CITY TILES LIMITED Vs. STATE

JUDGEMENT

(1.) These Are The Petitions Filed By Two Companies viz. City Tiles Limited and Airona Tiles Limited, for the purpose of obtaining the sanction of this court to a Scheme of Arrangement in the nature of Demerger and Transfer of the demerged Undertaking viz. Ceramic Division of City Tiles Limited to Airona Tiles Limited and Restructure of Share Capital of City Tiles Limited, proposed under section 391 to 394 read with sections 78 and 100 to 103 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013.

(2.) It Has Been Submitted That City Tiles Limited, the Petitioner Demerged Company is engaged in the manufacturing and marketing of a wide range of ceramic tiles and vitrified tiles. Airona Tiles Limited, the Petitioner Resulting Company has been incorporated recently with the objects of carrying on the business of manufacturing ceramic tiles. It is envisaged that the Resulting Company shall undertake the commercial activities of the Demerged Undertaking of City Tiles Limited, upon the scheme being effective. The proposed Scheme of Arrangement is proposed in order to segregate activities of the Demerged Company pertaining to different products. It has been realized that the two operating divisions of City Tiles Limited viz. Ceramic Tiles and Vitrified Tiles are quite different involving distinct business dynamics, distinct market segments and customers. The strategies for the development and growth of these businesses require different focus. The Petitions give in detail the benefits envisaged as a result of the said Scheme.

(3.) Attention Of The Court Is Drawn To Para 7.4 And 18 of the Petition for the Demerged Company and Clause 15 of the scheme. The Restructuring of the Capital of the Demerged Company is envisaged in form of Utilisation of the Securities Premium Account for the purpose of adjusting the net asset value of the demerged undertaking. The said proposal is covered under the provisions of Sec. 78 read with Sec. 100 to 103 of the Companies Act, 1956 and Section 52 of the Companies Act, 2013. However, the same being consequential in nature is proposed as an integral part of the proposed scheme. The proposal does not involve any reduction in the Issued and Subscribed Share Capital of the Company and the order of the Court sanctioning the Scheme shall be deemed to be an order under Section 102 of the Companies Act confirming the reduction. Considering the said submissions, vide order dated 23rd March 2016, passed in Company Application No. 112 of 2016, the procedure prescribed under Section 101(2) of the Companies Act, 1956 as well as under rules 48 to 65 of the Companies (Court) Rules 1959, was dispensed with.