14000. All the rights of the existing employees of the Transferee Company have been fully protected under Clause 13 of the Scheme of Arrangement. It has been specifically mentioned therein. The apprehensions sought to be raised are totally misconceived. The transfer of the employees shall be strictly in accordance with terms of their appointment and so is the salary and other benefits. 15. Mr. Ashok Aggarwal, learned Senior counsel appearing for the Transferee Company submitted that the Transferee Company had undertaken all the liabilities of the Transferor Company, especially with regard to the employees. It is only that as against the Transferor Company, the name of the Transferee Company shall be substituted. Conditions of service of all the employees will remain the same. All agreement already executed are to be honoured. In terms of Section 19 of the Industrial Disputes Act, there could be wage reduction as well, however, that right has been foregone by the Company for a period of one year. The Scheme is to be read in totality and no provision has to be read in isolation. There is no intention to reduce the wages of any of the employee. He has even filed affidavit dated 11.2.....
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....Transferor Company' means Ranbaxy Laboratories Limited, a company registered under the Act and having its registered office at A-41, Industrial Area, Phase VIII-A, SAS Nagar, Mohali, Punjab-160061, India; xx xx xx (u)'Transferee Company' means Sun Pharmaceutical Industries Limited, a company registered under the Act and having its registered office at SPARC, Tandalja, Vadodara - 390020, Gujarat, India; (v) 'Undertaking' shall mean the entire business and the whole of the undertakings of the Transferor Company as a going concern, all its assets, rights, licenses and powers, and all its debts, outstandings, liabilities, duties, obligations and employees as on the Appointed Date including, but not limited to, the following: (i) All the assets and properties (whether moveable or immoveable, tangible or intangible, real or personal, in possession or reversion, corporeal or incorporeal, present, future or contingent) of the Transferor Company, whether situated in India or abroad, including, but not limited to manufacturing facilities, laboratories, land (whether leasehold or freehold), processing plants, plant and machinery, computers, equipment, buildings and str....
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.... losses, rights, easements, privileges, liberties and advantages of whatsoever nature and wheresoever situate belonging to or in the ownership, power or possession and in the control of or vested in or granted in favour of or enjoyed by the Transferor Company or in connection with or relating to the Transferor Company and all other interests of whatsoever nature belonging to or in the ownership, power, possession or the control of or vested in or granted in favour of or held for the benefit of or enjoyed by the Transferor Company, in each case, whether in India or abroad. (ii) All agreements, rights, contracts, entitlements, licenses, permits, permissions, incentives, approvals, registrations, tax deferrals and benefits, subsidies, concessions, grants, rights, claims, leases, tenancy rights, liberties, special status and other benefits or privileges and claims as to any patents, trademarks, designs, quotas, rights, engagements, arrangements, authorities, allotments, security arrangements, benefits of any guarantees, reversions, powers and all other approvals of every kind, nature and description whatsoever relating to the Transferor Company business activities and operations. xx ....
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.... the Transferor Company, so as to become as and from the Appointed Date, the employees of the Transferee Company. The Transferee Company undertakes to continue to abide by any agreement/ settlement, if any, validly entered into by the Transferor Company with any union/employee of the Transferor Company recognized by the Transferor Company. (b) Without prejudice to the provisions of this Scheme and the rights and obligations of the Transferee Company under applicable law, for a period of 12 months after the Scheme comes into effect, (the "Relevant Period"), the Transferee Company shall provide (or cause its subsidiaries to provide each such employee of the Transferor Company whose employment was transferred to the Transferee Company pursuant to this Scheme (each, a "Transferred Employee") with compensation and benefits that are substantially comparable in the aggregate economically to the compensation and benefits provided to such Transferred Employee immediately prior to the Scheme coming into effect; provided, however, that during the Relevant Period there shall be no decrease in a Transferred Employee's base salary or base wage rate in effect immediately prior to the Scheme ....
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....[particularly clause 13(a)] or law does not permit, there cannot be any reduction in their base salary or base wage rate even after the expiry of the Relevant period. 3. It is submitted that the Applicants to the Company Application No. 964 of 2014 (Objectors) have alleged that pursuant to the Scheme being allowed by this Hon'ble Court, clause 13 (b) may be misused by the Transferee Company to reduce their base salary or base wage rate after the Relevant Period. 4. The Transferee Company submits and undertakes that it shall not use the Hon'ble Court's sanction to the Scheme including clause 13(b) of the Scheme as an instrument to reduce the base salary or base wage rate of the Transferred Employees, and any variation (increase or reduction) in the base salary or base wage rate of Transferred Employees after the Relevant period will be in accordance with the terms and conditions of employment, and subject always to all the extant laws including labour laws in this regards." 23. As far as transfer of the employees to the other associated or subsidiary is concerned, even in the letter of appointment of the applicants such a condition is existing. In Clause 13(a) of the ....
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....he shoes of the Transferor Company and will defend and settle the claim, if any, as per law. The relevant clauses of the Licence and Supply Agreement dated 11.6.2012 entered into between the Transferor Company and the applicant - Genepharm S.A. Greece, are extracted below:- " 14. ASSIGNMENT 14.1 This Agreement may not be assigned by either Party without the prior written consent of the other, such consent may not to be unreasonably withheld or delayed. 16.6 This Agreement will be binding, despite of any change of management control on either party. 21. DISPUTE RESOLUTION AND ARBITRATION 21.1 This Agreement shall be governed by and interpreted in accordance with English law. Any dispute, controversy or claim arising out of this Agreement, or the breach, termination or invalidity thereof, shall be discussed between the senior management of the Parties who will attempt to resolve the matter amicably. Any disputes which cannot be resolved in this way within sixty (60) days of one Party notifying the other of the existence of a dispute shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance ....
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....st the Transferee Company as effectually as if the same had been originally instituted and/or pending and/or arising by or against the Transferee Company. The Transferee Company has undertaken to have all legal or other proceedings initiated by or against the Transferor Company referred to in Clause 5(a) above transferred to its name and to have the same continued, prosecuted and enforced by or against the Transferee Company. The Transferee Company is bound by the result thereof, even if the cause of action arose to a party prior to the effective date. 31. For the reasons mentioned above, the objections raised by the applicants to the Scheme of Arrangement are not tenable. Hence, the same are dismissed. CP No. 165/2014 ON MERITS 32. Pursuant to the notice of second motion petition, the Official Liquidator has placed on record the report dated 16.1.2015 by way of affidavit of A. K. Chaturvedi, Regional Director, Northern Region, Ministry of Corporate Affairs, Noida. The issues raised by the Regional Director in his affidavit are as under:- "4. That the Deponent craves leave to submit that as per clause 10.1 of the scheme it has been stated that the amalgamation is to be consider....
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....xpressed in the documents submitted. 8. That the Deponent craves leave to submit with reference to this Directorate's letter dated 18.11.2014 issued to the Registrar of Companies, Chandigarh copy enclosed as "Annexure- B", in this regard Registrar of Companies, Chandigarh has made the following observations as under: i. The merger is also subject to the approval/conditions to be imposed by Competition Commission of India. ii. As per Clause 9 of the scheme of Amalgamation i.e. REDUCTION OF CAPITAL AND RESERVES sub clause (9.1) An amount equal to the balance lying to the debit in statement of profit and loss in the books of the Transferor Company on the close of 31" day of March, 2014, shall be, in the books of the Transferor Company, adjusted/reduced as follows in accordance with provisions of section 391 to 394, section 78 and 100 to 103 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013 and any other applicable provisions of law: (a) Firstly, against reduction of Capital Reserve Account of the Transferor or Company amounting to INR 176.20 Crore. (Rupees One hundred Seventy Six corers and twenty lacs only). (b) Secondly, against reduction of Securities P....
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....ompanies have under the Income Tax Act regarding carry forward of losses shall be strictly adhered to. The observations were totally uncalled for. In fact after Scheme of Arrangement comes into effect, more revenue will be generated. 38. Heard learned counsel for the parties and perused the paper book. 39. As far as the issue raised by the Regional Director in his affidavit, the Transferor Company has clarified that the Scheme has been prepared in terms of Accounting Standard-14. Copy of the Scheme was sent to the Chief Commissioner of Income Tax, Chandigarh. However, no comments have been received. 40. It has further been undertaken by the Transferor Company that all legal formalities required shall be complied with by the Transferor Company. 41. In the report of the Official Liquidator, it has been stated that the Scheme of Arrangement is prejudicial to the interest of revenue and public at large, as the Scheme is designed to set off "Carry Forward and Set Off Accumulated Losses and Unabsorbed Depreciation" of the Transferor Company against profits of the profit making Transferee Company. The Scheme was sent to the Income Tax Department. No comments have been received. In cas....