CIVIL APPEAL 164 of 2008 on 2 October 1945

1. Punjab Tractors Limited, Phase-IV, Industrial Area, S.A.S.Nagar (Mohali), Punjab.

...............Petitioner/Transferor Company

2. M/s Mahindra and Mahindra Limited, Gateway Building,Appollo Bunder, Mumbai-400001.

............... Transferee Company

CORAM:HON'BLE MR. JUSTICE K. KANNAN

1. Whether Reporters of local papers may be allowed to see thejudgment ? judgment ?

2. To be referred to the Reporters or not ?

3. Whether the judgment should be reported in the Digest ?

-.-

Present:Mr. Deepak Suri, Advocate.

Mr. D.P. Ojha, Official Liquidator.

K. KANNAJ J.

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1. This application has been filed under Sections 391 to 394 of theCompanies Act, 1956 for sanctioning and approval of the Scheme ofAmalgamation between the Punjab Tranctors Limited having its office atPhase IV, Industrial Area, S.A.S. Nagar (Mohali), Punjab and M/s Mahindraand Mahindra Limited, Gateway Building, Appollo Bunder, Mumbai-400001. The application has been filed at the instance of Punjab TractorsLimited called the Transferor Company pursuant to the decision ofShareholders' meeting.

2. From the reading of petition and with reference to the documents,it is clear that the Transferor Company had been incorporated on

27.06.1970. M/s Mahindra and Mahindra Limited (called the TransfereeCompany or M&M) had acquired 63.33% stake in the Transferor Companythrough a negotiated deal while 1.31% stake had been held by MahindraHoldings & Finance Limited (MHFL), the wholly owned subsidiary ofM&M, which had been subsequently amalgamated with M&M w.e.f.11.08.2008. As on date of the application, M&M held 64.64% of the EquityShare capital of the petitioner-Company. The authorised capital of theTransferor Company was Rs.75 Crores and the issued, subscribed and paidcapital was Rs.60,75.57 lacs consisting of 6,07,55,700 equity shares ofRs.10 per share. Out of the above, 3,92,70,165 equity shares had been heldby the Transferee Company.

3. The main object of the petitioner-Company was engagement inthe business of manufacture tractors. The Memorandum of Associationmakes provision "to amalgamate with any other company having objectsaltogether or in a part similar to those of this company." The Transferee-Company had been incorporated in Mumbai on 02.10.1945 in the name ofMahindra and Mohammed Limited subsequently changed to Mahindra &Mahindra Limited (M&M) w.e.f. 13.01.1948. The M&M Company wasengaged in the business of manufacture and sale inter aila, of tractors,general purpose utility vehicles, light commercial vehicles and threewheelers. The Memorandum of Association of the Transferee Companyalso makes provision for amalgamating with any other company havingobjects altogether or in any part similar to those of the company.

4. The rationale of the Scheme of Amalgamation spelt out:-

(i) Cost savings in terms of economies of scale,sourcingbenefits, vendor rationalisation, more focusedoperational efforts, rationalisation, standardisationand simplification of business processes andproductivity improvements;benefits, vendor rationalisation, more focusedoperational efforts, rationalisation, standardisationand simplification of business processes andproductivity improvements;

(ii) The synergies that exist between the two entities interms of similar products, processes and resources can be put to the best advantage of all stakeholders;

(iii) Greater size, scale, integration and greater financialstrength and flexibility for the amalgamated entity;strength and flexibility for the amalgamated entity;

Ratio decidendi

(iv) Strengthening leadership in the industry, in terms ofthe asset base, revenues, product range, productionvolumes and market share; and the asset base, revenues, product range, productionvolumes and market share; and

(v) The amalgamated entity will benefit from improvedorganizational capability and leadership, arising fromthe combination of people from PTL and M&M whohave the diverse skills, talent and vast experience tocompete successfully in an increasingly competitiveindustry.organizational capability and leadership, arising fromthe combination of people from PTL and M&M whohave the diverse skills, talent and vast experience tocompete successfully in an increasingly competitiveindustry.

5. The salient feathers of the Scheme are:-

4. TRANSFER AND VESTING OF UNERTAKING

4.1Subject to the provisions of this Scheme as specifiedhereinafter and with effect from the appointed date,the entire business and the Undertaking of theTransferor Company including all the debts,liabilities, duties and obligations of the TransferorCompany of every description and also including,without limitation, all the movables and immovableproperties and assets of the Tranferor Companycomprising amongst others all freehold and leaseholdland, all freehold and leasehold buildings,investments, vehicles, furniture and fixtures,computers, office equipment, permits, licences,authorisations, if any, rights and benefits of allagreements and all other interests, rights and powersof every kind, nature and description whatsoever,privileges, liberties, easements, advantages, benefitsand approvals, shall without any further act or deed,but subject to the charges affecting the same betransferred and/or deemed to be transferred to andvested in the Transferee Company as a going concernso as to become the assets and liabilities of theTransferee Company.

Provided always that the Scheme shall not operate toenlarge the security for any loan, deposit or facilityavailed of by the Transferor Company and theTransferee Company shall not be obliged to createany further or additional security therefor after theEffective Date or otherwise.

4.2

In respect of all the movable assets of the TransferorCompany and the assets which are otherwise capableof transfer by physical delivery or endorsement anddelivery, including cash on hand, shall be sotransferred to the Transferee Company and deemed tohave been physically handed over by physical 4.3

4.4. 4.5

4.6

delivery or by endorsement and delivery, as the casemay be, to the Transferee Company to the end andintent that the property and benefit therein passes tothe Transferee Company with effect from theAppointed Date.

Such delivery and transfer shall be made on a datemutually agreed upon between the TransferorCompany and the Transferee Company. However,such date of delivery shall be within thirty days fromthe Effective date.

In respect of any assets of the Transferor-Companyother than those mentioned in Clause 4.2 above,including actionable claims, sundry debtors,outstanding loans, advances recoverable in cash orkind or for value to be received and deposits with theGovernment, semi-Government, local and otherauthorities and bodies and customers, the TransferorCompany shall if so required by the TransfereeCompany, and the Transferee Company may, issuenotices in such form as the Transferee Company maydeem fit and proper stating that pursuant to the HighCourts having sanctioned this Scheme between theTransferor Company and the Transferee Companyunder Section 394 of the Act, the relevant debt, loan,advance or other asset, be paid or made good or heldon account of the Transferee Company, as the personentitled thereto, to the end and intent that the right ofthe Transferor Company to recover or realise thesame stands transferrred to the Transferee Companyand that appropriate entries should be passed in theirrespective books to record the aforesaid changes.

The transfer of assets and liabilities pursuant toClause 4.1 above and the continuance of proceedingsby the Transferee Company pursuant to Clause 7shall not affect any transaction or proceedingsalready concluded by Transferor Company on orbefore the Appointed Date or after the AppointedDate till the Effective Date to the end and intent thatthe Transferee Company accepts and adopts all acts,deeds and things done and executed by the TransferorCompany in regard thereto, as if done and executedby the Transferee Company on behalf of itself.

With effect from the Appointed Date, all debts,liabilities, contingent liabilities, duties andobligations of the Transferor Company, as on theAppointed Date whether provided for or not in thebooks of accounts of the Tranferor Company, and allother liabilities which may accrue or arise after theAppointed Date but which relates to the period on orupto the day of the Appointed Date shall, pursuant tothe orders of the High Courts or such other competentauthority as may be applicable under Section 394 and other applicable provisions of the Act, without anyfurther act or deed, be transferred or deemed to betransferred to and vested in the Transferee Company,so as to become as from the Appointed Date the debts,liabilities, contingent liabilities, duties andobligations of the Transferee Company on the sameterms and conditions as were applicable to theTransferor Company.

6. The Scheme provides that all the permanent employees of theTransferor Company shall from the effective date be engaged as theemployees of the Transferee Company without any break in service andterms and conditions not less favourable than those on which they werepreviously engaged by the Transferor Company immediately preceding theeffective date.

7. This Hon'ble Court vide its order dated 18.09.2008 dispensedwith the requirement of holding of the meeting of the secured and unsecuredcreditors and directed that the meeting of the equity shareholders beconvened by the petitioner/Transferor Company for the purpose ofconsidering and if thought fit, approving with or without modifications, theScheme of Amalgamation. The meeting of shareholders was accordinglyheld on 15.11.2008 and Mr. Aman Chaudhary, Advocate was appointed bythe Court to act as a Chairman. Out of the 338 votes, which were dulypolled at the meeting, 337 equity shareholders voted in favour of theresolution and one equity shareholder voted against the resolution. Since99.7041% of the equity shareholders who cast valid votes, voted in favour ofthe resolution., resolution was passed on the basis of majority votes. It isreported that no investigation proceedings are pending under Sections 235 to250A of the Companies Act and there is also no winding up proceedingsagainst the petitioner-Company. The Senior Vice President-Finance &Company Secretary and Authorized Representative of the petitioner-Company has filed the affidavit affirming the facts mentioned in the petitionseeking for saction of the Scheme. Notice to the Official Liquidator as well

as Regional Director, Company Law Affairs, Noida issued and publicationswere also effected in the "Indian Express" and "Punjab Kesari, ChandigarhEdition as well as in the Official Gazette of Punjab Government. There areno objections to the Scheme except that AS 14 is directed to be observed.An undertaking affidavit has been given by the company in this regard.Accordingly the order is passed approving the Scheme of Amalgamation ascarried through in the resolution under the chairmanship of the personappointed by this Court subject to the sanctioning of Scheme by BombayHigh Court. A certified copy of this order shall be filed with the Registrar ofCompanies within 14 days of the order in Form No.41. The Scheme shall bebinding upon all concerned including the shareholders of thepetitioner/Transferor Company and the Transferee Company.

January 16, 2009Pankaj*

(K. KANNAN) JUDGE