FIM Holdco I Ltd Vs

Harnam Singh Thakur, Member (Judicial)

This is a first motion application filed by the Applicant Company, namely; One World Center Private Limited, the Transferee Company described in short as “Applicant Company” in relation to the Scheme of Amalgamation between the Companies, namely FIM Holdco I Ltd. (Transferor Company 1) and Ariston Investments Sub A Limited (Transferor Company 2) (collectively referred to as, Transferor Companies / Non-Applicant Companies) with One World Center Private Limited (Applicant Company / Transferee Company) and their respective shareholders and creditors (Scheme of Amalgamation) under Sections 230-232 and 234 of the Companies Act, 2013 (the Act) read with Companies (Compromises, Arrangements and Arrangements) Rules, 2016 (the Rules) and Foreign Exchange Management (Cross Border Merger) Regulations, 2018. The said Scheme is attached as Annexure P-2 of the Application.

The Applicant Company / Transferee Company has prayed for dispensing with the requirement of the convening of the meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Applicant Company / Transferee Company.

The Applicant Company / Transferee Company is primarily engaged in the business of construction and leasing of commercial real estate projects and also undertakes business of providing operation, maintenance and support services in relation to the real estate projects.

It is submitted that the registered office of the Applicant Company / Transferee Company is situated in the State of Haryana, and the Non-Applicant Companies is situated in Republic of Mauritius. Therefore, the territorial jurisdiction of only the Applicant Company / Transferee Company falls with this Bench.

The rationale of the Scheme of Amalgamation is as under:-

The Transferor Companies are part of the same group and together hold 100% stake of the equity share capital of Transferee Company. The amalgamation will:

i. assist in rationalizing the corporate structure and reduction of shareholding tiers;

ii. simplify decision making, reduce duplication of administrative responsibilities and regulatory compliances; and

iii. result in savings of administration and other costs associated with managing separate entities.

This Scheme is expected to be in the best interest of the shareholders, creditors, employees and all other stakeholders.

It is stated that the Board of Directors of the Applicant Company / Transferee Company at their board meeting held on 17.03.2023, have considered and unanimously approved the Scheme of Amalgamation subject to sanctioning of the same by this Tribunal. Further, the Board of Directors and shareholders of the Transferor Companies / Non-Applicant Companies vide written resolutions of shareholders and directors of dated 20.03.2023, have considered and unanimously approved the Scheme of Amalgamation subject to sanctioning of the same by this Tribunal. The copies of the resolutions of the Applicant Company / Transferee Company and Transferor Companies / Non-Applicant Companies are attached as Annexure P-6 and P-14 of the Application.

The Appointed Date of the Scheme is 01.04.2023, as mentioned in Part-A Clause 1.6 of Scheme of Amalgamation, which is attached as Annexure P-2 of the Application.

It is stated that the Applicant Company / Transferee Company has filed the Independent auditor’s report along with audited financial statements as on 31.03.2022, 31.03.2021 and 31.03.2020 as Annexure P-5 of the Application and the provisional financial statements for the period ended 31.12.2022 certified by the Directors of the Applicant Company / Transferee Company as Annexure P-4 of the Application.

It is submitted that there are no proceedings pending under Sections 206 to 229 of the Act against the Applicant Company / Transferee Company.

It is submitted that the certificate of the statutory auditors of the Applicant Company / Transferee Company has been filed stating therein that the accounting treatment proposed in the Scheme of Amalgamation is in conformity with the accounting standards prescribed under Section 133 of the Act and other generally accepted accounting principles. The certificate of Walker Chandiok & Co LLP is at Annexure P-25 of the Application.

It is submitted that the share exchange ratio issued by Mr Akshat Jain, IBBI Registered Valuer is at Annexure P-24 of the Application. The share exchange ratio is as under:

"2.0242:1000, whereby every equity shareholder holding 1000 (One Thousand) equity shares of Amalgamating Company 1 having face value of USD 1 (United States Dollar One only) each fully paid-up would receive 2.0242 (two decimal zero two four two) fully paid-up equity shares of face value of INR 10/- (Rupees ten only) each in the Amalgamated Company.

2.7998:1000, whereby every equity shareholder holding 1000 (One Thousand) equity shares of Amalgamating Company 2 having face value of USD 1.2828 (United States Dollar One Decimal Two Eight Two Eight) each fully paid-up would receive 2.7998 (two decimal seven nine nine eight) fully paid-up equity shares of face value of INR 10/- (Rupees ten only) each in the Amalgamated Company "

Rule 25A of the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 states that a foreign company incorporated outside India may merge with an Indian Company after obtaining prior approval of the Reserve Bank of India and shall comply with the provisions of section 230 to 232 of the Act and rules made thereunder. The Learned Senior Counsel for the Applicant Company / Transferee Company has drawn attention to Regulation 9 of the notification No. FEMA.389/2018-RB dated 20.03.2018 in which it is stated that any transaction on account of a cross-border merger undertaken in accordance with the aforementioned Regulations shall be deemed to have a prior approval of the Reserve Bank of India under Rule 25A of the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016. It is further stated in Regulation 9 that a certificate from the Managing Director / Whole-time Director and Company Secretary, if any of the company concerned, ensuring compliances to the Regulations shall be furnished along with the Application made to the Hon’ble NCLT under the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016.

The Applicant Company / Transferee Company has submitted a certificate dated 17.03.2023 signed by Mr Abhishek Patil and Mr Mohit Arora, Directors confirming on behalf of the Applicant Company / Transferee Company that the Scheme of Amalgamation is in compliance with Foreign Exchange Management (Cross Border Merger) Regulations, 2018, which is attached as Annexure P-1 of the Application. Regulation 9 of the Foreign Exchange Management (Cross Border Merger) Regulation, is extracted below provides for deemed approval of a proposal under certain conditions :

"9. Deemed Approval

(1) Any transaction on account of a cross-border merger undertaken in accordance with these Regulations shall be deemed to have prior approval of the Reserve Bank as required under Rule 25A of the Companies (Compromises, Arrangement and Amalgamations) Rules, 2016."

In view of the afore-mentioned Certificate and provisions of deemed approval of Regulation 9, it is held that all necessary compliance with regard to provisions of Rule 25-A of Companies (Compromises, Arrangements and Arrangements) Rules, 2016 has been made.

It is submitted that the Scheme [Annexure P-2 of the Application] also takes care of the interests of the staff/workers and employees of the Companies by virtue of Part B-Clause 9(a) and Part C-Clause 18(a) of the Scheme of Amalgamation, which is stated as follows:

"9 a) On the Scheme coming into effect, all Employees, of the Amalgamating Company 1 in service on the Effective Date shall be deemed to have become employees of the Amalgamated Company without any break in their service and the terms and conditions of their employment with the Amalgamated Company shall not be less favorable than those applicable to them with reference to Amalgamating Company 1 on the Effective Date.

18 a) On the Scheme coming into effect, all Employees, of the Amalgamating Company 2 in service on the Effective Date shall be deemed to have become employees of the Amalgamated Company without any break in their service and the terms and conditions of their employment with the Amalgamated Company shall not be less favorable than those applicable to them with reference to Amalgamating Company 2 on the Effective Date."

It is submitted that the Scheme does not envisage any reduction of share capital.

The Applicant Company / Transferee Company have furnished the following documents:-

i. Certificate from two Directors of the Applicant Company ensuring compliance with the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 (Annexure P-1 of the Application).

ii. Proposed Scheme of Amalgamation (Annexure P-2 of the Application).

iii. Certificate(s) of Incorporation, Memorandum and Articles of Association of the Applicant Company (Annexure P-3 Colly of the Application).

iv. Board resolution of the Applicant Company dated 17.03.2023 approving the Scheme of Amalgamation (Annexure P-6 of the Application).

v. CA certificate certifying the list of Equity Shareholders of the Applicant Company as on 17.03.2023 alongwith consent affidavits of all the Equity Shareholders, according, their consent to the Scheme of Amalgamation (Annexure P-7 of the Application).

vi. CA certificate certifying the list of Secured and Unsecured Creditors of the Applicant Company as on 17.03.2023 (Annexure P-8 of the Application).

vii. Consent affidavits of 100% the Secured Creditors of Applicant Company (Annexure P-8 of the Application).

viii. Consent affidavits of 99.7% the Unsecured Creditors of Applicant Company (Filed vide an additional affidavit under diary no 01451/01 dated 08.06.2023).

ix. List of directors as on 17.03.2023 and master data of the Applicant Company from the website of Ministry of Corporate Affairs (Annexure P-11 Colly of the Application).

x. Fair share exchange ratio report dated 15.03.2023 issued by Mr Akshat Jain, IBBI Registered Valuer (Annexure P-24 of the Application).

xi. Certificate of the statutory auditors of the Applicant Company confirming the accounting treatment proposed in the Scheme of Amalgamation (Annexure P-25 of the application).

xii. Provisional financial statements for the period ended 31.12.2022 of the Applicant Company (Annexure P-4 of the Application).

xiii. Independent auditor’s report along with audited financial statements as on 31.03.2022, 31.03.2021 and 31.03.2020 of the Applicant Company (Annexure P-5 Colly of the Application).

The Applicant Company has furnished the details of the Equity Shareholders, Secured Creditors and Unsecured Creditors along with consent on affidavits which is as follow:

Name of the Applicant Company

Shareholders along with their consent on affidavits

Creditors along with their consent on affidavits

Equity shareholders

Consent

Secured Creditor

Consent

Unsecured Creditors

Consent

Applicant Company

2

(Two)

100%

in value

1

(One)

100%

in value

31

(Thirty One)

99.77% in

value

Accordingly, the directions of this Bench in the present case are as under:-

I.   In relation to the Applicant Company / Transferee Company:

a. The meeting of the Equity Shareholders of the Applicant Company is dispensed with keeping in view the shareholding pattern and financial structure of the Applicant Company and the fact that the consent of all the Equity Shareholders towards dispensation of their meeting has been received by way of affidavits.

b. The meeting of the Secured Creditor of the Applicant Company is dispensed with as it has 1 (One) Secured and the consent of the sole Secured Creditor has been received by way of an affidavit;

c. The meeting of the Unsecured Creditors of the Applicant Company is dispensed with as it has 31 (Thirty One) Unsecured Creditors and consent of the Unsecured Creditors holding 99.77% in value have been received by way of affidavits.

In view of the above, the First Motion Application stands allowed by giving liberty to the Applicant Company to file Second Motion Petition with a direction that the Applicant Company shall make specific prayer for sending notices to the (a) the Central Government through Regional Director (Northern Region), Ministry of Corporate Affairs, (b) jurisdictional Registrar of Companies, (c) the Official Liquidator (d) Reserve Bank of India; and (e) Income Tax Authorities by disclosing the PAN numbers of the Applicant Company in the title of the Second Motion Petition.