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Judgment
Mahendra Khandelwal, Member (Judicial)
The present Joint Petition is filed by the Petitioner Companies viz., M/s. BCC Edutech Private Limited (Petitioner Company No.1/Transferor Company No. 1), M/s. Urban Buildmart Private Limited (Petitioner Company No.2 /Transferor Company No. 2) with M/s. Conscient Infrastructure Private Limited (Petitioner Company No.3/Transferee Company) and their respective Shareholders and Creditors under Section 230-232 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 Sanction of the proposed Composite Scheme of Arrangement amongst the Transferor Company No. 1 and Transferor Company No.2 with Transferee Company. The copy of the Composite Scheme of Arrangement (hereinafter referred as the “Scheme”) has been placed on record.
The Petitioner Company No.1/Transferor Company No. 1 i.e. M/s. BCC Edutech Private Limited was incorporated on 03.07.1991 under the provisions of the Companies Act 1956 bearing CIN: U70100DL1991PTC044832 having its registered office at K-1, Green Park Main, New Delhi – 110016. The Petitioner Company No.1 is engaged in the business of real estate.
The Petitioner Company No. 2/ Transferor Company No.2 i.e. M/s. Urban Buildmart Private Limited was incorporated on 17.10.2005 under the provisions of the Companies Act, 1956 bearing CIN: U45101DL2005PTC141771 having its registered office at K-1, Green Park Main, New Delhi – 11016. The Petitioner Company No.2 is engaged in the business of real estate.
The Petitioner Company No.3/Transferee Company i.e. M/s. Conscient Infrastructure Private Limited was incorporated on 23.02.1990 under the provisions of the Companies Act, 1956 bearing CIN: U74899DL1990PTC039324 having its registered office registered office at K-1, Green Park Main, New Delhi – 11016. The Petitioner Company No.3 is engaged in the business of real estate.
Since the Registered Office of all the Petitioner(s) Companies is in New Delhi, this Tribunal is having territorial jurisdiction in the matter.
The Petitioner Companies submit that the proposed scheme of amalgamation of the Transferor Companies and Transferee Company would have the following benefits: -
i. Optimum and efficient utilization of capital, resources assets and facilities of the Companies;
ii. Consolidation of businesses and enhancement of shareholder value;
iii. Better management and focus of growing the business;
iv. To derive benefit of synergies arising out of consolidation of business, such as, enhancement of net worth of the combined business;
v. The assets of the Transferor Companies would augment the asset base and thereby result in optimal utilization of the resources and greater revenue inflow;
vi. The Scheme would result in reduction of overheads, administrative, managerial and other expenditure and bring about operational rationalization, efficiency and optimum utilization of various resources.
The appointed date as fixed for the proposed scheme of Amalgamation is 1st April, 2020 or such other date as may be directed by the National Company Law Tribunal.
From the records, it is seen that the First Motion joint application i.e., CA(CAA)38(ND)/2021 was filed before this Tribunal and this Tribunal vide order dated 14.10.2022 had allowed the CA(CAA)38(ND)/2021 and passed the following directions:-
i) the meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Transferor Company No.1 was dispensed with.
ii) the meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Transferor Company No.2 was dispensed with.
iii) the meeting of Equity Shareholders, Secured Creditors and Unsecured Creditors of the Transferee Company was dispensed with. The meeting of the 1004 homebuyers/ allottees of the Transferee Company was directed to be convened for seeking approval of the scheme.
The Petitioner Companies had filed the affidavit of service dated 05.12.2022 for placing on record the proof of service of notice of meeting of the homebuyers of the Transferee Company which were dispatched on 09.11.2022 through speed post and publication in newspapers informing the date of meeting of the home buyers as directed by this Tribunal in order dated 14.10.2022. Further, the notice was also served to the statutory authorities on behalf of the Petitioner Companies.
The Chairperson and Scrutinizer of the meeting of Home Buyers had placed on record Chairperson’s report dated 19.12.2022 and Scrutinizer’s Report dated 13.12.2022 respectively wherein it was stated that the meeting of homebuyers was conducted on 12.12.2022 at 11:00 a.m. wherein the required quorum was present and the resolution for the approval of scheme of amalgamation was approved, adopted and agreed with 100% votes in favor of the scheme.
This Tribunal vide order dated 03.02.2023 had directed the Petitioner Companies to publish the notice of the hearing of the main Company Scheme Petition in two newspapers namely, “Business Standard” (English Delhi edition) and “Business Standard” (Hindi Delhi edition) not less than 10 days before the next date fixed for hearing the petition. It is seen from the record that the petitioners have filed an Affidavit dated 21.02.2023 affirming compliance and disclosing that the Petitioner Companies have effected publication in “Business Standard” (English) New Delhi edition as well as “Business Standard” Hindi edition, both dated on 13.02.2023. In addition to the public notice, notices were served on the Regional Director (Northern Region), Official Liquidator, the Income Tax Department and to the other relevant sectoral regulators.
Pursuant to the notice issued to the Regional Director and Official Liquidator and Income Tax Department, they have filed their response/reply in the matter.
The Regional Director (RD) in its report dated 24.03.2023 has made certain observations with regard to the proposed scheme of Arrangement among the Petitioner Companies. The Petitioner Companies had filed reply dated 11.04.2023 in response to the observations made by the Regional Director, under wherein the Petitioner Companies gave clarifications and undertaking to address the observations made by the Regional Director. The details of which are summarised below:
Obse rvati on
Observations of the Regional Director vide report dated 24.03.2023
Reply of the Petitioner Companies vide affidavit dated 11.04.2023
10(1)
As per MCA General Circular no. 9/2019 dated 21.08.2019, if the appointed date is ante- dated beyond a Year from the date of filling, the justification for the same would have to be specifically brought out in the scheme and it should not be public interest. In this case, the appointed date is 01.04.2020. However, the Justification of the same being significantly ante-dated in terms of the above circular is not clearly brought out.
It is submitted that as per the Scheme of Arrangement, the Appointed Date is 01.04.2020 and the date of filing of C.A.(CAA) No.
38/230/232/ND/2022, i.e.,
first motion petition of the Scheme of Arrangement, is 11.03.2021.
It is apparent that the date of filing of the first motion petition is 11.03.2021 and the Appointed Date is 01.04.2020 which is within the timeframe as per General Circular no. 9/2019 dated 21.08.2019
issued by Ministry of Corporate Affairs (“MCA”).
Since the appointed date of the Scheme is not ante-dated beyond a year from the date of filing, no justification for the same is required in the Scheme in terms of the aforesaid circular issued by MCA. The Scheme is well within the timeframe and in compliance of the circular.
10(2)
It is mentioned in the proposed scheme of amalgamation that the scheme shall be effective from the effective date.
However, as per section 232(6) of the Companies Act, 2013 the scheme shall be effective from the appointed date. Hence, the same may be clarified from the company
It is apparent that the proposed Scheme is in compliance with Section 232(6) of the Companies Act,
2013 which states that a scheme 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 a date subsequent to the appointed date. Clause 2.2 of the Scheme specifically states that though the Scheme shall become effective from the Effective Date, the provisions of the Scheme shall be applicable and come into force from the Appointed Date, i.e.,
01.04.2020.
10(3)
As per audited financial statement of the Transferor co. 01 for the FY.2021-22, it is seen that the company has shown short term loans and advances of Rs.1,01.480/- which was same in the previous year as well. Hence, the nature of the said loan not in short term. Hence, the same may be clarified from the company. Further, it seen from the Note 13 that the Loan amount granted of Rs. 69.630/- was reduced to zero by creating a diminution provision against the loan
It is submitted that out of Rs. 1,01,480/- reflected in the financial statement of Transferor Company 1 for F.Y. 2021-22, Rs. 1,00,000/- was
paid by Transferor Company 1 towards the license fee paid to Directorate of Town and Country Planning (“DTCP”) and the same would remain under the short-term loans and advances unless the amount is adjusted. Further, the remaining Rs. 1,480/- was inadvertently over paid by Transferor Company 1 to National Securities Depository Limited (“NSDL”) and the same remains to be recovered, hence it is shown in short term loans and advances.
10(4)
As per of the audited financial statement of the Transferor co. 01 and Transferor co. 02 for the F.Y.2021-22, it is seen that the company has shown Amount recoverable from holding co. of Rs. 55,75,73,360/- and Rs. 56,58,1200/- respectively. The nature of such transaction is not clear.
It is submitted that as on 31.3.2022, the Transferee Company has sold flats to customers on behalf of Transferor Company 1, and demanded an amount of Rs. 55,59,61,864/- from the customers. This amount is shown as receivable from the Transferee Company (Note No. 14 – under other current assets) in the books of the Transferor Company 1. The aforesaid amount is recoverable by the Transferor Company 1 against the demands made on the sale of flats done by the Transferee Company on behalf of the Transferor Company 1. It is imperative to mention that the Transferee Company was developing flats on the land of the Transferor Companies
10(5)
As per note 05 of the audited financial statement of the Transferor co. 01 and Transferor Company 02 for the F.Y.2021-22, it is seen that the company has out-standing dues with respect to micro small & medium enterprises. However, on perusal records available with MCA-21 portal it is observed that the companies have not filed e-form MSME- I with the RoC.
It is submitted that a company has to file MSME FORM- 1 with the Registrar of Companies (“RoC”) only when they have payments outstanding for more than 45 days to a micro, small and medium enterprise (“MSME”). As per the financial statements of Transferor Companies 1 & 2 there are outstanding dues with respect to the statutory auditors who acquired the status of MSME on January, 2022. As per Clause 4.3 of the Scheme, the Transferee Company has undertaken to comply with the duties and obligations of the Transferor Companies as existing on the Appointed date and thus, it will be complied by Transferee Company.
10(6)
As per note-05 of the audited financial statement of the Transferor co. 01 and Transferor co 02 for the FY.2021-22 it is seen that the company has shown advance received of Rs.53,71,39,160 and Rs 4,99,08,060 and security deposit of Rs.14.58,00,000 and
58,50,000 respectively The nature of this transaction is
not clear.
It is submitted that when a demand of Rs. 55,59,61,864 was made to the allottees by Transferee Company on behalf of Transferor Company 1 in respect of the development done by the Transferee Company in the land of the Transferor Company 1, a corresponding entry was passed in the books of the Transferor Company No. 1 showing these as customer advance. Against the said amount, Rs. 2,58,22,709 has been recognized as revenue based on accounting principles in the books of Transferor Company 1 and the balance amount of Rs. 53,01,39,160 (55,59,61,864 - 2,58,22,709) is the amount that is being shown as advance in the books of the Transferor Company 1.
10(7)
As per of the audited financial statement of the Transferee Company for the F.Y.2021-22 it is seen that the company has granted long term loans and advance to subsidiary co. of Rs. 13,98,55,000/-, and short term loans and advances of 53.71,00,560/- hence, the company may be asked to ensure that the compliances of the provision of the section 185 of the Companies Act,2013.
It is submitted that the Transferor Company 1 and 9 Transferor Company 2 are the wholly owned subsidiaries of Transferee Company. Section 185(3)(c) of the Companies Act, 2013 specifically states that the provisions of Section
185 shall not apply to any loan made by a holding company to its wholly owned subsidiary company or any guarantee or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company.
10(8)
The Transferee company may kindly be directed to comply with the provisions of Section 232 (3) (i) of the Companies Act 2013 regarding fee payable of its revised Authorized Share Capital.
It is submitted that Section 232(3)(i) of the Companies Act, 2013 states that where a 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.
This Tribunal had vide order dated 24.05.2023 directed the Petitioner Companies to submit an affidavit clarifying the nature of transactions as mentioned in Paragraph 10(7) of the RD’s Report with regard to applicability of Section 185 of the Companies Act, 2013 and also provide the undertaking with regard to non-applicability of Section 185 of the Companies Act, 2013. The Petitioner Companies in compliance of this Tribunal’s order dated 29.05.2023 had submitted an affidavit cum undertaking wherein it was submitted that Section 185 of the Companies Act, 2013 is not applicable to the Transferee Company as all the mentioned conditions of MCA Notification No. G.S.R. 464(E) dated 05.06.2015 are complied with. The Petitioner Company No.3/Transferee Company had also placed on record certificate from statutory auditors of Transferee Company certifying that the conditions given in the notification dated 05.06.2015 are adhered to by Transferee Company/Petitioner Company No.3. We are satisfied with the clarifications given by the Petitioners to the observations of the Regional Director. However, this Tribunal is of the view that the Appointed Dated be changed from 01.04.2020 to 01.04.2022.
The Income Tax Department vide its report dated 20.04.2023 for Transferor Company No.2 and report dated 09.05.2023 for Transferor Company No. 1 had submitted that there are no demands outstanding against the Transferor Company No.1 and Transferor Company No.2. It is further submitted that the Income Tax department have no objection to the scheme of amalgamation if in the interest of justice and public at large, the interest of Revenue is protected.
The Official Liquidator has filed its report dated 22.03.2023, wherein it was submitted that the Official Liquidator is of the view that the affairs of the aforesaid Transferor Companies do not appear to have been conducted in a manner prejudicial to the interest of its members or to public interest in terms of the provisions of the Companies Act, 2013.
In this petition it has also been affirmed that no proceeding for inspection, inquiry or investigation under the provisions of the Companies Act, 2013 or under provisions of Companies Act, 1956 is pending against the Petitioner Companies.
Considering the reply of the Petitioner Companies and further, the undertaking of the Petitioner Companies with respect to the observations and clarifications, we find no impediment in approving the present Composite Scheme of Arrangement.
Certificates of Statutory auditor of the petitioner companies, has 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 read with Rule 7 of the Companies Accounts Rules, 2014 and Companies (Accounting Standards) Amendment Rules, 2016, and other generally accepted accounting principles in accordance with the Companies Act, 2013, as applicable.
The shareholders of the petitioner companies are the best judges of their interest, being 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 the judicial function to examine entrepreneurial activities and their commercial decisions. It is well settled that the Tribunal evaluating the Scheme, of which sanction is sought under Section 230-232 of the Companies Act of 2013, will not ordinarily interfere with the corporate decisions of companies as approved by shareholders and creditors.
It has also been affirmed in the petition that the Scheme is in the interest of all the Petitioner Companies 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, 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 with the following directions: -
(i) The Petitioners shall always remain bound to comply with the statutory requirements in accordance with law.
(ii) Notwithstanding the sanction, 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 in accordance with the law, against the concerned persons, directors and officials of the petitioners.
(iii) 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 further directs with respect to all the Transferor companies and the Transferee company, that:
(i) The Appointed Date of the Scheme shall be 01.04.2022.
(ii) Upon the sanction becoming effective from the appointed date as provided under the scheme, the Transferor Companies shall stand dissolved without undergoing the process of winding up.
(iii) All contracts of the Transferor Companies, 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 favor 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;
(iv) All the employees of the Transferor Companies 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 favorable than those on which they are engaged by the Transferor Companies, 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;
(v) All liabilities of the Transferor Companies, shall, pursuant to the provisions of section 232(4) and other applicable provisions of the Companies Act, 2013, to the extent they are outstanding as on the Effective Date, without any further act, instrument or deed stand transferred to and be deemed to be the debts, liabilities, contingent liabilities, duties and obligations etc. as the case may be, of the Transferee Company and shall be exercised by or against the Transferee Company, as if it had incurred such liabilities.
(vi) All proceedings now pending by or against the Transferor Companies be continued by or against the Transferee Company.
(vii) Any person interested or effected shall be at liberty to apply to this Tribunal in the above matter for any directions that may be necessary.
Further, the 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 Companies for registration and on such certified copy being so delivered, the Transferor companies shall be dissolved and the Registrar of Companies shall place all documents relating to the Transferor Companies on the file kept by him in relation to the Transferee Company and the files relating to all the Petitioner Companies shall be consolidated accordingly.
In compliance with the requirement of Section 232 (7) of the Act, the transferee company shall until the full implementation of the Scheme of Amalgamation shall file a statement every year in the Form CAA 8 along with the required fees with the Registrar of Companies as prescribed in the Companies (Registration offices and fees) Rules 2014 within 210 days from the end of each financial year.
The petition stands disposed of in the above terms. Let copy of the order be served to the parties.