ARV Hydro Power Company Pvt. Ltd vs Registrar of Companies

Harnam Singh Thakur, Member (Judicial)

This is a joint second motion company petition filed by the Petitioner Companies, namely, ARV Hydro Power Company Pvt. Ltd. (Transferor Company /Petitioner Company No.1) With Kapil Mohan And Associates Hydro Power Pvt. Ltd. (Transferee Company /Petitioner Company No.2) in terms of Sections 230-232 of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

The Petitioner Companies have prayed for sanctioning of the Scheme of Amalgamation between the respective companies. The said Scheme is attached as Annexure P-1 of the petition.

The first motion application seeking directions for dispensing/ convening the meetings of the Equity Shareholders, secured and unsecured creditors of the Applicant Companies was filed before this Tribunal vide Company Application No.CA (CAA) No. 3/Chd/HP/2022 and based on such application necessary directions were issued on 10.05.2022. In the order dated 10.05.2022, the meetings of equity shareholders, secured creditors and unsecured creditors of the Applicant Company No. 1 and preference shareholders of Applicant Company No.2 were dispensed with for the reasons mentioned in the aforesaid order. The meetings of equity shareholders, secured creditors and unsecured creditors of Applicant Company No.2 were to be convened on 28.05.2022.

The main objectives, date of incorporation, authorized and paid-up share capital and the rationale of the Scheme have been discussed in details in the order dated 10.05.2022.

In the second motion proceedings, certain directions were issued by this Tribunal by order dated 12.07.2022 and the same were complied by filing affidavit by Diary No. 01107/1 dated 11.11.2022. The notice of hearing was published in “Business Standard” (English) Chandigarh Edition and “Jansatta” (Hindi), Chandigarh and Himachal Pradesh Edition on 22.08.2022 and the original copies of the newspapers are attached as Annexure A-1 & A-2 of the aforesaid affidavit. It is also stated in the affidavit furnished by petitioner companies that copies of notices were served upon the (1) Central Government through the Regional Director (Northern Region), Ministry of Corporate Affairs; (2) Registrar of Companies, Himachal Pradesh and Chandigarh; (3) Official Liquidator and (4) The Chief Commissioner of Income Tax and the jurisdictional Income Tax Department, by way of speed post. Original postal receipts along with the Tracking report and acknowledgement receipts are attached as Annexure A-3 to A-6 of the aforesaid affidavit.

It is deposed by the authorized signatories of petitioner companies that the petitioner companies have not received any representation/objection to the proposed scheme. The aforesaid affidavit has been filed by Diary No. 01107/1 dated 11.11.2022.

In response to the abovementioned notices, the statutory authorities have furnished their responses.

7.1 Registrar of Companies (RoC)/Regional Director (RD)

7.1.1 The Regional Director (RD) has filed its report along with the report of the Registrar of Companies by Diary No. 01107/3 dated 13.02.2023.In para 10 of the report of the Regional Director sets out certain observations based on Para 24 of the report of Registrar of Companies, Himachal Pradesh and Chandigarh dated 04.01.2022 stating that as per Section 232(3) (i) of the Companies Act, 2013, the fee, if any, paid by the Transferor Companies on its authorised capital shall be set-off against any fee payable by the Transferee Company on its authorised capital subsequent to the amalgamation. The Transferee Company is a subsidiary of Transferor Company and the transferor company has Share Premium a/c balance of Rs.5.61 Crore as on 31.03.2021 whereas the Transferee Company has a security premium a/c balance of Rs. 26.41 Crore on 31.03.2022. The Transferor Company is not carrying on any business activity and has Nil revenue from operation since incorporation and the company is acting as a conduit to transfer funds from one company (its holding company to another company (its subsidiary company) as it has minimal expenses. It is further pointed out that 19,60,000 equity shares and 10,05,533, 6% fully convertible cumulative preference shares of the Transferee Company held by the Transferor Company have been pledged with Canara Bank as security for the secured loan of Rs.62.12 Cores availed by the Transferee Company from Canara Bank.

7.1.2 The petitioner companies have filed reply to the report of the Regional Director by Diary No. 01107/4 dated 06.02.2023, wherein it is clarified that 19,60,000/- Equity Shares as well as 10,05,533, 6 % fully convertible cumulative Preference Shares of the Transferee Company held by the Transferor Company was pledged with Canara Bank as security for the loan of Rs.62.12 Crores availed by the Transferee Company from Canara Bank and the aforesaid Charges are satisfied and documents pertaining to the satisfaction of the carges are attached as Annexure AA-1 of Diary No 01107/4 dated 06.02.2023. Records indicate that the company has filed Form No. CHG-4 in this regard with the RoC.

7.1.3 Thus, no adverse observation can be inferred from the report of the Regional Director/Registrar of Companies.

7.2 Income Tax Department

7.2.1 The Income Tax Department filed its report by Diary Nos. 00119 /3 dated 29.11.2022 with respect to Petitioner Companies wherein it has been stated that the Scheme is prejudicial to the interest of revenue and does not involve any public interest as such. The scheme is driven solely for the purpose to the prejudice of the revenue. The Transferor Company is a loss-making company and losses of the Transferor Company after amalgamation will be adjusted against the income of the Transferee Company. The Brought forward losses shall affect the Revenue adversely. The department reserve its right to initiate or continue any proceeding under Income Tax Act.

7.2.2 The petitioner companies have filed response to the report of Income Tax Department vide diary No. 1107/5 dated 06.02.2023 stating that the Scheme of amalgamation is neither prejudicial to the interest of revenue department not to the public at large. It is undertaken by the Authorized Signatory of Transferee Company that the losses of the Transferor Company will not be adjusted against the income of the Transferee Company and any demand payable by the Transferor Company will be paid by the Transferee Company.

7.2.3 Thus, after pursuing the undertaking of the petitioner companies, there is no adverse observation inferred from the report of the Income Tax Department.

7.3 Official Liquidator

7.3.1 The Official Liquidator filed its report by Diary No. 01107/2 dated 19.12.2022. The Official Liquidator in its report has reproduced the information on the incorporation of the Petitioner Companies, their capital structure, financial highlights, shareholding, etc. The Official Liquidator has also reproduced the extracts of Reports of the Statutory Auditors of the Petitioner Companies on the Financial Statements.

7.3.2 Thus, no adverse observation can be inferred from the report of Official Liquidator..

The certificate of the Statutory Auditors with respect to the Scheme between Petitioner Companies to the effect that the accounting treatment proposed in the Scheme is in compliance with applicable Indian Accounting Standards (Ind AS) as specified in Section 133 of the Act, read with rules thereunder and other Generally Accepted Accounting Principles is attached as Annexures- P7 and P9 of the Petition.

We have heard the learned counsel for petitioner companies and learned counsel for the Income Tax Department and have perused the record carefully.

In the context of the above discussion, the Scheme contemplated between the petitioner companies, appears to be prima facie in compliance with all the requirements stipulated under the relevant Sections of the Companies Act, 2013. As the observations from the Statutory Authorities have been duly addressed by the Petitioner Companies and since all the requisite statutory compliances have been fulfilled, this Tribunal sanctions the Scheme of Amalgamation attached as Annexure- P-1 with the petition.

Notwithstanding the submission that no investigation is pending against the petitioner companies, if there is any deficiency found or, the violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with the law, against the concerned persons, directors and officials of the petitioners.

While approving the scheme as above, it is clarified 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, payment is due or required 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 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 Sections 230 & 232 of the Companies Act, 2013, be transferred to and vested in the Transferee Company for all the estate and interest of the Transferor Company but subject nevertheless to all charges now affecting the same; and

ii. 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 Sections 230 to 232 of the Companies Act, 2013, be transferred to and become the liabilities and duties of the Transferee Company;

iii. All benefits, entitlements, incentives and concessions under incentive schemes and policies that the Transferor Company is entitled to include under Customs, Excise, Service Tax, VAT, Sales Tax, GST and Entry Tax and Income Tax laws, subsidy receivables from Government, grant from any governmental authorities, direct tax benefit/exemptions/deductions, shall, to the extent statutorily available and along with associated obligations, stand transferred to and be available to the Transferee Company as if the Transferee Company was originally entitled to all such benefits, entitlements, incentives and concessions;

iv. All contracts of the Transferor Company which are subsisting or having effect immediately before the Effective Date, shall stand transferred to and vested in the Transferee Company and be in full force and effect in favour of the Transferee Company and may be enforced by or against it as fully and effectually as if, instead of the Transferor Company, the Transferee Company had been a party or beneficiary or obliged thereto;

v. All the employees of the Transferor Company shall be deemed to have become the employees and the staff of the Transferee Company with effect from the Appointed Date, and shall stand transferred to the Transferee Company without any interruption of service and on the terms and conditions no less favourable than those on which they are engaged by the Transferor Company, as on the Effective Date, including in relation to the level of remuneration and contractual and statutory benefits, incentive plans, terminal benefits, gratuity plans, provident plans and any other retirement benefits;

vi. That the Appointed Date for the scheme shall be 01.04.2021 as specified in the Scheme;

vii. That the proceedings, if any, now pending by or against the Transferor Company be continued by or against the Transferee Company;

viii. That the Transferee Company shall, without further application, allot to the existing members of the Transferor Company shares of Transferee Company to which they are entitled under the said Scheme;

ix. That the fee, if any, paid by the Transferor Company on their authorized capital shall be set off against any fees payable by the Transferee Company on its authorized capital subsequent to the sanction of the ‘Scheme’;

x. That the assessment under the Income Tax Act will be in accordance with the provisions of the Section 170 (2A) of the Income Tax Act, 1961.

xi. That the Transferee Company shall file the revised memorandum and articles of association with the concerned Registrar of Companies and further make the requisite payments of the differential fee (if any) for the enhancement of authorized capital of the Transferee Company; after setting off the fees paid by the Transferor Companies;

xii. That the Petitioner Companies shall, within 30 days after the date of receipt of this order, cause a certified copy of this order to be delivered to the concerned Registrar of Companies for registration and on such certified copy being so delivered, the Transferor Company shall be dissolved without undergoing the process of winding up. The concerned Registrar of Companies shall place all documents relating to the Transferor Company registered with him on the file relating to the said Transferee Company, and the files relating to the Companies and Transferee Company shall be consolidated accordingly, as the case may be; and

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

As per the aforesaid directions, formal orders in Form No. CAA-7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 be issued after the filing of the Schedule of Properties within three weeks from the date of receiving a certified copy of this order by the petitioners.

All the concerned Regulatory Authorities are to act on a copy of this order annexed with the Scheme duly authenticated by the Registrar of this Bench.

The Company Petition CP (CAA) No.45/Chd/HP/2022 is allowed and disposed of accordingly.