CP/107/2013 of M/s. Virtusa (India) Private Limited Vs Andhra Pradesh Industrial Infrastructure Corporation on 30 December 2013

COMMON ORDER:

These two petitions are filed, under Sections 391 and 394 of theCompanies Act, 1956 (for short, “the Act”), seeking approval of the schemeof amalgamation. The petitioner in C.P.No.107 of 2013 is the transferorcompany, whereas petitioner in C.P.No.108 of 2013 is the transfereecompany.

2. The transferor Company viz., M/s. Virtusa (India) Private Limited wasoriginally incorporated as a private limited company under the name andstyle of M/s.Technology Providers (India) Private Limited on 16.11.1999. Later on the name of the company was changed to M/s. Erunway (India)Private Limited and a fresh certificate of incorporation consequent uponchange of name was issued by the Registrar of Companies, on 26.07.2000. Again the company had changed its name to its present name i.e.,M/s.Virtusa (India) Private Limited and a fresh certificate of incorporationconsequent on change of name was issued by the Registrar of Companies,Hyderabad, on 03.05.2002. The authorized share capital of the company isRs.5,00,00,000/- divided into 50,00,000 equity shares of Rs.10/- each. Thepresent issued, subscribed and aped up share capital of VIPL/transferorcompany is Rs.2,92,62,400/- divided into 29,26,240 equity shares of Rs.10/-each fully paid up. The main objects of the transferor company are asfollows:-

1. To undertake development and/or trade in sale, import, exportof computer software and all varieties of Information Technologyservices like Internet services, Intranet services, Net Workinglike Wan, LAN and its related protocols, e-commerce, GIC/GPSmapping, data entries, Data Conversion, Forex operation relatingto software, Hardware consultancy, Hiring, Installation sale,Export, Import, maintenance of computer hardware, platformchanging, peripherals and related services either on directcontract or sub-contract basis and running and maintaininginstitute/school providing computer education, training,information technologies and training covering, inter alia, relatingto software and hardware and general management relating to allaspects thereof etc.,of computer software and all varieties of Information Technologyservices like Internet services, Intranet services, Net Workinglike Wan, LAN and its related protocols, e-commerce, GIC/GPSmapping, data entries, Data Conversion, Forex operation relatingto software, Hardware consultancy, Hiring, Installation sale,Export, Import, maintenance of computer hardware, platformchanging, peripherals and related services either on directcontract or sub-contract basis and running and maintaininginstitute/school providing computer education, training,information technologies and training covering, inter alia, relatingto software and hardware and general management relating to allaspects thereof etc.,

3. Whereas the transferee Company viz., M/s. Virtusa ConsultingServices Private Limited was incorporated on 05.03.2008. The authorizedshare capital of the company is Rs.10,00,000/- divided into 1,00,000 equityshares of Rs.10/- each. The present issued, subscribed and paid up sharecapital of transferee company is Rs.1,00,000/- divided into 10,000 equityshares of Rs.10/- each fully paid up. The main objects of the transfereecompany are similar to that of the transferor company.

4. It would be evident from the above that the objects of both thecompanies are similar and both of them are I.T. companies. Both thecompanies have two shareholders each, who are the same shareholders inboth the companies. The transferor company has two shareholders, asdetailed below:

Whereas the transferee company has two shareholders, as detailed below:

5. The transferor company has only one secured creditor

viz., HCL Info systems Ltd., and under its letter of consent, dated26.12.2012, filed as Annexure-F, the said secured creditor has given acertificate that as at present, no dues are there and hence, they have givenno dues certificate to the petitioner company. The petitioner company hadfiled Comp.A.No.282 of 2013 seeking dispensing with the meeting ofshareholders in view of the letters of consent given by both the saidshareholders. This court by order, dated 20.02.2013, allowed the saidapplication and dispensed with the meeting of shareholders. Similarly, byanother Comp.A.No.283 of 213, the meeting of secured creditors was alsodispensed with as most of the other trade creditors were found to be contingent liabilities and not falling in the category of secured creditors. Thesaid application, accordingly, was ordered on 20.02.2013, dispensing withthe meeting of secured creditors. So far as unsecured creditors of thetransferor company is concerned, vide orders in Comp.A.No.284 of 2013,dated 20.02.2013, a meeting was directed to be convened and held by aChairman appointed by this court. The Chairman appointed in the saidmeeting has since filed his report, which is annexed at page 261, showingthat the unsecured creditors themselves and through their proxies voted infavour of the proposed scheme of arrangement. Consequently, the presentpetition is filed seeking approval of this court for the scheme ofamalgamation.

6. The scheme of amalgamation, copy of which is annexed at page 22 ofthe petition, states that the scheme is envisaged in view of the similarity ofbusiness of the transferor and the transferee companies in order to achieveconsolidation of activities of both the companies by pooling the resourceswith optimum beneficial reserves and achieve greater consolidation ofactivities of both the companies. The scheme is envisaged to come intoforce from the appointed date, which is fixed as 01.04.2012.

7. So far as the transferee company is concerned, which is petitioner inC.P.No.108 of 2013, as mentioned above, same shareholders areshareholders in this company also and that there are no secured creditorsfor the transferee company. So far as unsecured creditors are concerned,the meeting thereof was held by the Chairman appointed by this court byvirtue of orders in Comp.A.No.281 of 2013, dated 20.02.2013. The Chairmanappointed for the said meeting has conducted the meeting and has filed hisreport reporting that all the unsecured creditors/proxies have voted throughpoll process in favour of the proposed scheme of arrangement being adoptedand carried into effect.

8. These company petitions were filed after the reports from therespective Chairman’s were received and this court by order, dated25.04.2013, ordered publications to be carried out as per the Rules and alsoissued notice to the official liquidator and to the Central Government. Reports of the official liquidator and the Central Government are, accordingly, filed.

9. The Regional Director, (South East Region), who has examined thescheme, has filed the report pointing out that the swap ratio is recommendedbased on the fairness report/certificate given by M/s.GyanmagnusAssociates, Chartered Accountants. However, the working analysis indetermining such swap ratio was not furnished to the central government.

10. To the extent of the said objection, learned senior counsel for thepetitioner states that both the companies are by the same management andby the same shareholders and the same business activity and hence itwould not make any difference with regard to the said ratio.

11. In the circumstances, therefore, the said only objection raised by thecentral government does not survive.

12. So far as the report of the official liquidator is concerned, it wasobjected by the official liquidator in para 3.k that the transferor company hasobtained a land from APIIC as a lessee and the clauses 2.7 and 2.8 of thelease agreement may require consent of the APIIC as lessor.

13. After noticing the aforesaid objection this court by order, dated25.07.2012, directed the petitioner to implead APIIC as a party, which isaccordingly been impleaded and Mr.B.P.Mohan, learned counsel appearingfor APIIC, has filed a counter together with the documents and the matter isfully heard.

14. It is not in dispute that the land on which the petitioner company is thelessee is covered by the registered lease deed, dated 27.11.2007, betweenAPIIC and the petitioner/transferor company. The objection is with reference to clause 2.7 and 2.8, which are extracted hereunder:

“ 2.7 The Lessor agrees to consider any successor, transferee orassignee of the Lessee including by reason of any scheme ofreconstruction, merger, demerger and any other change may besubstituted in place of the Lessee subject to the terms of this LeaseDeed and the provisions of the Special Economic Zone’s Act, 2005(hereinafter referred to SEZ Act) and the Rules and Regulationsframed there under.

2.8 The Lessee shall not alienate, encumber or transfer any rights or interest whatsoever in ‘Sector A’, in favour of any person during theperiod of lease subject to clause 2.6 mentioned hereinabove.”

15. Learned standing counsel for APIIC states that since various termsand conditions of the lease and obligations and liabilities on the lessee arerequired to be fulfilled by the lessee, such amalgamation by which thetransferee company gets substituted in the place of transferor companywould affect the memorandum of understanding as well as the lease deed.Therefore, prior consent of APIIC is required to be obtained by the transferorcompany for the proposed scheme of amalgamation.

16. Learned senior counsel for the petitioner states that scheme ofamalgamation does not involve any alienation nor it amounts to sublettingand hence ex facie no such prior approval from APIIC is required. He,therefore, submits that all the applications of the lessor automatically willhave to be vested and discharged by the transferee company with which thetransferor company is getting amalgamated. The APIIC, therefore, does notin any way get affected nor its rights get diminished in any manner byapproval of the said scheme of amalgamation.

16. A reading of clauses 2.7 and 2.8 above itself would show that the leasedeed envisages possibility of lessee undergoing scheme of re-construction,merger or demerger and hence, it is specifically provided that the lesseemay be succeeded by transferee or assignee by virtue of such scheme ofre-construction, merger or de-merger and that the lessor agrees to considersuch successor, transferee or assignee as the lessee. Clause 2.8 thoughmentions restrictions on the lessor to alienate, encumber, or transfer anyrights or interests in the land, the intention appears to put such restriction onthe lessee and even assuming that the said clause is intended to putrestrictions on the lessee, by the approval of the scheme of amalgamation, Iam unable to see as to how rights of the lessor with regard to the leasedproperty would any way be affected. A scheme of amalgamation does notamount to any alienation by transferor company to transferee company nor ittantamounts to sub-leasing to attract Clause 2.8 as above. The transferorcompany’s rights, liabilities and obligations stand vested in the transfereecompany under the scheme and so far as the lessor is concerned, would be entitled to equally enforce all the said obligations again on the transfereecompany as the transferee company would stand substituted in place of thetransferor company. No prejudice of any nature, therefore, is envisaged sofar as interests of the lessor are concerned, merely by permitting thescheme of amalgamation to operate.

17. I, therefore, do not see any substance in the objections on behalf of theAPIIC that its prior consent is required even for approval of scheme ofamalgamation. I do not see any provision in the lease deed or memorandumof understanding warranting such requirement. The said objection withregard to approval of APIIC being unnecessary, is rejected.

18. Since there is no other objection raised with regard to the scheme ofamalgamation, there is no impediment in approving the scheme. Thescheme, accordingly, shall stand approved without any modification.

Company petitions are, accordingly, allowed. The scheme ofarrangement is approved without any modification. The appointed date asfixed under the scheme is 01.04.2012. The petitioner company shall filecertified copy of the order of this court before the Registrar of Companieswithin 30 days from the date of receipt of a copy of this order and also paythe stamp duty, if any. The petitioner company shall also pay Rs.5,000/-(Rupees five thousand only) each to the learned Assistant Solicitor Generaland the official liquidator for the work done by him in examining the schemeand filing reports. Miscellaneous applications pending, if any, shall standclosed. There shall be no order as to costs.

December 30, 2013LMV

______________________

VILAS V. AFZULPURKAR, J

HONOURABLE SRI JUSTICE VILAS V. AFZULPURKAR

LMV

COMPANY PETITION Nos.107 and 108 of 2013

Dt: 30.12.2013