Aix Connect Private Limited Vs

Subrata Kumar Dash, Member (Technical)

This is a joint First Motion Application filed by the Applicant Companies namely; AIX Connect Private Limited (Transferor Company) and Air India Express Limited (Transferee Company) under Sections 230 to 232 of the Companies Act, 2013, read with Rules 3 and 5 of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 (the Rules) in relation to the Composite Scheme of Arrangement between AIX Connect Private Limited (Transferor Company) and Air India Express Limited (Transferee Company) and their respective shareholders. The said Scheme is attached as Annexure-A1 of the Application.

The Applicant Companies have prayed for dispensing with the requirement of convening the meetings of the Equity Shareholders of both the Applicant Companies. It is further prayed to dispense the convening of the meeting of the secured creditors of the Transferor Company and to convene the meetings of those unsecured creditors of Applicant Companies having outstanding balances of Rs. 10 Lakh and above.

The Transferor Company is engaged in the business of aircraft passenger and cargo services and operates as a domestic low-cost carrier with a network extending to 19 (nineteen) destinations in India. The Transferor Company also operates non-scheduled cargo charter flights on international sectors (upon approval of the Directorate General of Civil Aviation).

The Transferee Company is engaged in the business of aircraft passenger and cargo services and operates as an international low-cost carrier with the objective of providing convenient connectivity to short/medium haul international routes in the Gulf and Southeast Asia at affordable fares with a network extending to 34 (thirty-four) destinations.

The Applicant Companies are wholly owned subsidiaries of Air India Limited.

It is submitted that the respective registered offices of the Applicant Companies are situated in the State of Haryana, and hence, the jurisdiction of each of the Applicant Companies falls within this Bench.

The rationale of the Scheme is given below:

a. The Transferee Company and Transferor Company are wholly owned subsidiaries of the same entity.

b. The Transferor Company is engaged in the business of aircraft passenger and cargo services and operates as a domestic low-cost carrier with a network extending to 19 (nineteen) destinations in India. The Transferor Company also operates non-scheduled cargo charter flights on international sectors (upon approval of the Directorate General of Civil Aviation).

c. The Transferee Company is engaged in the business of aircraft passenger and cargo services and operates as an international low-cost carrier with the objective of providing convenient connectivity to short/medium haul international routes in the Gulf and Southeast Asia at affordable fares with a network extending to 34 (thirty-four) destinations.

d. The Transferor Company and the Transferee Company have significant complementarities and synergies, and their consolidation shall generate significant business synergies thereby enhancing all stakeholders’ value.

e. The proposed amalgamation would enable optimum utilization of existing assets such as aircraft (current and order book), landing and parking slots at airports, efficient network planning, potentially resulting in improvement in operational efficiencies and scale, and leading to an improvement in financial performance.

f. The proposed amalgamation would provide an opportunity to utilize the pool of skilled and experienced manpower available with the Transferor Company and the Transferee Company.

g. The proposed amalgamation would provide an integrated international /domestic footprint which would significantly enhance customer proposition.

h. The proposed amalgamation would provide an opportunity to fully utilize strong assets, capabilities, and infrastructure.

i. The proposed amalgamation would help to achieve a high growth and profitable business through optimisation of its route network and resource utilisation for greater economies of scale, bring enhanced flexibility and agility for capturing demand across market segments, and tap on a larger consumer base and network.

j. The proposed amalgamation would create a single unified airline entity with a stronger capital and asset base having greater capacity for conducting its operations more efficiently and competitively in domestic and international routes.

It is stated that the Board of Directors of both the Applicant Companies in their meetings, all held on June 23, 2023, have considered and unanimously approved the proposed Composite Scheme of Arrangement subject to sanctioning of the same by this Tribunal. The copies of the respective Board Resolutions of Transferor Company and Transferee Company are attached with the application as Annexures A-11 and A-12, respectively.

The appointed date of the Scheme shall be 29.11.2022 and the Effective Date has been defined in Clause 1.1.8 of Part-I of the Scheme to mean the 10th (tenth) business day from the completion of the last of the conditions set out in Clause 16 of the Scheme.

Both the Applicant Companies have filed their respective standalone, Audited Financial Statements for the year ended 31.03.2023 and unaudited financial statement as on 30.06.2023 which are attached as Annexures A-3,A-4,A-6 and Annexure A-7 respectively of the application.

It is submitted that no corporate debt restructuring is envisaged in the proposed Scheme of Arrangement and doesn’t involve reduction of share capital.

It is further submitted that in pursuance of the proviso to Section 230(7) and Section 232(3) of the Act, the Transferor Company has filed a certificate dated 30.06.2023 issued by its Chatered Accountant and the Transferee Company has filed a certificate dated 23.06.2023, issued by its independent Auditor certifying that the Scheme is in compliance with the Accounting Standards under Section 133 of the Act and the same is attached with the application as Annexure A-9 and A-10.

It is further submitted the Valuation Report dated 23.06.2023 submitted by BDO Valuation Advisory LLP IBBI No.: IBBI/RV-E/02/2019/103, Registered Valuer, is attached as Annexure A-8 of the application. The Share Exchange Ratio for the mergers as mentioned in the Scheme is given below:

“a. 5,65,207 (Five Lakhs Sixty-Five Thousand Two Hundred and Seven) fully paid-up equity shares of Transferee Company of face value of INR. 100/- (Indian Rupees One Hundred only) each for every 10,00,00,000 (Ten Crore) fully paid-up equity share of Transferor Company of face value of INR 10/- (Indian Rupees Ten only) each.

It is deposed by the respective authorised representatives of the Applicant Companies that both the Applicant Companies are regulated by the sectoral regulators and statutory authorities as mentioned in the Affidavits submitted by the authorised representatives as Annexures A-26 and Annexure A-27 with the application.

It is also deposed by the authorised representative of the Transferor Company that there are certain material investigations and legal proceedings/litigations pending against the Transferor Company which are limited to those mentioned in the Affidavit submitted by the authorised representative of Transferor Company as Annexure-A28 with the application, and besides those mentioned therein, there are no material investigations or proceedings/litigations pending against the Transferor Company. Moreover, there are no proceedings or investigations pending against Transferor Company under Sections 206 to 227 of the Companies Act, 2013.

It is also deposed by the authorised representative of the Transferee Company that there are certain material investigations and legal proceedings/litigations pending against the Transferee Company which are limited to those mentioned in the Affidavit submitted by the authorised representative of Transferee Company as Annexure-A29 with the application, and besides those mentioned therein, there are no material investigations or proceedings/litigations pending against the Transferee Company. Moreover, there are no proceedings or investigations pending against Transferee Company under Sections 206 to 227 of the Companies Act, 2013.

The Applicant Companies have furnished the following documents:

i. Composite Scheme of Arrangement (Annexure-A1 of the application).

ii. Copies of Master Data, Certificate of Incorporation along with Memorandum and Articles of Association of the Applicant Companies (Annexures A-2 and Annexure A-5 respectively of the Application).

iii. List of Equity Shareholders of the Transferor Company as on 30.06.2023. (Annexure A-13 of the Application)

iv. Copies of consent affidavits executed by all the equity shareholders of the Transferor Company (Annexure A-14 of the Application)

v. List of Equity Shareholders of the Transferee Company as on 30.06.2023 along with consent affidavits (Annexures A-19 of the Application).

vi. Copies of consent affidavits executed by all the equity shareholders of the Transferee Company. (Annexure A-20 of the Application).

vii. List of Secured Creditors, Unsecured Creditors and Unsecured Creditors (having outstanding balances of over Rs. 10 Lakh) of the Transferor Company as on 30.06.2023 duly certified by MOJ and Associates Chartered Accountants. (Annexures A-15, A-17 and A-18 respectively of the Application).

viii. Copies of consent affidavits executed by all the secured creditors of the Transferor Company (Annexure A-16 of the Application)

ix. Certificates issued by Devesh K. Shah & Associates LLP Chartered Accountants certifying that the Transferee Company has no Secured Creditors as on 30.06.2023 (Annexures A-21 of the Application).

x. List of Unsecured Creditors and Unsecured Creditors (having outstanding balances of over Rs. 10 Lakh) of the Transferee Company as on 30.06.2023 duly certified by Devesh K. Shah & Associates LLP Chartered Accountants. (Annexures A-22 and Annexure A-23 of the Application).

xi. Certificate of the Statutory Auditor of the Transferee Company to the effect that the Accounting treatment proposed in the Scheme is in conformity with Section 133 of the Companies Act, 2013 (Annexure-A-10 of the Application).

xii. Audited Financial Statements as on 31.03.2023 of the Transferor Company and the Transferee Company (Annexures A-3 and A-6 respectively of the application).

xiii. Report on Valuation of Shares dated 23.06.2023 (Annexure A-8 of the Application).

The Applicant Companies have furnished the details of the Shareholders, Secured Creditors and Unsecured Creditors which are as follows:

Name of the Applicant

Companies

Shareholders along with their consent on affidavit

Creditors along with their consents on affidavit

Equity Shareholder

Consent submitted on Affidavit

Preference Shareholders

Consent Submitted

on Affidavit

Secured Creditors

Consent submitted

on Affidavit

Unsecured Creditors

Unsecured Creditors having outstanding

balances of

over Rs. 10 Lakhs

Consent submitted on affidavit

Transferor

Company

2

(Two)

100%

in value

Nil

NA

5

(Five)

100%

in value

544

(Five Hundred and Forty Four)

184

Meetings

to          be

convened for unsecured creditors

having

outstandin

g balances

of over Rs.

10 Lakhs.

Transferee

Company

7

(Seven)

100%

in value

Nil

NA

Nil

NA

327(Three Hundred and Twenty Seven)

112 (One Hundred and twelve)

Meetings    to be  convened

for unsecured creditors having outstanding

balances    of over  Rs.  10 Lakhs.

Accordingly, the directions of this Bench in the present case are as under:

I.   In relation to Applicant Company No. 1/Transferor Company :

a. The meetings of the Equity Shareholders are dispensed with keeping in view the shareholding pattern, financial structure of the company, and the fact that the consent by way of affidavits has been received;

b. The meeting of NIL Preference Shareholderholder of the Applicant Company No. 1 has been dispensed with as there is no scope of any meeting;

c. The meetings of Secured Creditors of the Applicant Company No. 1 have been dispensed with as the consent of all Secured Creditors have been received by way of affidavits;

d. The meeting of the unsecured creditors of the Transferor Company having outstanding balances below Rs. 10 Lakh is dispensed.

e. The meetings of the unsecured creditors of the Transferor Company having outstanding balances above Rs. 10 Lakh be convened as prayed for on 9 December,2023 (Saturday) at 10:00 AM through video conferencing with facility of remote e-voting, subject to notice of the meeting being issued. The quorum of the meeting of the Unsecured Creditors shall be 184 in number or 40% in value of the Unsecured Creditors;

II. In relation to Applicant Company No. 2/Transferee Company:

a. The meetings of the Equity Shareholders are dispensed with keeping in view the shareholding pattern, financial structure of the company, and the fact that the consent by way of affidavits has been received;

b. The meeting of Nil Preference Shareholder Holders of the Applicant Company No. 2 has been dispensed as there is no scope of any meeting;

c. Since there are no Secured Creditors in Applicant Company No. 2, therefore, there is no scope for any meeting;

d. The meeting of the unsecured creditors of the Transferee Company having outstanding balances below Rs. 10 Lakh is dispensed.

e. The meetings of the unsecured creditors of the Transferee Company having outstanding balances above Rs. 10 Lakh be convened as prayed for on 9 December,2023 (Saturday) at 12:00 PM through video conferencing with facility of remote e-voting, subject to notice of the meeting being issued. The quorum of the meeting of the Unsecured Creditors shall be 112 in number or 40% in value of the Unsecured Creditors;

III. In case the required quorum as noted above for the meetings is not present at the commencement of the meeting, the meeting shall be adjourned by 30 minutes and thereafter the persons shall be deemed to constitute the quorum.

IV. Hon’ble Mr. Justice B S Walia (Retd.), address: Kothi 27, Sector 4, Chandigarh, Mobile No. 9814006691, email id: waliabs@gmail.com is appointed as the Chairperson for the meetings to be called under this order. An amount of ₹2,00,000/- (Rupees Two Lakhs Only) be paid for his services as the Chairperson.

V. Mr. Arav Gupta, Advocate, address: 5111, Sector 5-F, Eco City1, New Chandigarh,MobileNo.9781127265,e-mailid: aravgupta.adv2401@gmail.com, is appointed  as the  Alternate Chairperson for the meetings to be called under this order. An amount of  ₹1,50,000/- (Rupees One Lakh Fifty Thousand Only) be paid for his services as the Alternate Chairperson.

VI. Mr. Rohit Garg, Practising Chartered Accountant, address: House No. 1370,  Sector  40  B,  Chandigarh,  Mobile No. 9988901370, email id: gargrohitassociates@gmail.com, is appointed as the Scrutinizer for the above meetings to be called under this order. An amount of ₹1,00,000/- (Rupees One Lakh Only) be paid for his services as the Scrutinizer.

VII. The fee of the Chairperson, Alternate Chairperson and Scrutinizer and other out of pocket expenses for them shall be borne by the Applicant Companies jointly.

VIII. It is further directed that along with the notices, Applicant Companies shall also send, statements explaining the effect of the scheme on the creditors, key managerial personnel, promoters and non-promoter members, etc. along with the effect of the scheme of arrangement on any material interests of the Directors of the Company or the debenture trustees if any, as provided under sub-section (3) of Section 230 of the Act.

IX. That the Applicant Companies shall publish an advertisement with a gap of at least 30 clear days before the aforesaid meeting, indicating the day, date and place and the time of the meeting as aforesaid, to be published in “Business Standard” (English, All India Edition) and “Business Standard” (Hindi, All India Edition); The publication shall also indicate that the explanatory statement required to be furnished pursuant to Sections 230 & 232 read with Section 102 of the Companies Act, 2019 can be obtained free of charge at the registered office of the Applicant Companies. The Applicant Company No.1 shall also publish the notice on its website, if any.

X. Voting shall be allowed on the “Scheme” through electronic means which will remain open for a period as mandated under Clause 8.3 of Secretarial Standards on General Meetings to the Applicant Companies under the Act and the Rules framed thereunder.

XI. The Scrutinizer’s report will contain his/her findings on the compliance to the directions given in Para III to X above.

XII. The Chairperson shall be responsible to report the result of the meeting to the Tribunal in Form No. CAA-4, as per Rule 14 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 within 7 (seven) days of the conclusion of the meeting. The Chairperson would be fully assisted by the authorized representative/Company Secretary of the Applicant Companies and the Alternate Chairperson. The Scrutinizer will assist the Hon’ble Chairperson and Alternate Chairperson in preparing and finalizing the report.

XIII. The Applicant Companies shall individually and in compliance of sub-section (5) of Section 230 of the Act and Rule 8 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 send notices in Form No. CAA-3 along with copy of the Scheme, Explanatory Statement and the disclosures mentioned in Rule 6 of the “Rules” to (a) the Central Government through the office of the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi; (b) the Registrar of Companies, N.C.T. of Delhi and Haryana; (c) the Official Liquidator, attached to the High Court of Punjab & Haryana; (d) the Income Tax Department through its nodal office and the jurisdictional assessment office of each of the Applicant Companies by mentioning the PAN number of the Applicant Companies; (f) Ministry of Civil Aviation; and (h) the Directorate General of Civil Aviation; and to such other Sectoral Regulator(s) governing the business of the Applicant Companies, if any, stating that report on the same, if any, shall be sent to this Tribunal within a period of 30 days from the date of receipt of such notice and copy of such report shall be simultaneously sent to the applicant companies, failing which it shall be presumed that they have no objection to the proposed Scheme.

XIV. The applicant company shall file a note on the necessity of having 29.11.2022 as the appointed date instead of the ordinarily adopted date of first day of Financial Year.

XV. The Applicant Companies shall furnish a copy of the Scheme free of charge within one day of any requisition for the Scheme made by any creditor or member/shareholder entitled to attend the meeting as aforesaid.

XVI. The authorized representative of the Applicant Companies shall furnish an affidavit of service of notice of meeting and publication of advertisement and compliance of all directions contained herein at least a week before the proposed meeting.

XVII. All the aforesaid directions are to be complied with strictly in accordance with the applicable laws including forms and formats contained in the Rules as well as the provisions of the Companies Act, 2013 by the Applicant Companies

With the aforesaid directions, this First Motion Application stands disposed of. A copy of this order be supplied to the learned counsel for the Applicant Companies who in turn shall supply a copy of the same to the Chairperson, Alternate Chairperson and the Scrutinizer immediately.