TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 2052
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....nd other relevant provisions of the Companies Act, 2013 ("2013 Act") [erstwhile provisions of Sections 391 of the Companies Act, 1956 ("1956 Act")]. 3. The Petitioner Company is engaged inter alia in the business of manufacturing, marketing, distribution and/or sale of soaps, detergents, personal care products, beverages, processed foods etc. The shares of the Petitioner Company are listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The Petitioner Company had applied to the said stock exchanges for their no-objection to file the Scheme of Arrangement in the Hon'ble Bombay High Court for sanction. The BSE by its letter dated 8th March, 2016 and NSE by Its letter dated 9th March, 2016 have given their no objection to file the Scheme of Arrangement in the High Court for sanction (after receiving comments from SEBI). The Scheme of Arrangement provides that upon coming into effect of the Scheme, the entire amount of Rs. 2,187.33 crores standing to the credit of the General Reserves of the Petitioner Company, as on the Appointed Date, shall be reclassified and credited to the 'Profit and Loss Account' of the Petitioner Company and subsequ....
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....pril, 2016, meeting of the equity shareholders of Petitioner Company was held and the Scheme was approved by 1516 equity shareholders holding in aggregate 1,74,28,08,028 equity shares constituting 97.24% in number and representing 99.24% in holding of the equity shares which was more than the requisite majority in number and shareholding of the equity shareholders of the Petitioner Company who voted at the said meeting either in person or by proxy or by authorised representative at the meeting through e-voting and through remote e-voting. 4. The Advocate for the Petitioner Company states that the Petitioner Company has complied with all the directions passed by the Hon'ble Bombay High Court in the Company Summons for Direction No. 346 of 2016 and the Company Scheme Petition No. 659 of 2016 filed in the Hon'ble Bombay High Court and now transferred to this Tribunal and the same are in consonance with the order passed in the said Company Summons for Direction. 5. The Advocate appearing for the Petitioner Company has stated that the Petitioner Company has complied with all the requirements as per the directions of the Hon'ble Bombay High Court and it has filed necessary ....
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....der Section 131 of the 2013 Act; d. The Scheme is incomplete / hypothetical since manner and extent payout is not specified; e. The amount of Rs. 2187.33 crores is not a General Reserve but is instead 'Other Reserves - statutorily created under Section 205(2A) of the 1956 Act read with the Companies (Transfer of Profits to Reserves) Rules, 1975. Accordingly, proposed transfer vide the Scheme is illegal; f. Lack of transparency and good governance; g. Appointed date clause the scheme is in violation of Section 232(6) and 232(3)(a) of the 2013 Act and hence needs amendment; h. Effective date clause in the scheme is in violation of Section 232(6) of the 2013 Act and hence needs amendment; i. There is a discrepancy between Issued and Subscribed Capital tabulated in the Scheme and the Balance Sheet; j. Accounting treatment provides for accounting an illegal accounting transaction of re-classification of items in the Balance Sheet cloaked through the Scheme; k. Board Resolution extending date beyond 31st March, 2017 needs to be produced before the Hon'ble NCLT; l. Powers to give directions in the interpretation and implementation of the Scheme have been given to....
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.... company from crediting amounts standing in the General Reserve to the Surplus of the Profit and Loss Account. There Is therefore no restriction in law in relation to the treatment of general reserves as envisaged under the Scheme; (iv) 2nd proviso to Section 123(1) and the 2014 Rules apply only in years when there is an inadequacy or absence of profit. It does not apply when there is no inadequacy or absence of profit in any particular year. This is not a case of a year of inadequacy or absence of profit; (v) 2nd proviso to Section 123 (1) and the 2014 Rules (relied upon by the RD & ROC) do not apply at all. Consequently, the RD's contention that the proviso to Section 123 (1) and the 2014 Rules are required to be complied with is based on an incorrect appreciation of the provisions of the 2013 Act and 2014 Rules. (vi) It is therefore incorrect to state that the Scheme has been framed to circumvent the provision of Section 123(1) of the 2013 Act or the 2014 Rules. (vii) The Scheme is not prohibited under any provision of law and is not contrary to Section 123 of the 2013 Act or the 2014 Rules; (viii) A substantially similar scheme has been sanctioned by the Hon'b....
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....for the Petitioner Company submits inter alia as follows: (i) The contentions of the ROC proceed on an incorrect appreciation of Section 131(1) of the 2013 Act; (ii) Section 131 does not contain the term "reclassification". It pertains to revision of the balance sheet or Board report; (iii) The word "reclassification" used in the Scheme is not a defined term and has not been used as purported to be understood by the ROC and RD in Sections 131, 129 and 134 of the Companies Act, 2013 and has been used in the ordinary sense of the word; (iv) Section 131 of the 2013 Act, which deals with voluntary revision of financial statements or the Board's report, has absolutely no applicability in the present case; (v) Section 131 Is required to be resorted to only if the financial statements or the Board's Report do not comply with the provisions or Section 129 or Section 134 of the 2013 Act respectively ; (vi) Section 129 requires financial statements to give a true and fair view of the state of affairs of the company or companies, comply with the accounting standards notified under Section 133 and be in the form or forms as may be provided. (vii) The Scheme is neither an ....
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.... on 31st March, 2016, and does not have any secured or unsecured loans, fixed deposits or preference shares, which entail repayment obligations; (v) The Petitioner Company has a strong track record of paying regular dividends to its shareholders - cumulative dividends to the tune of Rs. 15,335.73 crores have been declared during the period from Financial Year 2010 - 11 to Financial Year 2014 - 15, which has been confirmed by the RD in his Report; (vi) The funds transferred out of its profits under Section 205(2A) of the 1956 Act which are accumulated and represented in the General Reserves are in excess of the company's current and anticipated operational needs, even after considering the foreseeable investments required for opportunities vis. a vis. the company's overall growth strategy; (vii) Further, although the Scheme the mechanism for payouts (including the quantum, manner and timing thereof) is left to the discretion of the Board of Directors after taking into account all relevant factors, as provided in Clause 5 or the Scheme, illustratively set out below are the details of the aggregate amount of dividend that has been declared and paid by the Petitioner Comp....
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....ng in General Reserves' to the 'Profit and Loss Account.' Consequently, the Scheme does not violate any law; (iii) The Scheme neither affects the general public in any manner nor causes any loss or detriment to any public authority; (iv) Neither the RD nor ROC has been able to show any specific adverse impact on public interest by sanction of this Scheme. It is respectfully submitted that it is incumbent upon the RD / ROC to highlight specifically how the Scheme, its incidents or consequences have an alleged adverse impact on public interest. No scheme can be rejected on the basis of hypothetical assumptions and it has to be shown specifically how the public interest is allegedly prejudiced by this Scheme [Hindustan Lever Employees' Union v. Hindustan Lever & Ors. AIR 1995 SC 470 - para. 82]; (v) Only the shareholders' interest is not equivalent to "public interest", it is respectfully submitted that this Scheme is also not prejudicial to the interests of the shareholders of the Petitioner Company (including the public shareholders) in any way; (vi) In fact Scheme is also in the interest of the public shareholders of the Petitioner Company as they ....