Auto Pluss Electrical Components (Chennai) Private Limited vs Rajsriya Automotive Industries Private Limited

Ch. Mohd. Sharief Tariq, J

Under consideration is the Company Petition No. 644/CAA/2019 filed under Sections 230 to 232 of the Companies Act, 2013 r/w the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. As per the Scheme of Amalgamation (in Short, 'Scheme'), M/s. Auto Pluss Electrical Components (Chennai) Private Limited (hereafter referred to as Transferor Company') is proposed to be merged, amalgamated and vested with M/s. Rajsriya Automotive Industries Private Limited, (hereafter referred to as 'Transferee Company') as a going concern.

The Transferor Company was incorporated under the Companies Act, 1956 on 25.01.2002, having its Registered Office at No. 95, Harrington Road, chetpet, Chennai - 600031, Tamil Nadu. The Transferee Company was incorporated under the Companies Act, 1956 on 03.07.1996, having its Registered Office at No. 95, Harrington Road, chetpet, Chennai - 600031, Tamil Nadu.

The main object of the Transferor Company is to carry on the business of manufacture, fabricate, trade and provide consultancy service in Automotive Components, Electrical Components, Assemblies and Products, etc. The details of the main objects are set out in the Memorandum of Association of the Transferor Company.

The main object of the Transferee Company is to carry on the business of manufacture, fabricate, trade and provide consultancy service in Automotive Components, Assemblies & Products, etc. The details of the main objects are set out in the Memorandum of Association of the Transferee Company. The Board of Directors of the Petitioner Company vide their Resolution(s) dated 13.06.2017, have approved the present Scheme of Amalgamation. The other necessary requirements have also been fulfilled as per the Order dated 20.12.2018 passed by this Bench in CA/207 & 208/CAA/2018. It is worthwhile to record that while disposing off the CAs, it has specifically been mentioned that the Transferee Company is not required to file Petition as the Transferor Company is a wholly subsidiary of the Transferee Company.

The Counsel appearing for the Petitioner Company has submitted that the amalgamation will enable consolidation of the business of the two entities into one entity which will facilitate in focused growth, operational efficiency, integration synergies and better supervision of the business of the group. The amalgamation will enable pooling of resources of the Transferor Company with the resources of the transferee Company to their advantage, resulting in more productive utilization of said resources, and cost and operational efficiency which would be beneficial to all stakeholders. The Scheme would facilitate scaling of operations, reduce administrative costs and garner greater visibility in the market.

The Regional Director, Southern Region (In short, 'RD') in the Affidavit dated 21.03.2019 submitted that Clause 6.1, Part-II of the Scheme provides for the protection of the interest of the employees of the Transferor Company. It has further been submitted that as per the report of the RoC, Chennai, the Transferor and Transferee Companies are regular in filing the statutory returns. He has further submitted that no complaint/inspection/investigation or prosecution is pending against the Transferor and the Transferee Companies.

The RD has also submitted that as per clause 10 of Part II of the Scheme, the authorised capital of the Transferor Company will be merged with the authorised capital of the Transferee Company. The RD has suggested that the Transferee Company may be directed to file the amended MOA and AOA with the ROC, Chennai for his records. The RD further observed that in the said Clause of the Scheme, it is stated that the Transferee Company would not be required to pay any fee or stamp duty for the increase of the authorised capital. He has mentioned that as provided under Clause (i) to Sub Section (3) of Section 232 of the Companies Act, 2013, the Transferee Company has to pay the fees, if any, for the enhanced authorised capital subsequent to the amalgamation after setting off the fees paid by the Transferor Company. He has suggested that the Transferee Company may be directed to comply with the provisions of the Act, by making an application with the RoC, Chennai for payment of the balance fee as applicable under the provisions of the Act and Rules framed thereunder.

In relation to the observation(s) made by the RD in Para 10 of his report, the authorised signatory of the Transferor Company has filed an Affidavit deposing therein that the Transferee Company undertakes to pay the differential fee, which is to be paid for the increase in the authorized capital. Accordingly, the Transferee Company shall amend the MoA and AoA and file the same with the RoC, Chennai, and shall pay fee as may be required.

The RD has further submitted that in the Transferee Company a Private trust is holding 10% of its shares. The law does not recognize Trust as a member of a Company since trusts are not legal persons. Therefore, it is incumbent upon the Transferee Company to derecognize the trust as a member by seeking to bring on record of the Register of Members, the authorized Trustee as a member representing the interest of the trust and its beneficiaries. In relation to the observation(s) made by the RD in Para 11 of his report, the authorised signatory of the Transferor Company has filed an Affidavit deposing therein that the Transferee Company has complied with such requirements and have filed the requisite E-Forms.

The RD has further submitted that in clause 12.1 to Part II of the Scheme it has been stated that the Transferee Company will follow the Purchase Method for accounting the Scheme in its books. However in clauses 12.2 to 12.5 of the Scheme has stated that all the assets and liabilities of the Transferor Company will be recorded in the Transferee Company's books on book value method. There is a contradiction. However the Company has vide its letter dated 20.03.2019 clarified that it will account the scheme on Pooling of Interest Method only and assured to amend the Scheme before this Hon'ble Tribunal.

In relation to the observation(s) made by the RD in Para 12 of his report, the Petitioner Companies have filed MA/719/2019 in order to make change in the Accounting Treatment by amending Clause 12.1 of the Scheme. The revised clause 12.1 proposed to be changed under the Scheme, shall be read as-

"12.1 Upon the Scheme becoming effective, the amalgamation of the Transferor Company with the Transferee Company shall be accounted for as per the "Pooling of Interest Method" provided under Accounting Standard 14 issued by the National Advisory Committee on Accounting Standards ('NACAS')."

The Official Liquidator (In short, 'OL') in his Report, submitted that the Auditor appointed has broadly reviewed and observed that the entire Equity Share Capital of the Transferor Company is held by the Transferee Company and its nominees. Therefore, by virtue of the shareholding pattern, the Transferee Company is the Holding Company and the Transferor Company is the wholly owned subsidiary. Accordingly, pursuant to this Scheme, no shares of the Transferee Company shall be allotted to the Shareholders of the Transferor Company. Upon coming into effect of this Scheme, the shares held by the Transferee Company and its nominees in the Transferor company shall be deemed to be cancelled without any further act or deed for cancellation thereof by the Transferee Company.

The OL has also stated that the Chartered Accountants appointed has reported that the documents and records available with the Company were examined, nothing adverse or objectionable issues affecting the interest of the Companies or its members or creditors or prejudicial to the public interest has come to their notice.

The OL has further stated that the books of accounts records, registers etc. were examined/scrutinized and the business has not been carried on with intent to defraud the creditors or any other person or for any fraudulent purpose attracting the penal provisions of Section 339 of the Companies Act, 2013. Neither has any person or Officer or Directors of the Company misapplied or diverted or retained or became liable or accountable for any money or property of the Company or has been found guilty of any misappropriation, breach of trust in relation to the Company under section 340 of the Companies Act, 2013. The OL has not raised any objection.

Keeping in view the amendment made in Clause 12.1 of Part-II of the Scheme, it appears that the Accounting Treatment is in conformity with the Accounting Standards. The Appointed date of the said Scheme is 01.04.2017.

There is no additional requirement for any modification and the said Scheme of Amalgamation appears to be fair and reasonable and is not contrary to public policy and not violative of any provisions of law. All the statutory compliances have been made under Sections 230 to 232 of the Companies Act, 2013. Taking into consideration the above facts, the Company Petition is allowed and the Scheme of Amalgamation annexed with the Petition(s) is hereby sanctioned which shall be binding on the Shareholders, Creditors and employees of the Petitioner Companies.

While approving the Scheme as above, it is further clarified that this Order will not be construed as an order granting exemptionfrom payment of stamp duty or taxes or any other charges, if payable, as per the relevant provisions of law or from any applicable permissions that may have to be obtained or, even compliances that may have to be made as per the mandate of law.

The Companies to the said Scheme or other person interested shall be at liberty to apply to this Bench for any direction that may be necessary with regard to the working of the said Scheme.

A certified copy of this Order shall be filed with the concerned Registrar of Companies within 30 days of the receipt of this Order.

The Transferor Company shall be dissolved without winding up from the date of the filing of the certified copy of this Order with the concerned Registrar of Companies.

Upon receiving the certified copy of this Order, the RoC, Chennai, is directed to place all documents relating to the Transferor Company with that of the Transferee Company and the files relating to the Transferor Company shall be consolidated with the files and records of the Transferee Company.

The Order of sanction to this Scheme shall be prepared by the Registry as per the relevant format provided under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 notified on 14th December, 2016.

Accordingly, the Scheme stands sanctioned and CP/644/CAA/2019 stands disposed of.