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Judgment
Kishore Vemulapalli, Member (Technical)
Heard the learned Counsel for the Petitioners and the Authorized representative of the Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai. No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition.
The sanction of the Tribunal is sought under section 232 r/w 230 and Section 66 and other applicable provisions of the Companies Act, 2013 read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 to the Composite Scheme of Amalgamation (merger by Absorption) cum Demerger and Arrangement amongst the Petitioner Companies and their respective shareholders.
The Petitioner Companies submits that:
a) The Petitioner Company No.1 owns agricultural lands and carries out agricultural activities and is exploring opportunities to carry out industrial / commercial activities.
b) The Petitioner Company No.2 is engaged in the cultivation of agricultural land in the state of Telangana.
c) The Petitioner Company No.3 is engaged in the research, development, production, processing, marketing, licensing and sale of horticultural produce and planting material.
d) The Petitioner Company No.4 is a Registered Non-Banking Financial Company engaged in the business of investment in the securities of listed companies, mutual funds and other non-strategic investments like jewelleries, fixed deposits and providing loans / inter corporate deposit to persons outside group viz. treasury business. Further it has made strategic investments in the group companies and other agro based companies and also engaged in the business of agriculture and allied activities and it extends loans/ inter corporate deposits to group companies viz. strategic business.
e) The Petitioner Company No.5 is inter alia engaged in agriculture and investment business, as per the memorandum of association.
f) The Petitioner Company No.6 conducts agricultural activities on its agricultural lands.
g) The Petitioner Company No.7 owns agricultural lands on which it conducts agricultural activities.
h) The Petitioner Company No.8 owns agricultural lands on which it conducts agricultural activities.
i) The Petitioner Company No.9 owns agricultural lands on which it conducts agricultural activities.
j) The Petitioner Company No.10 owns agricultural lands on which it conducts agricultural activities.
k) The Petitioner Company No.11 is engaged in the business of seed production, processing, and marketing of all varieties of vegetable seeds, including hybrids.
l) The Petitioner Company No.12 is engaged in the business of sale of variety of agricultural seeds. Further, it owns agricultural land on which it carries out agricultural activities.
The Fourth Petitioner Company holds 34.38% stake in the Twelfth Petitioner Company.
m) The Petitioner Company No.13 owns agricultural land on which it carries out agricultural activities.
n) The Petitioner Company No.14 is focused on research and development, production, processing, and marketing of hybrid and varietal seeds for India’s farming fraternity.
The Petitioner Companies have approved the said Scheme by passing the Board Resolutions. Further the Petitioner Companies have also approved the modification to the scheme by passing Board Resolutions with modified Appointed Date as 1st April 2023 or such other date as may be determined by the Board of Directors of Transferor Company 1, Transferor Company 2, Transferor Company 3, Transferor Company 4 and Transferee Companies or such other date as may be fixed or approved by the National Company Law Tribunal or such other competent authority / Appropriate Authority. This Bench sought clarification from the Petitioner whether there shall be an impact on the shares swap ratio consequent to postponement of the appointed dated to 01.04.2023. It was submitted by the Counsel that the proposed scheme of arrangement is made out to effectuate the family settlement agreement, and has also filed a certificate from the valuer that their shall not be change in the swap ratio consequent upon postponement of the appointed date. It is noticed that the valuer has stated so in the light of family arrangement.
The Petitioners states that the Petitions have been filed in consonance with the order dated 10th November, 2022, passed by this Tribunal in the Company Scheme Application bearing C.A.(CAA)/130/MB/2022.
The Petitioner Companies have complied with all requirements as per directions of this Tribunal and they have filed necessary affidavits of compliance in this Tribunal. Moreover, the Petitioner Companies undertake to comply with all the statutory requirements, if any, as may be required under the Companies Act, 2013 and the Rules made there under. The said undertaking is accepted by the Petitioner Companies.
Rational of the Scheme:
The Mahyco Grow group has been engaged in the agriculture sector and various allied and related business spread across several companies. The ultimate shareholders of all the companies under the scheme are members of the Barwale Family. Now, with an intent to rationalise the group holding structure by way of reduction of number of entities through which the business is carried out and consolidate the value of the business by consolidating entities engaged in business of similar nature under a single entity, segregate the various lines of business in which the group companies are engaged and also demonstrate direct commitment to and engagement with the flagship company of the group of / by the promoters of Mahyco Grow group, the Board of Directors of all the Companies propose to enter into the proposed Scheme to hive off the treasury business of Demerged Company into Resulting Company, and further merge the remaining business of the Demerged Company and other Transferor Companies, with the identified group Companies. The proposed Scheme would inter alia have the following benefits:
1) Streamline the corporate structure of the group and consolidate the assets and liabilities of the Transferor Companies with the Transferee Companies, which shall be directly administered by the promoter group.
2) Lead to clear strategic direction on account of segregation of the various businesses in which the group is engaged, viz. treasury business, traditional seeds business, export of fruits, fruit concentrate business, and other agriculture business.
3) Further, bifurcation of these businesses will enable unlocking value of the consolidated business of each vertical thereby paving way for focused growth with a view to create significant stakeholder value.
4) Improve organisational capability and leadership, arising from the pooling of human capital that have the diverse skills, talent, and vast experience to compete successfully in an increasingly competitive industry.
5) Enhance business potential and increased capability through improvement in management oversight to bring in operational efficiencies.
6) Enable greater access to different market segments in conduct of its business and inclusion of additional products in the portfolio would improve the competitive position of the combined entity.
7) Result in financial resources being efficiently merged and pooled leading to more effective and centralised management of funds, greater economies of scale, stronger base for future growth and rationalisation of costs by simplification of management structure leading to better administration and cost savings and further optimise the valuation of the consolidated entity and enable fund raising for future expansion.
8) Further, the synergies arising out of the consolidation of business will lead to enhancement of net worth of the combined business and enhancement in earnings and cash flow would optimise the value of the Transferee Companies and enhance the shareholder’s value.
9) Moreover, the Scheme is expected to increase the long-term value for all the shareholders of the Transferor Companies and Transferee Companies.
Consideration:
For AMALGAMATION (MERGER BY ABSORPTION) OF PART II TRANSFEROR COMPANIES WITH TRANSFEREE COMPANY 1
For the shareholders of Transferor Company 1
“1 (One) fully paid-up Redeemable Preference Share of Transferee Company 1 of the face value of INR 10 (Rupees Ten Only) each, shall be issued and allotted as fully paid-up preference shares to the equity shareholders of Transferor Company 1, for every 100 (One
Hundred) fully paid-up equity shares of INR 10 (Rupees Ten only) each of the Transferor Company 1 held by such shareholders”
For the shareholders of Transferor Company 2
“1 (One) fully paid-up Redeemable Preference Share of Transferee Company 1 of the face value of INR 10 (Rupees Ten Only) each, shall be issued and allotted as fully paid-up preference shares to the equity shareholders of Transferor Company 2, for every 100 (One Hundred) fully paid-up equity shares of INR 100 (Rupees Hundred only) each of the Transferor Company 2 held by such shareholders”
For DEMERGER AND VESTING OF DEMERGED UNDERTAKING OF THE DEMERGED COMPANY INTO THE RESULTING COMPANY
“1 (One) fully paid-up Redeemable Preference Share of Resulting Company of INR 10 (Rupees Ten only) each, credited as fully paid up, for every 100 (One Hundred) fully paid up equity shares of INR 10 (Rupees Ten only) each of the Demerged Company held by such shareholders.”
For AMALGAMATION (MERGER BY ABSORPTION) OF PART IV TRANSFEROR COMPANIES WITH TRANSFEREE COMPANY 3
For the shareholders of Transferor Company 3
“1 (One) fully paid up Optionally Convertible Redeemable Preference Shares of Transferee Company 3 of the face value of INR
10 (Rupees Ten Only) each, shall be issued and allotted as fully paid up preference shares to the equity shareholders of Transferor Company 3, for every 100 (One Hundred) fully paid up equity shares of INR 10 (Rupees Ten only) each of the Transferor Company 3 held by such shareholders, and such shares of the Transferee Company 3 as are held by the Transferor Company 3, shall stand cancelled pursuant to Part IV of this scheme;
For the shareholders of Transferor Company 4
Pursuant to Part IV of the Scheme coming into effect, Transferor Company 4 shall be the wholly owned subsidiary of Transferee Company 3 and thus no shares of the Transferee Company 3 shall be allotted in lieu of amalgamation of Transferor Company 4 into Transferee Company 3.
For AMALGAMATION (MERGER BY ABSORPTION) OF PART V TRANSFEROR COMPA-NIES WITH TRANSFEREE COMPANY 3
For the shareholders of Transferor Company 5
Pursuant to Part IV of the Scheme coming into effect, Transferor Company 5 shall be the wholly owned subsidiary of Transferee Company 3 and thus no shares of the Transferee Company 3 shall be allotted in lieu of amalgamation of Transferor Company 5 into Transferee Company 3;
For the shareholders of Transferor Company 6
1(One) fully paid up Redeemable Preference Shares of Transferee Company 3 of the face value of INR 10 (Rupees Ten Only) each, shall be issued and allotted as fully paid up preference shares to the equity shareholders of Transferor Company 6, for every 100 (One Hundred) fully paid up equity shares of INR 10 (Rupees Ten only) each of the Transferor Company 6 held by such shareholders, and such equity shares of the Transferor Company 6 as are held by the Transferee Company 3, shall stand cancelled pursuant to amalgamation of Transferor Company 6 with Transferee Company 3;
For the shareholders of Transferor Company 7
Pursuant to Part IV of the Scheme coming into effect, Transferor Company 7 shall be the wholly owned subsidiary of Transferee Company 3 and thus no shares of the Transferee Company 3 shall be allotted in lieu of amalgamation of Transferor Company 7 into Transferee Company 3;
For the shareholders of Transferor Company 8
Pursuant to Part IV of the Scheme coming into effect, Transferor Company 8 shall be the wholly owned subsidiary of Transferee Company 3 and thus no shares of the Transferee Company 3 shall be allotted in lieu of amalgamation of Transferor Company 8 into Transferee Company 3;
For the shareholders of Transferor Company 9
1(One) fully paid up Redeemable Preference Shares of Transferee Company 3 of the face value of INR 10 (Rupees Ten Only) each, shall be issued and allotted as fully paid up preference shares to the equity shareholders of Transferor Company 9, for every 100 (One Hundred) fully paid up equity shares of INR 1000 (Rupees One Thousand only) each of the Transferor Company 9 held by such shareholders, and Equity and Preference shares of the Transferor Company 9 as are held by the Transferee Company 3, shall stand cancelled pursuant to amalgamation of Transferor Company 9 with Transferee Company 3;
For the shareholders of Transferor Company 10
“1(One) fully paid up Redeemable Preference Shares of Transferee Company 3 of the face value of INR 10 (Rupees Ten Only) each, shall be issued and allotted as fully paid up preference shares to the equity shareholders of Transferor Company 10, for every 100 (One Hundred) fully paid up equity shares of INR 100 (Rupees Hundred only) each of the Transferor Company 10 held by such shareholders, and such equity shares of the Transferor Company 10 as are held by the Transferee Company 3, shall stand cancelled pursuant to amalgamation of Transferor Company 10 with Transferee Company 3”
For the shareholders of Transferor Company 11
“1(One) fully paid up Redeemable Preference Shares of Transferee Company 3 of the face value of INR 10 (Rupees Ten Only) each, shall be issued and allotted as fully paid up preference shares to the equity shareholders of Transferor Company 11, for every 100 (One Hundred) fully paid up equity shares of INR 10 (Rupees Ten only) each of the Transferor Company 11 held by such shareholders, and such equity shares of the Transferor Company 11 as are held by the Transferee Company 3, shall stand cancelled pursuant to amalgamation of Transferor Company 11 with Transferee Company 3”
The Regional Director has filed his Report dated 09.02.2023 making certain observations. The Petitioner Companies have submitted/undertaken that: -
a. The Petitioner Companies will pass such accounting entries which are necessary in connection to the Scheme under the requirements of the relevant Accounting Standards/ Indian Accounting Standards;
b. The provisions set out in Section 232(3)(i) of the Companies Act, 2013 and where the Transferor Companies are dissolved, the fee and stamp duty, if any, paid by the Transferor Companies on their authorized share capital shall be set off against any fees and stamp duty payable by the Transferee Companies on their authorized share capital subsequent to the amalgamation, and therefore, the Transferee Companies shall pay the difference of fees and stamp duty, as applicable;
c. Since the present Scheme is an arrangement between the Petitioner Companies and its shareholders as contemplated in Section 230(1)(b) and not in accordance with the provisions of Section 230(1)(a) of the Companies Act, 2013 not affecting the rights and interests of the Unsecured Creditors of the Petitioner Companies, and involving no compromise or arrangement with such creditors. Further there is no diminution of liability of any of the Unsecured Creditors of the Petitioner Companies who will be paid off in the ordinary course of business;
d. All the property of the Demerged Undertaking, being transferred by the Demerged Company, immediately before the demerger, shall become the property of the Resulting Company by virtue of the demerger;
e. All the liabilities relatable to the Demerged Undertaking, being transferred by the Demerged Company, immediately before the demerger, shall become the liabilities of the Resulting Company by virtue of the demerger;
f. The transfer of the Demerged Undertaking is on a going concern basis;
g. The Regional Director, in its report, has observed that the Demerged Company has not replied to the auditor’s qualifications in the Director’s report, which is a violation of Section 134 of the Companies Act, 2013.
h. The Transferee Company will comply with Income Tax Provisions in relation to proceedings/claims under Income Tax Act against the Transferor Company; and
i. The Petitioner Companies confirm that no inquiry, investigation, inspection and prosecution is pending against any of the Petitioner Companies.
Ms. Rupa Sutar, Deputy Director, Office of Regional Director (WR), Mumbai appeared on the date of hearing and submits that the explanations and clarifications given by the Petitioner Companies in rejoinder are satisfactory and they have no further objection to the Scheme.
The Official Liquidator has filed its Report dated 21st April 2023, inter alia stating therein the observations on the scheme as stated in paragraph 2 of the said Report. In response to the observations made by the Official Liquidator, the Petitioner Companies have filed reply affidavits cum rejoinder on 15th May, 2023 and have given necessary clarifications and undertakings. The observations made by the Official Liquidator and the clarifications and undertakings given by the Petitioner Companies are as below:
2.1.1.As regards to the observation made in Paragraph 2(17) of the said report, the the clause 44.1 of the Scheme states that “Upon the Scheme becoming effective the authorised share capital of the Part II Transferor Companies shall stand transferred, reorganised, reclassified, credited and merged with that of the Transferee Company 1 and the authorised share capital of the Transferee Company 1 will be increased to that effect by filing requisite forms and payment of any additional fees and stamp duty, if any and no separate procedure shall be followed under the Act. Consequently, the Memorandum of Association of the Transferee Company 1 shall without any further act, instrument or deed be and stand altered, modified, and amended pursuant to Sections 13, 61 and other applicable provisions of the Act”.
2.2. The said clause does not mention that the same shall override the provisions of the Companies Act, 2013.
2.3. The Petitioner Companies shall comply with the provisions set out in Section 232(3)(i) of the Companies Act, 2013 and that the fee, if any, paid by the Transferor Companies on its authorized share capital shall be set off against any fees payable by the Transferee Companies on its authorized share capital subsequent to the amalgamation, and additional fee if any shall be paid by respective Transferee Companies.
The Official Liquidator inter alia stated in his report that the affairs of the Transferor Companies have been conducted in a proper manner. Accordingly, the Transferor Companies may be ordered to be dissolved without winding up.
From the material on record, the Scheme appears to be fair and reasonable and is not in violation of any provisions of law and is not contrary to public policy.
All the assets and liabilities including taxes and charges, if any and duties of the Transferor Companies, shall pursuant to section 232 of the Companies Act, 2013, be transferred to and become the liabilities and duties of the Transferee Companies.
The Income Tax Department will be at liberty to examine the aspect of any tax payable because of this scheme and it shall be open to the income tax authorities to take necessary action as possible under the Income Tax Law. It is also clarified that the Income Tax department will also be at liberty to examine applicability of section 56 of the Income Tax Act in relation to benefit occurring to the shareholders of the beneficiary company pursuant to this scheme giving effect to family settlement.
The creditors of undertaking, being demerged, shall be entitled to make claim against the resulting company as well as demerged company in relation to their debt up to the date of demerger. In case the resulting Company is made to pay the debt of such undertaking, it shall be entitled to seek reimbursement of the amount so paid from the Demerged Company.
Since all the requisite statutory compliances have been fulfilled, Company Petition bearing C.P. (C.A.A.)/249/MB/2022 filed by the Petitioner Companies is made absolute in terms of prayers clause of the said Company Scheme Petition.
The Petitioner Companies are directed to file a certified copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically, along with e-Form INC-28 in addition to physical copy, within 30 days from the date of receipt of order, duly certified by the Deputy Registrar or the Assistant Registrar, as the case may be, of this Tribunal.
The Petitioner Companies to lodge a certified copy of this order and the Scheme duly authenticated by the Deputy Registrar/ Assistant Registrar, as the case may be, of this Tribunal, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of receipt of certified copy of the order from the Registry of this Tribunal.
All concerned regulatory authorities to act on a copy of this Order duly certified by the Registry of this Tribunal, along with a copy of the Scheme.
The Composite Scheme of Amalgamation (merger by Absorption) cum Demerger and Arrangement is hereby sanctioned, and the Appointed Date 1 of the Scheme is fixed as 1st Day of April 2023 and Appointed Date 2 is fixed as effective date as defined in clause 1.22 of the Scheme, for the purposes of Section 232(6) of the Companies Act, 2013.
The Petitioner Company Nos. 1, 2, & 6 to 13 are dissolved without winding up.
Ordered Accordingly.