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2012 Supreme(AP) 1025
High Court of Andhra Pradesh
RAMESH RANGANATHAN, J.
IL&FS Engineering and Construction Company Limited
Versus
Wardha Power Company Limited
Company Petition No. 240 of 2011
Decided on : 17-10-2012
For the Petitioners:S. Ravi, Advocate.
For the Respondent:Ch. Ramesh Babu, Advocate. For the Central Government: Ponnam Ashok Goud, Asst. Solicitor General.
Headnote:
The High Court of Andhra Pradesh, in the case of IL&FS Engineering and Construction Limited v. Union of India, examined the circumstances surrounding a scheme of arrangement involving reduction of share capital and determined whether the scheme was fair and equitable to all parties involved.
Fact of the Case:
IL&FS Engineering and Construction Limited (the petitioner) filed a petition with the High Court of Andhra Pradesh seeking sanction for a scheme of arrangement involving reduction of share capital. The petitioner was a listed company with shares traded on both the National Stock Exchange and the Bombay Stock Exchange. The scheme of arrangement proposed to utilize the balance in the securities premium account to write off past losses and revive profits for the year 2007-08. A part of the revived profits would be used to pay dividends to preference shareholders. The scheme was approved by the shareholders, secured creditors, and unsecured creditors at meetings convened for the purpose.
Finding of the Court:
The High Court, after examining the scheme of arrangement and the relevant provisions of the Companies Act, 1956, held that the scheme was fair and equitable to all parties involved. The court noted that the scheme had been properly explained to the shareholders and creditors, and that the statutory majorities had voted in favor of the scheme. The court also considered the fact that the petitioner was a listed company and that public interest would be served by informing prospective investors of the reduction of capital. The court directed the petitioner to add the words "and reduced" to its name for a period of time and to publish the reasons for the reduction of capital in order to protect the interests of prospective investors and safeguard public interest.
Issues: ['Whether the scheme of arrangement involving reduction of share capital was fair and equitable to all parties involved.', 'Whether the scheme had been properly explained to the shareholders and creditors.', 'Whether the statutory majorities had voted in favor of the scheme.', 'Whether public interest would be served by informing prospective investors of the reduction of capital.']
Ratio Decidendi: The court held that the scheme of arrangement was fair and equitable to all parties involved because it had been properly explained to the shareholders and creditors, the statutory majorities had voted in favor of the scheme, and public interest would be served by informing prospective investors of the reduction of capital.
Final Decision: The High Court sanctioned the scheme of arrangement involving reduction of share capital, subject to certain conditions. The petitioner was directed to add the words "and reduced" to its name for a period of time and to publish the reasons for the reduction of capital in order to protect the interests of prospective investors and safeguard public interest.
ORDER
Ramesh Ranganathan
1. This petition is filed by IL&FS Engineering and Construction Limited, (hereinafter called the "petitioner"), under Sections 391 to 394 read with Sections 78, 100 to 104 of the Companies Act, seeking sanction of this Court for the scheme of arrangement between them and their shareholders and creditors. The petitioner was incorporated on 06.05.1988 as a Private Limited Company under the name and style of "Satyam Construction Private Limited". On its conversion into a Public Limited Company, its name was changed to "Satyam Construction Limited" on the 1st of July, 1993. Its name was again changed to 'Maytas Infra Limited' on 09.02.2007 and, thereafter, its name has now been changed to its present name. The registered office of the petitioner is situated at Hyderabad. The objects of the petitioner company is to take over the business, carried on by "Satyam Construction Company Limited", as a going concern with all its existing assets and liabilities; to continue to carry on the existing construction activity of Satyam Construction Company; to carry on the business of undertaking all types of civil contracts, to act as consultants and fabricators, to carry on electrical and mechanical works, civil construction, project construction, dam construction, supply works, railway works and other engineering works; to carry on activities of construction, execution, undertaking, running, acquiring, developing, taking on lease, purchasing or acquiring, on any other terms and conditions, any hospitals, clubs, tanks, hotels, schools, restaurants etc; to promote and develop infrastructure projects within the country or outside in various areas like State and National Highways, Auto Bahns, Flyovers, Elevated Roads etc; to construct transmission lines, and take over distribution of power, purchase power from generators and distribute it to their consumers over the distribution network etc, to take up turnkey contracts within the country and outside involving engineering, consultancy, procurement, construction, project management etc; and to compete in various sectors like power, onshore oil & gas, refinery, fertilizers, chemicals, petrochemicals, etc.
2. The authorized share capital of the petitioner company, as at 31.03.2011, was Rs. 500 crores divided into 15 crore equity shares of Rs. 10/- each for Rs. 150 crores, and 3,50,00,000 preference shares of Rs. 100/- each for Rs. 350 crores. Its issued, subscribed and paid up capital, as at 31.03.2011, was Rs. 384,86,50,250 divided into 7,73,70,025 equity shares of Rs. 10/- each fully paid up for Rs. 77,37,00,250/-; 57,49,500 6% optionally convertible cumulative Redeemable Preference (OCCRPS) Shares of Rs. 100/- each fully paid up for Rs. 57,49,50,000/-; and 2,50,00,000 6% cumulative redeemable Preference Shares (CRPS) of Rs. 100/- each fully paid up for Rs. 250 crores.
3. The Board of Directors of the petitioner, by way of a resolution by circulation, approved the proposed scheme of arrangement on 27.07.2011. The petitioner, thereafter, filed C.A. No. 1649 of 2011 before this Court praying that a meeting of the equity shareholders (38351 in number) be convened and held for the purpose of considering and, if thought fit, approving the scheme of arrangement. This Court, by order dated 04.11.2011, directed that the meeting, of the equity shareholders of the petitioner, be convened on 09.12.2011. The quorum of the said meeting was fixed at 20. Individual notices were issued to the equity shareholders, and a notice of the meeting was published in Business Standard (English daily), and Andhra Prabha (Telugu daily) news papers. The Chairperson of the meeting, in his report dated 09.12.2012, informed this Court that the meeting was attended by 57 members in person, holding shares valued at Rs. 51,80,37,430/- divided into 5,18,03,743 equity shares of Rs. 10/- each; and five members, through their proxies, holding shares valued at Rs. 47,28,830/- divided into 4,72,883/- equity shares of
