Forbes Campbell Services Limited Vs

Anuradha Sanjay Bhatia, Member (Technical)

This Court is convened by video conferencing.

The Learned Counsel for the Applicant Companies submits that the present Scheme is a Composite Scheme of Arrangement between Forbes Campbell Services Limited (hereinafter referred to as ‘Transferor Company’ or ‘FCSL’) with Forbes Technosys Limited (hereinafter referred to as ‘Transferee Company’ or ‘FTL’ or ‘the Company’) and their respective Shareholders (‘Scheme’).

The Learned Counsel for the Applicant Companies submits that the First Applicant Company is engaged in the business of advisers and consultants for selection and recruitment of offices and/or administrative, managerial, supervisory technical and other personnel and generally to carry on business of industrial business and personnel consultants.

The Learned Counsel for the Applicant Companies submits that the Second Applicant Company is a leading provider of payment processing and transaction automation solutions, services and networks that help organizations handle large transaction volumes effectively and efficiently.

The Learned Counsel for the Applicant Companies submits that the Board of Directors of the Applicant Companies in their respective meetings held on 27th Day of December 2021 have approved the proposed Scheme with the Appointed Date as 1st day of October, 2021. The Board Resolution approving the Scheme for the First Applicant Company and Second Applicant Company are annexed as Annexure ‘C1’ and Annexure ‘C2’ respectively to the Company Scheme Application.

The Appointed Date for the Composite Scheme of Arrangement is 1st day of October 2021.

The Authorized, Issued, Subscribed and Paid-up Share Capital of the Applicant Companies as on 30th day of September 2021 is as under:

i. The Authorized Share Capital of the First Applicant Company is Rs.5,00,000/- divided into 50,000 Equity shares of Rs. 10/- each. Issued, Subscribed and Paid-up Share Capital of the First Applicant Company is Rs.5,00,000/- divided into 50,000 Equity shares of Rs. 10/- each

ii. The Authorized Share Capital of the Second Applicant Company is Rs. 169,00,00,000/- divided into 9,70,00,000 Equity Shares of Rs. 10/- each, fully paid up amounting to Rs. 97,00,00,000/- and 7,20,00,000 Preference Shares of Rs. 10/- each, fully paid up amounting to Rs. 72,00,00,000/-. Issued, Subscribed and Paid-up Share Capital of the Second Applicant Company is Rs. 166,89,72,000/- divided into 9,48,97,200 Equity Shares of Rs. 10/- each, fully paid up amounting to Rs. 94,89,72,000/-, 1,00,00,000, 0.1% Cumulative, Non-Convertible Redeemable Preference Shares of Rs. 10/- each, fully paid up amounting to Rs. 10,00,00,000/- and 6,20,00,000, 10 % Optionally Convertible Preference Shares of Rs. 10/- each, fully paid up amounting Rs. 62,00,00,000.

The Learned Counsel for the Applicant Companies further submits that the rationale for the Scheme is as follow:

I.   For Amalgamation of Transferor Company into Transferee Company

• Transferor Company and the Transferee Company are both part of the same Group.

• The proposed merger would achieve the following benefits:

o Synergy benefits, such as, enhancement of net worth of the combined business for future growth and expansion and effective and efficient utilization of available resources

o Reduction in overheads, including administrative, managerial and other administrative costs

o Reduction in multiplicity of legal and regulatory compliances

o Avoid duplication of efforts

II.   For Reduction of Share Capital in Forbes Technosys Limited

• The losses of the Transferee Company have substantially wiped off the value represented by the Share Capital thus the financial statements presently do not reflect the correct picture of financial position of the Transferee Company. This has given rise to the need to adjust the relation between capital and assets and to accurately and fairly reflect the liabilities and assets of Transferee Company in its books of accounts.

• The proposed reduction of share capital would enable Transferee Company to have a right capital structure commensurate with its business and assets and would have a positive impact on the key financial ratios such as return on capital employed, return on net worth, etc.

• The proposed reduction of share capital would enable Transferee Company to attract investors as reduction of share capital would improve dividend paying ability of FTL.

• The proposed reduction of share capital does not affect Transferee Company’s ability in future to increase its share capital and/or raise fund through borrowings.

• The proposed reduction of share capital would improve the future earnings per share for the shareholders and will reflect true value of their investments in FTL.

• The proposed reduction of share capital is not likely to cause any prejudice to the creditors of the Transferee Company. The creditors will not be adversely affected by the proposed reduction as there will not be any reduction in the amount payable to any of the creditors and no compromise or arrangement is contemplated and Transferee Company will have assets in excess of all its liabilities.

The Learned Counsel for the Applicant Companies submits that the consideration for the Scheme is as follows:

a. Reduction of share capital of FTL

Upon the Scheme becoming effective and with effect from the Appointed Date –

• FTL shall proportionately reduce by cancelling 9,39,48,228 (Nine Crore Thirty-Nine Lakhs Forty-Eight Thousand Two Hundred Twenty-Eight) equity shares of Rs. 10/- each out of the existing 9,48,97,200 (Nine Crore Forty-Eight Lakhs Ninety-Seven Thousand Two Hundred) equity shares of Rs. 10 each fully paid up.

• FTL shall pay Re. 0.001 as consideration for each equity share so cancelled and extinguished.

• FTL shall proportionately reduce by cancelling 6,13,80,000 (Six Crore Thirteen Lakhs Eighty Thousand) 10% Optionally Convertible Redeemable Preference shares (OCRPS) of Rs. 10/- each out of the existing 6,20,00,000 (Six Crore Twenty Lakhs) OCRPS of Rs. 10/-each fully paid up.

• FTL shall pay Rs. 0.001/- as consideration for each OCRPS so cancelled and extinguished.

• FTL shall proportionately reduce by cancelling 99,00,000 (Ninety-Nine Lakhs) 0.10% Non-Convertible Redeemable Preference shares (NCRPS) of Rs. 10/- each out of the existing 1,00,00,000 (One Crore) NCRPS of Rs. 10/- each fully paid up.

• FTL shall pay Re. 0.001/- as consideration for each NCRPS so cancelled and extinguished.

b. Upon amalgamation of the Transferor Company with the Transferee Company

“2,60,000 (Two Lakhs Sixty Thousand), 6% Non-cumulative Non-Convertible Redeemable Preference Shares (NCRPS) of Rs. 10 (Rupee Ten) each of the Transferee Company shall be issued and allotted to the Equity Shareholders of the Transferor Company in proportion to their holding in the Transferor Company as on the Record Date for Amalgamation.”

The Learned Counsel for the Applicant Companies submits that as on 31st day of December 2021, there are 7 (Seven) equity shareholders in First Applicant Company, all the Equity Shareholders of the First Applicant Company have given their consent in writing to the proposed Scheme. The Consent Affidavits of the First Applicant Company are annexed to the Company Scheme Application. In view of the Consent Affidavits filed by all the Equity Shareholders of the First Applicant Company, the meetings of the Equity Shareholders of the First Applicant Company, for the purpose of considering and, if thought fit, approving the proposed Scheme with or without modification(s) is hereby dispensed with.

The Learned Counsel for the Applicant Companies submits that as on 31st day of December 2021, there are 7 (Seven) equity shareholders and 5 (Five) Preference shareholders in Second Applicant Company, all the Equity and Preference Shareholders of the Second Applicant Company have given their consent in writing to the proposed Scheme. The Consent Affidavits of the Second Applicant Company are annexed to the Company Scheme Application. In view of the Consent Affidavits filed by all the Equity and Preference Shareholders of the Second Applicant Company, the meetings of the Equity and Preference Shareholders of the Second Applicant Company, for the purpose of considering and, if thought fit, approving the proposed Scheme with or without modification(s) are hereby dispensed with.

The Learned Counsel for the Applicant Companies submits that the First Applicant Company do not have any Secured Creditors, therefore, the question of convening and holding of the meeting of Secured Creditors of the First Applicant Company does not arise.

The Learned Counsel for the Applicant Companies submits that the Second Applicant Company has 2(Two) Secured Creditors aggregating to Rs. 18,61,20,980/- (Eighteen Crore Sixty-One Lakh Twenty Thousand Nine Hundred and Eighty) as on 31st day of December, 2021. As, the present Scheme is an arrangement between the Applicant Companies and its Shareholders as contemplated under Section 230(1)(b) and not in accordance with the provisions of Section 230(1)(a) of the Companies Act, 2013 and there is no Compromise and/or Arrangement with the Creditors as no sacrifice is called for and the proposed Scheme would only improve its net worth as the Transferor Company carries positive net worth, the meetings of the Secured Creditors of the Second Applicant Company, for the purpose of considering and, if thought fit, approving the proposed Scheme with or without modification(s) are hereby dispensed with. The Second Applicant Company undertakes to procure the consent affidavit of not less than 90% in value of the Secured Creditors prior to sanction of the Scheme by this Tribunal. The Second Applicant Company will also serve notice of application to all its secured creditors as on 31st day of December 2021. The Auditor’s Certificate verifying the list of Secured Creditors of the Second Applicant Company is annexed to Company Scheme Application.

The Learned Counsel for the Applicant Companies submits that the First Applicant Company do not have any Unsecured Creditors, therefore, the question of convening and holding of the meeting of Unsecured Creditors of the First Applicant Company does not arise.

The Learned Counsel for the Applicant Companies submits that the Second Applicant Company has 231 (Two Hundred and Thirty-One) unsecured creditors aggregating Rs. 129,49,53,206 (One Hundred and Twenty-Nine Crores Forty-Nine Lakhs Fifty-Three Thousand Two Hundred and Six) as on 31st day of December 2021. As, the present Scheme is an arrangement between the Applicant Companies and its Shareholders as contemplated under Section 230(1)(b) and not in accordance with the provisions of Section 230(1)(a) of the Companies Act, 2013 and there is no Compromise and/or Arrangement with the Creditors as no sacrifice is called for and the proposed Scheme would only improve its net worth as the Transferor Company carries positive net worth, the meetings of the Unsecured Creditors of the Second Applicant Company, for the purpose of considering and, if thought fit, approving the proposed Scheme with or without modification(s) are hereby dispensed with. However, the Second Applicant Company undertakes to serve notice of application to all its unsecured creditors as on 31st day of December 2021. The Auditor’s Certificate verifying the list of Unsecured Creditors of the Second Applicant Company is annexed to Company Scheme Application.

The First Applicant Company is directed to serve notice upon the – (1) Central Government through the office of Regional Director (Western region), Mumbai; (2) Registrar of Companies, Maharashtra, Mumbai; (3) Income Tax Authority within whose jurisdiction the First Applicant Company is assessed to tax, bearing PAN number AAACF7034J having IT ward jurisdiction ITO 1(1)(3), Aaykar Bhavan, Mumbai; (4) Official Liquidator, High Court Bombay and (5) GST Authority within whose jurisdiction the First Applicant Company is assessed to GST, bearing GSTIN 27AAACF7034J1ZM having jurisdiction Air India building, Mumbai, pursuant to Section 230(5) of the Companies Act, 2013 and Rule 8 of the Companies (Compromises Arrangements and Amalgamations) Rules, 2016. If no response is received by the Tribunal from such authorities within 30 days of the date of receipt of the notice, it will be presumed that they have no objection to the proposed Scheme.

The Tribunal appoints, M/s. Sandeep Rathi & Associates (Firm registration no. 113728W), Chartered Accountants, having their office at 304, Saba Palace, 4th road, near Khar Municipal Market, Khar west, Mumbai 400052, Contact No.9821238422, email id: [email protected] to assist the Official Liquidator to scrutinize the books of accounts of the Transferor Company for the last five (5) years. The fee of the Chartered Accountant to be fixed as Rs. 1,00,000/- to be paid by the Transferor Company. The Official Liquidator may submit his representations, if any, within a period of thirty (30) days from the date of the receipt of such notice to the Tribunal with copy of such representations shall simultaneously be served upon the Transferor Company.

The Second Applicant Company is directed to serve notice upon the – (1) Central Government through the office of Regional Director (Western region), Mumbai; (2) Registrar of Companies, Maharashtra, Mumbai; (3) Income Tax Authority within whose jurisdiction the Second Applicant Company is assessed to tax, bearing PAN number AAACF8567A having IT ward DCIT 1(1), Aaykar Bhavan, Mumbai; and (4) GST Authority within whose jurisdiction the Second Applicant Company is assessed to GST, bearing GSTIN 27AAKCS0662F1ZC having jurisdiction Air India building, Mumbai, pursuant to section 230(5) of the Companies Act, 2013 and rule 8 of the Companies (Compromises Arrangements and Amalgamations) Rules, 2016. If no response is received by the Tribunal from such authorities within 30 days of the date of receipt of the notice, it will be presumed that they have no objection to the proposed Scheme.

That the Applicant Companies to file Affidavits of Service respectively, with the Registry proving dispatch of notices to creditors and regulatory authorities as stated above, and report to this Tribunal that the directions have been duly complied with.

Ordered accordingly.