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Judgment
Prabhat Kumar, Member (Techncial)
The Bench convened through video conferencing.
We have heard the Representative for the Petitioner Companies and the Authorised Representative of the Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai. Neither objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition to the Scheme.
The sanction of the Tribunal is sought under Sections 232 read with Section 230, Sections 52, 66 and other relevant provisions of the Companies Act, 2013 (“the Act”) and the Rules framed thereunder for the Scheme of Arrangement and Merger of Booker Satnam Wholesale Limited (‘Transferor Company’) with Booker India Limited (‘Transferee Company’) and their respective Shareholders (hereinafter referred as to “Scheme”) for:
I. Merger of Booker Satnam Wholesale Limited with Booker India Limited; and
II. As an integral part of the Scheme, the Issued, Subscribed and Paid-up Equity Share Capital of the existing Equity Shareholder of the Transferee Company be reduced on a proportionate basis from Rs.4,40,12,21,450/- divided into 44,01,22,145/- Equity Shares of Rs. 10/- each fully paid up to Rs.2,20,06,10,725/- divided into 44,01,22,145/- Equity Shares of Rs.5/- each fully paid up by reducing face value of Equity Shares from Rs.10 (Rupees Ten) each fully paid up to Rs.5 (Rupees Five) each fully paid up and the balance in securities premium account be reduced from the present sum of Rs. 1,18,18,34,346/- to Rs.29,18,71,451/-. The debit balance in the Retained Earnings Account of the Transferee Company of Rs. 3,09,05,73,619/- as on 31st March, 2021 shall be first adjusted against the reduction of Equity Share Capital of Rs. 2,20,06,10,725/- and thereon adjusted against the reduction of securities premium on account of Rs. 88,99,62,894/-. The reduction of Share Capital and Securities Premium Account as herein above, shall be effected as an integral part of the scheme as the same does not involve either diminution of liability in respect of unpaid Share Capital or payment to any Shareholder of any Paid Up Share Capital and it shall also be deemed to be in compliance with the provisions of Sections 66, 52 and other applicable provisions of the Act and rules and regulations made there under upon the Scheme becoming effective and the order of the NCLT sanctioning the Scheme shall be deemed to be an order under Section 66 of the Companies Act, confirming the reduction.
The Representative for the Petitioner Companies submits that Board of Directors of the Petitioner Companies approved the Scheme in their respective Board Meetings held on 3rd August, 2021. The Appointed Date fixed under the Scheme is 1st April, 2021.
The Petitioner Company No. 1 is engaged in the business of cash and carry and is a wholesaler supplying to caterers, retailers and other businesses through one store. The Petitioner Company No. 2 is engaged in the business of cash and carry and is a wholesaler supplying to caterers, retailers and other businesses through its seven stores.
The rationale of the Scheme of Arrangement and Merger is summarised as follows:
A. To reduce the share capital and securities premium account of the Transferee Company which is already lost on account of accumulated losses and have a balance sheet which depicts real capital employed which is fully represented by the value of currently productive assets on the assets side of the balance sheet. Post arrangement, it will be possible to service capital and declare dividend.
B. Post reduction of capital and in order to streamline the holding structure and to consolidate and effectively manage the Transferor Company and the Transferee Company in a single unified entity, which will provide several benefits including consolidation of resources, synergy, economies of scale, attaining efficiencies and cost reduction, it is intended that the Transferor Company be merged with Transferee Company. The merger of Transferor Company with Transferee Company would inter alia have the following benefits:
i. The merger shall lead to greater efficiency in overall combined business including economies of scale, efficiency of operations, cash flow management, increased asset base for the purpose of development of businesses of the combined entity, enhancing their growth opportunities and maximize the shareholder’s value.
ii. The merger shall provide for more productive and optimum utilization of various resources by pooling of the managerial, technical and financial resources of the Transferor Company and the Transferee Company which shall minimize the administrative compliances and overheads.
iii. The merger shall also result in simplification of the group structure.
The Present Company Scheme Petitions is filed in consonance with Section 230-232 read with Sections 52, 66 of the Companies Act, 2013 and in terms of order dated 20th September, 2022 passed in C.A. (CAA)/212/MB-IV/2021 by this Tribunal.
The Representative appearing on behalf of the Petitioner Companies submits that the Petitioner Companies have complied with all requirements as per directions of this Tribunal and they have made requisite filings to demonstrate compliance with this Tribunal. Moreover, the Petitioner Companies undertake to comply with all statutory/ regulatory requirements, if and to extent applicable, as may be required under the Companies Act, 2013 and the Rules made thereunder to give effect to the Scheme.
The Authorised, Issued, Subscribed and paid-up Share Capital of the Petitioner Company No. 1/ Transferor Company as on 31st March, 2022 is as under:
Particulars
Amount. in Rs.
Authorised Share Capital
5,00,00,000 equity shares of Rs.10/- each
50,00,00,000
TOTAL
50,00,00,000
Issued, Subscribed and Paid–Up Share Capital:
4,29,53,498 equity shares of Rs. 10/- each
fully paid up
42,95,34,980
TOTAL
42,95,34,980
The Authorised, Issued, Subscribed and paid-up Share Capital of the Petitioner Company No. 2/ Transferee Company as on 31st March, 2022 is as under:
Particulars
Amt in Rs.
Authorised Share Capital:
44,20,00,000 equity shares of Rs.10/- each.
442,00,00,000
4,80,00,000 compulsorily convertible preference
shares of Rs. 5/- each
24,00,00,000
TOTAL
466,00,00,000
Issued, Subscribed and Paid –Up Share Capital:
44,01,22,145 equity shares of Rs.10/- each
fully paid up.
440,12,21,450
4,79,34,095 compulsorily convertible preference
shares of Rs. 5/- each fully paid up
23,96,70,475
TOTAL
464,08,91,925
Subsequently after 31st March, 2022 the Authorised Share Capital was increased by 10,90,00,000 compulsorily convertible preference shares of Rs. 5/- each. The issued, subscribed and paid up capital was increased by issue of 10,75,29,842 compulsorily convertible preference shares of Rs. 5/- at face value on right basis only to the existing Shareholders of the Petitioner Company No. 2. The present Authorised, Issued, Subscribed and Paid-Up Share Capital of the Petitioner Company No. 2 as on filing of Company Scheme Petition is as under :-
Particulars
Amt in Rs.
Authorised Share Capital:
44,20,00,000 equity shares of Rs.10/- each.
442,00,00,000
15,70,00,000 compulsorily convertible
preference shares of Rs. 5/- each
78,50,00,000
TOTAL
520,50,00,000
Issued, Subscribed and Paid –Up Share
Capital
44,01,22,145 equity shares of Rs.10/- each
fully paid up.
440,12,21,450
4,79,34,095 compulsorily convertible
preference shares of Rs. 5/- each fully paid up
23,96,70,475
8,00,22,208 compulsorily convertible
preference shares Series A of Rs. 5/- each
40,01,11,040
2,75,07,634 compulsorily convertible
preference shares Series B of Rs. 5/- each
13,75,38,170
TOTAL
517,85,41,135
Consideration :-
Since all the paid-up shares of the Transferor Company are wholly owned by the Transferee Company and its nominees and therefore, there would be no issue of shares by the Transferee Company.
The Regional Director has filed his Report dated 5th December, 2022 making certain observations and the Transferee Company has undertaken/made following submission that :-
i. the Petitioner Companies have complied with the requirements and clarification of circular no. F. No. 7/12/2019/CL-I dated 21.08.2019 issued by the Ministry of Corporate Affairs (“Circular”) and the Appointed Date is in accordance with the provisions thereof. The Circular clarifies that a company may choose the appointed date to be a specific calendar date and the Petitioner Companies have accordingly complied with the requirements of the Circular.
ii. As per provision of Section 230 the explanation provides that “for removable doubts, it is hereby declared that the provisions of Section 66 shall not apply to reduction of share capital effected in pursuance of the order of the Tribunal under this Section.” Further, it is submitted that since the reduction of share capital and securities premium account is being done as an integral part of the Scheme and the order of the NCLT sanctioning the Scheme shall be deemed to be an order under Section 66 of the Act confirming the reduction. Hence, the separate approval for reduction of share capital and securities premium account is not required.
iii. the proviso of section 232(3)(i) of the Companies Act, 2013, as applicable, and pay the difference of fees and stamp duty on increasing the authorised capital after setting–off of the fee and stamp duty paid by the Transferor Company while giving effect to increase in authorized share capital of the Transferee Company.
iv. the Transferee Company undertakes to comply with provisions of Section 2(1B) of the Income Tax Act, 1961, as applicable.
v. the “Securities Premium” reflecting in the Financial Statements of the Petitioner Company 2 is as a result of issue of Securities from time to time, latest being issued during the financial year 2016-17 on 16th November, 2016 and its application / utilization u/s 52(2) of the Companies Act, 2013. The details are as under :-
Financial Year of Allotment
No. of Shares
Issue Price of Share including Premium
Security Premium Per Shares
Total Share Premium Collected (Rs.)
2009-10
27,48,096
70
60
16,48,85,760
2010-11
19,34,747
70
60
11,60,84,820
2011-12
30,36,782
70
60
18,22,06,920
2012-13
40,54,611
70
60
24,32,76,660
2013-14
2,15,80,278
16
6
12,94,81,668
2014-15
2,44,76,327
16
6
14,68,57,962
2015-16
2,17,37,124
16
6
13,04,22,744
2016-17
1,32,55,750
16
6
7,95,34,500
Total
1,19,27,51,034
2019-20
Securities Premium utilized u/s 52(2)(c) of the Companies Act, 2013
(47,56,997)
Securities Premium utilized u/s 52(2)(c) of the Companies Act, 2013
(61,59,691)
Total as per audited financial statements as on 31.03.2021
1,18,18,34,346
vi. that the Petitioner Company No. 2 has issued shares to the shareholders who after detailed due diligence and independent valuation including regulatory valuation of the Petitioner Company 2, have subscribed to the shares at premium. The said Securities Premium has been appropriately considered and disclosed in the Audited Financial Statements and Income Tax Returns of the relevant Assessment Year (A.Y) as required under the Income Tax Act, 1961 and rules made thereunder and also in compliance with all relevant laws. Further, no specific inquiry or proceedings in relation to issue of shares at premium has been initiated or pending against the Petitioner Company 2 by any Income Tax Authority in any of the Financial Year (F.Y.) referred above. Further no addition has been made under Section 68 of the Income Tax Act, 1961 on account of Securities Premium in any of the said A.Y. Further, the Petitioner Companies submits that the approval of the Scheme by this Tribunal will not deter any Authorities to deal with above issues arising after giving effect to the Scheme and the decision of such Authorities shall be binding on the Petitioner Companies.
vii. As per MCA21 record and financial statements Shareholding pattern of corporate body shareholders / LLPs / HUF having more than 10% shareholders in petitioner companies are as under:-
Name of the Petitioner Companies
Name of Shareholders
Shareholding in Petitioner Companies
Remarks
Booker Satnam Wholesale Limited (Transferor Company)
Booker India Limited
100%
BEN-2 not filed
Petitioner Company may be directed to file form BEN-2
Booker India Limited (Transferee Company)
Trent Limited
51%
BEN-2 not filed
Petitioner Company may be directed to file form BEN-2
Tesco Overseas Investment Limited
49%
BEN-2 not filed
Petitioner Company may be directed to file form BEN-2
viii. the Petitioner Companies submits that Registrar of Companies may take appropriate action, if required to deal with the non- compliance of provisions of Section 90 of the Companies Act, 2013 read with the Companies (Significant Beneficial Owners) Rules, 2018, amended from time to time by the Petitioner Companies. All issues arising thereunder shall be decided in accordance with law
The Regional Director appeared through its representative and submitted that their observations/ objections have been satisfactorily explained by the Petitioner Company and are acceptable to them. Hence, the Regional Director does not have any further objection to the proposed Scheme Company Petition.
The Official Liquidator has filed his Report dated 6th January, 2023 inter-alia, stating therein that the affairs of the Transferor Company have been conducted in a proper manner and the Scheme is not prejudicial to the interest of the public and the Shareholders of the Transferor Company. Accordingly, the Transferor Company may be ordered to be dissolved without winding up.
The Income Tax Department will be at liberty to examine the aspect of any tax payable as a result of this scheme and it shall be open to the income tax authorities to take necessary action as possible under the Income Tax Law.
From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy considering that no objection has so far been received from any Authority or Creditors or Members or any other Stakeholders.
Since all the requisite statutory compliances have been fulfilled, consolidated Company Scheme Petition in C.P. (CAA) 212/MB/2022 filed by Petitioner Companies are made absolute in terms of clause (a) to (e) of the said Company Scheme Petition.
The Scheme is hereby sanctioned and the Appointed Date of the Scheme is fixed as 1st April, 2021.
The Petitioner Companies are directed to lodge a certified copy of this Order along with a copy of the Scheme with the concerned Registrar of Companies, electronically in E-Form INC-28 within 30 days from the date of receipt of the Order from the Registry.
The Petitioner Companies are directed to lodge a certified copy of this order and the Scheme duly authenticated by the Deputy/ Assistant Registrar of this Tribunal, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, payable, if any, within 60 clear working days from the date of receipt of certified copy of the Order from the Registry of this Tribunal.
All concerned Regulatory Authorities to act on a copy of this Order duly certified by the Deputy Registrar/ Assistant Registrar of this Tribunal along with copy of the Scheme.
Any person or any Authority, whose interest is adversely affected, shall be at liberty to approach appropriate Forum or to take appropriate action as permissible under law.
Ordered Accordingly. C.P.(CAA)/212/MB/2022 is allowed and disposed-off.