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Judgment
Dr. Deepti Mukesh, J
This joint petition has been filed by the Petitioner Companies under Sections 230 and 232 of the Companies Act, 2013 read with the Companies
(Compromises, Arrangements and Amalgamations) Rules, 2016 and the National Company Law Tribunal Rules, 2016, for the purpose of the approval
of the Scheme of Amalgamation of Transferor Company into TransfereeCompany.
A perusal of the petition discloses that initially the First Motion joint application was filed before this Tribunal vide CA (CAA)-125(ND)2019 and
based on such application moved under Sections 230-232 of the Companies Act, 2013, directions were issued by this Tribunal, wherein the meetings of
the Equity Shareholders, Secured Creditors, Unsecured Creditors of the Petitioner Company No.1 and the Secured Creditors of the Petitioner
Company No 2 were dispensed whereas the meetings of the Equity Shareholders and Unsecured Creditors of the Petitioner Company No. 2 were
convened in compliance of the order dated 08.11.2019.The report of the chairperson dated 02.01.2020 and 03.01.2020 for equity shareholders and
unsecured creditorsrespectively for the transferee company has been placed on record.
Thereafter 2nd motion petition was filed vide CAA -12 (ND)/2020 within prescribed time limit and vide order dated 24.01.2020 the Petitioners were
directed to carry out publication in the newspaper “Financial Express†(English, Delhi Edition) and ‘Jansatta’ (Hindi, Delhi Edition) and in
addition, notices were directed to be served on to the Regional Director (Northern Region), Ministry of Corporate Affairs, Registrar of Companies,
NCT of Delhi and Haryana, the Income Tax Department, Official Liquidator, Reserve Bank of India, Bombay Stock Exchange Limited, Ministry of
Information & Broadcasting, and to the other relevant sectoral regulators.
It is seen from the records that all the Petitioners have filed an affidavit dated 06.03.2020 affirming compliance of the order passed by the tribunal
dated 08.11.2019. A perusal of the affidavit disclose that the Petitioners have affected the newspaper publication as directed in one issue of the
‘Financial Express (English Edition) and ‘Jansatta’ (Hindi Edition). Further, the Petitioners have also affirmed that the copy of petition have
been duly served upon the Registrar of Companies, Reginal Director, Northern Region and Income Tax Department, Official Liquidator,Reserve Bank
of India, Bombay Stock Exchange Limited, Ministry of Information & Broadcasting, in compliance of the order and in proof of the same
acknowledgment from the respective offices have also been placed on record.
The Regional Director filed its representation dated 20.02.2020, averting:
a) That the debt raised by the Transferor Company in the amount of Rs.250 crore by issuance of debentures is a ‘colourful transaction’ and
that the consideration to be issued to the shareholders of the Transferor Company by way of issuance of equity shares is an exorbitant consideration;
b) That the Transferor Company has created charge on its assets without there being sufficient underlying assets for creating charge and therefore
the issuance of debentures by the Transferor Company is to be treated as deposit under the Companies 2013 Act;
c) That the share valuation of each of the Petitioner companies is not realistic and methodology followed for valuation of each of the Petitioner
companies is different. It is further alleged that the valuation expert has superficially valued the shares of the Petitioner/ Transferor Company by
extrapolating future years profit without any basis.
The Regional Director has further referred to and relied upon the observations of the Registrar of Companies, with respect to the Petitioner
Companies:-
a) that the provisional unaudited balance sheet of the Transferor Company and Transferee Company as at 30 June, 2019 is not showing the
investment of the Transferor Company in the equity share capital of the Transferee Company and further that the provisional balance sheet of the
Transferor Companyas at 30June, 2019 is not reflecting the true and fair value which is in contravention of Section 129 of the 2013 Act;
b) that the Transferee Company has not filed Form P AS-3 for allotment of shares to the Transferor Company;
c) that theTransferor Company has not filed its list of shareholders withe-Form MGT-7 for the financial year 2018-19;
d) that the balance sheet of the Transferee Company for the financial year 2018-19 as filed with the present Company Petition is different from that
as filed on the portal of the Ministry of Corporate Affairs
e) that IL&FS Financial Services Ltd. is a shareholder of the Transferee Company and investigation into the affairs of IL&FS has been ordered.
The petitioners has filed their reply to the objection raised by the regional director and has asserted that:
a) The Regional Director has completely misunderstood the transaction relating to the raising Rs. 250 crore (by issuance of non-convertible listed
debentures aggregating to Rs.250 crore by the Transferor Company which has in fact, received approval from all concerned authorities regulators and
stakeholders. The Transferee Company in March 2017, sought approval for purchase of upto 100% equity share capital by AION Investments Private
Limited, Mauritius and the Transferor Company. The Ministry of Information & Broadcastingby way of a letter dated 17 December, 2018 (after
almost 21 months) granted approval for each of AION and the Transferor Company to acquire the equity shares of the Transferee Company for a
consideration of Rs.387 crore and Rs.248 crore respectively. A copy of the letter dated 17 December, 2018 of the MIB is annexed. Pursuant to the
application of the Transferor Company, the BSE Limited on 18 April, 2019 conveyed its in-principle approval for the private placement of the NCDs.
A copy of the communication dated 18 April, 2019 of the BSE is annexed. It is stated that the NCDs as issued by the Transferor Company in terms of
the above permission are listed on the wholesale debt Segment of the BSE. The raising of debt of Rs. 250 crore by way of issuance of the NCDs by
the Transferor Company is a legitimate and legal transaction carried out in accordance with applicable law and after obtaining the relevant permissions
and approvals as set out herein-above. The proceeds from the issuance of the NCDs was utilized by the Transferor Company for the purpose of
acquiring 42.37% of the equity share capital of the Transferee Company, which acquisition was undertaken with the approval of the MIB as required
under applicable law. That pursuant to the above, the Transferor Company in June, 2019, acquired 42.37% of the paid up equity share capital of the
Transferee Company.
b) Although the NCDs issued by the Transferor Company have been inter alia secured by way of creation of a pledge over the equity shares of the
Transferee Company held by the Transferor Company and a hypothecation over certain of the assets of the Transferor Company, the NCDs issued
by the Petitioner/Transferor Company are not 'secured debentures' for the purposes of the 2013 Act read with the Companies (Share Capital and
Debentures) Rules, 2014 (""2014 Rules"") and the NCDs issued by the Transferor Company are unsecured financial obligations of the said Company.
Upon issuance of the NCDs, the Transferor Company on yd June, 2019 filed e-Form CHG-9 for the creation of charge with respect to the security
created by it in relation to the NCDs. The MCA by communication dated 9 August, 2019 called upon the Petitioner/ Transferor Company to re-submit
Form CHG-9 and also raised certain queries. The transferor company on 13 August 2019 informed the Registrar of Companies that the NCDs are not
'secured debentures' and accordingly Rule 18(I)(b) of the 2014 Rules are not applicable. On 30 August, 2019, the MCA in view of the above
explanations as provided, approved the e-Form CHG-9 and issued the Certificate of Registration of Charge to the Transferor Company. The record
therefore clearly demonstrates that the e-Form CHG-9 submitted by the Transferor Company with the MCA stands approved by the MCA and there
is no violation as alleged of the provisions of Section 71 of the 2013 Act read with Rule 18 of the 2014 Rules.Accordingly, it is clear and evident that
the provisions of Section 2(31) and Section 73 of the 2013 Act are not attracted in the present case. In addition, it is to be noted that as per Rule 2(l)
(c)(iii) of Companies (Acceptance of Deposits) Rules, 2014 (""Deposit Rules""), any amount received inter alia from foreign bodies corporate and
foreign citizens, authorities or person residentoutside India subject to the provisions of Foreign Exchange Management Act, 1999and rules and
regulations made there under, will not be considered as a ""deposit"" for the purposes of the Deposit Rules. Since the NCDs issued by the Transferor
Company were subscribed to by foreign bodies corporate I persons resident outside India, the amounts received by the Transferor Company will not
be a ""deposit"" as defined in the Deposit Rules. In the present case, the NCDs were subscribed to by AION Investments Private Limited, Mauritius;
Standard Chartered Bank (Singapore) Limited, and Investec Bank PLC, United Kingdom. There is therefore no merit whatsoever in the allegations of
the Regional Director that the issuance of the NCDs falls under the definition of ""deposit"" under the 2013 Act.
c) The Valuer has in the present case, on 26 July, 2019 issued the recommendation of the share exchange ratio for the amalgamation of the
Transferor Company with and into the Transferee Company. The net worth of the Transferor Company is not negative as alleged and its principal
value is derived from its equity holding in the Transferee Company. Reference is reiterated to the contents of para 7(c) above. The Transferee
Company has established business operations in the teleport and broadcasting industry. Based on the above, the Valuer has determined the valuation
of each of the Petitioner Companies and accordingly the share exchange ratio. There has been no unjustified extrapolation in the Valuation Report by
the Valuer as alleged. The Valuer in valuing the Transferor Company has adopted the asset approach since the principal value of the said Company is
derived from the equity holding in the Transferee Company. As regards the Transferee Company, the registered valuer has used the mcome approach
while also considering the available future projections of business of the Transferee Company since the said Company has established operations.
There is no infirmity in the valuation exercise which has been carried out by the Valuer and all allegations contrary thereto by the Regional Director
are in the realm of speculation and conjecture. The Valuation Report has been accepted by the respective BOD of both the companies and also the
respective shareholders and creditors of the Petitioner Companies. The valuation and the exchange ratio has been determined by the Valuer, who is
an expert, by adopting accepted approaches. and methodologies and is based on the financial fair value of each of the Petitioner Companies. No
cogent ground whatsoever has been set out by the Regional Director to challenge the Valuation Report.
To the queries raised upon the observations of the Registrar of Companies, with respect to the Petitioner Companies, the companies has replied as
follows:
a) The provisional unaudited balance sheet of the Transferor Company as on 30June, 2019 under the heading ""Assets"" and at Note 9 thereto clearly
sets out and records the investment of the Transferor Company in the equity share capital of the Transferee Company. The relevant extracts from the
provisional unaudited balance sheet of the Transferor Company as on 30 June, 2019 are annexed. The provisional unaudited balance sheet of the
Petitioner /Transferee Company as on 30 June, 2019 under the heading ""Equity and Liabilities"" read with Note 10(c) thereto clearly sets out and
records the investment of the Transferor Company in the equity share capital of the Transferee Company.
b) In terms of Section 39(4) and Section 42(9) of the 2013 Act, read with Rule 12 and 14 of the Companies (Prospectus and Allotment of Securities)
Rules, 2014, Form PAS-3 is required to be filed only in case of issuance and allotment of securities by a company by way of private placement. The
Transferor Company acquired (by way of a secondary purchase) the equity shares of the Transferee Company from the then existing promoters/
shareholders of the Transferee Company and the Transferee Company did not issue any fresh shares to the Transferor Company under the provisions
of Section 42 of the 2013 Act. Hence there was no requirement to file Form PAS-3 as per the requirement under the provisions of Section 42 of the
2013 Act.
c) Contrary to the record and what is claimed by the RD, the transferee company has filed with the Ministry of Corporate Affairs, its list of
shareholders in excel form along withe-Form MGT-7 for the financial year 2018-19. Form MGT-7 as filed along with inter alia the list of shareholders
is annexed.
d) The audited accounts of the Transferee Company for the financial year 2018-19 as filed with the Company Petition,
e) IL&FS holds only 1.75% in the paid up equity share capital of the Transferee Company since 15 November, 2008.
The Official Liquidator has filed its report on 09.03.2020 wherein no specific objection has been raised against the approval of the scheme. It is
submitted in the report that the Official Liquidator has not received any complaint against the proposed scheme from any person/party interested in the
scheme in any manner and that the affairs of the transferor companies do not appear to have been conducted in a manner prejudicial to the interest of
its members or to public interest.
The Income Tax Department has filed its report on 17.03.2020 wherein no specific objection has been raised against the approval of the scheme.
As per ITBA system, no demand is outstanding and no proceedings are pending against both the petitioner companies.
The Bombay Stock Exchange has filed its representation on 16.12.2019 wherein no specific objection has been raised against the approval of the
scheme. Further, the Exchange reserves its right to withdraw its In-principle-approval at any later stage if the Information submitted to the Exchange
is found to be incomplete/ incorrect/ misleading/ false or for any contravention of Rules, Bye-laws and Regulations of the Exchange, Listing
Agreement, Guidelines/ Regulations issued by the statutory authorities etc.
The Reserve Bank of India has filed its report on 04.02.2020 wherein no specific objection has been raised against the approval of the scheme.
The Ministry of Broadcasting has filed its report on 04.02.2020 wherein the permission has been granted only if the company/teleport holds a valid
WPC license for the Teleport.
Both the petitioner companies have affirmed that no proceedings for inspection, inquiry or investigation under the provisions of the Companies Act,
2013 or under the provisions of the Companies Act, 1956 are pending against the Petitioner Companies.
Certificates of respective statutory auditors of all the petitioner companies have been placed on record to the effect that accounting treatment
proposed in the Scheme of Amalgamation is in conformity with the accounting standard notified by the Central Government as specified under the
provisions of Section 133 of the Companies Act, 2013.
In view of the foregoing, upon considering the approval accorded by the members and creditors of all the petitioner companies to the proposed
scheme, as well as the objections filed by the regional director, northern region, the official liquidator, and the income tax department and being
satisfied in view of affidavit of undertaking filed by the transfereecompany, there appears to be no impediment in sanctioning the present scheme. The
Ld. counsel for petitioner argued the submission made by them in its reply to the queries of regional director and registrar of companiesand submitted
that mere apprehension or possibility in future of any irregularity cannot be the ground at present in sanctioning the scheme. If at all any violation is
observed done by the company, the regulators have remedy against the company.
Consequently, sanction is hereby granted to the scheme under section 230 & 232 of the Companies Act, 2013. The petitioner however remain
bound to comply with the statutory requirements in accordance with law.
Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction
granted by this court to the scheme, will not come in the way of action being taken, albeit, in accordance with law, against any of the concerned
person, director and officials of the petitioners.
While approving the scheme as above, we further clarify that this order should not be construed as an order in any way granting exemption from
payment of stamp duty, taxes, GST, or any other charges, if any, and payment 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(S):
a) That all the transferor company shall stand dissolved without following the process of winding up; and
b) That all the property, rights and powers of all the transferor company, be transferred without further act or deed, to the transferee company and
accordingly the same shall pursuant to Section 232 of the Companies Act, 2013, be transferred to and vets in the transferee company.
c) That all the liabilities and duties of the all transferor company, be transferred without further act or deed, to the transferee company and accordingly
the same shall, pursuant to Section 232 of the Act, be transferred to and become the liabilities and duties of the transferee company; and
d) That all proceeding now pending by or against the transferor company, be continued by or against the transferee company;
e) The allotment of shares to the shareholders of transferor company in transferee company shall be issued in proportion as under:
“6383 equity shares of Rs 10 each of transferee company for one equity share of Rs 10 each held in transferor companyâ€.
f) That all the employees of the transferor company in service, on the date immediately preceding the date on which the scheme takes effect, i.e., the
effective date shall become the employees of the transferee company on such date without any break or interruption in services and upon terms and
conditions not less favorable than those subsisting in the respective transferor companies on the said date.
g) That petitioner companies shall within thirty days of the date of the receipt of this order cause a certified copy of this order to be delivered to the
Registrar of Company for registration and on such certified copy being so delivered all the transferor companies shall stand dissolved and the
Registrar of Company shall place all documents relating to all the transferor company registered with him on the file kept by him in relation to the
transferee company and the files relating to all the petitioner companies shall be consolidated accordingly; and
h) That any person interested shall be at liberty to apply to the tribunal in the above matter for any directions that may be necessary.
The petition stands disposed of in the above terms.