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Sequeira
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION

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COMPANY SCHEME PETITION NO.849 OF 2012
WITH

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COMPANY SUMMONS FOR DIRECTION NO.783 OF 2012

Pantaloon Retail (India) Limited .. Petitioner

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AND
COMPANY SCHEME PETITION NO.850 OF 2012
WITH

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COMPANY SUMMONS FOR DIRECTION NO.784 OF 2012
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Peter England Fashions and Retail Limited .. Petitioner
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Mr.Janak Dwarkadas, Sr. advocate a/w Mr.Ankit Lohia a/w Mr.Hemant
Sethi i/b Hemant Sethi & Co., for petitioner in CSP No.849 of 2012.
Mr.Tapan Deshpande i/b Amarchand and Mangaldas & S.A.Shroff & Co.,
for petitioner in CSP No.850 of 2012.
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Smt S.V.Bharucha a/w Ms Purnima Awasthi, for Regional Director.

Mr.Laxmipat Surana, proprietor of Mahavir Constructions present.
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CORAM : N.M.JAMDAR, J.
Friday 1 March 2013
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P.C.:

Heard learned counsel for the parties. An objection has been

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received from Mahavir Constructions. Mr.Laxmipat Surana the proprietor

of Mahavir Constructions has appeared in person.

2. By this petition sanction of the Court is sought for Scheme of

Arrangement which is annexed to the petition. The Scheme of

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Arrangement is between Pantaloon Retail India Limited- the Demerged

Company and Peter England Fashions and Retail Limited- the Resulting

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Company and their respective shareholders, creditors and Indigold Trade
and Services Limited as shareholder of the Resulting Company. The

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scheme provides for transfer by way of Demerging of the merging
Company to the Resulting Company, upon effectiveness of the scheme.

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3. The Demerged Company is diversified retail player and also has
interests in financial services, insurance, media and other businesses and
includes business of retailing fashions in apparels. The resulting Company

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is engaged in apparels business and its main business includes export of
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readymade garments.
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4. The proposed transfer by way of demerger of Demerged
undertaking of the Demerged Company into resulting Company shall
interalia enable business activities comprised in the Demerged Undertaking
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to be carried out with separate and independent management set up and

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greater focus, attention and specialisation for sustained growth. One of the
other purpose of the scheme is that Demerged Undertaking will also benefit
the combining with similar business of resulting Company and its
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shareholders resulting in enhancement of shareholder value. Further in

consideration of the demerger, the shareholders of Demerged Company will
allot shares on proportionate basis in the Resulting Company. This would
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provide the existing shareholders of the demerged Company with the option
of continuing in both the Demerged Company as well as the Resulting
Company.

5. The Indigold Traders and Services Limited and each of its

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Affiliates will make an Open Offer for shares of Demerger Resulting

Company. The Board of Directors of the Demerged Company and the

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Resulting Company have approved the Scheme by passing respective board
Resolutions which have been annexed to the petition.

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6. The learned counsel for the petitioner submits that the petitioners
have complied with the directions passed in respect of Company Summons

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for Direction and the Company Scheme Petition which have been filed in
consonance with the orders passed in respect of Company Scheme
Petitions. Accordingly, the petitioner seeks sanction of this Court for the

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proposed Scheme of Arrangement between the Demerged Company and the
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Resulting Company and their respective shareholders, creditors and
Indigold Trade and Services Limited as shareholders of the Resulting
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Company.

7. The Regional Director has filed an affidavit on 8 February 2013

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wherein the Regional Director has stated that Scheme does not appear to be
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prejudicial to the interest of shareholders and the public. The Regional

Director has made certain comments and raised certain objections in their
affidavit which are as under -
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(a) Clause 12.2 read with clause 14 of the

scheme, the authorized share capital of the Resulting
Company shall stand increased to Rs. 110,15,00,000/-. In
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this connection the Transferee Company may be directed

to comply with provisions of Section 94/97 read with
Schedule X of the Companies Act, 1956, in respect of
filing of necessary forms with the Registrar of Companies
after payment of necessary filing fee and stamp duty as
applicable on the said forms.

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(b) Clause 13 of the Scheme deals with

amendment in Main Objects Clause of the Memorandum
of Association of the Resulting Company. In this

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connection, the Transferee Company may be directed to
comply with provisions of section 40 read with section

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18 of the Act and to file amended copy of Memorandum
of Association alongwith From No.21 with the Registrar of
Companies.

(c) Clause 15 of the scheme state that on or after

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the effective date, but prior to the listing of PEFRL
shares, indigold and/or its Affiliates may make an Open
Offer to the public shareholders of PEFRL to acquire
from such public shareholders up to 26% of the issued

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post Demerger and paid up equity share capital of
PEFRL based on the price per share of Rs.175 which is
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subject to obtaining necessary approval from Regulatory
Authorities.
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(d) The deponent further respectfully submits that,
a complaint dated 14/01/2013 has been received form
Proprietor of M/s. Mahaveer Construction claiming that
he is shareholder as well as creditor of M/s. Pantaloon
Retail India Limited. In the said complaint inter alia he is
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disputing the service of creditors notice to him. He further

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informed that a legal proceedings were initiated against

the company before the Hon’ble High Court of Calcutta
for recovery of their dues. In response to the letter dated
14/01/2013 the Demerged Company forwarded its reply
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dated 21/01/2013 to the complinant. The Demerged

Company claims that the complainant is not the creditor
of the company. However, another company viz. Agre
Properties & Services Limited has given undertaking
before the Hon’ble High Court of Calcutta in the said
legal proceedings initiated by complainant. Further a
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Bank Guarantee dated 22/02/2013 has been provided by

M/s. ASPL for a sum of Rs.6.5 crores as directed by the
Hon’ble High Court of Calcutta which is annexed hereto
and marked as Exhibit-D. In this regard from the letter
dated 14/0/2013 of the complainant addressed to Regional
Director it is understood that the complainant has

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submitted his complaint to the Company Registrar of this

Hon’ble High Court. As the issue in the case is as to
whether the complainant is creditor of the Demerged

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Company or not is a fact which can be clarified by the
Demerged Company and the complainants.

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In view of the above the complainants may also be heard by
this Hon'ble High Court in the scheme proceedings. Copies
of the correspondence exchanged between complainant and
Demerged Company are enclosed hereto and marked as

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Exhibit 'E' collectively.

Save and except as stated in para 6(a), (b), (c) & (d), it
appears that the Scheme is not prejudicial to the interest of

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shareholders and public.”

8.
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As far as the observations in paragraph 6(a) of the affidavit of
Regional Director is concerned, the Resulting Company has undertaken to
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comply with provisions of section 94 / 97 r.w. Schedule 10 of the
Companies Act 1956 in respect of filing necessary forms with the Registrar
of Companies after paying necessary filing fees and stamp duty as
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applicable on said forms. The said undertaking is accepted.

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9. As far as observations made in paragraph 6(b) of the affidavit of

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Regional Director is concerned, the Resulting Company has undertaken to

comply with the provisions of section 40 r.w. Section 18 of the Companies
Act 1956 and file amended copy of Memorandum of Association along
with form 21 with Registrar of Companies. The said undertaking is
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accepted.

10. As far as observations in paragraph 6(c) of the affidavit of

Regional Director, the resulting Company has undertaken that necessary

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approval from relevant Regulatory Authorities in respect of open offer to be

made to the public shareholders of PEFRL by Indigold Trade Services Ltd.

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and / or its affiliates will be obtained. The said undertaking is accepted.

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11. As far as observations of the Regional Director in paragraph 6(d)
is concerned, it relates to the objection of Mahavir Constructions.
Mr.Surana ( the Objector ) has addressed the Court on two occasions in

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respect of his objections. He has filed his objections on 23 January 2013 as
well as an additional affidavit dated 28 February 2013.

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12. The matter was first heard on when the Objector addressed the
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Court for some time in respect of his objection. After arguing the matter for
some time he sought time to file additional affidavit and a compilation.
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Inspite of opposition of the learned counsel for the petitioner, by way of
indulgence two weeks time was granted. It was made clear that no further
time will be granted.
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13. The Objector raised objection for the grant of sanction to the
Scheme on the ground that he has certain dues against Pantaloon Retail
India Private Limited, (PRIPL) the petitioner / Demerged Company. The
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Objector sought to advance arguments in detail in respect of his claim. He

submitted that he is landlord of a Mall where the petitioner-PRIPL was in
occupation of part of the premises. According to him there are dues to the
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tune of almost Rs.220 crores which are payable by petitioner-PRIPL. He

submitted that he has instituted arbitration proceedings against the
petitioner-PRIPL. He submitted that in proceedings filed under section 9 of
the Arbitration Act, Calcutta High Court has found that his claim was prima
facie justified and has directed the petitioner-PRIPL to submit a bank

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guarantee of Rs.6.5 crores. The Objector submitted that the order directing
the petitioner -PRIPL to deposit the bank guarantee was challenged by the

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petitioner in the Apex Court and the challenge has failed. He submited that
petitioner -PRIPL has taken a stand that Mahavir Constructions is not their

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creditor and if the scheme as in present form is allowed then it will
seriously prejudice his rights as a creditor. He also sought to urge that the
Scheme is a fraudulent exercise on the part of the petitioner-PRIPL and by

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way of illustration he tried to show that in the balance sheet Rs.58 crores
have been shown as expenses. He submitted that inspite of Mahavir
Constructions being one of the main creditors, the petitioner has not shown

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name of Mahavir Constructions in the list of creditors. He submitted that
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even as a shareholder of the Company he has certain objections. He further
submitted that the orders dated 24 August 2010 and 25 March 2010 passed
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by this Court in respect of demerger of the petitioner-PRIPL are also
obtained by fraud by suppressing material facts and he has moved
Company applications for recalling those orders.
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14. The petitioner has filed a reply dealing with the objection raised.
The learned senior counsel for the petitioner submitted that there is a
serious dispute regarding the liability of the petitioner Company towards
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the dues of Mahavir Constructions. The learned counsel submitted that

initially in the Arbitration proceedings Mahavir Constructions had sought
recovery of 22 crores and later on the claim has been inflated to 220 crores.
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Learned counsel for the petitioner-PRIPL submitted that the said Mahavir
Constructions is not the creditor of petitioner PRIPL and in any case since
the petitioner-PRIPL is already been made a party in the Arbitration
proceedings all the disputes raised by the Objector can be raised in the
pending arbitration proceedings, as well as the proceedings that the

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Objector intends to take up. The learned counsel further submitted that if
the claims of the Objector are kept open to be argued on merits then he

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cannot in any manner be aggrieved by the sanctioning of the Scheme.
Learned counsel submitted that there are absolutely no details to allege

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fraud except repeatedly using the phrase 'fraud' in the oral arguments and
the rules of pleadings require that specific particulars must be stated if
ground of fraud is to be agitated. Learned counsel submitted that the

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requisite majority of the shareholders, the creditors as well as the Regional
Director have found the Scheme to be proper and the objections by the
Objector are raised only with a view of cornering the Company on the eve

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of end of financial year to make the payment of a debt which is disputed.
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The learned counsel has relied on receipt of this Court laying down the
scope of objections by the creditors to sanctioning of Company Scheme
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Petitions.

15. Before the objections of the Objector are adverted to it is

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necessary to notice the scope of inquiry by the Court while sanctioning the
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Schemes.

16. As laid down by the Apex Court in the case of Miheer H.

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Mafatlal V. Mafatlal Industries Ltd. reported in (1997) 1 Supreme

Court Cases 579, when a Scheme for Arrangement, merger, amalgamation
is presented before the Court for sanction, the jurisdiction of the Court
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while sanctioning the scheme is supervisory and not appellate. Once it is

established that all requisite statutory compliances have been made, and the
scheme is not against public interest, and that requisite number of
shareholders accepted the scheme, and that the decision of the majority was
fair and proper, then the Court cannot refuse to sanction the scheme. The

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parties to the scheme in their wisdom and commercial interest arrive at

these decisions and the Courts do not have expertise nor jurisdiction to

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dissect the scheme, and reject it. If such a jurisdiction is exercised it would
be an appellate jurisdiction which is not vested in the Court while

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considering sanction of the scheme.

17. The creditors of the Company cannot use the proceedings for

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sanction of scheme, as a weapon to pressurise the Company to pay disputed
debts. The learned counsel for the petitioner has relied upon the decision of
learned Single Judge of this Court in Company Scheme Petition No.377

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of 2011 wherein the learned Judge observed as under -
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“9. To my mind, the objector or intervener cannot,
on the basis of the claim which has been made against the
transferee company, succeed and oppose the scheme when
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such a claim is pending adjudication. Once it has been
pointed out that the sum is a disputed liability and it is being
adjudicated, then, to my mind, it will not be possible to
withhold sanction and approval to the scheme only on
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account of such a claim. In the affidavits that have been

filed by the parties, they have placed their own version in
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support of their claims and counter claims. This Court is

not a forum which could adjudicate and decide the same.
Admittedly, the parties are before the Arbitral Tribunal
which has taken cognizance of these versions and they are
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being adjudicated. Nothing prevents the intervener/objector,

on the basis of the contents of the balance-sheet in making
an application for securing the alleged admitted sum. Once
such a course is available under the Arbitration and
Conciliation Act, 1996 and even thereafter when the
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intervener/objector secures and obtains an award

crystalising the claims, then, all the more there is no reason
to withhold the approval and sanction to the scheme.
Nothing has been pointed out in the statutory provisions
relied upon, which would indicate that this Court, can on the
strength of a disputed claim, withhold the sanction and
approval to the scheme”.

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18. Similar view is reiterated in Scheme of Amalgamation of Zee

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Interactive Multimedia Limited – 2002(4) Bom.C.R. 137; Scheme of
Amalgamation of Sanvijay Aloys Pvt. Ltd. -2004(6) Bom.C.R. 481 and

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Scheme of Amalgamation between Mayfair Ltd. And Zodiac Clothing
Co. Ltd.-2004(2) Bom.C.R. 235.

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19. In this backdrop the above legal position the scope of the
objections raised by the Objector need to be considered. The petitioner has
filed a reply to the objection in which the claim of the Objector is seriously

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disputed. It is also disputed that the Objector is a creditor of the petitioner-
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PRIPL. The petitioner has also challenged quantification of the claim of
Rs.225 crores, which according to petitioner is grossly inflated and
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disproportionate and cannot be possibly so high for a lease rent, even
assuming the Objector can claim an amount towards the lease rent. Be that
as it may, the claim made by the Objector is pending adjudication in the
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Arbitration proceedings. In the Arbitration proceedings the petitioner-

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PRIPL is a party. It is open for the objector to proceed against the

petitioner-PRIPL in the said Arbitration proceedings to establish his claim.
The objector states that this Court should direct the petitioner-PRIPL to pay
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the amount claimed by him or rule on merits of his claim and record prima
facie findings in favour of his claim.
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20. Once the Objector has resorted to getting his dispute regarding
the debts resolved before an arbitral forum, it is not necessary for this Court
to give a finding regarding claim of the objector. If all contentions of the
objector are kept open, that is enough safeguard for the objector and his
objection cannot therefore, be an impediment in the way of sanctioning of

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this Scheme. Accordingly the merits of the claim of the Objector are kept
open and it will be open to the Objector to proceed against the petitioner-

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PRIPL. Contentions of both parties are kept open. The dispute between
the parties as to whether the objector is in fact creditor or the petitioner-

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PRIPL, is also kept open and it will be open for the objector and the
petitioner to agitate that issue in the arbitral proceedings.

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21. As far as the ground of fraud alleged by the objector is
concerned, the learned counsel for the petitioner is right in contending that
fraud has to be specifically pleaded and proved. There are no particulars in

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the objections which are lodged nor there are any particulars in the affidavit
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in rejoinder. The objector was given two weeks time to file additional
affidavit but he has not placed any particulars regarding fraud. In any case
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requisite majority of shareholders, the other creditors and the Regional
Director of Companies have found the Scheme to be proper. The
submission of the objector in capacity of shareholder is concerned no such
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objection is raised either in the statement of objection filed as well as in the

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affidavit in rejoinder. No other shareholder has come forth to object. It

appears that the entire attempt of the objector is to raise some objection or
the other to pressurise the Company to pay the debt which is under
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adjudication in Arbitration proceedings.

22. As far as the challenge to the orders of demerger dated 24 August

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2010 and 25 March 2010 is concerned, the objector states that Company
applications for recalling these orders are being filed today. There is
absolutely no explanation as to why applications are moved after three
years. Apart from this position, the learned counsel for the petitioner-
PRIPL is right in contending that at the most if the objector succeeds in the

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challenge the petitioner-PRIPL will again become sub-licensee of the

objector and that will not make any difference to the claim of the objector

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as the petitioner Company is already made a party in the Arbitration
proceedings.

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23. The objector submitted that pursuant to the order by the Calcutta
High Court, the petitioner-PRIPL was to submit a bank guarantee to the

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tune of 6.5 crores and inspite of making a statement to this Court on the last
date, they have not deposited the said bank guarantee. He has produced
photocopy of a letter of Registrar of Insolvency High Court of Calcutta

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dated 27 February 2013 to that effect. The learned counsel for the
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petitioner-PRIPL states that the said bank guarantee has been already
lodged by the Agre Properties and Services Limited. Learned counsel for
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the petitioner-PRIPL submits that in the affidavit dated 11 February 2013
filed by Mr.Virendra Samani, the authorised signatory, the petitioner-
PRIPL has stated on oath that said bank guarantee has already been
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furnished. The learned counsel for the petitioner reiterates the position that
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said bank guarantee has been furnished. Since the statement has been made
on oath and also in the Court by the learned counsel, there is no reason not
to accept the said statement. The statement is accepted. If the statement is
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found to be incorrect, necessary consequences will always ensue.

24. In view of the above, the objections raised by the Objector

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cannot, in law as well as on facts, be an impediment in sanctioning of the

present Scheme. Considering the petition perusal of scheme as well as the
affidavit filed by the Regional Director the Scheme does not appear to be
against public interest neither it appears to be contrary to any public policy.

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25. Since all requisite statutory compliances have been fulfilled the
Company Scheme Petition No.849 of 2012 filed by the Demerged

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Company is made absolute in terms of prayer clause (a) to (c) and
Company Scheme Petition No.850 of 2012 filed by Resulting Company is

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made absolute in terms of prayer clause (a) and (b).

26. The petitioner-PRIPL Company shall act on a copy of this order

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duly authenticated by Company Registrar, High Court, (O.S.) Bombay
with concerned Superintendent of Stamps, for the purpose of adjudication
if any, on the same within 60 days from the date of the order along with the

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Scheme of Arrangement. ig
27. The petitioner Pantaloon Retail India Pvt. Limited is directed to
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file copy of this order along with copy of Scheme of Arrangement with the
concerned Registrar of Company electronically along with e-form 21 in
addition to physical copy, as per the provisions of the Companies Act.
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28. The petitioner in the Company Scheme Petition will pay costs of
Rs.10,000/- each to Regional Director Western Region Mumbai. Costs to
be paid within four weeks from today.
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29. Filing and issuance of the drawn up order is dispensed with.

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30. All concerned authorities to act on a copy of this order along with
Scheme duly authenticated by the Company Registrar, High Court (O.S.),
Bombay. untitled folder

31. At this stage, the objector seeks stay of this order sanctioning

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the Scheme, for period of three weeks. The learned counsel for the
petitioner-PRIPL opposes the prayer and submits that the Scheme has been

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sanctioned by requisite majority as well as all the statutory authorities and
since the objection of the objector is kept open to be agitated in the

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concerned forum, there is no reason why this sanction of Scheme be
detained any further. He submits that in view of the end of financial year
which is only four weeks away, grant of any stay at this stage will seriously

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prejudice the petitioner-PRIPL.

32. Since I have kept all the contentions of the objector open and the

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objector is already prosecuting his Arbitration proceedings and that the
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Scheme is found by me to be proper, and also considering the fact that end
of financial year is only four weeks away and that stay of three weeks at
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this stage will cause serious prejudice to the petitioner-PRIPL the request of
the objector to stay this order for a period of three weeks cannot be
entertained.
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Request is accordingly refused.

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N.M.JAMDAR, J.
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