I.

Cases
A. AKSHAY JHUNJHUNWALA

1. Akshay Jhunjhunwala & Anr. v. UOI through Ministry of Corporate Affairs 

 Brief facts
The Petitioner, a corporate debtor was of the opinion that the distinction between
an operational creditor and financial creditor with regard to insolvency
proceedings in not rational. A financial creditor has a right to be in the Committee
of Creditors (COC) of a corporate debtor in an insolvency proceeding. An
operational creditor, although such creditor may have a claim far in excess than
that of the financial creditor, will have no say in the Committee of Creditors. In a
given situation, a corporate debtor may have only one financial creditor. Such
financial creditor will constitute COC, without any participation from any other
category of creditors of a corporate debtor including that of an operational
creditor, although the number of operational creditors may exceed the number of
financial creditors. Such a distinction between the two categories of creditors in
respect of the same financial debtor is unjust, unfair, impracticable, irrational and
ought not to be countenanced by a Court. 

 Content of scheme - (no merger)

 Issues 
1. Whether the distinction made between financial creditor and operational
creditor in respect of corporate debtor is of rational and intelligible basis?
2. Whether Section 7,8, and 9 of the IBC are ultra vires to the constitution?  
3. Whether the treatment of a financial creditor on a pedestal higher than an
operational creditor  is just and proper or whether the same offends any
provisions of the Constitution ?
 Prevailing law
Section 7,8,9  of the IBC; The Constitution of India
  Decision of court
Financial and operational creditors are defined in IBC, 2016. The definitions of a
financial and an operational creditor as obtaining in the Code of 2016 can be said
to have certainty and exactitude. The classification made by the Code of 2016
amongst the creditors of a company is on reasonable differential. The differential
introduced by the Code in respect of a creditor of a company does not offend any
provisions of the Constitution of India. At least the same is not the argument of
the parties before the Court. What has been argued is that, the differentiation
between the two creditors is such that, one of the classified creditors, that is to
say, the financial creditor takes precedence over the operational creditor. The
rationale of giving a particular treatment to a financial creditor in the process of
insolvency of a company under the Code of 2016 cannot be said to offend any
provisions of the Constitution of India.
B. WIPRO

WIPRO TECHNOLOGIES AUSTRIA

Brief Facts

 A scheme of amalgamation was approved by board whereby Wipro Technologies Austria

GmbH (Co. 1), Wipro Information Technology Austria GmbH (Co 2), Newlogic Tech
SARL (Co. 3) and Appirio India Cloud Services Ltd (Co. 4) was to be merged with
Wipro Ltd. (Transferee company)
 Petition fled to the tribunal seeking direction to dispense with the meeting of Equity
shareholders and unsecured creditors of the transferor company and convene equity
shareholders and unsecured creditors of the transferee company 4, and to convene the
meeting of equity shareholders and unsecured creditors of Transferee Company.
 Tribunal allowed the said petition- asked them to issue notices to all relevant statutory
authorities (RD, ROC, OL, IT Dept and other relevant authorities). This was done-
publication in English and regional newspaper too was done.

Contents of scheme

Issues
Issues raised

 Regional Director made the following observations

a. Even though appointed date is mentioned as S.232(6), the effective date is not
mentioned.
b. Clubbing of authorised capital of transferor company 4 with transferee company is
mentioned in a clause and it was also stated that transferee co. is required to pay any
fee or stamp duty for its increased authorised capital- in this regard transferee
company shall comply with S.232(3)(i) of CA, and the transferee has to pay the
differential fee if any setting off the fee already paid by the Transferor company on its
authorised capital.
c. Transferee company is required to take prior approval of reserved bank before filing
petition for sanction (acc to S.234(2) of CA read with Rule 25A)
d. Transferor company 4 and transferee company have related party transactions as per
the 2018 balance sheet. Petitioner however has submitted an affidavit showing
compliance with S.188 through an affidavit.
e. As per directors report, company had complied with CSR Requirements under S.135.
Petitioner company also submitted a compliance affidavit to this effect. (learn amount
spent on csr if need be)
f. There are no prosecutions, complaints, pending in this office on the transferee
company and the transferor company no. 4.

 Regional Director also made a number of important observations about the scheme
a. Even though appointed date is mentioned as S.232(6), the effective date is not
mentioned. (Same as regional director)
b. Clubbing of authorised capital issue- pointed out again
c. Approval from RBI needed.

 RBI made a statement- it is the duty of the companies undergoing the

compromise/arrangement amalgamation to comply with the requirements of various laws
including rules, regulations and guidelines prescribed by the RBI- companies may have
to comply with the FEMA and rules thereunder.
Response

 Transferee here responded (to RD and ROC)

a. Effective date shall be the last of the dates on which all applicable steps referred to in
clause 18 of the scheme are completed, including filing copy of order of tribunal
sanctioning the scheme, with the RoC. The scheme shall take effect from the
Appointed Date (April 1, 2018) and shall be operative from the effective date.
b. As per clause 11, authorised share capital of Appirio India Cloud Solutions shall
stand combined with Wipro’s authorised share capital. Company further undertakes
to pay additional fees and other expenses for increase in authorised share capital upon
scheme being approved by tribunal.
c. Transferee received no objection from reserve bank

Other facts and issues (not too important)

 Official liquidator gave two directions- he wanted to appoint a Chartered Accountant

from a panel approved by the HC of Karnataka for scrutiny of books and records of the
company. The company would be required to pay the professional fees of the said
accountant.
 Official Liquidator filed a report of the CA (who was appointed pursuant to the previous
order)- according to them all the accounts have been maintained, and business was not
conducted in a manner prejudicial to the members or the public.
 Tax authorities- have expressed no objection for the proposed amalgamation
 Transferee company later filed a compliance affidavit stating
a. Approval from Reserve bank has been recieved
b. Regarding approval from BSE and NSE (stated that approval is not required due to a
relevant SEBI notification)
c. Undertaking filed that CCI is not required to be fulfilled.
d. Transferor companies being foreign companies have complied with relevant
requirements as per their requisite local laws.

Prevailing law

Decision of court
 Tribunal ordered
a. Approval does not in any way imply exemption from payment of any dues
b. No appropriate authority is barred from taking any action for non compliance,
violation or offences under the scheme
c. Whole property, rights and powers of transferor company are now to be transferred to
transferee company, without obstructing compliance of depositing any outstanding
tax dues
d. Order shouldn’t be construed as exemption from payment of stamp duty, taxes or
other charges
e. All pending proceedings shall be continued by or against the transferee company
f. All employees of transferor company will become employees of the transferee
company
g. Tax implications arising out of the scheme is subject to the final decision of tax
authorities- these are to be binding
h. They further have to ensure that
1. Implementation of scheme will be in compliance with all relevant laws. Company
was further specifically asked to ensure compliance with regulation 16 of the
FEMA as amended from time to time.
2. Transferee company shall be in compliance with S.232(3) of the Companies act
and transferee company has to pay differential fees if any after setting off the fee
already paid by the transferor companies on its authorised capital
3. Compliance in respect of related party transactions and CSR to be ensured
4. Furnishing compliance certificate of regulatory requirement of respective
jurisdictions to be done
5. Payment of dues to IT Dept to be made
6. Confirmation certificate that the transferee company has complied with all
relevant provisions and regulations of SEBI, NSE and BSE to be shown.
i. Within 20 days of receipt of order- certified copy along with a copy of scheme of
arrangement to be delivered to ROC.
j. Appointed date as per scheme- 1st April 2018
 k. Transferee should ensure compliance with affidavits and will submit quarterly/annual
status of compliance through an affidavit.
l. Registrar of companies shall ensure that stamp duty fixed is paid on time
m. After transfer- transferor companies have to transfer the relevant books of account
and other documents.

C. IDEA CASE

Idea Cellular Ltd., NCLT Ahmedabad Bench (2018)

1. Brief Facts
- A petition under Sections 230-232 filed before the Tribunal for approval of scheme of
amalgamation and arrangement between Vodafone Mobile Services Limited,
Vodafone India Limited and Idea Cellular Limited (transferee company).

2. Content and purpose of scheme

- Consolidation of telecommunication businesses resulting in expansion of business
- Creation of greater value for shareholders and all stakeholders
- Availability of combined resources and consequently economies of scale,
rationalization of network infrastructure, creation of efficiencies and optimization of
capital
- Higher spectrum availability and larger single radio access network deployment
- Harmonization of sales and service channels
 - Streamlining of regional and nationwide IT systems and development of a common IT
system
- General and administrative cost reduction and productivity gains by pooling of
financial, managerial and technical resources, personnel capabilities, skills, expertise
and technologies of parties

3. Issues in fact and in law (not exactly issues but more of compliances and directions)
- Regional Director observations
i. P be directed to place on record all relevant facts for issuance of equity shares to
transferor co. 1 (TC1) and subsequent cancellation by P
ii. P be directed to take compliance of Sec. 232(3)(i) of the Companies Act, 2013 and
pay fees accordingly
iii. P to comply with SEBI circulars as well as observations by BSE and NSE in their
letters
iv. P to comply with FEMA guidelines and RBI
v. P be directed to obtain licenses, approvals and other permission from any
regulatory
vi. P be directed to place on record all relevant facts and undertake compliances of
Dept. of Telecommunications.
vii.P be directed to place on record all relevant facts and undertake compliances of CCI
viii. P be directed to give an undertaking to the effect that the reserves so created, if
any, shall not be available for distribution of dividend and all, P shall comply with
AS-14
ix. P be directed to place on record the material to show scheme is in interest of public
shareholding

- Issue of shares
i. P to issue to TC1 shareholders 89% of issued, subscribed and paid-up share capital
on a fully-diluted basis
ii. P to issue to TC2 shareholders 100% of issued, subscribed and paid-up share capital
on a fully-diluted basis
 iii. As on effective date, outstanding ESOPs of P shall be added to the then paid-up
equity share cap of P, and no. of shares issued shall be calculated accordingly

- SEBI compliances
i. Received NOC from BSE and NSE
ii. Sent notices to SEBI, BSE and NSE
iii. Not received representation from any if the three. SEBI’s letter observed comments
of compliances already adhered to by P

- CCI requirements complied with

- P stated public shareholding is not getting reduced under the scheme – only % holding
will change. SER arrived at by independent valuers and same has been approved by
shareholders.

- P given liberty in delay of filing for telecom license and given 30 days from time to
time.

- One observation by NCLT came up with respect to a determination to be made in

another case before the Bom HC w.r.to whether Vodafone is a representative assessee.
Income tax shall be decided accordingly after petition is decided by HC. Until then,
other compliances under IT are done.

4. Decision of Court - elaborate on what ground it was accepted / rejected

The NCLT decided that scheme is genuine based on the following compliances by P:

 Filed order to convene meetings of Equity Shareholders, Secured Creditors and

Unsecured Creditors – NCLT granted – individual notice of meetings + adv – approved
by all 3
  Issuance of notice to
a. CG through RD
b. RoC
c. Income Tax authories
d. GoI
e. Dept. of Telecommunications
f. CCI
g. SEBI
h. RBI
i. Official Liquidator
Also published hearing of petitions in the newspaper

Thus, scheme is genuine and bona fide and in the interest of shareholders and creditors. Scheme
accepted but santion subject to order of NCLT, Mumbai Bench in TC Vodafone India Limited

D. VODAFONE CASE

Brief facts of the case :

Vodafone filed a petition for reduction of share capital under Section 66 of Companies
Act, 2013 in NCLT Mumbai. Article 14 of AOA allowed the company to go for the
reduction of the share capital. The notice of the scheme had been given to (a) Central
Govt, (b) SEBI, (c) ROC, (d) Creditors. Scheme was passed by the shareholders in an
extraordinary general meeting for alteration of MOA, by reducing its issued, subscribed
and paid up equity share capital. Regional Directorate (RD) as a part of the CG submitted
a report with few observations regarding the scheme. Vodafone in return, filed an
Affidavit stating all the compliances with RD’s report.

Contents of the Scheme:

The petition under Section 66 of CA, 2013 is filed for confirmation of a special
resolution, passed at the Petitioner's Extraordinary General Meeting held on 14
September 2017, for alteration of its Memorandum of Association, by reducing its issued,
subscribed and paid-up equity share capital from Rs.28,132,958,230 (Rupees Twenty
Eight Billion One Hundred Thirty Two Million Nine Hundred Fifty Eight Thousand Two
Hundred Thirty) divided into 2,813,295,823 (Two Billlon Eight Hundred Thirteen
Million Two Hundred Ninety Five Thousand Eight Hundred Twenty Three) equity shares
of Rs.10 (Rupees Ten) each to Rs.15,011 ,746,520 (Rupees Fifteen Billion Eleven
Million Seven Hundred Forty Six Thousand Flve Hundred Twenty) divided into
1,501,174,652 (One Billion Five Hundred One Million One Hundred Seventy Four
Thousand Six Hundred Fifty Two) equity shares of Rs.10 (Rupees Ten) each, to be
effected by cancelling an aggregate of 1,3I2,L21,171 (One Billion Three Hundred
Twelve Million One Hundred Twenty One Thousand One Hundred Seventy One) equity
shares of Rs.10 (Rupees Ten) each of the Petitioner, allocated among the shareholders
pro rata to their shareholding in the Petitioner, and distributing in consideration therefor,
an aggregate of 500,504 (Five Hundred Thousand Five Hundred Four) equity shares of
Re.1 (Rupee One) each held, directly or beneficially, by the Petitioner in Indus*,
comprising 42% of the issued, subscribed and paid-up share capital of Indus, to the
shareholders of the Petitioner pro rata to their shareholding in the Petitioner.

Indus Towers Ltd – It is another company in which Vodafone has a stake.

Decision of the tribunal

Tribunal approved the scheme of reduction of capital of the petitioner. They further
directed the petitioner to register/file/lodge a certified copy of this order along with Form
of Minute with the concerned ROC both in physical and electronic form, in manner
prescribed by the relevant provisions of the companies act, 2013 within 30 days of this
order. The ROC shall, within 30 days of delivery of the certified copy of the order of the
Tribunal, and of the Form of Minute, issue a certificate to that effect to the petitioner.
The Petitioner is further directed to cause publication of notice regarding registration of
order and Minutes of reduction by the concerned ROC, Mumbai, in two newspapers, viz,
‘Economic Times’ and ‘Maharashtra Times’ in Marathi language within 14 days of
registration of order. Notice, in the form of published, shall also be uploaded on the
website of the Petitioner.
II. Mergers

A. VODAFONE IDEA
1. Transferor- idea. Transferee - Vodafone Indi
2. Effective date
a. 31st of august, 2018
3. Appointment
a. apr 1, 2018
4. Main object
a. simplification of the corporate structure;
b. better, efficient and economical management and control over the running of
businesses of the subsidiaries;
c. elimination of duplication in administrative cost and multiple record keeping thus
resulting in cost savings, increased operational efficiencies and administrative
convenience;
d. strengthening the financial position and ability of the Transferee Company by
raising resources against the assets owned by the Transferor Company, such as
investments in mutual funds, Indus Towers Limited, etc., including monetisation
of such assets; and
e. creating better synergies across the group, optimal utilization of resources and
obtaining economies of scale.
5. Share exchange ratio
a. A
6. Jurisdiction
a. NCLT- Ahmedabad/ ROC-Ahmedabad
b. Income Tax Authorities
c. SEBI
 d. TRAI
e. Regional Director
f. Reserve Bank of India

B. JET-ETHIAD

1. Purchase 272,63,372 Equity Shares (24%) by Ethiad in Jet, face value of Rs.10/- bought
at the value of Rs. 754.74/share. Total of 2060 crore
2. Foreign Investment Promotion Board- granted approval
3. CCI Passed order stating no adverse effect on competition in India
4. SEBI in an order dated 8th May, 2014 held that Takeover Code shall not be triggered in
this case
5. The sale will help Jet reduce its debt from $2.1B to $1.5b
6. Object/ Benefit/ Synergy
a. Alliance will bring significant benefits to the Indian economy, both in terms of
growth, job creation, trade and tourism
b. Jet Airways passengers from 23 cities in India to gain direct access to an
expanded global network
c. The strategic alliance between the two airlines will bring additional traffic,
frequencies and revenues to metro airports, as well as other airports of AAI
d. New India-Abu Dhabi routes and Jet Airways to establish a Gulf gateway for
flights to the US, Europe, Africa and the Middle East
e. This strategic investment with a US$600 million commitment from Etihad
Airways will help further strengthening of Jet Airways financial position.

For more detailed reading of the issue- http://www.nishithdesai.com/information/research-and-

articles/nda-hotline/nda-hotline-single-view/article/competition-commission-of-india-approves-
jet-etihad-combination.html?no_cache=1&cHash=1caec18e8828475d9184e79621d6d182
https://www.business-standard.com/article/companies/all-you-need-to-know-about-jet-etihad-
deal-113112000302_1.html

https://www.forbes.com/sites/naazneenkarmali/2013/04/25/etihad-buys-stake-in-indias-jet-
airways-amid-protests/#4bcd892e37b9

C. Hindalco-Novelis

1. Who is the transferor and transferee?

Transferor= Novelis Inc

Transferee= Hindalco

2. What is the appointed date and effective date?

The acquisition on Novelis by Hindalco was announced on February 11, 2007 while the actual
acquisition was made on May 15,2007.

3. Jurisdiction

Ontario Superior Court of Justice ,Canada

4. What is the main object/content for this scheme?

Object:

The acquisition would further internationalize its operations and increase the company's global
presence. By acquiring Novelis, Hindalco aimed to achieve its long-held ambition of becoming
the world's leading producer of aluminum flat rolled products. Hindalco had developed long-
term strategies for expanding its operations globally and this acquisition was a part of it. Novelis
was the leader in producing rolled products in the Asia-Pacific, Europe, and South America and
was the second largest company in North America in aluminum recycling, metal solidification
and in rolling technologies worldwide.

The Deal
AV Metals purchased 100 percent of the issued and outstanding common shares of Novelis at
US$ 44.93 per share, amounting to US$ 3.6 billion. Hindalco paid a premium of 16.6 percent on
the closing price of Novelis' stock. Apart from equity purchase, Hindalco also acquired Novelis'
debts to the tune of US$ 2.4 billion.

The root cause of the acquisition of a global heavy- weight, NovelisInc in year 2005 the
substantial loss incurred by it year 2006. With global presence, shock of the sudden increase in
world's Aluminum prices was also of large scale. Between September 30 2005 and 2006, the
world's Aluminum prices witnessed an appreciation of 39% in its prices which it was not able to
pass on to its customers globally owing to their earlier contract and commitments. Consequently,
a net loss of USD 275 million in year 2006 against the net income of USD 90 million in At the
domestic forefront of Hindalco Industries year 2005 was incurred by it.

Correspondingly, on another front Hindalco Industries Ltd was reflecting a fortified and
impressive position posting year on year profits. Its PAT increased from Rs.686 crore in 2002 to
Rs.2654 crore in year 2007.

Hence, the two contrasting positions of two competitors offered an attractive option to Hindalco
Industries Ltd to make a global imprint by acquiring Novelis Inc. in year 2007.

Hindalco acquired all 75,415,536 outstanding common shares of Novelis at a price of USD 44.93
per share. The deal terminated all outstanding stock options and other equity incentives in
exchange for the cash payments. Also, Novelis'debt of USD 2.8 billion was acquired by
Hindalco at a net cost of USD 6.2 billion. The acquisition of Novelis was actually made by the
acquisition subsidiary of Hindalco, namely AV Metals according to the agreement entered on
February 10, 2007. Subsequent to the acquisition, immediately, the common shares of Novelis
were the common shares of Novelis were transferred from AV Metals (Hindalco's subsidiary) to
its wholly-owned subsidiary AV Aluminum Inc.

5. Synergy

The combination of Hindalco and Novelis will establish a global integrated aluminum producer
with low-cost alumina and aluminum production facilities combined with high-end aluminum
rolled product capabilities. The complementary expertise of both these companies will create and
provide a strong platform for sustainable growth and ongoing success.
This will not only help Hindalco penetrate highly valued US and other western markets (Novelis
has operations in 11 countries) but also help the shareholders to regain their investment (Novelis
is presently a loss making company).
Both the companies involved in the merger action are present leaders in their respective markets;
Hindalco in the low cost aluminum production and Novelis in the aluminum rolled products.

The most important synergy that the companies can be looking for with this merger is the fact
that Novelis is a producer of aluminum products whereas Hindalco is the lowest cost base metal
producer in the world as far as aluminum is concerned. Before the merger the issue with Novelis
was to procure raw material from the market, which it converts into value-added products at the
most reasonable prices. Hindalco on the other side has announced capacity expansion plans in a
major way in the coming three to five years. Once that is done, it can supply the raw material to
Novelis at a very economic cost as Novelis does not produce the inputs to its process (aluminum)
in part or whole. This will help Novelis in bringing down its cost of production, particularly at a
time when metal prices, particularly aluminum are running strong, which in turn will help
Novelis to improve upon its margins and it will get reflected in the balance sheets of both the
companies.

Ref:

http://www.icmrindia.org/casestudies/catalogue/Business%20Strategy/Hindalco%20Acquisition-
Novelis-Business%20Strategy%20Case%20Study.htm

http://effulgence.rdias.ac.in/user/article_pdf/article_15_Vol2.7.pdf

http://nrao-m-a-handbook.blogspot.com/2007/10/acquisition-of-novelis-by-hindalco-case.html?
m=1

D. Tata- Corus

1. Who is the transferor and transferee?

Transferor: Corus
Transferee: Tata Steel

2. What is the appointed date and effective date?

The official declaration of the completed transaction between the two companies was announced
to be effective by Court of Justice in England and Wales and consistent with the Scheme of
Arrangement of the Tata Steel Scheme on April 2, 2007. The process started on September 20,
2006 and completed on July 2, 2007

3. Jurisdiction

High Court of Justice in England and Wales

4. What is the main object/content for this scheme?

Object:

As stated by Tata, the initial motive behind the completion of the deal was not Corus’ revenue
size, but rather its market value. Even though Corus is larger in size compared to Tata, the
company was valued less than Tata (at approximately $6 billion) at the time when the deal
negotiations started. But from Corus’ point of view, as the management has stated that the basic
reason for supporting this deal were the expected synergies between the two entities. Corus has
supported the Tata acquisition due to different motives. However, with the Tata acquisition
Corus has gained a great and profitable opportunity to make an exit as the company has been
looking out for a potential buyer for quite some time.

The deal:

The deal between Tata & Corus took place at a price of 608 pence per ordinary share in cash.
This deal is a 100% acquisition and the new entity will be run by one of Tata’s steel subsidiaries.
The total value of this acquisition amounted to ₤6.2 billion (US$12 billion). Tata Steel the
winner of the auction for Corus declares a bid of 608 pence per share surpassed the final bid
from Brazilian Steel maker Companhia Siderurgica Nacional (CSN) of 603 pence per share

5. Synergy
Most experts were of the opinion that the acquisition did make strategic sense for Tata Steel.
After successfully acquiring Corus, Tata Steel became the 5th largest producer of steel in the
world, up from fifty sixth position. There were many likely synergies between Tata Steel, the
lowest cost producer of steel in the world, and Corus, a large player with significant presence in
value added steel segment and a strong distribution network in Europe. Another benefit to Tata
Steel was a fact that it would be able to supply semi-finished steel to Corus for finishing at its
plants, which were located closer to the high value markets. Additionally, an obvious come out
of large-scale consolidation- would be the synergies of joint procurement. Economies of scale
would give more strength during raw material purchase negotiation and also while implementing
product changes. All the synergies were expected to increase the merged entities profitability
further.