Eldeco Jalandhar Properties Pvt. Ltd. vs Eldeco Sohna Projects Ltd.

Pradeep R. Sethi, Member (Technical)

This is a joint Second Motion Petition under Sections 230 and 232 of the Companies Act, 2013 (for short to be referred hereinafter as the

‘Act’) filed by the Petitioner Companies in terms of Rule 15 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016

(for brevity, ‘Rules’) for the sanction of Scheme of Amalgamation (for brevity ‘Scheme’) of Eldeco Jalandhar Properties Private Limited

(Transferor Company), with Eldeco Sohna Projects Limited (Transferee Company). The joint petition is maintainable in terms of Rule 3(2) of the

Rules.

The Petitioner Companies filed first motion Application CA (CAA) No. 29/Chd/Hry/2018 before this Tribunal for seeking dispensation of meetings

of Shareholders, Secured Creditors and Unsecured Creditors of both the Petitioner Companies. The First Motion Petition was allowed on 27.11.2018,

dispensing with holding of meetings of the Shareholders, Secured Creditors and Unsecured Creditors of both the Petitioner Companies. Copy of the

order dated 27.11.2018 passed in the First Motion Application is at Annexure P-6 of the petition.

When the matter was listed on 21.12.2018, following order was passed:â€

“The petition be listed for hearing on 12.03.2019. Notice of the hearing be advertised in the “Business Standard†(English, Delhi

NCR Edition) and “Business Standardâ€​ (Hindi, Delhi NCR Edition) not less than 10 days before the aforesaid date fixed for hearing.

Notice shall also be served upon Objector(s) or to their representatives as contemplated under sub-section (4) of Section 230 of the Act who

may have made representation and who have desired to be heard in their representation along with a copy of the petition and the annexures

filed therewith at least 15 days before the date fixed for hearing. It be specified in the notices that the objections, if any, to the Scheme

contemplated by the authorities to whom notice has been given on or before the date of hearing fixed herein may be filed, failing which it

will be considered that there is no objection to the approval of the Scheme on the part of the authorities by this Tribunal and subject to

other conditions being satisfied as may be applicable under the Companies Act, 2013 and relevant rules framed thereunder. In addition to

the above public notice, each of the Petitioner shall serve the notice of the petition on the following Authorities namely, (a) Central

Government through Regional Director (Northern Region), Ministry of Corporate Affairs; (b) Registrar of Companies, Delhi and Haryana,

Ministry of Corporate Affairs; (c) Official Liquidator, Haryana at Chandigarh; and (d) Income Tax Department through the Nodal Officer-

Principal Chief Commissioner of Income Tax, NWR, Aaykar Bhawan, Sector-17-E, Chandigarh, by mentioning the PAN of the Companies (e)

Real Estate Regulatory Authority (RERA), Camp Office, PUDA Bhawan, Sector 62, SAS Nagar, Punjab, with respect to the Transferor

Company, (f) Haryana Real Estate Regulatory Authority (RERA), HUDA Complex, Sector 6, Panchkula 134 109, Haryana, with respect to

the Transferee Company, along with copy of this petition; and to such other Sectoral Regulator(s) who may govern the working of the

respective companies involved in the Scheme.

The Petitioner Companies shall at least 7 days before the date of hearing of the petition, file an affidavit of service regarding paper

publication as well as service of notices on the authorities specified above including the sectoral regulator as well as to objectors, if any

.Objections, if any, to the ‘Scheme’ contemplated by the authorities to whom notice has been given on or before the date of hearing

fixed herein may be filed, failing which it will be considered that there is no objection to the approval of the ‘Scheme’ on the part of

the authorities by this Tribunal and subject to other condition being satisfied as may be applicable under the Companies Act, 2013 and

relevant rules framed thereunder.

Registry shall also report before the date fixed as to whether any objection has been received to the proposed Scheme in the registry.â€​

The affidavit of compliance by the respective authorized representatives of the Petitioner Companies were filed vide Diary No. 1028 dated

28.02.2019 alongwith copies of the newspaper publications in “Business Standard†(English, Delhi NCR Edition) and in “Business Standardâ€

(Hindi, Delhi NCR Edition) both dated 15.01.2019. Copies of proof of service of notice to the statutory authorities, i.e., Regional Director, Northern

Region, Ministry of Corporate Affairs, New Delhi; Registrar of Companies, Delhi & Haryana, New Delhi; Official Liquidator, Haryana, Chandigarh;

Real Estate Regulatory Authority (RERA), Camp Office, PUDA Bhawan, Sector 62, SAS Nagar, Punjab; Haryana Real Estate Regulatory Authority

(RERA), HUDA Complex, Sector 6, Panchkula 134 109, Haryana; Income Tax Department, through the Nodal Officer-Principal Chief Commissioner

of Income Tax, NWR, Aaykar Bhawan, Sector-17-E, Chandigarh, as well as the postal receipts and tracking reports are part and parcel of Diary No.

1028. It is further deposed that there is no other sectoral regulator who may have significant bearing on the operations of the Petitioner Companies.

Affidavits of the authorized representatives of both the Petitioner Companies have also been filed vide Diary No. 1156 dated 11.03.2019, stating

therein that none of these companies or their counsel have received any objection/representation against the proposed Scheme.

The certificates of the Transferor Company and the Transferee Company dated 30.08.2018 of RaA & Co., Chartered Accountants, the Statutory

Auditors of the Petitioner Companies certifying that the accounting treatment proposed in the Scheme is in conformity with the applicable provisions of

the Companies Act, 2013 and accounting standards prescribed under Section 133 of the Companies Act, 2013 and Generally Accepted Accounting

Principles in India (Indian GAAP), are at Annexure P-5 of the petition.

The main objects, authorized and paid up share capital and rationale of the Scheme have been discussed in detail in the order disposing of the First

Motion Application on 27.11.2018.

The Scheme also takes care of the interest of employees which finds mention in Part III, Para 4.4 of the ‘Scheme’. From the relevant

clauses of the Scheme there seems to be no adverse impact on the service conditions of the employees of the Transferor Company.

It is stated in the Scheme that all legal proceedings of whatever nature by or against the Transferor Company pending on the Effective Date, shall

not be abated, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertaking of the Transferor Company or of

anything contained in this Scheme but the proceedings may be continued, prosecuted and enforced by or against the Transferee Company in the same

manner and to the same extent as it would or might have been continued, prosecuted and enforced by or against the Transferor Company as if the

Scheme had not been made.

We have heard the learned counsel for the Petitioners, the Registrar of Companies, NCT of Delhi and Haryana, Official Liquidator, Haryana the

Regional Director, Northern Region & the Income Tax Department and have perused the records.

As per the Scheme, the Appointed Date is 01.04.2018. The Scheme provides for the manner in respect of share exchange ratio for which the

valuation report of Khandelia & Sharma, Chartered Accountants, has also been annexed as Annexure A-3 of the first motion application. A detailed

reference has also been made in para 29 of the order dated 27.11.2018 (Annexure P-6) of the petition. The following exchange ratio has been

proposed:â€

“a) The Transferee Company will issue an aggregate of 1,00,000 (one lakh) Equity Shares of Rs. 10 each, credited as fully paid up, to its

sole Equity Shareholder (being the Holding Company)-Eldeco Infrastructure and Properties Ltd. in lieu of the total issued, subscribed and

paid up Share Capital (Class A and Class B) of the Transferor Company held by such Holding Company on a proportionate basis such that

in exchange of each fully paid up and partly paid up share held by the shareholder of the Transferor Company, New Equity Shares shall be

issued based on the proportion of paid up amount (including premium) to the respective issue price of such equity shares.â€​

The report of Dr. Raj Singh, Regional Director, Northern Region, Ministry of Corporate Affairs was filed by way of affidavit by Diary No. 1173

dated 11.03.2019. In his report dated 08.03.2019 the Regional Director has raised no objection to the scheme of amalgamation between the Petitioner

Companies. It is further submitted that neither any prosecution has been filed and nor technical scrutiny and inspection is pending against the

Transferee Company.

Mr. O.P. Sharma, Official Liquidator (OL) filed its report vide Diary No. 1389 dated 20.03.2019. In his report dated 20.03.2019, The Official

Liquidator has made following observations:

i) In para 23 of the report, it is stated that the Transferee Company will issue 1 non-convertible debentures of Rs. 10 each, credited as fully paid up,

for every 1 fully convertible debenture of Rs. 10 each held in the Transferor Company.

ii) In para 25.3 of the report, it is submitted that the Transferor Company has granted unsecured loan to fellow subsidiary at lower rate as compared to

market rate and such terms of loan will be prejudicial to the company's interest.

iii) In para 25.10 of the report, it is stated that the Income Tax Department has raised an outstanding demand of Rs. 31,570/- in respect of the

Transferor company for the Assessment Year 2014-15 under Section 143(1) of the Income Tax Act, 1961. It is further contended that the

management of the company is of the belief that such demand would be quashed on filing rectification u/s 154 of the Income Tax Act.

iv) In para 25.11 of the report, it is submitted that as per the Auditor Report for the year ended 31.03.2015, 31.03.2017, 31.03.2017 & 31.03.2018, the

Transferor Company has granted interest free unsecured loans to five wholly owned subsidiary companies in order to provide financial support to its

allied companies for the company's project and adjusted with the receivables/receivables on demand. It is further stated that some additional

unsecured loans are being granted to these wholly owned subsidiaries of the company. That some of the loans are being adjusted in the current year

against the receivables and rest are being carried forward during the year 2015 without any change in the terms of the loan.

v) In para 25.12 of the report, it is averred that as per the Audit report for the year ending 31.03.2014, the transactions made in pursuance of contracts

and arrangements referred to Section 301 of the Companies Act, 1956 exceeding the value of Rs. 5 lacs in relation to the payment of management

fees at unreasonable price as compared to prevailing market prices, which are for company's specialized requirement for which suitable alternatives

are not available.

vi) In para 25.14 of the report, it is stated that as per Audit Report for the year ended 31.03.2014, the transferor company does not have an internal

audit system.

The Transferor Company has filed their reply to the report of Official Liquidator by way of affidavit of the authorized representative (Diary No.

2016 dated 22.04.2019), the para-wise reply to the observations of the OL are as under:

i) In reply to para 25.3 of the OL Report, it is stated that the above loan has been given to the Transferee Company which is a group company to

provide financial support to complete the ongoing real estate project. It is further submitted that such loan shall stand cancelled, being an inter-

company transaction post amalgamation.

ii) In reply to the para 25.10 of the OL report, it is submitted that the Company will be filing rectification application u/s 154 of the Income Tax

Act,1961. It is further contended that scheme contains relevant clause in which the all the assets and liabilities including pending demands and

litigations in the Transferor Company will vest in the Transferee Company. That the Income Tax Department is very much entitled to recover any tax

demand or dues of the Transferor Company from the Transferee Company by virtue of ‘Scheme’ itself.

iii) In reply to the para 25.11 of the OL Report, it is stated that loans were granted to provide support to the wholly owned subsidiaries. Further it is

submitted that the Auditor in his report for FY 2015-16, 2016-17 & 2017-18 stated that these loans are not prejudicial to the Company's interest.

iv) In reply to the para 25.12 of OL Report, it is submitted that that these observations made by the Auditor are merely factual statements and does

not need any further clarification.

v) In reply to the para 25.14 of OL Report, it is stated that the requirement of internal audit was not applicable on the Transferor Company for 2013-

It is also stated that the Auditor in the same report has averred that the Company has an adequate internal control system to commensurate with

the size of the company and nature of its business.

The Registrar of Companies in its report (Dairy No. 245 dated 23.05.2019) has not raised any adverse observations and has very largely touched

upon the facts already mentioned in the petition.

Mr. Akhtar H. Ansari, Joint Commissioner of Income Tax (OSD) o/o Central Circle-1, Noida in its report has stated that both the petitioner

companies are assessed within its jurisdiction and there is no outstanding demand against these two companies. It is also submitted that the income tax

authorities have no objections to the proposed scheme of amalgamation between the petitioner companies.

There has been no representation from the Real Estate Regulatory Authority (RERA) and Haryana Real Estate Regulatory Authority so far.

It has been observed that both the Petitioner Companies are wholly owned subsidiaries of a common Parent Company i.e. Eldeco Infrastructure

and Properties Limited which is only shareholder in both the Petitioner Companies. So there would be no change in the number of shareholders of the

Transferee Company post amalgamation.

In view of the above discussion, we conclude that the objections/observations to the Scheme received from the Official Liquidator have been

adequately replied by the Petitioner Companies and hence, there is no impediment in the sanction of the Scheme. The “Scheme†is hereby

approved. While approving the Scheme, it is clarified that this order should not be construed as an order in any way granting exemption from payment

of any stamp duty, taxes or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance with any other

requirement which may be specifically required under any law. With the sanction of the Scheme, the Transferor Company shall stand dissolved

without undergoing the process of winding up resulting in increase in the share capital of the Transferee Company as per the terms of the

‘Scheme’.

AND 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 to 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; and

iii) That all the proceedings now pending by or against the Transferor Company be continued by or against the Transferee Company; and

iv) That the employees of the Transferor Company shall be transferred to the Transferee Company in terms of the ‘Scheme’; and

v) That the Transferee Company do, 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 of Amalgamation: and

vi) That 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 sanction of the ‘Scheme’; and

vii) That the Petitioner Companies do, within 30 days after the date of 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 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 Transferor and Transferee Companies shall be consolidated

accordingly, as the case may be;

viii) That the Transferee Company shall deposit an amount of Rs. 50,000/- (Rupees Fifty Thousand only) with the Pay & Accounts Officer, in favour

of Ministry of Corporate Affairs and Rs. 25,000/- (Rupees Twenty Five Thousand only) with “The Company Law Tribunal Bar Associationâ€

within a period of five weeks from the date of receipt of certified copy of this order; and

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

As per the above directions and Form No. CAA-7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 formal orders be

issued on the petitioners on filing of the Schedule of Property i.e. (i) freehold property of the Transferor Company and (ii) leasehold property of the

Transferor Company, by way of affidavit of the Transferor Company.

Copy of this order be communicated to the Counsel for the Petitioners.

Pronounced in open Court.