Aeroflex International Limited Vs

Justice P.N. Deshmukh, Member (Judicial)

The Bench is convened by video conference.

Heard the Learned Counsel for the Petitioner Companies. No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition to the said Scheme.

The sanction of the Tribunal is sought under Sections 230 to 232 of the Companies Act, 2013 and other relevant provisions of the Companies Act, 2013 and the rules framed thereunder for the Scheme of Amalgamation of Aeroflex International Limited, Transferor Company No.1 and Italica Furniture Private Limited, Transferor Company No.2 with Sat Industries Limited, Transferee Company.

The Learned Counsel for the Petitioner Companies states that the Petitioner Companies have approved the said Scheme of Amalgamation by passing Board Resolutions dated 23rd September, 2020 which are annexed to the respective Company Scheme Petitions.

The Learned Counsel for the Petitioner Companies states that the Petition have been filed in consonance with the Minutes of the Order dated 9th December, 2020 passed in the Company Scheme Application No.: 1106(MB) of 2020 by the Tribunal.

The Learned Counsel for the Petitioner Companies further states that the Petitioner Companies have complied with all requirements as per directions of the National Company Law Tribunal, Mumbai Bench and they have filed necessary Affidavits of compliance in the National Company Law Tribunal, Mumbai Bench.

The Learned Counsel for the Petitioner Companies states that the 1st Petitioner Company is presently carrying on business to design, manufacture, fabricate, assemble, machinery, work on process, repair, alter, convert, buy, deal in, import, export, or consult for plants, machineries, sub-assembles, machineries parts, tools, gauges, jigs, instruments, appliances, components, accessories and finished or semi-finished engineering products made of steel, thermoplastic, polymer and/or any other materials for industrial, agricultural or domestic use.

The 2nd Petitioner Company is engaged in the business of manufacturers of and dealers in plastic moulded goods of all kinds and for all purposes and in rubber and plastic tubes and tyres and in bottles, containers, tubes, thermowares, drums, crates, furniture, tanks, doors, windows, flaskwares, furnitures wrapping materials, foams rubber and plastic product, transmission belts and conveyors, and similar industrial articles, pipes, tubes, hoses, rubber containers and rubber lined vessels, tanks, equipment, pipes, and similar equipment, electric products, electronic product, shoe products and parts thereof, either rubber products and parts, toys, insulating materials and all other blown, moulded, formed, extruded, cleandered and dipped good and articles.

The 3rd Petitioner Company is engaged in the business of providing internet services and other wireless network services, software systems, E-commerce, M-Commerce, any other commerce in any other form or forms, data bank, data processing, communication, Information systems and to design and develop computer, design software consisting of schematic capture, net list translation, simulation hardware description languages suchas HlDC design kits placement and routing test vector translation and tool Integration, designing and developing business applications, software Involving local area networks, multitasking operating systems, graphical user Inter face, relations, data base management systems, object oriented-data base management system and interactive multimedia system, preparing advertisements and publishing the Information, advertisement on internet, conducting exhibition of internet, incorporating data on CDROM and to act as internet service provider (ISP), advertising, publicity and propaganda agents to manufacturers, traders, dealers, importers and exporters, and promote the sale of their products and service in India and abroad through various media such as internet, newspapers, periodicals, cinemas, journals, direct main publicity display until, exhibition on line, gathering, arranging conferences, seminars, symposiums, lectures, training, mass meetings, appoint distributors, sub distributors, selling agents and all such other activities for promoting the sale of various products through above means and to provide online services like America Online and/or Compuserve and develop software for local and international market.

The rationale for the Scheme of Amalgamation of the Petitioner Companies that the proposed amalgamation, inter alia, will result into following benefits:

(i) The consolidation of operations of all three Companies by way of amalgamation would lead to efficient utilization of capital and will result in administrative and operational rationalization and promote organizational efficiencies;

(ii) The amalgamation would result in greater integration and greater financial strength and flexibility for the amalgamated entity, which would result in maximizing overall shareholders value and will improve the competitive position of the combined entity;

(iii) The amalgamation would result in greater efficiency in cash management of the amalgamated entity, and unfettered access to cash flow generated by the combined business which can be deployed more efficiently to fund growth opportunities, to maximize shareholders value;

(iv) For the purpose of better, efficient and economical management, control and running of the business of the undertaking concerned and/or administrative convenience and to obtain advantages of economies of scale and to pool the resources for growth and development of the businesses of the Companies; and

(v) With the amalgamation of all three Companies, the Transferee Company would have the complete access on the readily available utilities, liasoning, etc. and this will help the Transferee Company to initiate expansion promptly without any gestation period.

The Regional Director has filed his Report dated 2nd November, 2021 stating therein that save and except the observations as stated in

paragraph IV (a) to (n) of the report, it appears that the Scheme is not prejudicial to the interest of shareholders and public. In paragraph IV of the said Report, the Regional Director has stated that:

a) In addition to compliance of AS-14 (IND AS-103) the Transferee Company shall pass such accounting entries which are necessary in connection with the scheme to comply with other applicable Accounting Standard such as AS-5 (IND AS-8) etc.

b) As per Part-I-Definitions Clause 1 (1.3), Clause 1 (1.6) and 1 (1.8) of the Scheme.

“Appointed Date” means 1st April, 2020 or such other date as may be fixed by National Company Law Tribunal (NCLT)

“Effective Date” means the date when the certified copy of the order of the NCLT sanctioning the present Scheme of Amalgamation is filed with the Registrar of Companies, Maharashtra at Mumbai by the transferor and transferee Companies;

“Record Date” means the date to be fixed by the Board of Directors of the Transferee Company for determining names of the Equity Shareholders of the Transferor Companies, who shall be entitled to Equity Shares of the Transferee Company;

In this regard, it is submitted that Section 232(6) of the Companies Act, 2013 states that the scheme under this section shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. However, this aspect may be decided by the Tribunal taking into account its inherent powers.

Further, the Petitioner may be asked to comply with the requirement and clarify vide circular no. F. No. 7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs.

c) The Tribunal may kindly seek the undertaking that this Scheme is approved by the requisite majority of member and creditors as per Section 230(6) of the Act in meetings duly held in terms of Section 230(1) read with subsection (3) to (5) of Section 230 of the Act and the Minutes thereof are duly placed before the Tribunal.

d) NCLT may kindly direct the petitioner to file an affidavit to the extent that the Scheme enclosed to Company Application & Company Petition, are one and same and there is no discrepancy/any changes are made, for changes if any, liberty be given to Central Government to file further report if any required;

e) The Petitioner under provisions of Section 230(5) of the Companies Act, 2013 have to serve notices to concerned authorities which are likely to be affected by Amalgamation. Further, the approval of the scheme by this Tribunal may not deter such authorities to deal with any of the issues arising after giving effect to the scheme. The decision of such Authorities is binding on the Petitioner Company(s).

f) Petitioner Company have to undertake to comply with section 232(3)(i) of Companies Act, 2013, where the transferor company is dissolved, the fees if any, paid by the transferor company on its authorised capital shall be set-off against any fees payable by the transferee company on its authorised capital subsequent to the amalgamation and therefore, petitioners to affirm that they comply the provisions of the section.

g) The Petitioner Company may be directed to submit undertaking that the Petitioner Company shall ensure compliance of all provisions of the Income Tax Act, 1961 including provisions of Section 2(1B) of the Income Tax Act.

h) As per Part II Clause 12 (12.1 to 12.3) of the Scheme (Amendment to Memorandum of Association of The Transferee Company, validity of Existing Resolution Etc.); In this regard it is submitted that the fee payable by the Transferee Company shall be in accordance with the provisions of Section 13 and Section 232(3)(i) of the Companies Act, 2013 further if any stamp duty is payable the same should be paid in accordance with applicable laws of the State;

i) As per Part-II- Clause 15(15.1 &15.2) of the Scheme (Accounting Treatment). The amalgamation shall be accounted for in the books of account of the Transferee Company according to the pooling of interest method prescribed under Appendix C- ‘Business combination of entities under common control’ to Indian Accounting Standard (Ind AS) 103-Business Combinations (referred to as Ind AS 103) which are prescribed under Section 133 of the Act.

In this regard it is stated that in Indian Accounting Standard (Ind AS) 103-prescribes application of pooling of Interest Method to account for common control business combinations. Under this method: …. Any difference, whether positive or negative, shall be adjusted against the capital reserves (for “Amalgamation Adjustment Deficit Account” in some cases). In view of the above it is submitted that the difference so credited to “Capital Reserve arising out of Amalgamation” shall not be available for distribution of dividend and other similar purposes.

j) As per Part-III-(General Terms and Conditions) Clause 16(16.1 to 16.6) of the Scheme (Combination of Authorized Share Capital); In this regard it is submitted that fee payable by the Transferee Company shall be in accordance with the provision of Section 13, Section 61, Section 64 and Section 232(3)(i) of the Companies Act, 2013 further if any stamp duty is payable the same should be paid in accordance with applicable laws of the State.

k) Since the Transferee Company limited by shares, is listed on the Bombay Stock Exchange and the National Stock Exchange, the Petitioner Company be directed to place on record whether necessary approval from SEBI and the concerned Stock Exchange have been obtained and whether the meeting of the Shareholders/ class of shareholders have been convened as per the listing / SEBI guidelines.

l) Since the Transferee Company have foreign/ nonresident shareholders, therefore, it is subject to compliance of Section 55 of the Companies Act, 2013 the FEMA Regulations/ RBI Guidelines by the Transferee Company.

m) The Petitioner may be directed to place on record whether necessary NOC/ approval from Competition Commission of India (CCI) have been obtained or not, if applicable.

n) In view of the observations raised by the ROC, Mumbai, mentioned at Para 19 above, the NCLT may pass appropriate Orders as it deem fit.

The  Learned  Counsel  for  the  Petitioner  Companies  states  that  the Petitioner Companies filed their Reply dated 8th November, 2021 to the Report of the Regional Director thereby explaining the observations as under:

i. So far as the observation made in Paragraph IV (a) of the Report of Regional Director is concerned, the Transferee Company submits that in addition to the Compliance of AS-14, the Transferee Company shall pass such accounting entries which are necessary in connection with the scheme to comply with other applicable Accounting Standards.

ii. So far as the observation in Paragraph IV(b) of the Report of the Regional Director is concerned, the Petitioner Companies submit that the appointed date will be open of business hours on 1st April, 2020. The Petitioner Companies has complied with the requirements as envisages in Circular No. F.No. 7/12/2019/CL-1 dated 21/08/2019 issued by Ministry of Corporate Affairs.

iii. So far as the observation in Paragraph IV(c) of the Report of the Regional Director is concerned, the Petitioner Companies submit that this Tribunal vide its Order dated 09/12/2020 has been pleased to dispense with the meeting of the Equity Shareholders of both the Transferor Companies as the consent of the Members of Transferor Companies were duly obtained. The Tribunal was further pleased to dispense with the Meeting of Equity Shareholders of the Transferee Company as there was no reconstruction or arrangement proposed with its shareholders and/or creditors of the Transferee Company which was supported by the ratio laid down by this Tribunal in ‘CSA No. 243 of 2017 in the matter of Housing Development Finance Corporation Limited’, in ‘CSA No. 899 of 2017 in the matter of Mahindra CIE Automotive Limited’, in CSA No. 915 of 2017 in the matter of Godrej Consumer Products Limited, in CSA No. 1019 of 2017 in case of Godrej Properties Limited, in CSA No. 1615 of 2018 in case of Dolvi Minerals and Metals Private Limited, in CSA No. 396 of 2019 in case of JSW Logistics Infrastructure Private Limited, in CSA No. 1142 of 2019 in case of City Corporation Limited, in CSA No. 3123 of 2019 in case of Jai Realty Ventures Limited, in CSA No. 3219 of 2019 in case of Impact Automotive Solutions Limited and in CSA No. of 3749 of 2019 in case of Datamatics Digital Limited. Both the Transferor Companies and Transferee Companies have duly complied with the directions given by this Tribunal in Para no. 14(c) and 14 (d) of the Order dated 09/12/2020.

iv. So far as the observation in Paragraph IV(d) of the Report of the Regional Director is concerned the Petitioner Companies confirm and declare that there are no discrepancies in Scheme enclosed with Company Scheme Application and Company Scheme Petition and the same are one and the same. However, the Petitioner Companies undertake to file an Affidavit if so directed by this Tribunal that the Scheme enclose to Company Scheme Application and Company Scheme Petition are one and the same.

v. So far as the observation in Paragraph IV (e) of the Report of the Regional Director is concerned, the Petitioner Companies declare that they have duly served the notices to all the concerned authorities i.e. Registrar of Companies, Regional Director, Income Tax Authority, Official Liquidator, Bombay Stock Exchange and Securities Exchange Board of India which are likely to be affected by the amalgamation. However, no representation has been received by the Petitioner Companies from any of the above mentioned Authorities within a period of 30 days from the date of Receipt of notice served on them. The Petitioner Companies hereby confirm that the approval of the Scheme by this Tribunal will not deter such authorities to deal with any of the issues arising after giving effect to the Scheme.

vi. So far as the observation in Paragraph IV(f) of the Report of the Regional Director is concerned, the Transferee Company hereby undertake to comply with Section 232(3)(i) of the Companies Act, 2013 where the Transferor Company is dissolved, the fees, if any, paid by the Transferor Companies on its authorized capital shall be set off against any fees payable by the Transferee Company subsequent to the Amalgamation and therefore, Petitioner Companies affirm to comply with the provisions of this Section.

vii. So far as the observation in Paragraph IV(g) is concerned, the Transferee Company undertakes that it shall comply with all provisions of Income Tax Act, 1961 including provisions of Section 2(1B) of the Income Tax Act as applicable.

viii. So far as the observation in Paragraph IV(h) is concerned the Petitioner Companies submit and undertake that the fees payable by the Transferee Company shall be in accordance with the provisions of Section 13 and Section 232(3)(i) of the Companies Act, 2013 further if any stamp duty is payable the same shall be paid in accordance with applicable laws of the State.

ix. So far as the observation in Paragraph IV(i) is concerned the Transferee Company submits that the amalgamation shall be accounted for in its books of accounts of the Transferee Company according to the pooling of interest method prescribed under Appendix C- “Business combination of entities under common controls” to Indian Accounting Standard (IND AS) 103- Business Combinations (referred to as IND AS 103) which are prescribed under Section 133 of the Act. In case of any difference in accounting policy between the Transferor Companies and the Transferee Company, the same shall be harmonized and impact of the same will be given in accordance with IND AS 103. The Petitioner Companies undertake that under this method any difference whether positive or negative shall be adjusted against the “Capital Reserves arising out of Amalgamation” shall not be available for distribution of dividend and other similar purposes.

x. So far as the observation in Paragraph IV(j) of the Report of the Regional Director is concerned the Transferee Company submits that pursuant to the amalgamation of the Companies fee payable by the Transferee Company shall be in accordance with the provision of Section 13, Section 61, Section 61, Section 64, and Section 232(3)(i) of the Companies Act, 2013. The Petitioner Companies further undertake that if any stamp duty is payable by the Companies shall be paid in accordance to the applicable law of the State.

xi. So far as the observation in Paragraph IV(k) of the Report of the Regional Director is concerned the Petitioner Companies submit that the Transferor Companies are the wholly owned subsidiaries of the Transferee Company. Hence, draft Scheme of Amalgamation of the Transferor Companies and the Transferee Company was submitted to BSE for the purpose of disclosure in terms of SEBI Circular No. CFD/DIL3/CIR/2018/2 dated 03/01/2018. The Transferee Company submits that no prior approval of SEBI and concerned Stock Exchange i.e. BSE is required to be obtained for Amalgamation of Transferor Companies with the Transferee Company nor any meetings of Shareholders/ Class of Shareholders were required to be conveyed as per listing/ SEBI guidelines.

xii. So far as the observation in Paragraph IV(l) of the Report of the Regional Director is concerned the Transferee Company submits that Section 55 of the Companies Act, 2013 is not applicable as there are no Foreign non-resident shareholders holding any Preference Shares in the Petitioner Companies. Also, there is no Preference Share Capital in the Transferee Company. Therefore, though there are foreign/ non-resident shareholders, compliance of Section 55 of the Companies Act, 2013, the FEMA Regulations and RBI Guidelines are not applicable.

xiii. So far as the observation in Paragraph IV(m) of the Report of the Regional Director is concerned, the Petitioner Companies hereby confirm and declare that no NOC/ approvals are required from the Competition Commission of India.

xiv. So far as the observation in Paragraph IV(n) of the Report of the Regional Director is concerned, the ROC, Mumbai in its Report/ Letter No. ROC/ STA/ AIL(2)- SIL/ 230- 232/ 07/ 2021/ 83 dated 03/08/2021, the ROC Mumbai has made two (2) observations:

(a) CAA 3 by Transferee Company SEBI & Stock Exchange not attached.

(b) Interest of the Creditors should be protected.

The Learned Counsel for the Petitioner Companies submit that the Regional Director has filed Supplementary Report dated 24/11/2021 stating therein the observations in paragraph IV (k) to (m) of the report as under:

“IV (k): On the observation made by the Regional Director and Reply submitted by the Petitioner Company thereon, Hon’ble Tribunal may pass appropriate orders/ orders as deem fit on merit.

IV (l): On the observation made by the Regional Director and Reply submitted by the Petitioner Company thereon, Hon’ble Tribunal may pass appropriate orders/ orders as deem fit on merit.

IV (m): On the observation made by the Regional Director and Reply submitted by the Petitioner Company thereon, Hon’ble Tribunal may pass appropriate orders/ orders as deem fit on merit.”

The Learned Counsel for the Petitioner Companies submits that in compliance of the directions passed by the Tribunal vide Order dated 10/11/2021, the Petitioner Companies have served the copy of Form CAA 3 along with the Annexures thereto to (1) Competition Commission of India and (2) Reserve Bank of India on 11/11/2021 through Speed Post. The Learned Counsel for the Petitioner Companies confirms that no objection has been received from Competition Commission of India. However, the Reserve Bank of India has addressed a Letter bearing reference No. FED MRO CAP No/S471/04.69.999/2021-22 thereby indicating that as a regulator it will not be ethical on the part of RBI to vet individual cases as it will preclude it from taking action on contravention, if any, committed by such Companies. The Learned Counsel for the Petitioner Companies confirms and declares that no pre- approvals are required from Competition Commission of India and Reserve Bank of India as they are not governed under the respective laws.

The clarifications and undertakings given by the Petitioner Companies are accepted by this Tribunal.

From the material on record, the Scheme appears to be fair and reasonable and does not violate any of the provisions of law and is not contrary to public policy.

Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No.: 1106 of 2020 are made absolute.

Petitioners are directed to file a copy of this Order along with a copy of the Scheme of Arrangement with the concerned Registrar of Companies, electronically along with E-Form INC-28, in addition to physical copy within 30 days from the date of receipt of the Order from the Registry.

The Petitioner Companies to lodge a copy of this Order and the Scheme duly authenticated by the Deputy Registrar or Assistant Registrar, National Company Law Tribunal, Mumbai Bench, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable within 60 days from the date of receipt of the Order, if any.

All authorities concerned to act on a copy of this Order along with Scheme duly authenticated by the Deputy Registrar or Assistant Registrar, National Company Law Tribunal, Mumbai.

The Appointed Date is 1st April, 2020.

Ordered accordingly. CP(CAA)50/MB/2021 is allowed and the Scheme is hereby sanctioned.