Jamipol Limited vs Registrar of Companies

Balraj Joshi, Member (Technical)

This is a petition filed by the Petitioner Company namely Jamipol Limited (hereinafter referred to as the “Petitioner Company”) under Sections 230 to 231 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 in relation to a Scheme of Arrangement proposed between Jamipol Limited and its Members (“Scheme of Arrangement”). A copy of the said Scheme of Arrangement has been annexed as Annexure “A” to the petition.

The object of this petition is to obtain sanction of this Tribunal to the said Scheme of Arrangement, whereby the Petitioner Company is seeking to transfer the amounts lying in the credit of the General Reserves as on March 31, 2020 to the Retained Earnings of the Petitioner Company, and such amounts credited to the Retained Earnings of the Petitioner Company shall be reclassified as and constitute accumulated profits of the Petitioner Company for the previous financial years, and which will be available for distribution to the Members, from time to time.

The Board of Directors of the Petitioner Company has resolved and approved the said Scheme of Arrangement by a Board Resolution dated March 18, 2021 being Annexure “E” subject to the directions and sanctions of this Tribunal as required under law and other authorities that may be necessary.

The Statutory Auditors of the Petitioner Company have certified by a certificate annexed as Annexure “K” that there is no non-compliance with the Accounting Standards.

It is stated that the Scheme of Arrangement does not contain or provide for Corporate Debt Restructuring and does not in any way violate, override or circumvents any provision of the Companies Act, 2013 and the Rules, Regulations and Guidelines made under the said Act.

It has been stated that the Scheme of Arrangement does not in any way violate, override, or circumscribe any provision of the Companies Act, 2013 and the rules, regulations and guidelines made under the said Act.

It is stated that there are no proceedings pending under Sections 217, 219, 221, 224 and 225 of the Companies Act, 2013 against the Petitioner Company and that there are no investigation proceedings pending against the Petitioner Company under the Companies Act, 1956 or the Companies Act, 2013. It has also been stated that there is no winding up petition or resolution process under the provisions of Insolvency and Bankruptcy Code, 2016 pending against the Petitioner Company in any court or the National Company Law Tribunal in India.

The Petitioner Company had 73 equity shareholders as on June 4, 2021. The list of shareholders as certified by Chartered Accountant dated June 15, 2021 has been annexed as Annexure ‘H’ of the petition.

The Petitioner Company has 2 (two) secured creditors. The list as certified by Chartered Accountant has been annexed as Annexure ‘I’ of the petition. It is stated that 100% of the secured creditors of the Petitioner Company had considered the proposed Scheme of Arrangement and gave their consent in writing accepting the Scheme of Arrangement and also waiving the requirement of holding the meeting of the secured creditors of the Petitioner Company, by way of affidavits. In view of such circumstances, the meeting of secured creditors was dispensed with by this Tribunal in view of the consents by way of affidavits provided by both the secured creditors to the Scheme and the Petitioner Company now seek admission of the instant petition presented by them for sanction of the Scheme.

The Petitioner Company states that it has several unsecured creditors arising in the usual course of trade and will be paid off in the ordinary course of business and that they will not be affected by the proposed Scheme of Arrangement in view of the fact that the assets of the Petitioner Company after sanction of the proposed Scheme of Arrangement will be far more than its liabilities. The Petitioner Company states that none of the unsecured creditors of the Petitioner Company being the usual trade creditors numbering 225 will be affected by reason of sanction of the Scheme of Arrangement. A schedule showing the position of the unsecured creditors as certified by Chartered Accountants has been annexed as Annexure “J” to the petition. In the said circumstances, there was no necessity or requirement for calling for meeting for the unsecured creditors being the usual trade creditors and consequently, any such meeting of the unsecured creditors being the usual trade creditors was dispensed with.

The terms and conditions of the Arrangement are fully stated in the Scheme. It is stated that the Scheme of Arrangement does not involve any reduction in the Issued, Subscribed and Paid-up share capital of the Petitioner Company. Moreover, the Scheme does not contain or provide for corporate debt restructuring. It is also stated that the Scheme of Arrangement will not in any manner adversely or prejudicially affect the rights of any creditors of the Petitioner Company or contemplate any compromise or arrangement with the creditors of the Petitioner Company.

The Petitioner Company does not have Preference Shareholders as on the date of filing the petition. It is stated that the Petitioner Company has a positive net worth as per its latest audited financial statement. Inasmuch as there is no change in the shareholding pattern of the Petitioner Company which has been made up to June 4, 2021, nor any equity shares are being issued pursuant to the Scheme of Arrangement hence there is no requirement of a valuation of shares or assets of the Petitioner Company to be undertaken.

By an order dated 03.11.2021, passed in C.A.(CAA) No. 111/KB/2021, this Tribunal had directed convening and holding of the virtual meetings of the Equity Shareholders on Saturday, 18.12.2021 at 11.00 AM, of the Petitioner Company for the purpose of considering and if thought fit, approving, with or without modification, the said Scheme of Arrangement.

In compliance to the directions provided under the order dated 03.11.2021, passed in C.A.(CAA) No. 111/KB/2021, the Petitioner Company has filed an affidavit on 08.12.2021 evidencing service of Notices on the Equity Shareholders, Statutory Authorities and pertaining to the newspaper publications, annexed as Annexure “L” to the Petition.

Accordingly, the Petitioner Company convened and held the said meetings of the Equity Shareholders of the Petitioner Company in terms of the order dated 03.11.2021 and the provisions of the Companies Act, 2013. The proposed Scheme of Arrangement of the Petitioner Company was duly approved by the majority of persons representing more than 3/4th in value of the Shareholders in accordance with requirement of Section 230 of the Companies Act, 2013. The Chairperson appointed for the said meetings has filed his report with this Tribunal vide an affidavit affirmed on 30.12.2021, annexed as Annexure “G” to the Petition. The Petitioner Company has complied with all the directions given by this Tribunal at the stage of Company Application.

The Petitioner Company states that the Scheme of Arrangement duly approved under and pursuant to the aforesaid resolution is fair and in the interest of all Shareholders of the Petitioner Company and that the Scheme of Arrangement will not, once sanctioned by this Tribunal, work unjustly or inequitably against the interests of the other stakeholders.

Consequently, the Petitioner Company presented the instant petition for sanction of the Scheme. By an order dated 14.03.2022, passed in CP (CAA) No.13/KB/2022, connected with CA (CAA) No.111/KB/2021, this Tribunal had directed advertisement of the hearing of this Petition in “Uditvani”, Hindi newspaper and in “Avenue Mail”, English newspaper in terms of Form NCLT-3A of the National Company Law Tribunal Rules, 2016 with necessary variations respectively stating the PAN of the Petitioner Company, at least ten days before the date fixed for hearing. The Petitioner Company was also directed to again serve the notice under Section 230(5) of the Companies Act, 2013 along with all accompanying documents, including a copy of the aforesaid Scheme of Amalgamation and explanatory statement under the provisions of the Companies Act, 2013 upon the applicable statutory authorities and also to publish advertisements in newspapers as mandated under Rule 16 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. Further, the Petitioner Company was also directed to file an Affidavit, along with the copy of the advertisement in the newspapers and evidencing service of notice upon statutory authorities.

In compliance with the order dated 14.03.2022, passed in CP (CAA) No.13/KB/2022, connected with CA (CAA) No.111/KB/2021, the Petitioner Company has filed an Affidavit affirmed on 14.04.2022 evidencing publication of notice in the newspapers and service of notice upon the statutory authorities.

Pursuant to the said publication of notice, the Regional Director, Eastern Region, Ministry of Corporate Affairs, Kolkata (‘RD’) has filed representation before this Tribunal on behalf of the Central Government.

The RD has filed his reply affidavit dated April 22, 2021 (“RD affidavit”) which has been dealt with by the Petitioner Company by their Rejoinder dated April 25, 2022 (“Rejoinder”). The observations of the RD and responses of the Petitioners are summarized as under: -

a. Paragraph No. 2(a) of the RD Affidavit:

That it is submitted that on examination of the report of the Registrar of Companies-cum-Official Liquidator, Jharkhand, Ranchi it appears that no complaint and/or representation has been received against the proposed Scheme of Arrangement. Further, the Petitioner Company is also updated in filing their statutory returns.

Paragraph 2(a) of the Rejoinder:

It is stated and submitted that the contents of the paragraph 2(a) of the Reply are matter of record.

b. Paragraph No. 2(b) of the RD Affidavit:

In compliance of Accounting Standard 14 or IND-AS 103, as may be applicable, the Transferee Company shall pass such accounting entries which arc necessary in connection with the scheme to comply with other applicable Accounting Standards such as AS-5 or IND AS- 8 etc.

Paragraph 2(b) of the Rejoinder:

It is stated and submitted that the Petitioner Company shall pass accounting entries which are necessary in connection with the proposed Scheme of Arrangement to comply with applicable Accounting Standards.

c. Para 2(c) of the RD Affidavit:

The Hon'ble Tribunal may kindly seek the undertaking that this scheme is approved by the requisite majority of members and creditors as per section 230(6) of the Companies Act 2013 in meeting duly held in terms of section 230(1) read with sub-sections (3) to (5) of section 230 of the said Act and the Minutes thereof are duly placed on record.

Para 2(c) of the Rejoinder:

With regard to the contents of the paragraph 2(c) of the Reply, it is stated and submitted that the Petitioner Company had filed an application under Sections 230 and 231 of the Companies Act, 2013 being C.A. (CAA) No. 111/ KB/ 2021, praying for convening and conducting of the meetings of equity shareholders of the Petitioner Company and dispensation of secured and unsecured creditors of the Petitioner Company. Such prayer was allowed by an order dated November 3, 2021, whereby the meeting of equity shareholders was directed to be convened and conducted and the meetings of secured and unsecured creditors of the Petitioner Company were dispensed with. Pursuant to aforesaid order November 3, 2021, Mr. Anuj Singh acted as the Chairperson of the meeting of the equity shareholders of the Petitioner Company, duly convened in accordance with the order dated November 3, 2021, on December 18, 2021 at 11:00 AM through audio-visual means. On December 20, 2021, the Chairperson declared the results of the meeting of equity shareholders of the Petitioner Company vide its letter of the even date. It is further stated and submitted that the resolution put to vote, was passed with requisite majority by the equity shareholders of the Petitioner Company. It is further stated that the Chairperson also filed his Report in Form CAA-4 as per the provisions of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 with this Tribunal by way of an Affidavit dated December 30, 2021. In view of the aforesaid, it is submitted that the compliance under section 230(6) of the Companies Act, 2013 has been duly made.

d. Para 2(d) of the RD Affidavit:

The Hon'ble Tribunal may kindly direct the Petitioners to file an affidavit to the extent that the Scheme enclosed to the Company Application and Company Petition are one and same and there is no discrepancy, or no change is made.

Para 2(d) of the Rejoinder:

With regard to the contents of the para 2(d) of the Reply, it is stated and submitted that the Scheme of Arrangement enclosed to the Company Application and Company Petition are one and same and that there is no discrepancy, or no change is made.

e. Para 2(e) of the RD Affidavit:

In the financial statements for 2018-19 and 2019-20 the company showed additions to reserves as under "securities Premium reserves” as Rs.959.41 lakhs and Rs.1656.66 lakhs respectively. Therefore, the general reserves were built up though securities premium also. Since general reserves cannot include securities premium, the financial statements provide seriously flawed positions and hence the scheme, being based on such financial statements is flawed.

Para 2(e) of the Rejoinder:

With regard to the contents of the para 2(e) of the Reply, it is stated and submitted that the Petitioner Company does not hold a Share Premium Account/Securities Premium Account as evident from its audited financial statements for the Financial Years 2018-19 and 2019-2020 or its XBRL filing with the Registrar of Companies, Ranchi as on the relevant date. It is further clarified that while filling the audited financial statements for the Financial Years 2018-19 and 2019-2020 with the Registrar of Companies, Ranchi in the prescribed XBRL format, there was no specific column/sub-head for specifying the nature of reserves in the XBRL filing (as mentioned in the audited financial statements of the Petitioner Company). It is for this reason, the items as specified in the audited financial statements of the Petitioner Company for Financial Years 2018-19 and 2019-2020 under the correct categories i.e., “Profit & (Loss) for the year, Remeasurement Gains/ (Loss) , Fair value change of Long Term Investment-Through OCI, Dividend Payable-Group Companies, Dividend Payable-External Party, Dividend Tax”, were grouped together and a summation of the amounts liable to be transferred to the “General Reserves” was mentioned under the category of “Other Additions to Reserves” in the XBRL filing. In view of the aforesaid, it is denied that the general reserves of the Petitioner Company have been built up through securities premium account, as alleged or at all. It is also denied that the financial statements of the Petitioner Company provide any seriously flawed positions or that the Scheme, being based on such financial statements is flawed, as alleged or at all.

f. Para 2(f) of the RD Affidavit:

The company reported in its financial statement for 2019- 20 (the reserves standing on 31.3.2020 being subject matter of the scheme), being the latest financial statement filed in MCA portal public domain, the figures in the financial statement for the preceding year 2018-19 differently from what was originally reported in the profit and loss account for 2018-19 which formed part of the financial statement for 2018-19 earlier filed by the company. The changed figures, which are of material incidence, are mentioned in the RD Affidavit. Therefore, the company changed the approved figures of 2018-19 without, as it appears from records available MCA portal, obtaining necessary order for revising the financial statement from Hon'ble National Company Law Tribunal. This deponent therefore points out the serious infirmity in the scheme which is based on the underlying financials of the Transferor companies and the distortion in the financial figures in the financial statement rendering the financial statement lacing credibility and impacting the scheme.

Para 2(f) of the Rejoinder:

With regard to the contents of the para 2(f) of the Reply, it is stated and submitted that previous years’ figures for the Financial Years 2018-19 have been regrouped/reclassified wherever necessary to correspond with the current years’ classification/disclosure as also evident from Note 35 of the audited financial statements for the Financial Year 2019-20 of the Petitioner Company as filed with the Registrar of Companies Ranchi. For illustrative purposes, a chart containing details regarding regrouping/reclassification in accordance with permissible accounting standards is annexed herewith and marked as “Annexure B”. It is therefore denied that there is serious infirmity in the Scheme of Arrangement which is based on the underlying financials of the Petitioner Company, as alleged or at all. It is also denied that there is any distortion in the financial figures in the financial statements or that the financial statements are lacking credibility and impacting the Scheme of Arrangement, as alleged or at all.

g. Para 2(g) of the RD Affidavit:

It is submitted that as per instructions i.e. the Ministry of Corporate Affairs, New Delhi, a copy of the scheme was forwarded to the Income Tax Department on 14/12/2021 for their views/ observation in the mailer. However, the same is still awaited.

Para 2(g) of the Rejoinder:

With regard to the contents of the para 2(g) of the Reply, it is stated and submitted that, the Petitioner Company has already served notices to concerned authorities and undertake to abide by the decisions of the concerned authorities, which are likely to be affected by the proposed Scheme of Arrangement.

Heard the arguments of the Learned Counsel and Mr Sanjay Sardar, Deputy Director in the office of the Regional Director (Eastern Region), Ministry of Corporate Affairs, Kolkata, representing the Central Government. After going through the documents available on record and in absence of any objection, the following orders in terms of prayers made by the Petitioner Company are passed by this Tribunal:

a) The Scheme of Arrangement mentioned in the Petition being Annexure “A”, is hereby sanctioned with effect from the 31st March 2020; and shall be binding on Jamipol Limited and its members and all concerned

b) The Petitioner Company shall within 30 days of obtaining the certified copy of the order cause the certified copies of this order to be delivered to the Registrar of Companies, Ranchi for registration.

c) Liberty is given to the Petitioner Company and all other persons interested in this Petition to apply to this Tribunal for any related direction that may be necessary.

Accordingly, the Company Petition being C.P.(CAA)No.13/KB/2022 connected with C.A.(CAA) No.111/KB/2021 stands disposed of.

The Registry is directed to send e-mail copies of the order forthwith to the Petitioner Company and its Ld. Counsel for information and for taking necessary steps.

Certified copy of this order be issued, if applied for, upon compliance of all the requisites formalities.