Karmatex Apparels Private Limited Vs

Kuldip Kumar Kareer, Member (Judicial)

The Bench is convened through videoconference.

Karmatex Apparels Private Limited (hereinafter referred to as the “First Applicant Company” or “Transferor Company”) and Twilight Prints Private Limited (hereinafter referred to as the “Second Applicant Company” or “Transferee Company”) are entering into a scheme of amalgamation (“Scheme”). For the sake of convenience, the First Applicant Company and the Second Applicant may be collectively referred to as “Applicant Companies” wherever required. The Scheme has been approved by the boards of the respective companies vide resolution dated 22nd July 2022.

The Learned Counsel for the Applicant Companies further submits that the Company Application has come up for hearing on several occasions before this Hon’ble Tribunal. But, due to paucity of time the matter did not reach for hearing.

During the pendency of the admission of the Company Scheme Application before Hon’ble NCLT Mumbai Bench, the management of the Applicant Companies have decided to change the Appointed Date in the Scheme from 1st October 2022 to 1st April 2023. The Board of Directors of the Applicant Companies in their respective meetings held on 8th December 2022 have approved the amended scheme. Further, to place such amendments on record before this Hon’ble Bench, an Additional Affidavit dated 27th February 2023 (“Additional Affidavit”) was filed by the Applicant Companies. The Amended Scheme is annexed as Exhibit B to the Additional Affidavit.

The said amended Scheme provides for amalgamation of the Transferor Company with the Transferee Company with effect from the Appointed Date under the provisions of Sections 230 to 232 and other applicable provisions of the Companies Act 2013 read with Section 2(1B) and other applicable provisions of the Income Tax Act, 1961 and various other matters consequential thereto or otherwise integrally connected therewith in the manner set out in this amended Scheme. The Appointed Date as mentioned in the amended Scheme is 1st April 2023.

The registered office of Applicant Companies is situated in Mumbai, Maharashtra. The subject matter of this application is within the jurisdiction of the Mumbai Bench.

Learned Counsel for the Applicant Companies submits that the circumstances and / or reasons and/or grounds that have necessitated and/or justified the Scheme and some of the major benefits which would accrue from the Scheme are extracted from the Scheme and stated below:

The Scheme will result in the following benefits:

(a) combination of resources, creating better synergies, optimal utilisation of resources and greater economies of scale and deriving operating efficiencies from adoption of existing technology-enabled processes of the Transferor Company;

(b) More efficient utilization of capital for enhanced development and growth of the consolidated business under a single entity;

(c) Enable opportunities for employees of the parties to grow, by bringing them into a common pool; and

(d) Elimination of multiple entities, legal and regulatory compliances and, reduction of administrative costs.

The Scheme is in the best interests of the shareholders, employees and the creditors of each of the Parties.”

The Learned Counsel for the Applicant Companies submits that, as per Clause 8.1 of the amended Scheme, the Transferee Company shall, without any further application, act, deed, consent, acts, instrument or deed, issue and allot, on a proportionate basis to each shareholder of the Transferor Company whose name is recorded in the register of members and records of the depository as members of the Transferor Company as on the Effective Date, as under:

“90 (Ninety) fully paid-up Equity Shares of the face value of INR 10/-(Ten) each of the Transferee Company, for every 1 (One) fully paid-up Equity Share of the face value of INR 10/- (Ten) each of the Transferor Company shall be issued and allotted as fully paid up to the equity shareholders of the Transferor Company in the proportion of their holdings in the Transferor Company”

The Learned Counsel for the Applicant Companies submit that the First Applicant Company has received the consent affidavits from all its Equity Shareholders, whereby they have given their consent and approval to the amended Scheme. The Consent Affidavits of the Equity Shareholders of the First Applicant Company are annexed to the Additional Affidavit at Exhibit D-Colly. Accordingly, the requirement to hold meetings of the Equity Shareholders of the First Applicant Company is dispensed with.

The Learned Counsel for the Applicant Companies submit that the Second Applicant Company has received the consent affidavits from all its Equity Shareholders, whereby they have given their consent and approval to the amended Scheme. The Consent Affidavits of the Equity Shareholders of the Second Applicant Company are annexed to the Additional Affidavit at Exhibit E- Colly. Accordingly, the requirement to hold meetings of the Equity Shareholders of the Second Applicant Company is dispensed with.

The Learned Counsel submitted that the Applicant Companies do not have preference shareholders and therefore the question of convening and holding of a meeting of the preference shareholders of the Applicant Companies to consider and approve the amended Scheme does not arise. Accordingly, the requirement of convening meeting of the preference shareholders of the Applicant Companies is dispensed with.

The Learned Counsel for the First Applicant Company submitted that as on 31st October 2022, there are 2 (Two) Secured Creditors in the First Applicant Company having an outstanding amount of INR. 30,75,50,416/- Details of the Secured Creditors of the First Applicant Company as on 31st October 2022 alongwith their No-Objection Certificates are annexed to the Additional Affidavit at Exhibit H- Colly. The Counsel for the Applicant Companies further submits that the present amended Scheme is between the Transferor Company and Transferee Company and their respective 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 as there is no Compromise and/or Arrangement with the creditors as no sacrifice is called for. Therefore, the meeting of Secured Creditors of the First Applicant Company be dispensed with.

The  Learned  Counsel  for  the  Second  Applicant  Company submitted that as on 31st October 2022, there are no secured creditors of the Second Applicant Company. As such the question of convening and holding the meeting of the secured creditors of the Second Applicant Company and approve the proposed amended Scheme does not arise.

The Learned Counsel for the First Applicant Company submitted that as on 31st October 2022, there are 51 Unsecured Creditors of the First Applicant Company having an outstanding amount of INR. 23,37,35,364/-. The First Applicant Company has procured written consent affidavits from 42 unsecured creditors representing 95.42% in value. Details of the Unsecured Creditors of the First Applicant Company as on 31st October 2022 is annexed to the Additional Affidavit at Exhibit I- Colly. The Counsel for the Applicant Companies further submits that the present amended Scheme is between the Transferor Company and Transferee Company and their respective 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 as there is no Compromise and/or Arrangement with the Unsecured Creditors as no sacrifice is called for. Therefore, the meeting of Unsecured Creditors of the First Applicant Company be dispensed with.

The  Learned  Counsel  for  the  Second  Applicant  Company submitted that as on 31st October 2022, there are no unsecured creditors of the Second Applicant Company. As such the question of convening and holding the meeting of the unsecured creditors of the Second Applicant Company and approve the proposed amended Scheme does not arise.

The Applicant Companies to serve notices upon (i) the Central Government through the Regional Director, Western Region, Ministry of Corporate Affairs; (ii) Registrar of Companies at Mumbai; (iii) Income Tax Department at within whose jurisdiction the Applicant Companies are assessed to tax, for the First Applicant Company bearing PAN AADCK1172B having jurisdiction at Circle 4(3)(1), Aayakar Bhawan Building, Maharishi Karve Road, Mumbai, Maharashtra, 400 020 and for Second Applicant Company bearing PAN AAACT4220A having jurisdiction at Circle 4(3)(1), Aayakar Bhawan Building, Maharishi Karve Road, Mumbai, Maharashtra, 400 020; and (iv) GST Department bearing GST No. 27AAACI1559F1ZQ having jurisdiction at Range III, Division IV for First Applicant Company and the Second Applicant Company is not registered with the GST Authorities and hence there is no question of sending notices with regards to the Second Applicant Company.

Additionally, the First Applicant Company is directed to serve notice along with a copy of the amended Scheme upon the Official Liquidator, High Court, Bombay, pursuant to Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Official Liquidator shall submit his Report to the Tribunal within 30 (Thirty) days of the date of receipt of such notice, failing which it shall be presumed that the Official Liquidator has no objection to the proposed amended Scheme. A copy of the Report shall simultaneously be served upon the First Applicant Company.

The Applicant Companies to serve notices upon any other sectoral authorities, if applicable, pursuant to Section 230(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016. If no response is received by the Tribunal from the concerned sectoral authorities or authorities within 30 (Thirty) days of the date of receipt of the notice, it will be presumed that the concerned sectoral regulators or authorities have no objection to the proposed amended Scheme.

The Applicant Companies are directed to file an Affidavit of Service cum Compliance Report with the Registry in regard to the directions given in this Order.