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| Madras HC asked to take up Subhiksha merger plea first |
| Press Trust of India / New Delhi Nov 24, 2009, 20:30 IST |
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The Supreme Court today asked the Madras High Court to first hear on Thursday the amalgamation plea of cash-strapped retail chain Subhiksha Trading Services with its subsidiary Blue Green Construction and Investments (BGCIL).
The retailer was forced to shut its network of supermarkets across India due to acute financial crunch.
A Bench, headed by Justice S H Kapadia, while disposing of the petition filed by Cash and Carry Wholesale Traders (C&C), a subsidiary of the retailer, asked the High Court to take up amalgamation proceedings before the winding up plea.
"...No reason to interfere in the SLP except requesting the company court to take up for hearing on November 26 the scheme of amalgamation in the first place... if the court finds merit in the context of financial viability, depending on the view of the company court it will look into the scheme of arrangement.
"However, if the court finds the amalgamation is not viable, then it will take up the winding up case...," Justice Kapadia said.
He further said the high court should not be influenced by any remarks made by the apex court.
Challenging the high court verdict that dismissed Subhiksha's scheme of arrangement proposal, C&C said no useful purpose would be served by the winding up of the company without exploring the possibility of settlement scheme with the creditors.
Senior counsels C A Sundaram and Mukul Rohtagi, appearing for Kotak Mahindra Bank and Hindustan Lever, respectively, said they have no objection if the High Court decided the amalgamation issue prior to taking up winding up petitions.
C&C senior counsel Ashok Desai said it would be able to infuse funds to the tune of Rs 250 crore only after merger.
However, the Bench was not impressed by Desai's arguments and wanted to know the source of these funds. It further went on to say that C&C can reveal the name of foreign investors which intended to infuse funds in a "sealed envelope".
C&C, which is a listed company, said the high court's approach in dismissing its plea was "erroneous" as it was BGCIL and the sponsor which would infuse the required Rs 250 crore in the ailing company and the same could be done only after the merger scheme was approved.
C&C submitted that the impugned high court order has the effect of shutting out all efforts to revive the company which otherwise is viable as proposed by the scheme.
C&C in its petition said the board of directors of BGCIL and Subhiksha had approved the merger scheme in June last year whereby all the assets and liabilities of the retailer were taken over by the former and the new entity was to be named as Subhiksha.
It said that if the court passed orders on various proposals regarding corporate debt restructuring and scheme of settlement with the creditors, it would adversely prejudice the interests of Subhiksha and the petitioner as a shareholder.
Even the Subhiksha's shareholders had also passed a resolution authorising its Board of Directors to enter into a business arrangement with BGCIL, it said.
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