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2010 Supreme(Bom) 829
High Court of Judicature at Bombay
S.J. VAZIFDAR
Cairn India Limited
Vs
NIL
Decided on: 22-06-2010
Mr.I.M. Chagla, Senior Counsel with Mr.J.D. Dwarkadas, Senior Counsel, Mr.Virag V. Tulzapurkar, Senior Counsel, Mr.J.C. Perreira and Mr.Ankit Lohia i/b Rajesh Shah & Co. for the Petitioner.
Mr.J.P. Avasia with Mr.R.I. Chagla for the Regional Director. Mr.Dinesh V. Lakhani for the Objector. Ms.Alpana Ghone with Mr.Kamlesh Khavade i/b India Law Alliance for the Objectionist.
The Court considered and addressed various objections raised in relation to the scheme of arrangement, including the appointed date, the authority to modify the scheme, the names of joint holders of shares, the utilization of securities premium account, and the latest financial position, and made a final decision to make the company petition absolute.
Headnote:
Companies Act - Scheme of Arrangement - 391, 394 - The Petitioner seeks an order sanctioning a scheme of arrangement between itself and four transferor companies Cairn Energy India Pvt. Ltd. ("CEIPL"), Cairn Energy India West B.V., ("CE India West"), Cairn Energy Cambay B.V. ("CE Cambay") and Cairn Energy Gujarat B.V. ("CE Gujarat"). The scheme proposes to simplify and consolidate the structure and business operations by transferring the entire oil and gas exploration, development and production business of the transferor companies in India into the transferee company. The overwhelming majority of the equity shareholders voted in favour of the scheme. The objections raised on behalf of the Regional Director are taken care of. The objection regarding the appointed date is well founded and is ordered to be cured. The clause authorizing the Board of Directors to modify the scheme without the sanction of the Court is modified. The objection regarding the names of joint holders of shares is rejected. The objection regarding the utilization of securities premium account is rejected. The objection regarding the latest financial position is considered and the company petition is made absolute.
Fact of the Case:
The Petitioner seeks an order sanctioning a scheme of arrangement between itself and four transferor companies Cairn Energy India Pvt. Ltd. ("CEIPL"), Cairn Energy India West B.V., ("CE India West"), Cairn Energy Cambay B.V. ("CE Cambay") and Cairn Energy Gujarat B.V. ("CE Gujarat"). The scheme proposes to simplify and consolidate the structure and business operations by transferring the entire oil and gas exploration, development and production business of the transferor companies in India into the transferee company. The overwhelming majority of the equity shareholders voted in favour of the scheme. The objections raised on behalf of the Regional Director are taken care of. The objection regarding the appointed date is well founded and is ordered to be cured. The clause authorizing the Board of Directors to modify the scheme without the sanction of the Court is modified. The objection regarding the names of joint holders of shares is rejected. The objection regarding the utilization of securities premium account is rejected. The objection regarding the latest financial position is considered and the company petition is made absolute.
Finding of the Court:
The objections raised on behalf of the Regional Director are taken care of. The objection regarding the appointed date is well founded and is ordered to be cured. The clause authorizing the Board of Directors to modify the scheme without the sanction of the Court is modified. The objection regarding the names of joint holders of shares is rejected. The objection regarding the utilization of securities premium account is rejected. The objection regarding the latest financial position is considered and the company petition is made absolute.
Issues: The objections raised on behalf of the Regional Director, the appointed date, the clause authorizing the Board of Directors to modify the scheme without the sanction of the Court, the names of joint holders of shares, the utilization of securities premium account, and the latest financial position.
Ratio Decidendi: The objections raised on behalf of the Regional Director are taken care of. The objection regarding the appointed date is well founded and is ordered to be cured. The clause authorizing the Board of Directors to modify the scheme without the sanction of the Court is modified. The objection regarding the names of joint holders of shares is rejected. The objection regarding the utilization of securities premium account is rejected. The objection regarding the latest financial position is considered and the company petition is made absolute.
Final Decision: The objections raised on behalf of the Regional Director are taken care of. The objection regarding the appointed date is well founded and is ordered to be cured. The clause authorizing the Board of Directors to modify the scheme without the sanction of the Court is modified. The objection regarding the names of joint holders of shares is rejected. The objection regarding the utilization of securities premium account is rejected. The objection regarding the latest financial position is considered and the company petition is made absolute.
ORAL JUDGMENT
The Petitioner seeks an order sanctioning a scheme of arrangement between itself and four transferor companies Cairn Energy India Pvt. Ltd. ("CEIPL"), Cairn Energy India West B.V., ("CE India West"), Cairn Energy Cambay B.V. ("CE Cambay") and Cairn Energy Gujarat B.V. ("CE Gujarat"). The first transferor company is incorporated in Australia and the others are incorporated in Netherlands. Under the scheme, the entire business relating to the Indian undertakings of the transferor companies are to stand transferred to and vested in the Petitioner with effect from the appointed date without any further act or deed pursuant to the provisions of 391 and 394 of the Companies Act, 1956.
2. The Petitioner is listed on the Bombay Stock Exchange and the National Stock Exchange of India limit. The issued, subscribed and paid up capital of the Petitioner prior to 31.3.2009 was Rs.18,966,678,160 comprising of 189,66,67,816 equity shares of Rs.10/-each. After 31.3.2009 the same increased to Rs.18,967,892,270/- on account of ESOPs.
3. The Petitioner is primarily engaged in the business of surveying, prospecting, drilling, exploring and dealing in minerals, natural oils, petroleum, gas and related products. The transferor companies are the Petitioner's subsidiaries. The transferor companies also carry on business activities in India through their project offices. Each of the transferor companies is a participant in various oil and gas blocks granted by the Government of India through production sharing contracts entered into with the Government of India and other joint venture parties.
4. A copy of the audited statement of accounts as of 31.3.2009 and unaudited statement of accounts as on 30.9.2009 of each of the transferor companies has been annexed to the petition. Further a copy of the audited statement of accounts in foreign currency of each of the transferor companies as on 31.12.2008 is also filed with the petition. The Petitioner has furnished the rational for the proposed scheme. According to the Petitioner, a multiple layered structure, comprising various foreign subsidiaries, between it and the Indian undertakings is administratively burdensome. The scheme proposes to simplify and consolidate the structure and business operations by transferring the entire oil and gas exploration, development and production business of the transferor companies in India into the transferee company. Consequently, it is contended that there would be greater efficiency in the cash management of the transferee company and unfettered access to the cash flow generated by the Indian company of the transferor companies with its own benefits. There are also the usual benefits arising from such a scheme such as administrative convenience by reducing the legal and regulatory compliances.
5. The Board of Directors of the respective companies considered and proposed the scheme and by a resolution dated 9.12.2009 approved the same. It is a composite scheme under sections 78, 100 to 103 and 391 to 394 of the Companies Act, 1956. I will refer to some of the provisions of the scheme which have been questioned by one of the shareholders.
6. By an order dated 8.1.2010, this Court directed the Petitioner to convene and hold a meeting of the equity shareholders for the purpose of considering the said scheme. By the said order, Mr.Justice M.H. Kania (Retired Chief Justice of India) was appointed as a Chairman of the meeting. Meeting of the secured and unsecured creditors were dispensed with. Notice of the meeting of the equity shareholders was dispatched individually to the equity shareholders along with the necessary documents. A notice convening the meeting was also advertised as directed by the said order.
7. A meeting of the equity shareholders was convened and held pursuant to the said order dated 8.1.2010. The Chairman reported the result thereat by filing his report dated 19.2.2010 along with the affidavit in verification thereof. The scrutin
