Indiabulls Properties Private Limited vs BXIN Office Parks India Private Limited

Subrata Kumar Dash, Member (Technical)

This is a joint second motion company petition filed by Petitioner Companies namely; Indiabulls Properties Private Limited (Demerged Company / Petitioner Company No. 1), and BXIN Office Parks India Private Limited (Resulting Company / Petitioner Company No. 2) under Section 230-232 of the Companies Act, 2013 (hereinafter referred to as the “Act”) and other applicable provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (hereinafter referred to as the “Rules”).

The Petitioner Companies have prayed for sanctioning of the Scheme of Arrangement between the respective companies (hereinafter referred to as the “Scheme”). The said Scheme is attached as Annexure-1 of the company petition.

The Petitioner Companies filed first motion application bearing CA (CAA) No.24/Chd/Hry/2020 before this Tribunal for seeking directions for dispensing with the meetings of equity shareholders and Compulsorily Convertible Debenture holders of the Demerged Company and equity shareholders, secured and unsecured creditors of the Resulting Company and for convening the meeting of secured and unsecured creditors of the Demerged Company.

The  first  motion  application  was  disposed  of  vide  order  dated 3. 11.2020, with directions to convene the meetings of secured and unsecured creditors (to whom more than or equal to ₹2,00,000 is payable) of the Demerged Company on 12.12.2020 and to dispense with the meetings of equity shareholders and CCD holders of the Demerged Company and equity shareholders, secured and unsecured creditors of Resulting Company for the reasons recorded in the aforesaid order.

In compliance with the directions issued by this Tribunal, meetings of secured creditors and unsecured creditors of the Demerged Company were held on 12. 12.2020.

As per the report of the Chairperson, the Scheme was approved by all the secured and unsecured creditors of the Demerged Company present and voting at their respective meetings.

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 order dated 03.11.2020.

In the second motion petition proceedings, certain directions were issued by this Tribunal vide order dated 18.06.2021 and the same were complied through compliance affidavit filed vide Diary No. 02074/2 and Diary No. 02074/3, all dated 27.07.2021. The Petitioner Companies have made newspaper publications in "Indian Express" (English) and "Jansatta" (Hindi) both Delhi NCR Edition on 22. 06.2021. The copies of the newspapers were attached as Annexure A of the aforesaid affidavits. It was also stated in the aforesaid affidavits that copies of notices were served upon the (a) Central Government through Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi (b) Registrar of Companies, NCT of Delhi and Haryana at New Delhi, (c) the Official Liquidator, (d) Income Tax Department, (e) Competition Commission of India. Copies of original postal receipts evidencing service of notice are attached as Annexure B to F of the aforesaid affidavits. It is also deposed by way of affidavits that the petitioner companies do not have any objectors as contemplated under Section 230 (4) of Companies Act, 2013.

In response to the abovementioned notices, the statutory authorities have furnished their replies.

9.1 Registrar of Companies / Regional Director

9.1.1 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 02074/4 dated 19.08.2021. The RD in its report has made the following observations :

9.1.2 As per the Clause 32 of the RoC report dated 05.08.2021 it is observed that in Clause 16.1 of scheme reads as “In the event of any of the sanctions and approvals referred to Clause 15 of the Scheme not being obtained and/or the Scheme not being sanctioned by the Hon’ble Tribunal or the order not been passed as aforesaid before 31.12.2020 or within such further period or periods as may be agreed upon between these companies, this Scheme shall stand revoked, cancelled and be of no effect.”

9.1.3 The petitioner companies have filed response to the RoC report vide Diary No. 02074/15 dated 26.08.2021 wherein it has been stated that the Board of Directors of both Companies have been passed fresh resolutions dated August 12, 2021 wherein they have further resolved to reiterate that the validity of the Scheme had been extended till March 31, 2022. Copies of the said Resolutions dated August 12, 2021 are attached as Annexure-C of Dairy No. 02074/15 Dated 26.08.2021

9.1.4 The Registrar of Companies has observed in the report that the Resulting Company will allot shares to two shareholders of the Demerged Company who are foreign body corporates towards purchase consideration to give the effect on this scheme on post arrangement. The scheme is silent about the compliance of provisions of Reserve Bank of India in respect of allotment of shares to the foreign body corporates. In view of the above it is prayed before the Hon'ble Tribunal may direct the company to made strict compliance of the Reserve Bank of India rules in this regard.

9.1.5 The petitioner companies have replied that FIM Holdco I Limited, Mauritius, is a shareholder of the Resulting Company as well as the Demerged Company. FIM Holdco, I Limited has invested in the Demerged Company and the Resulting Company under the automatic route in accordance with the Foreign Exchange Management Act, 1999 and the relevant rules / regulations / guidelines. As such, there is no fresh investment by FIM Hold Co I Limited in the Resulting Company pursuant to the Scheme. In any case, investment in the Resulting Company is permitted under the automatic route per the extant exchange control regulations. Consequently, the Resulting Company submitted that it does not require the approval of the RBI for the issuance of the shares to the non-resident shareholder since it is covered under the automatic route in accordance with the Foreign Exchange Management Act, 1999 read with Rule 9 of Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

9.1.6 It is also observed by RD that the scheme is silent about the details of assets and liabilities of the Demerged company to be transferred to the Resulting Company. The Demerged Company has submitted their reply to the Directorate submitting the details of assets and liabilities to be transferred from the De-merged Company to the Resulting Company and the probable position of assets and liabilities in the books of the Resulting Companies on post arrangement. The details of said statements of assets and liabilities are attached as Annexure - C & D of the report of RD and Annexure A of Diary No.02074/15 dated 26.08.2021 Thus, the observations of RD/RoC in respect of the Petitioner Companies stands satisfied.

9.2 Income Tax Department

9.2.1 The Income Tax Department filed its report vide Diary No. 020274/19 Dated 03.03.2022 for the petitioner companies has observed that AS per the records, there is an outstanding demand of Rs. 2,02,49,080/- (Two Crores Two Lakh Forty Nine Thousand And Eighty Rupees) for A.Y. 2018/2019 raises vide assessment record under Section 143(3) Dated 4.5.2021 against the Demerged Company/Petitioner Company No.1.

9.2.2 In response to the Report of Income Tax Department, the Demerged Company submits that is that as per paragraph 9.3 of the Scheme provides that any tax assessment proceedings / appeals pertaining to the period prior to the Appointed Date in relation to the Demerged Undertaking shall be continued and / or enforced by or against the Demerged Company. Similarly, paragraph 9.4 of the Scheme provides that any tax assessment proceedings / appeals pertaining to the period after the Appointed Date in relation to the Demerged Undertaking shall be continued and / or enforced by or against the Resulting Company.

9.2.3 As It is apparent from the above discussions, the liabilities towards Income Tax Department exist in the Petitioner company No 1. In this context, it is clarified that this Tribunal is not shutting out the legitimate interest of the income-tax authorities to recover the lawful dues payable by the Demerged Company and the Resulting Company. Furthermore, the same are not being dissolved, and the scheme provides the savings in relation to the liabilities as well, the rights of the tax authorities remain intact, and they can proceed against the Petitioner Companies in accordance with the law, if any amount is found due and payable. The Hon'ble National Company Law Appellate Tribunal also in the Ad2Pro Global Creative Solutions P. Ltd. v. Regional Director, (S.E.R.), Ministry of Corporate Affairs MANU/NL/0469/2019 : [2019] 217 Comp Cas 443 (NCLAT), in Company Appeal (AT) No. 98 of 2019, in relation to the dues of the income-tax has held in paragraph 7 as follows (page 449):

"Admittedly, proceedings are pending in appeal before the Income-tax Appellate Tribunal and depending upon the outcome of such proceedings. The transferee company has undertaken to satisfy all demands emanating from and raised by the competent tax authorities. The scheme having been approved and sanctioned and the same being in consonance with law, no fault can be found with the transferee's undertaking to satisfy all demands raised by the tax authorities as finally determined by due process. The appellants are justified in maintaining that the tax liabilities would be satisfied by the transferee as determined by the competent forum seized of the matter in accordance with the approved scheme, which admittedly does not come in conflict with any express provision of the Companies Act, 2013. The legitimate interests of the concerned tax authorities have been lawfully protected, and their right to recover the tax dues as determined by the Income-tax Appellate Tribunal or any other competent forum as the case may remain intact."

9.2.4  Further, in Company petition C.A.A. No. 284/ND/2018 vide order dated November 12, 2018, the National Company Law Tribunal, New Delhi has made the following observations with regard to the right of the Income-tax Department in the scheme of amalgamation:

"... taking into consideration the clauses contained in the scheme in relation to liability to tax and also as insisted upon by the income-tax and in terms of the decision in Vodafone Essar Gujarat Ltd. v. DIT MANU/GJ/0794/2012 : [2013] 176 Comp Cas 7 (Guj); [2013] 353 ITR 222 (Guj) and the same being also affirmed by the Hon'ble Supreme Court and as reported in Department of Income-tax v. Vodafone Essar Gujarat Ltd. [2015] 190 Comp Cas 105 (S.C.); [2015] 373 ITR 525 (S.C.); [2016] 66 taxmann.com. 374 (S.C.) from which it is seen that at the time of declining the S.L.P.s filed by the Revenue, however stating to the following effect vide its order dated April 15, 2015, that the Department is entitled to take out appropriate proceedings for recovery of any statutory dues from the transferor or transferee or any other person who is liable for payment of such tax dues the said protection be afforded is granted. With the above observations, the petition stands allowed, and the scheme of amalgamation is sanctioned."

Thus, the observations of Income Tax department in respect of the Petitioner Companies stands satisfied.

9.3 Official Liquidator

The official liquidator has filed its report vide a Diary No.02074/5 Dated 18.08.2021 wherein it has been observed that as per the Scheme, there will be no winding up of the companies.

The official liquidator has made no adverse observation in its report

9.4 Competition Commission of India

The Competition Commission of India has filed its report that wherein it has been stated that a notice of combination is mandatory given to Commission subject to the meeting of threshold, in terms of combined assets or combined turnover and the said matter has not been filed with the commission under the provisions of the Act. It is further stated that approval with regard to the competition commission is not required in the present matter.

Objectors and their submissions

10.1 Trafigura Global Services Private Limited (hereinafter referred to as “Trafigura”) vide a Diary No. 02074/16 Dated 11.10.2021 has filed an objection to the Scheme stating that there was a breach of lease deed by the applicant company No.1 and the dispute was referred to the arbitration. The amount of the claim filed by the Objector is of Rs. 1,53,61,46,905/-(Rupees One Hundred and Fifty Three Crores Sixty One Lakh Forty Six Thousand Nine Hundred and Five). The objector has also stated that they have not received any notices for the meeting to be convened on 12.12.2020. The objector has sought to question the commercial and financial validity of the Petitioner Company 1, in the event the Scheme is sanctioned. It is submitted that the only assets of the commercial business is IndiaBulls Centre in respect of the which the objector has a claim. The Petitioner Company No.1 has suffered a loss of Rs. 5579.40 million and has a negative cash flow of Rs. 63.04 million and Applicant Company No.2 is newly incorporated and has no revenue. The only commercial asset i.e. One IndiaBulls Centre has not only been encumbered but there appears to be no means to service the debts owned.

10.2 The Petitioner Companies have filed its responses to the objections filed by Trafigura vide Diary No. 02074/17 Dated 28.10.2021. It is stated that IndiaBulls Properties Pvt. Ltd. – Petitioner Company No.1 has preferred a counter-claim of Rs. 303.3 Cr. Along with interest for unpaid rentals for balance lock-in-period, damages caused as result of fit-outs, brokerage, stamp duty and compensation for loss of goodwill and reputation which are pending before the arbitrator. It is also mentioned that a copy of notice of meeting of unsecured creditors has been duly sent to the address of Trafigura i.e. D 64 Defence Colony, New Delhi a copy of postal receipts along with delivery confirmation is attached as Annexure R-1 of the affidavit.

10.3 The Petitioner Companies has filed a joint affidavit vide Diary No. 02074/22 Dated 09.03.2022 it is stated in the affidavit that in order to achieve the closure and to overcome unnecessary delays, the Petitioner Companies in the respective Board resolutions passed on March 4, 2022 have resolved as under:

“RESOLVED THAT in the matter of objections filed by Trafigura Global Services Private Limited (“Objector”) in CP (CAA) No 2/CHD/HRY/2021 with the National Company Law Tribunal, Chandigarh Bench, in relation to the scheme of arrangement between Indiabulls Properties Private Limited (“ Demerged Company”) and BXIN Office Parks India Private Limited (“Resulting Company”) and their respective shareholders (“Scheme”), the Demerged Company and the Resulting Company (together, the “ Petitioner Companies”), shall jointly and severally undertake, to meet any liability that may arise qua either of them in connection with the arbitration proceedings initiated at the behest of the Objector, upon determination of an arbitration award, subject to the right to appeal by the Petitioner Companies, and the award being upheld as final, against either of the Petitioner Companies (“Undertaking”).

On the last date of hearing it has been stated by the learned counsel for the objector that they have no issue with the approval of the scheme if the submissions of joint affidavit be made part of the order.

Thus, the objections of Trafigura stands satisfied.

The certificate of the Statutory Auditors with respect to the Scheme between Petitioner 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 is attached as Annexure-10 of the application.

We have heard the learned Counsel for Petitioner Companies and learned counsel for the Objector and perused the record 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 Companies Act, 2013. In the absence of any further objections before us and since all the requisite statutory compliance have been fulfilled, this Tribunal sanctions the Scheme of Arrangement appended as Annexure-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 Demerged Company pertaining to the Demerged Business be transferred, without further act or deed, to the Resulting Company and accordingly, the same shall pursuant to Sections 230 to 232 of the Companies Act, 2013, be transferred to and vested in the Resulting Company for all the estate and interest of the Demerged Companies but subject nevertheless to all charges now affecting the same;

(ii) That all the liabilities and duties of the Demerged Company pertaining to the Demerged Business be transferred, without further act or deed, to the Resulting 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 Resulting Company;

(iii) That the Appointed Date for the scheme shall be 01.04.2020 as specified in the Scheme;

(iv) That the proceedings, if any, now pending by or against the Demerged Company pertaining to the Demerged Business be continued by or against the Resulting Company;

(v) That the employees of the Demerged Company pertaining to the Demerged Business shall be transferred to the Resulting Company in terms of the ‘Scheme’;

(vi) That the Resulting Company shall, without further application, allot to the existing members of the Demerged Company shares of Resulting Company to which they are entitled under the said Scheme;

(vii) That the Demerged Company and Resulting Company shall jointly and severely liable to meet any liability that may arise either in connection with the arbitration proceedings initiated by the Objector-Trifugra Global Services Pvt. Ltd. subject to the right to appeal and the award being upheld as final against either of the Petitioner Companies.

(viii) 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 in prescribed form and on such certified copy being so delivered;

(ix) That the Resulting Company shall deposit an amount of Rs.1,00,000/-(Rupees One Lakh Rupees 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.

(x) 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, Form No. CAA.7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, formal orders be issued on the petitioners filing the schedule of properties in relation to Demerged Undertaking within three weeks from the date of receiving a 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.2/Chd/Hry/2021 is disposed of accordingly.