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Judgment
Subrata Kumar Dash, Member (Technical)
This is a joint second motion application filed by Petitioner Companies namely; Goldview Tie-Up Private Limited (Petitioner Company No. 1/Transferor Company No. 1), Crossroad Vinimay Private Limited (Petitioner Company No. 2/ Transferor Company No. 2), Spotlight Suppliers Private Limited (Petitioner Company No. 3 / Transferor Company No. 3), Delhi Infra Developers Private Limited (Petitioner Company No. 4 / Transferor Company No. 4) and Skyview Real Estate Private Limited (Petitioner Company No. 5 /Transferor Company No.5) And Top-Ten Software Private Limited (Petitioner Company No. 6 / Transferee Company) under Sections 230-232 and Section 52 of the Companies Act, 2013 (the Act) and other applicable provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (the Rules).
The Petitioner Companies have prayed for sanctioning of the Scheme of Amalgamation between the respective companies. The said Scheme is attached as Annexure P-1 of the application.
The Petitioner Companies have filed the first motion application bearing CA (CAA) No. 43/CHD/CHD/2019 before this Tribunal for seeking directions for dispensing with the meetings of the Shareholders and Debenture Holders of the Applicant Companies. The First motion application was disposed of vide order dated
01.2020, with directions to dispense with the meetings of Equity Shareholders, Debenture Holders and Secured & Unsecured Creditors of the Applicant Companies for the reasons mentioned in the aforesaid orders.
The main objects, date of incorporation, authorized and paid-up share capital, and the rationale of the Scheme had been discussed in detail in the first motion order dated 07.01.2020.
In the second motion proceedings, certain directions were issued by this Tribunal vide order dated 06.02.2020 and in compliance of such directions, an affidavit of compliance was filed vide diary No.00567/6 dated 04.08.2020. The notice of hearing was published in “Business Standard” (English) Chandigarh Edition circulated in Shimla and “Jansatta” (Hindi) Chandigarh Edition and “Shimla Kesri” (Hindi) Shimla Edition on 13.03.2020. The original copies of the newspapers are attached as Annexure-1 of the aforesaid affidavit. It has also stated in the affidavit that copies of notices were served upon the (a) A. Registrar of Companies, Chandigarh & Himachal Pradesh; (b) the Official Liquidator; and (c) Income Tax Department through the Nodal Officer-Principal Chief Commissioner of Income Tax, Aaykar Bhawan, Sector-17E, Chandigarh by way of speed post. Copy of table of service, notices sent to authorities, speed post receipts, and tracking report of the notices are attached as Annexures-2, 3, 4, and 5 respectively of the aforesaid affidavit. This Bench has again issued notices to the Regional Director, Registrar of Companies, and the Official Liquidator by order dated 17.09.2021, and the petitioner companies have filed an affidavit of service by Diary No.00397/6 dated 29.10.2021 wherein original speed post receipts along with tracking report are attached.
It is also deposed by the authorised signatories of the petitioner companies that the Petitioner Companies have not received any representation/objection to the proposed scheem from the public. The aforesaid affidavit is part of Diary No.00397/6 dated 29.10.2021.
In response to the abovementioned notices, the statutory authorities have furnished their replies.
7.1 Registrar of Companies (RoC)/Regional Director (RD)
7.1.1 The Regional Director (hereinafter referred to as “RD”) has filed its report along with the report of the Registrar of Companies (hereinafter referred to as “RoC”) vide Dairy No 00567/9 dated 29.10.2020.
7.1.2 The First objection taken by RD in its report at Para 10 (i) is that the money in Securities Premium Account is utilized for making investments which is in contravention of Section 52 r/w Section 4 of the Companies Act, 2013. The company is neither registered as NBFC Company nor having such objects in its MOA to function as investment company and it has used shareholder’s funds (in form of Capital & security premium) in contravention of its object and section 52 r/w section 4 of the Companies Act, 2013. Another objection is related to the registration of the companies as Non Banking Finance Companies (NBFCs). It is stated that the financial assets of these three companies exceed 50% of the total assets of the company and the income from financial assets also exceeds 50% of the total income of the respective companies. Hence, these three companies clearly fulfil the criteria for being called as NBFCs and hence, the Hon’ble Tribunal may direct the Reserve Bank of India (RBI) to look into the Scheme since these companies are not registered with RBI. It is further objected by RD in Para 10 (iii) that the petitioner company has failed to show calculation of valuation of assets in valuation report. The valuation report has failed to show any calculation to arrive at the value of Net Assets of the companies. The Valuer has simply mentioned the methods used for valuation of the respective company and has given value of Net Assets.T he Net Assets Value Method, which is used for valuation of shares in all the petitioner companies shows a value of shares which apparently seems to be unreasonable, given the size of Balance Sheets of each company. Hence, the value per share of transferor company is at inflated price and that of transferee company is at lesser value in order to enable issue of more number of shares to the shareholders of the transferee company by fact of this amalgamation.
7.1.3 The petitioner companies has filed its reply vide a Diary No. 00567/12 dated 16.02.2021 there is difference between application of Securities premium account and the funds arising therefrom absolutely clear that the Securities Premium Account may be applied by the Company as per the provision of Section 52 of the Companies Act, 2013. However, in the present case the Applicant/ Petitioner Companies did not apply the Securities Premium Account as the same remains intact even by having an apparent look at the Balance Sheets of the Petitioner Companies. It is mentioned that there is no restriction to use the funds arising from the Premium on the allotment of the Shares. It is further clarified by the petitioner companies that there is NIL income from the said financial assets and thereby none of the Petitioner Companies falls under category of the NBFCs. With regard to the objection mentioned in Para 10 (iii) of the report, it is replied that the value so calculated/ arrived at are based on the prominent methods of valuation i.e, Net Assets Value method and same is prepared and certified by the Chartered Accountant who is a Registered Valuer as per norms and list issued by the Insolvency and Bankruptcy Board of India.
7.1.4 After going through the aforementioned response of the applicant companies, the ROC has filed a further affidavit vide a Diary No. 00567/19 dated 30.03.2022 in which it has been stated that the petitioner companies have clarified the observations raised and the same is found to be satisfactory. Although the transfer company No.3 may be directed to file updated financial statement for the FY 2018-19 as per the provisions of Section 230(2)(a) of the Companies Act, 2013. As the statement filed by the company is of some other company the petitioner company has filed affidavit vide a Diary No. 00567/21 dated 18.04.2022 wherein the Petitioner Company No.3/ Transfer Company No.3 has filed form AOC-4 (revised) as Annexure A-1 in compliance to the ROC observation.
Thus, the objections raised by the RD/RoC in respect of the petitioner Companies stand satisfied.
7.2 Official Liquidator
7.2.1 The Official Liquidator has filed his report vide Diary No.005607/8 dated 20.10.2020 and Diary No.245 dated 01.07.2020. The relevant parts of the report in respect of Petitioner Companies are extracted below:
7.2.2 The OL has stated in its report that the valuation of shares and swap ratio determined by Mr. Krishan Grover in the valuation report dated 17.08.2019 is determined on Net Asset Value Approach. However, the Transferor Companies and Transferee Company have no fixed asset but having only non-current assets. The Earning Per Share (EPS) is negative of Transferor Companies and EPF of Transferee Company is not given in the financial statement. It is further stated that the present scheme is filed under section 66 of Companies Act r/w Section 52 for the purpose of reduction. The reduction would not involve either a diminution of liability in respect of unfit share capital or payment of paid up share capital and the provisions of Section 66 will not be applicable.
7.2.3 The petitioner companies has filed a response vide a Diary No. 00567/13 dated 16.02.2021 wherein it has been stated that the entire calculation already formed part of the Petition and the Books of Accounts for the Financial Year ended on 31.03.2017, 31.03.2018 & 31.03.2019 respectively have already been duly supplied to the respective office of the Official Liquidator and the same is clearly evident from Para 6, 12, 18, 24 and 36 of the report. It is further stated that the negative Earning per Share is the results of losses incurred by the Companies which is natural and in the case of transferor Company the EPS is inadvertently missed to be mentioned by the auditors in Balance Sheet for the year 2018-19 and the same is a clerical error but all the facts and figures are absolutely correct as audited.
On a perusal of this response, we feel that the issues raised by the OL has been adequately addressed and no adverse observation against the petitioner companies is called for.
7.4 Income Tax Department
7.4.1 The Income Tax Department has filed its report vide Diary No.00567/2, 00567/3, 00567/4, 00567/5 all dated 17.07.2020 and vide Diary No.00567/7 dated 19.08.2020 and has stated that the Transferor Company No. 1, 2 & 3 is a loss-making Company and losses of the Transferor Company No. 1, 2 & 3 after amalgamation will be adjusted against the income of the Transferee Company. However, as on date there is no outstanding demand / pending proceedings against the Transferor Company No. 1, 2 & 3 and the Brought Forward losses shall affect the Revenue adversely. It is also stated that there is a demand of Rs. 5,31,410/- pending for the AY 2017-18 with respect to the transferee company.
7.4.2 In response to the report filed by Income Tax Authorities, the petitioner companies have filed an undertaking vide Diary No.00567/11 dated 16.02.2021 and have submitted that the Transferee Company is not going to adjust the losses of the Transferor Companies since the provisions of the Income Tax Act do not allow the adjustment and the Transferee Company will also comply with the provisions of the Income Tax Act including Section 281 of the said Act.
Keeping in view the aforementioned undertaking, it is held that the interests of the Income Tax Department is not adversely affected in the proposed scheme. Thus, the objections raised by the Income Tax Department in respect of the petitioner Companies stand satisfied.
The certificate of the Statutory Auditors with respect to the Scheme between Applicant Companies to the effect that the accounting treatment proposed in the Scheme is in compliance with applicable Indian Accounting Standards (Ind AS) as specified in Section 133 of the Act, read with Rules thereunder and other Generally Accepted Accounting Principles was filed as Annexure- P-23 of the petition.
We have heard the learned Senior Counsel and others for petitioner companies and learned Senior Standing Counsel for the Income Tax Department and perused the records carefully.
In the context of the above discussion, the Scheme contemplated between the petitioner companies, appears to be prima facie in compliance with all the requirements stipulated under the relevant Sections of the Companies Act, 2013. As the objections from the Statutory Authorities have been duly addressed by the Petitioner Companies and since all the requisite statutory compliance have been fulfilled, this Tribunal sanctions the scheme of amalgamation appended as Annexure “P-1” with the company petition.
Notwithstanding the submission that no investigation is pending against the petitioner companies, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the petitioners.
While approving the scheme as above, it is clarified 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, payment is due or required 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 DO FURTHER ORDER:
(i) That all the property, rights and powers of the Transferor Companies be transferred, without further act or deed, to the Transferee Companies 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 Companies but subject nevertheless to all charges now affecting the same;
(ii) That all the liabilities and duties of the Transferor Company be Transferor Companies, 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;
(iii) That the Appointed Date for the scheme shall be 01.04.2019 as specified in the scheme;
(iv) That the proceedings, if any, now pending by or against the Transferor Company be continued by or against the Transferee Company;
(v) That the employees of the Transferor Company shall be transferred to the Transferee Company in terms of the 'Scheme';
(vi) That the Transferee Company shall not adjust the losses of the Transferor Companies and will also comply with the provisions of the Income Tax Act including Section 281 of the said Act as mentioned in their undertaking furnished vide Diary No. 00567/11 dated 16.02.2021.
(vii) 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';
(viii) That the Transferee Company shall file the revised memorandum and articles of association with the Registrar of Companies, N.C.T. of Delhi & Haryana and further make the requisite payments of the differential fee (if any) for the enhancement of authorized capital of the Transferee Company; after setting off the fees paid by the Transferor Company;
(ix) That the Petitioner Companies shall, 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 Company and Transferee Company shall be consolidated accordingly, as the case may be;
(x) That the Transferee Company shall deposit an amount of ₹1,00,000/-(Rupees One Lakh Only) to be paid in favour of “Pay and Accounts Officer, Ministry of Corporate Affairs, New Delhi ” and ₹ 50,000/- (Rupees Fifty Thousand Only) in favour of "The Company Law Tribunal Bar Association" Chandigarh within a period of four weeks from the date of receipt of the certified copy of this order;
As per the aforesaid directions, Form No. CAA-7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, formal orders be issued on the petitioners to the filing of the Schedule of Properties within three weeks from the date of receiving a certified copy of this order.
All the concerned Regulatory Authorities to act on a copy of this order annexed with the Scheme duly authenticated by the Registrar of this Bench.
The certified copy of this order, if applied for, be supplied to the parties, subject to compliance with all requisite formalities.
The Company Petition CP (CAA) No. 3/CHD/CHD/2020 is disposed of accordingly.