ARSS ENGINEERING LIMITED Vs. STATE

JUDGEMENT

(1.) This petition, filed under Sections 391 to 394 of the Companies Act, 1956, seeks sanction of the Court to a scheme of amalgamation ("Scheme") between Arss Engineering Ltd. ("transferor company") and Trio Mercantile & Trading Ltd. ("transferee company").

(2.) The Scheme broadly envisages transfer of the entire undertaking of the transferor company including all its assets and liabilities as on the appointed date, i.e. 1 April 2014, to the transferee company as a going concern. The Scheme has received the requisite consents of the equity shareholders; the meetings of secured and unsecured creditors were dispensed with under orders passed by this Court; and upon notice, no creditor has come forward to oppose the scheme. Neither the Regional Director nor the Registrar of Companies has any significant objection to the Scheme. The transferor and transferee companies pray for sanction of the Scheme.

(3.) The only opposition to the Scheme is by Securities and Exchange Board of India ("SEBI"). The objections of SEBI are two-fold. It is firstly submitted that the Scheme is aimed at evading the provisions of the Securities and Exchange Board of India Regulations ("SEBI Regulations") and the Issue of Capital and Disclosure Requirements, Regulations, 2009 ("ICDR") inasmuch as what is sought to be achieved through the expedient of the proposed amalgamation is conversion of shareholding in an unlisted company (the transferor company) into shareholding of a listed company (the transferee company) without having to go through any of the rigorous requirements including mandatory disclosures under the regulatory framework including the Act, SEBI Regulations and ICDR. Secondly, it is submitted that the consideration contemplated under the Scheme is arrived at by manipulating the financials of the transferor and transferee companies and the share swap ratio proposed in the Scheme is deliberately and wrongfully skewed in favour of shareholders of the transferor company at the cost of the shareholders of the transferee company, many of whom are members of the public.