Aristo Jewellery Limited vs R.K. Creative Designers Private Limited

The sanction of the Tribunal is sought under sections 230 to 232 and other applicable provisions of the Companies Act, 2013 (the Act) and the Rules framed thereunder to the Scheme of Amalgamation (the Scheme) of Aristo Jewellery Limited with R.K. Creative Designers Private Limited and their respective Shareholders.

We have heard the learned Authorised Representatives for the Petitioner Companies and the Deputy Director, WR, MCA. No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition.

The learned Authorised Representatives for the Petitioner Companies submitted that the Petitioner Company No.1 was engaged in the business of jewellers, gold and silversmiths, dealers in gold, bullion, precious metals and stones and the Petitioner Company No.2 is engaged in the business of manufacturing and designing garments and textiles.

The Board of Directors of Petitioner Companies have approved the Scheme in their respective meetings held on February 21, 2019. The appointed date fixed under Scheme is 1st April, 2019.

The rationale for the Scheme is as under:

a) The Transferor Company is an Associate Company of the Transferee Company.

b) Consolidation of Business: The merger will enable the Transferor Company and the Transferee Company to consolidate their business into single Company. This will enable R.K. Creative Designers Private Limited with an opportunity to provide services in a seamless manner to its customers. Further, this will also help R.K. Creative Designers Private Limited to demonstrate its capability and provide competitive advantages vis-a-vis its competitors.

c) Focused Management: Consolidation of the business into a single consolidated entity which shall enable focused strategies, management, investment and leadership for the consolidated entity and further result into better administration and operational synergies.

d) Unlock Shareholders value: In furtherance to its objectives and in view of existence of business synergies between the Transferor and Transferee Company, and to enhance shareholders value, it is proposed to merge the Transferor Company with the Transferee Company in accordance with the provision of this Scheme of Merger by way of Absorption.

e) Efficiency in Fund raising: Increase in the networth of R.K. Creative Designers Private Limited which shall facilitate and provide adequate opportunities to mobilize the financial resources for the growth of business and also streamline the process for fund raising. Merged entity would be in better position as compared to smaller standalone Companies.

f) Reduction in number of Companies and Regulatory Compliance thereof: Reduction of shareholding layers, overheads, facilitates administrative convenience, enable cost savings and ensure optimum utilization of resources.

The Company Petition is filed in consonance with Sections 230 to 232 of the Act in accordance with the Order dated 26th September, 2019 passed in C.A. (CAA) 835/MB/2018 by this Tribunal.

The Petitioner Companies have complied with all requirements as per directions of the Tribunal and have filed necessary affidavits of compliance before the Tribunal. Moreover, the Petitioner Companies undertake to comply with all statutory/regulatory requirements, if any, as required under the Act and the Rules made thereunder as applicable. The undertaking given by the Petitioner Companies is accepted.

The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, has filed its Report dated January 27, 2021 inter alia stating therein its observations on the Scheme as stated in para IV (a) to (f) of the Report. In response to the observations made by the Regional Director, the Petitioner Companies have given necessary clarifications and undertakings by filing the Affidavit in Rejoinder. The observations made by the Regional Director and the clarifications and undertakings given by the Petitioner Companies are summarized in the table below:

Sr.

No. Para

(IV)

RD Report / Observation Dated 27th January, 2021

Response 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.

Apropos observation made in paragraph IV (a) of the report of Regional Director is concerned, the Petitioner Companies undertakes to comply with such applicable accounting standards for Amalgamation while passing necessary entries in connection with

the Scheme.

b)

As per definition of the Scheme,

"Appointed Date" means 1 day of April 2019

"Effective Date" means the date on which the certified copies of the order passed by the National Company Law Tribunal if filed with the Registrar of Companies, Maharashtra, Mumbai. References in the Scheme to date of 'coming into effect of the scheme' or 'effectiveness of the scheme in the terms of law' shall be construed as reference to the effective date

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 Hon'ble Tribunal taking into account its inherent powers.

Further, the Petitioners may be asked to comply with the requirements as clarified vide circular no. F. No. 7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs.

Apropos observation of the Regional Director, Western Region, Mumbai, as stated in paragraph IV

(b) of his report concerned, the Petitioner Companies confirms that the definition "Appointed Date" means 1stApril, 2020. Further, the Petitioner Companies confirms that the "Effective Date" shall be the date on which the certified or authenticated copies of the order sanctioning this scheme by the Mumbai Bench of National Company Law Tribunal is filed with the Registrar of Companies, Mumbai Maharashtra by the Transferor Companies and the Transferee Company as required under the provisions of the Companies Act. The petitioners further undertake to comply with the circular no. F. No.7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs.

c)

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

Apropos observation made in paragraph IV (c) of the report of Regional Director is concerned, the Petitioner Companies undertakes to comply with the provisions of Section 232(3)(i) of the Companies Act, 2013.

d)

The Hon'ble Tribunal may kindly seek the undertaking that this scheme is approved by the requisite majority of members and creditors as per Section 230(6) of the Act in meetings duly held in terms of Section 230(1) read with sub section (3) to (5) of the Section 230 of the Act and the Minutes thereof are duly placed before the Tribunal.

Apropos observation made in paragraph IV (d) of the report of Regional Director is concerned, the Petitioner Companies submits that the Hon'ble Tribunal vide their order dated September 26, 2019 had dispensed with the convening of meeting of Shareholders of the Petitioner Companies in view of the consents on affidavit given by them. The Hon'ble Tribunal also

dispensed the meetings of creditors of the Petitioner Companies as the present Scheme does not involve an arrangement with the creditors. However, it was directed that individual notice to the said Creditors be issued by the clearly indicating therein that in case they have any objection, they may file the same before the Hon'ble Tribunal with a copy to the respective Transferee Company, within a period of thirty days from the date of receipt of such intimation of said Companies. The said intimation was duly served upon the said creditors and an Affidavit of service was duly filed before the Hon'ble Tribunal confirming the Compliance of the said Order. In view of the aforesaid submission, the question of preparation of Minutes thereof does not arise. Therefore, Petitioners Companies submits that there is no requirement for issuance of an undertaking that the scheme is approved by the requisite majority of members and creditors as per

section 230 (6) of the Act.

e)

As per Part III Clause 22(d) of the Accounting Treatment clause of the Scheme, stated that the difference, being excess / deficit in the value of assets over the value of liabilities as transferred to the Transferee Company (after adjusting for cancellation of investment held by

the Transferor Company in the Transferee Company) arising pursuant to the Scheme shall be accounted for based on the accounting principal prescribed under Accounting Standard 14, the surplus if any arising out of the scheme shall be credited to Capital Reserve and deficit if any arising out of the same shall be debited to Goodwill Account of the Transferee. The Capital Reserve arising out of the amalgamation shall not be considered as free reserve and not available for distribution of dividend.

Apropos observation made in paragraph IV (e) of the report of Regional Director is concerned, the Transferee Company undertakes to comply with clause 22(d) of the Scheme and confirm that surplus, if any credited to the Capital Reserve arising out of amalgamation, shall not be available for distribution of dividend.

f)

The Petitioner Company states that the scheme is in compliance with the provision of section 2(1B) and other relevant provisions of the Income Tax Act, 1961. In this regards, the petitioner company shall ensure compliances of all the provisions of Income Tax Act, and Rules thereof.

Apropos observation made in paragraph IV (f) of the report of Regional Director is concerned, the Petitioner Companies undertakes to comply with the provisions of Section 2(1B) of the Income Tax Act, 1961.

The observations made by the Regional Director and the clarifications & undertakings given by the Petitioner Companies have been verified and accepted.

The Official Liquidator has filed his report dated 1st February, 2021 inter alia, stating therein that the affairs of the Transferor Company have been conducted in a proper manner not prejudicial to the interest of the Shareholders of the Transferor Company.

From the material on record, the Scheme appears to be fair, reasonable and is not in violation to any provisions of law nor is contrary to public interest/policy.

Since all the requisite statutory compliances have been fulfilled, CP (CAA) 740/MB/2020 is made absolute in terms of 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, 2019 placed at Pages 291 to 308 (Annexure - G) of the Company Petition, is hereby sanctioned. It shall be binding on the Petitioner Companies involved in the Scheme and all concerned including their respective Shareholders, Unsecured Creditors/Trade Creditors and Employees.

(ii) The Transferor Company be dissolved without being wound up.

(iii) The Registrar of this Tribunal shall issue the certified copy of this Order along with the Scheme forthwith. The Petitioner Companies 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 Petitioner Companies shall lodge a copy of this Order and the Scheme duly authenticated by the Registrar of this Tribunal with the Superintendent of Stamps concerned, within 60 working days from the date of the receipt of the Order, for the purpose of adjudication of stamp duty, if any, payable.

(v) The Petitioner Companies shall comply with all the undertakings given by them.

(vi) The Petitioner Companies 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.

(vii) The Petitioner Companies shall take all consequential and statutory steps required under the provisions of the Act in pursuance of the Scheme.

(viii) All concerned shall act on a copy of this Order along with the Scheme duly authenticated by the Registrar of this Tribunal.

(ix) Any person interested in the above matter shall be at liberty to apply to the Tribunal for any directions that may be necessary.