In a relatively recent order, the Chandigarh Bench of National Company Law Tribunal has occasion to consider whether consideration in the form of issuance of shares can be provided by the parent company of the resulting company and whether filing of the certified true copy of the order sanctioning the scheme with the Registrar of Companies (“RoC”) can be made conditional upon an event which has not been specified in the scheme.
Relevant Facts:
The case pertained to a scheme of arrangement and demerger between Reckitt Benckiser (India) Private Limited, RB Hygiene Home India Private Limited (“Resulting Company”) and Reckitt Benckiser (Hygiene Home) Holdings Limited (collectively referred to as the “Petitioner Companies”) wherein clarification was sought by the Regional Director in relation to the consideration being provided in the form of issuance of shares by the parent company of the resulting company and not the resulting company itself. Further, the Petitioner Companies submitted that the certified true copy of the order sanctioning the scheme would be filed with the RoC within 30 days from the date of grant of no objection/approval to the implementation of the scheme by the Department of Pharmaceuticals, Ministry of Chemicals & Fertilizers, Government of India (“DOP”), however, the same was not specified in the scheme.
Query:
The questions before this Tribunal were: (a) whether consideration in the form of issuance of shares can be provided by the parent company of the resulting company or does it necessarily have to be discharged by issuance of shares by the resulting company only; and (b) whether filing of the certified true copy of the order sanctioning the scheme with the Registrar of Companies (“RoC”) can be made conditional upon an event which has not been specified in the scheme.
Findings of the Tribunal:
The Tribunal accepted the contention of the Resulting Company that consideration in the form of issuance of shares can be provided by the parent company of the Resulting Company. It drew support from the decisions of the Hon’ble High Court of Bombay in (a) Re: Thomas Cook Insurance Services (India) Limited, (Company Petition No.99 of 2015) wherein it was held that consideration in terms of allotment of shares of the companies other than the transferee companies, including, holding company of the transferee company, can be approved; and (b) GlobeOp Financial Services (India) Private Limited and GlobeOP Financial Services Technologies (India) Private Limited and Others (Company Petition No.641 of 2014) wherein it was held that the consideration for transfer of an undertaking can come in the form of any legitimate consideration which the transferor is entitled to accept for contract of transfer and that the consideration in the form of shares issued by the parent company of the transferee is a valid consideration.
The Tribunal held that since the definition of ‘effective date’ in the scheme had no reference to the conditional event, i.e., obtaining a no objection/approval to the implementation of the scheme by the DOP and also the clauses in the scheme which sets of the criteria on which the scheme is conditional upon and subject to, had no reference of the same, therefore, the submission of the Petitioner Companies that the scheme will not be effective if the DOP does not grant a no objection/approval to the implementation of the scheme was not in accordance with the scheme and thus, the request to file the certified true copy of the order passed by the Tribunal with the RoC within 30 days of grant of no-objection/approval by the DOP was rejected.
Observations:
Please find a copy of the first motion order here; and a copy of the second motion order here.
This update has been contributed by Arka Majumdar (Partner) and Juhi Wadhwani (Associate).
7A, 7th Floor, Tower C, Max House,
Okhla Industrial Area, Phase 3,
New Delhi – 110020
The rules of the Bar Council of India do not permit advocates to solicit work or advertise in any manner. This website has been created only for informational purposes and is not intended to constitute solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work in any manner. By clicking on 'Agree' below, you acknowledge and confirm the following:
a) there has been no solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
b) you are desirous of obtaining further information about us on your own accord and for your use;
c) no information or material provided on this website is to be construed as a legal opinion and use of this website will not create any lawyer-client relationship;
d) while reasonable care has been taken in ensuring the accuracy of the contents of the website, Argus Partners shall not be responsible for the results of any actions taken on the basis of information provided in this website or for any error or omission in the website; and
e) in cases where the user has any legal issues, the user must seek independent legal advice.