Amalgamation Of Aadhunik Realtors Private Limited vs Haldiram Products Private Limited

S. K. Mohapatra, Member

This Joint application has been filed by the Petitioner Companies under Sections 230 to 232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016, for the purpose of the approval of the Scheme of Amalgamation of the transferor company into the Transferee Company. A copy of the Scheme of amalgamation has been placed on record.

The "Transferor Company", Adhunik Realtors Private Limited was incorporated on 18.01.2007 under the provisions of companies Act 1956, having its registered office B-1/H-3, Mohan Co-operative Industrial Estate, Mathura Road New Delhi- 110044.

The "Transferee Company", Haldiram Products Private Limited was incorporated on 29.08.1996 under the provisions of companies Act, 1956, having its registered office at office 19A, Shivaji Marg, Najafgarh Road New Delhi-110015.

A perusal of the petition discloses that initially the First Motion application seeking direction for convening the meeting of Shareholders and Creditors of both the companies was filed before this Tribunal being CA (CAA) No.'153 (PB) 2017 under Sections 230-232 of the Companies Act, 2013. In the order dated 07.03.2018 the meetings of the Shareholders, Secured Creditors and Unsecured Creditors of both the Petitioner Companies were dispersed with.

On 20.04.2018 the Petitioners were directed to carry out publication in the newspapers 'Business Standard' English Delhi edition as well as in 'Business standard' Hindi Delhi edition. In addition to the public notice, notices were directed to be served on to the Regional Director (Northern Region), Registrar of Companies, NCT of Delhi and Haryana, Official Liquidator, the Income Tax Department and to the other relevant sectoral regulators.

It is seen from the records that the Petitioners have filed an affidavit dated 04.06.2018 affirming compliance of the order passed by the Tribunal dated 20.04.2018. A perusal of the affidavit discloses that the petitioners have affected the newspaper suiblication as directed in one issue of the 'Business Standard' English edition on 19.05.2018 as well as in 'Business Standard' Hindi edition again on 19.05.2018 in relation to the date of hearing of the petition. Further, the affidavit also discloses that copies of petition have been duly served to the Registrar of Companies, Regional Director, Northern Region, Official Liquidator and Income Tax Department in compliance of the order and in proof of the same acknowledgement made by the respective offices have also been placed on record. In addition both the petitioners have also filed affidavits dated 04.06.2018 to the effect that the petitioners and _ their representatives have not received any objection against the Scheme.

The Regional Director has filed its representation dated 08.06.2018 in which it is submitted that as per the Scheme the authorized capital of the Transferor company shall stand added without any further act or deed. It is stated that the petitioner companies may be directed to furnish a verified statement regarding fee payables, if any, for addition of the authorized share capital of the transferor company with that of the transferor company alemeorith an undertaking for payment of the said fee.

Further, it has been pointed out that as per clause 17.6 of the Scheme, fractional shares arising out of the exchange shall be paid in cash and/or will be sold among the members and proceeds distributed among the members will attract the provisions of Section 230(10) of the Companies Act, 2013. An objection has been raised that the petitioners have not disclosed about the disputed statutory dues in the Proposed Scheme.

The petitioners have filed its response which runs as follows:

(i) Reply to point no. 9 - We hereby undertake to pay the fees to the Registrar of Companies, NCT of Delhi & Haryana in relation to the addition of the Authorized share capital of the Transferor Company with that of the Transferee Company after Amalgamation.

As per the provision of Section 230(3) (I) of the Companies Act' 2013 it is clearly implied that the fees to Registrar of Companies, NCT of Delhi & Haryana for the addition of the Authorized share Capital of the Transferor Company with that of the Transferee Company after setting off the fees already paid by the Transferor Company shall be payable by the Transferee Company after amalgamation.

(ii) Reply to point no. 10 - Any fractional shares arising out of the exchange shall be paid in cash and/ or will be sold among the members/ shareholders will not attract the provisions of Section 230(10) of the Companies Act' 2013. As this is among the shareholders of the Transferor Company and transferee Company.

As per Clause 4 of the Scheme, all the Liabilities of the Transferor Company shall be paid by the Transferee Company after Amsdlaataaiton.

Further, Disputed statutory Dues which are not crystallized and finalized are still pending as per the details mentioned in the Audit Report of the Transferee Company i.e. Haldiram Products Private Limited as Annexure A point (viti)(b)."

The petitioner companies have thus _ specifically undertaken to pay the fee in respect of the total authorized share capital emerging after the approval of the scheme of amalgamation in accordance with law.

The Official Liquidator has filed its report dated 08.06.2018 and pointed out that the transferor company, has acquired land at Sonepat on 31.07.2007 at a consideration of Rs. 3,22,59,069/- and the said land was reflected in the balance sheet of the company till 31st March, 2013. Later on from 2014 onwards the land does not appear in the balance sheet of the transferor company.

It is contended in the report that on query raised about this matter it has been informed by the petitioners that the transferor company had entered into a contract for sale of property which consists of land and building under construction against which the company has_ received advance. Subsequently the said contract was not executed as party was not paying the sale consideration and consequently, the company has forfeited the advance of Rs. 7.50 crore in accordance with the terms of contract. Accordingly it is contended that the said land value has been reduced to Nil and the land has not been shown in the balance sheet on and after 31st March, 2014. It has been also submitted that the said land has been purchased on 31.07.2007 ata consMeralion of Rs. 3,22,59,069/- and Rs. 7.50 lacs on account of earnest money towards contract for sale of said land was received during 01.12.2011 to 13.12.201 1.

Further, the transfer company has received Rs. 9.25 crore as a security deposit from M/s Haldiram Products Private Ltd for the construction of building on said land. Therefore, it is submitted that the applicability of income tax at the time of adjustment for forfeited amount with the cost of the land shall be dealt by income tax authority in accordance with law and the stamp duty for the Transfer of Property can be applied as per law after amalgamation of the company.

The official liquidator except the abovesaid observation has not raised any other material objection against the approval of the Scheme. It is also submitted in the report that the official liquidator has not received any complaint against the proposed Scheme from any person/party interested in the Scheme in any manner and that the affairs of the transferor company do not appear to have been conducted in a manner prejudicial to the interest of its members or to public interest.

The petitioners in response of the report filed by the official liquidator have filed their reply on 08.06.2018 and reiterated the aforesaid position and undertook to pay the applicable stamp duty for the transfer of property as per Transfer of Property Act, 1882 to the government as applicable.

The Income Tax department has filed its representations in respect of both the companies. The department of income tax in respect of Transferor Company has submitted that there are certain Brought Forward Losses of Transferor Company and there is no outstanding demand pending to be paid by the transferor company.

In respect of transferee company, the revenue department has raised an objection that the Scheme has been made to avoid taxes. Since, M/s Adhunik Realtors Pvt. Ltd. has huge losses which will be adjusted with the income of M/s Haldiram Products Pvt. Ltd. Therefore, the ultimate effect of the scheme will have result in some tax benefit or even it is framed with an object of saving tax and it may result into tes avoidance.

It is also submitted by the department that the approval of the scheme, should in no manner affect the tax treatments of the transactions under the Income Tax Act, 1961 or any other applicable taxing statute, nor would sanction of the Scheme or the effect thereof serve as a defense for the companies concerned against tax treatment under the aforementioned statutes.

19, The transferee company has filed its response against the report filed by the Income Tax Department and submitted that:

"i. Reply to point no. 4 (i) - The losses of the Transferor Company may be adjusted with the income of the Transferee Company as per the provisions of the Income Tax Act, 1961. In case of any liabilities arises on behalf of Transferor and Transferee Company, the same shall be paid by Transferee Company as per the provisions of Income Tax Act, 1961.

ii. Reply to point no. 4 (ii) - The approval of the scheme shall not affect the tax treatments of the transactions under the Income Tax Act, 1961 or any other applicable taxing statute. Further, the sanction of the Scheme or the effect thereof shall not serve as a defence for the Applicant Company No.1."

Needless to say, that the scheme should not be a device to evade law and to promote tax evasion. The scheme will be against the public interest in case the purpose of amalgamation is only to transfer capital asset to escape capital gain tax. Therefore, it is clarified that the present Scheme of amalgamation will not come in the way of the Income Tax department to proceed against the transferee company or any other entity in case there is any tax evasion, or violation of any provisions of Income Tax Act 1961. Additionally, liberty is further given by clarifying that there shall be no limitation on the power of the Income tax Department for recovery of pending Income Tax dues, including imposition of penalties etc. as provided in law.

It is pertinent to mention here that in respect of the aforementioned land of transferor company situated at Sonepat, a clarification was sought from the petitioners vide order dated 12 28.09.2018 as to whether there is any provision in the Scheme for transfer of the said land; the transfer of land is proposed for what consideration and what will be the amount of stamp duty for the transfer of the said land in the light of its market value.

Thereafter the petitioner companies filed their clarification on 01.10.2018 and submitted as follows:

"(a) It is submitted that the aforesaid facts mentioned in point 4.1 of Part III of the Scheme attached with the 1s' Motion Petition and 24 Motion Petition filed before the Hon'ble National Company Law Tribunal on 15.11.2017 and 22.03.2018 and stated that all 'Undertaking' of the Transferor Company shall, without any further act, instrument or deed, be and stand transferred to and vested in and / or be deemed to have been and stand transferred to and vested in the Transferee Company as a going concern so as to become the estate, assets, rights, title and interests and authorities of the Transferee Company.

Further, it is submitted that the amount of Fixed Assets inoluclers the Land value of Rs. 3,22,59,069/- and building value of Rs. 4,27,40,931/- which is not we included in the Fixed asset amount due to forfeited of Earnest money amounting to Rs.7,50,00,000/- and the same ts disclosed in the Report on Valuation of Shares and Share Exchange Ratio dated 30.11.2017 submitted by P.R. Kumar & Co., Chartered Accountants of Adhunik Realators Private Limited, Transferee Company (Copies of scheme and Valuation Report attached with the 24 motion Petition/application as Annexure A at page no.40 and Annexure I at page no. 143 respectively).

It is further submitted that the Accounting treatment for above mentioned forfeiture of advance was made as per case decided by Delhi High Court in Commissioner of Income-tax vs Meera Goyal (Delhi High Court) IT APPEAL NO.1263 OF 2011 (copy is enclosed for your reference as Annexure 2), Hon'ble Supreme Court in the case of Travancore Rubber and Tea Company Ltd. And Section 51 of Income Tax Act which is going reproduced as under:

If the owner of an asset has received advance money or other money by forfeiting the said amount relating to the asset, this amount will be deducted from the; a) The written down value in case of depreciable assets, or b) The cost of acquisition of the asset, or c) The fair market value of the asset that will be taken as cost of acquisition as on 01.04.1981, if the asset was purchased before 01.04.1981 as the case may be, in computing the cost of acquisition. The company has reduced the cost of land and WIP of Building Cost by such forfeited amount.

In view of above, the value of land has been reduced to nil in balance sheet as on 31.03.2014 whereas the company is still in the possession of land and super structure thereon.

Further, the applicability of the Income Tax at the time of adjustment for forfeited amount with the tt cost of land has been done in accordance with the provisions of the Section 51, in the Income Tax Act, 1961. (b) Further, it is submitted that the content of Paragraph 2 of Point NO. 43 of the Main Petition stated that upon the Scheme becoming finally effective, in consideration of the transfer of and vesting of the transferor company, the transferee company shall, subject to the provisions of the Scheme and without any further application, act, instrument or deed, issue and allot:- "48 Equity Share or Rs.10/-(Ten) each of Transferee Company (Haldiram Products Private Limited) shall be allotted for every 100 Equity Share of Rs.10/-(Ten) each of Transferor Company (Adhunik Realators Private Limited)." Also, the Transferor Company and the Transferee Company are Private Companies and the directors and their relatives/acquaintances hold the entire share capital of these companies.

It is submitted that in view of the above I also hereby undertake, on behalf of the applicant Transferee Company Haldiram Products Private Limited, to pay the applicable stamp duty as per the Indian Stamp Act to the Sub-Registrar's Office of the Treasury as per the applicable rate for transfer of said land and building from the Transferor Company to the Transferee Company after Amalgamation."

It is seen that the transferee company has undertaken to pay the applicable stamp duty as per the Indian Stamp Act, as applicable. Besides, in respect of the clarification made by the petitioner companies the Regional Director and the Official Liquidator have shown their satisfaction vide affidavit filed on 12.12.2018 and 30.11.2018 respectively and the same fact has been duly recorded in the order dated 02.01.2019.

It is submitted that the appointed date for amalgamation provided in the Scheme will be 01.04.2017.

In the joint petition it has been affirmed that no proceedings under Section 206 to 229 or Chapter XIV of the Companies Act, 2013 are pending against the Petitioner Companies.

Certificates of respective Statutory auditors of both the petitioner companies have been placed on record to the effect that Accounting Treatment proposed in the Scheme of Amalgamation is in conformity with the Accounting Standard notified by the Central Government as specified under the provisions of Section 133 of the Companies Act, 2013.

The share exchange ratio as provided in the Scheme is as under:

a) 48 equity shares of Rs. 10/- each of transferee company, credited as fully paid up, for every 100 equity shares of Rs. 10/- each of transferor company, shall be allotted to the shareholders of Transferor Company.

Copy of the valuation report/share exchange ratio report prepared by P.R. Kumar & Co., Chartered Accountant has been placed on record.

The shareholders of the petitioner companies are the best Judges to protect their interest, fully conversant with market trends, and therefore, their decision should not be interfered with by the Tribunal for the reason that it is not a part of judicial function to examine entrepreneurial activities and _ their commercial decisions. It is well settled that the Tribunal while evaluating the Scheme of which sanction is sought under Section 230-232 of the Companies Act, 2013 will not ordinarily . interfere with the corporate decisions of companies approved by shareholders and creditors.

In the case of Hindustan Lever Employees Union Vs. Hindustan Lever Limited reported in (1995) 5 SCC 491 the three judges bench of Hon'ble Supreme Court held that a company court does not exercise appellate jurisdiction over a scheme and its jurisdiction is limited to ascertaining fairness, justness and reasonableness of the Scheme and to ensure that neither any law has been violated or public interest compromised in the process.

Right to apply for the sanction of the Scheme has been statutorily provided under Section 230-234 of the Companies Act, 2013 and therefore, it is open to the applicant companies to avail the benefits extended by statutory provisions and the Rules.

It has also been affirmed in the petition that the Scheme is in the interest of the transferor company and the transferee company including their shareholders, creditors, employees and all concerned.

In view of the foregoing, upon considering the approval accorded by the members and creditors of the Petitioner companies to the proposed Scheme, and the affidavits filed by the Regional Director, Northern Region, Ministry of Corporate Affairs, the report of officiel liquidator and the report of Income Tax Department there appears to be no impediment in sanctioning the present Scheme.

Consequently, sanction is hereby granted to the Scheme under Section 230 to 232 of the Companies Act, 2013.

The Petitioners dial however remain bound to comply with the statutory requirements in accordance with law.

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.

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.

THIS TRIBUNAL DO FURTHER ORDER

i. That the Transferor Company shall stand dissolved without following the process of winding-up; and

ii. That all the property, rights and powers of the transferor company, be transferred without further act or deed, to the transferee company and accordingly the same_ shall pursuant to Section 232 of the Companies Act, 2013, be transferred to and vest in the transferee company.

iii. That all the liabilities and duties of the transferor company, be transferred without further act or deed, to the transferee company and accordingly the same shall, pursuant to Section 232 of the Act, be transferred to and become the liabilities and duties of the transferee company; and

iv. That all proceedings now pending by or against the transferor company, be continued by or against the transferee company; and

v. That all the employees of the transferor company in service, on the date immediately preceding the date on which the scheme takes effect, i.e. the effective date shall become the employees of the transferee company on such date without any break or interruption in service and upon terms and condition not less favorable than those subsisting in transferor company on the said date.

vi. That Petitioner companies shall within thirty days of the date of the receipt of this order cause a certified copy of this order to be delivered to the Registrar of Company for registration and on such certified copy being so delivered the we company shall be dissolved and the Registrar of Company shall place all documents relating to the transferor company registered with him on the file kept by him in relation to the transferee company and the files relating to both the petitioner companies shall be consolidated accordingly; and

vii. That any person interested shall be at liberty to apply to the Tribunal in the above matter for any directions that may be necessary.

The petition stands disposed of in the above terms.

Let copy of the order be served to the parties.