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Judgment
P. N. Deshmukh
This Joint Company Petition (CP) is filed in consonance with Sections 230 to 232 of the Companies Act, 2013 along with the Orders passed in CA 35/2021 dated 2nd March 2021 and CA (CAA) 1055/MB of 2020 dated 14th October 2020. CP is filed for approval of a Scheme of Amalgamation of Air Works Livery Services Pvt Ltd. with Air Works India (Engineering) Pvt Ltd and their respective shareholders and all concerned. Copy of the Scheme of Amalgamation has been placed on record in the Petition (pg 41-53).
The Transferor Company (Co) was incorporated on 26.04.2010 as a Private Co limited by Shares (pg 54).
The Transferee Co, Air Works India (Engineering) Pvt Ltd (Petitioner 2) was incorporated on 11.09.1986 as a Private Co limited by Shares. (Pg 87-88).
It is seen from the records that the meetings of Equity Shareholders, Secured Creditors and Unsecured Creditors of both the Companies were dispensed with, vide order dated 14.10.2020 (pg 150-160). Notices were directed to be served on the Regional Director, Registrar of Companies, Official Liquidator, the Income Tax Department, the Director General of Civil Aviation, Technical Centre, Opposite Safdarjung Airport, New Delhi - 110003 and to the other relevant sectoral regulators.
Vide order dated 14.10.2020 this Bench had passed the order wherein the Applicants had prayed for amalgamation of two Transferor Companies namely Air Works MRO Services Pvt. Ltd. and Air Works Livery Services Pvt. Ltd. with Air Works India (Engineering) Pvt. Ltd., Transferee Co. Subsequently one of these Transfer Companies namely Air Works MRO Services Pvt. Ltd. passed a Board Resolution for withdrawal from the Scheme of Amalgamation on 27.01.21 and was dropped from the Application. The remaining Transferor Co, Air Works Livery Services Pvt. Ltd. was left to be merged with the Transferee Co Air Works India (Engineering) Pvt. Ltd.
This Tribunal vide order dated 02.03.2021 allowed CA 35 of 2021 filed in CA CAA (No) 1055 of 2020 by modifying the scheme to the extent that there would be amalgamation between Air Works Livery Services Pvt Ltd (Transferor Co) and Air Works India (Engineering) Pvt Ltd (Transferee Co). The revised Scheme of Amalgamation was taken on record (pg 36-48).
The Board of Directors of the Transferor Co and the Transferee Co have approved the revised Scheme of Amalgamation in their respective Board meetings held on 27.01.2021 and 02.02.2021. The Appointed Date fixed under the Scheme is 1st April 2020.
Petitioners have filed affidavit dated 07.09.2021 affirming compliance of the order passed by the Tribunal dated 24.08.2021. A perusal of the affidavit discloses that the Petitioners have affected the newspaper publication in the “Business Standard” (English Mumbai Edition) as well as in “Navshakti” (Marathi, Mumbai Edition) dated 02.09.2021. Further, the affidavit also confirmed that neither the Petitioner Companies nor their Legal Counsel has received any objection/representation from any person against the Petition or the proposed Scheme of Amalgamation till the date of the Affidavit.
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 Scheme.
Transferor Co is engaged in the business of aircraft painting–interiors and exteriors, refurbishing, repairing, maintaining, servicing, designing etc. Transferee Co is engaged in the same line of business of aviation.
As per the petition, the Transferor Co is a Wholly Owned Subsidiary of the Transferee Co. The proposed amalgamation would result in business synergy and pooling of their resources etc.
The Petitioners state that they have complied with all requirements as per the directions of this Tribunal and have filed necessary Affidavits of compliance with the Tribunal.
The observations made by the RD on 11.10.21 and the clarifications and undertakings given by the Petitioners are summarized below:
Para IV
RD Observations
Affidavit in Rejoinder dated 08.11.21 of the Petitioner Companies
(a)
In addition to compliance of AS-14 (IND AS-103), the Petitioner Companies shall pass such accounting entries which are necessary in connection with the scheme to comply with other applicable Accounting Standards such as AS-5 (IND AS-8) etc.
With regard to the compliance of AS-14 or Ind AS-103, Transferee Co will give effect of the amalgamation in its books of accounts in accordance with accounting prescribed under “pooling of interest” method in accordance with the principles laid down in Appendix C of Indian Accounting Standard (Ind AS) 103–Business Combinations as notified under Section 133 of the
Companies Act, 2013 (the Act), read
with the Companies (Indian Accounting Standard) Rules, 2015. Petitioners undertake to pass such accounting entries to comply with such accounting standards notified under Sec 133 of the Act as may be applicable to the Petitioners such as AS-5 or Ind
AS-8.
(b)
The Petitioners 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 Co(s).
Petitioners confirm that in terms of provisions of section 230(5) of the Act,
and in compliance with orders dated
14.10.2020, dated 02.03.21 and dated
24.08.21, passed in 1st Motion
Application, 2nd and 3rd Motion
Petitions respectively, formal notices of
1st Motion Application and 2nd Motion
Petition have been sent to the following
Statutory Authorities, along with the
complete Paper Books:
i. RD, on 02.06.21 through Speed
Post (ED405227807IN) and on
02.09.2021 through Speed Post
(ED646719673IN);
ii. The ROC, on 02.06.21 through
Speed Post (ED404885285IN) and
on 02.09.2021 through Speed Post
(ED646719537IN);
iii. The OL, on 02.06.21 through Speed
Post (ED404885294IN) and on
02.09.21 through Speed Post
(ED646719545IN);
M/s PRASS & Associates, CA
appointed by the Tribunal to assist the
OL has also been served with the copies
of the 1st motion Application and 2nd
motion Petition on 03.06.21 through
Speed Post (ED405221061IN) and on
02.09.21 through Speed Post
(ED646719568IN).
iv. DG Civil Aviation, Tech Centre,
Opp Safdarjung Airport, New
Delhi–110 003 on 03.06.21 through Speed Post (ED045220945IN) and on 02.09.21 through Speed Post (ED646719554IN);
v. Income Tax (IT) Department, in the respective Ward of the IT Office where the Applicant Companies are assessed quoting the respective Permanent Account Number (PAN) of each Co, as under:
Air Works Livery Services Pvt Ltd
PAN: AAI CA 4187 D
IT Officer, Ward 2(1), C.R. Building,
I.P. Estate, New Delhi-110 095
Date of submission: 21st June, 2021 through Speed Post (ED211289875IN)
2nd September, 2021 through Speed Post (ED755104874IN)
Air Works India (Engineering) Pvt Ltd
PAN: AAB CA 1069 P
Asstt Commr of IT, Circle 1(1)(1) Room 533, Aayakar Bhawan, Mumbai–400 020
Date of submission
03.06.21 through Speed Post (ED405221075IN)
02.09.21 through Speed Post (ED646719642IN)
Further submitted that the approval of the present Scheme will not deter any statutory authority to deal with any issue that may arise pursuant the present Scheme becoming effective.
Petitioners do hereby undertake that the Transferee Co. will comply with all the directions that may be given by any statutory authority with regard to dealing with any issue that may arise pursuant the present Scheme becoming
effective.
(c)
The Hon’ble NCLT may kindly direct the Petitioners to file an Affidavit to the extent that the Scheme enclosed to the Co Application and the scheme enclosed to the Co Petition are one & same and there is no discrepancy or deviation.
With regard to the confirmation that the Scheme enclosed to the CA and CP are one and same, we do hereby clarify and confirm that the Scheme enclosed to the CA and CP are one and the same and that there is no discrepancy or deviation.
(d)
As per definitions of the Scheme, “Appointed Date” for the purpose of this Scheme means commencement of business on 1st April, 2020, or such other date as the Hon’ble NCLT or any other competent authority may approve. “Effective Date” means last of the dates on which the certified copies of the Order(s) passed by the Hon’ble NCLT, sanctioning the Scheme, are filed with the concerned Registrar of Companies, MCA. Any references in this Scheme to “upon this Scheme becoming effective” or “effectiveness of this Scheme” shall be a reference to the Effective Date.
Further, the Petitioners may be asked to comply with
the requirements vide circular F. 7/12/2019/CL-1 dated 21.08.19 issued by MCA.
We confirm that the Scheme contains definition of the term “Appointed Date” being 1st April, 2020 as a specific calendar date which is in compliance with the requirements of General Circular No. 9/2019 issued by MCA. Further, the Transferee Co. undertakes to comply with all the other requirements laid under said circular to the extent applicable. The Petitioners confirm that the Scheme will take effect from the Appointed Date as per Section 232(6) of the Act.
(e)
Petitioner Co have to undertake to comply with section 232(3)(i) of Companies Act, 2013, where the transferor Co are dissolved, the fee, if any, paid by the transferor Co on its authorized capital shall be set-off against any fees payable by the transferee Co on its authorized capital subsequent to the amalgamation and therefore, petitioners to affirm that they comply the provisions of the section.
Para 10.c of the Scheme provides that in t/o section 232(3)(i) and other applicable provisions, if any, the authorized share capital of the Transferor Co shall be added to and shall form part of the authorized share capital of the Transferee Co. Accordingly, the authorized share capital of the Transferee Co. shall stand increased to the extent of the authorized share capital of the Transferor Co. as on the effective date. However, it is pertinent to note that Para 10.c of the Scheme clearly provides that the Transferee Co. will pay the balance fee and other charges, if any, on the aforesaid increase in the authorized share capital after deducting the aggregate fees and other charges, if any, paid by the Transferor Co on the pre-
merger authorized share capital.
The Petitioners once again confirm that the Transferee Co will comply with the provisions of section 232(3)(i) of the Act, and other applicable provisions, if any, with regard to the payment of balance fee on increase of authorized capital subsequent to the sanction of the Scheme.
(f)
As per the Clause 11 of the Scheme, In case of any difference in Accounting policies between the Transferor Co and the Transferee Co, the accounting policies followed by the Transferee Co will prevail and the impact of the difference will be quantified and adjusted to the reserves of the Transferee Co to ensure that the financial statements of the Transferee Co reflect the financial position on the basis of consistent accounting policies.
Petitioner companies have to undertake that surplus shall be credited to capital reserve account arising out of amalgamation and deficit shall be debited to the goodwill account.
Further, Petitioner Companies have to undertake that reserve shall not be available for distribution of
dividend
With regard to surplus or deficit arising out of the amalgamation, we do hereby undertake that in case of any surplus arising out of the amalgamation, the same shall be credited to Capital Reserve Account. In case of any deficit arising out of the amalgamation, the same shall be adjusted against the reserves or debited to Goodwill Account, in compliance with the applicable Accounting Standard.
Petitioners confirm and undertake that such Capital Reserve shall not be available for distribution of dividend.
(g)
ROC, Mumbai Report dated 27.07.2021 has inter alia mentioned that there is no prosecution, no technical scrutiny, no inspection, no inquiry and no Complaint pending against the petitioner Companies.
Further mention that:
As per the Clause 9, it is stated that since the Transferor Co is a wholly owned subsidiary of the Transferee Co, no new share will be issued by the Transferee Co pursuant to this Scheme.
The applicant Companies have not filed e-form GNL-1 with the scheme on MCA portal as required under the provision of the Companies Act 2013.
The contents of para g. 1. are a matter of record and need no reply.
Requisite e-form Form GNL-1 were duly filed by both the Petitioners as per the following detail:
e-Form GNL-1 for filing of Notice of Application/Scheme of Arrangement along with Form CAA.3 by the Petitioner Transferor Co. vide SRN T32207201 dated 23.07.21.
e-Form GNL-1 for filing of Notice of Application/Scheme of Arrangement along with Form CAA.3 by the Petitioner Transferee Co. vide SRN
T32207086 dated 23.07.2021
In response to the Affidavit in Rejoinder of the Petitioner Co., the RD has filed his Supplementary Report dated 23.11.21, wherein the RD has further observed that the present Supplementary report may be taken on record for passing appropriate order. Moreover, the Petitioner Companies undertake to comply with all statutory requirements, if any, as required under the Act, and the Rules made thereunder whichever is applicable.
The Official Liquidator has filed his report dated 20.10.21 with this Tribunal, has observed that the affairs of the Transferor Co have been conducted in a proper manner.
The Income Tax Department (ITD), Mumbai has also filed its NOC for the Scheme of Amalgamation with regard to the Transferee Co. However, despite several opportunities, no report was filed on behalf of the ITD with regard to the Transferor Co. Our attention was drawn to the provisions of Section 230(5) of the Act, which provides that if no representation is filed by the Statutory Authorities within a period of 30 days from the date of receipt of notice, it shall be presumed that they have no representation to make on the Scheme. The Counsel of the Petitioners has clarified that under the proposed Scheme, all the assets and liabilities of the Transferor Co. will be transferred and be vested in the Transferee Co. Hence interest of the ITD will not be adversely affected by sanction of the Scheme by this Tribunal.
From the material on record, the Scheme appears to be fair and reasonable.
Since all the requisite statutory compliances have been fulfilled, C.P.(CAA) 71/MB/2021 is made absolute under Sections 230 to 232 of the Act, in terms of the prayer made in the Petition. Hence ordered.
ORDER
The Petition be and the same is allowed subject to the following:
(i) The Scheme with the Appointed Date fixed as 1st April 2020 placed at pg 41 to 53 of the Co Petition is hereby sanctioned under sections 230 to 232 of the Act. It shall be binding on the Petitioners and all concerned including their respective Shareholders, Secured Creditors and Unsecured Creditors / Trade Creditors and Employees.
(ii) The Transferor Co be dissolved without being wound up.
(iii) The Registrar of this Tribunal shall issue certified copy of this Order along with the Scheme forthwith. Petitioners are directed to file a certified copy of this Order along with a copy of the Scheme with the Registrar of Companies concerned, electronically in E-Form INC-28, within 30 days from the date of receipt of the Order from the Registry.
(iv) The Petitioners shall lodge a certified copy of this Order and the Scheme duly authenticated by the Registrar of this Tribunal within 60 days from the date of receipt of the Order, with the Superintendent of Stamps concerned, for the purpose of adjudication of stamp duty, if any, payable.
(v) Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this court to the Scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the petitioners.
(vi) While approving the Scheme as above, we further clarify that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes or any other charges, if any, and payment in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law.
(vii) All proceedings now pending by or against the Transferor Co., be continued by or against the Transferee Co.
(viii) The Petitioners shall comply with the undertakings given by it.
(ix) The Petitioners shall, within 15 days of receipt of this order, issue newspaper publications with respect to approval of the Scheme, in the same newspapers in which previous publications were issued.
(x) The Petitioners shall take all consequential and statutory steps required under the provisions of the Act in pursuance of the Scheme.
(xi) All concerned shall act on a certified copy of this Order along with the Scheme duly authenticated by the Registrar of this Tribunal.
(xii) Any person interested in the above matter shall be at liberty to apply to the Tribunal for any direction that may be necessary.