Midas Commodities Pvt. Ltd. And Ors vs Shridhar Financial Services Ltd

P.S.N. Prasad, J

The Present Petition is filed by Petitioner Companies under Sections 230 & 232 of the Companies Act, 2013 read with Rules framed thereunder, as in force from time to time, for the Sanction of the proposed Scheme of Amalgamation of Midas Commodities Pvt. Ltd, Capital Securities Ltd, Capital Stocks and Shares Ltd, Pravith India Advisors Pvt. Ltd, Shiny Buildwell Pvt. Ltd and Avika Developers Pvt. Ltd with Shridhar Financial Services Ltd and their respective Shareholders and Creditors (hereinafter referred to as "Scheme" or "Scheme of Amalgamation").

The proposed Scheme of Amalgamation has previously been approved by the Board of Directors of the Transferor Companies No. 1 to 4 in their respective meetings held on 27 July, 2019; the Board of Directors of the Transferor Companies No. 5 & 6 and the Transferee Company in their respective meetings held on 29th July, 2019.

The factual position of the Authorized, Issued, Subscribed and Paid up share Capital of all the Petitioner Companies are described well in the present Company Petition, which are being reproduced hereunder:

a. The Authorised Share Capital of the Transferor Company No. 1 is Rs. 1,00,00,000 divided into 10,00,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 65,17,000 divided into Rs. 6,51,700 Equity Shares of Rs. 10 each.

b. The Authorised Share Capital of the Transferor Company No. 2 is Rs. 1,20,00,000 divided into Rs. 12,00,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 1,10,00,000 divided into Rs. 11,00,000 Equity Shares of Rs. Rs. 10 each.

c. The Authorised Share Capital of the Transferor Company No. 3 is Rs. 1,00,00,000 divided into Rs. 10,00,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 33,40,000 divided into Rs. 3,34,000 Equity Shares of Rs. 10 each.

d. The Authorised Share Capital of the Transferor Company No. 4 Rs. 5,00,000 divided into Rs. 50,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 4,00,000 divided into Rs. 40,000 Equity Shares of Rs. 10 each.

e. The Authorised Share Capital of the Transferor Company No. 5 is Rs. 6,91,00,000 divided into Rs. 69,10,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 2,96,94,240 divided into Rs. 29,69,424 Equity Shares of Rs. 10 each.

f. The Authorised Share Capital of the Transferor Company No. 6 is Rs. 2,00,00,000 divided into Rs. 20,00,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 1,99,88,500 divided into Rs. 19,98,850 Equity Shares of Rs. 10 each.

g. The Authorised Share Capital of the Transferee Company is Rs. 3,00,00,000 divided into Rs. 30,00,000 Equity Shares of Rs. 10 each. The present Issued, Subscribed and Paid-up Share Capital of the Company is Rs. 2,49,53,200 divided into Rs. 24,95,320 Equity Shares of Rs. 10 each.

The Rational of the proposed Scheme of Amalgamation is elaborately described in the present Company Petition which may be summarized as under:

a. All the Transferor Companies and the Transferee Company are closely held Group Companies under common shareholding, management and control. The proposed amalgamation of the Transferor Companies with the Transferee Company would result in business synergy, consolidation and pooling of their resources.

b. The Transferor Company No. 1 is engaged in commodity derivatives broking and other related activities as a Trading Member of various Commodity Derivatives Exchanges. The Transferor Company No. 2 had been engaged in share and stock broking and was a member of erstwhile Delhi Stock Exchange. The Transferor Company No. 3 had been engaged in share and stock broking and was a member of erstwhile OTC Exchange of India. The Transferee Company had been engaged in share and stock broking and was a member of erstwhile Uttar Pradesh Stock Exchange. Whereas the Transferor Companies No. 4, 5 and 6 are primarily engaged in purchase, sale and trading of real estate and commodities; and other related activities. The Securities and Exchange Board of India (SEBI) has de-recognised most of the regional Stock Exchanges in India. Earlier, Commodity Derivates Market and Commodity Derivates Broking activities were being regulated by the Forward Markets Commission (FMC). Whereas the Capital Market and Share and Stock Broking activities were being regulated by the Securities and Exchange Board of India (SEBI). Commodity Derivates Broking and Share Broking activities were not allowed to be conducted in a single entity. However, the Government of India merged the FMC with the SEBI and regulation of the Commodity Derivatives Market was also entrusted with the SEBI. The Government allowed Commodity Derivates Broking and Share Broking activities to be carried on under a single entity. It is, accordingly, proposed to consolidate all the Transferor and Transferee Companies through a Scheme of Amalgamation.

c. The proposed amalgamation will enable these Companies to consolidate their present activities and to explore new business opportunities. The proposed Scheme of Amalgamation would result in pooling of physical, financial and human resource of these Companies for the most beneficial utilization of these factors in the combined entity. Post Scheme, the Transferee Company will enjoy large net worth and financial resources on the basis of which it can approach BSE/NSE for their membership.

d. The proposed Scheme of Amalgamation will result in usual economies of a centralized and a large company including elimination of duplicate work, reduction in overheads, better and more productive utilization of financial, human and other resource and enhancement of overall business efficiency. The proposed amalgamation will provide business consolidation, ease of doing business and various other business synergy. The proposed Scheme will enable these Companies to combine their managerial and operating strength, to build a wider capital and financial base and to promote and secure overall growth of their businesses.

e. The said Scheme of Amalgamation will contribute in fulfilling and furthering the objects of these Companies. It will strengthen, consolidate and stabilize the business of these Companies and will facilitate further expansion and growth of their business. The resulting amalgamated company will be able to participate more vigorously and profitably in the competitive market scenario.

f. The proposed amalgamation would enhance the shareholders' value of the Transferor and the Transferee Companies.

g. The said Scheme of Amalgamation will have beneficial impact on the Transferor and the Transferee Companies, their shareholders, employees and other stakeholders and all concerned.

The Petitioners have stated that the accounting treatment proposed in the Scheme of Amalgamation is in conformity with the Accounting Standards prescribed under Section 133 of the Companies Act, 2013.

It has also been stated in the Petition that none of the Directors of the Petitioner Companies have any material interest in the Scheme, save as except to the extent of shareholding in the abovementioned Petitioner Companies.

It has also been stated in the Petition that the Scheme is not prejudicial to the interest of the Shareholders and Creditors of the Petitioner Companies and the Petition is made bona fide and is in the interest of all the Petitioner Companies and their Shareholders and Un-secured Creditors as a whole and is also just and equitable.

It is also submitted that the Board of Directors of the Petitioner Transferor Company No. 1 to 6 and the Transferee Company have determined the share exchange ratio as under:

a. The Transferee Company-Shridhar Financial Services Ltd will issue 94 (ninety-four) Equity Shares of Rs. 10 each, credited as fully paid up, for every 100 (one hundred) Equity Shares of Rs. 10 each held in the Transferor Company No. 1-Midas Commodities Pvt. Ltd.

b. The Transferee Company-Shridhar Financial Services Ltd will issue 68 (sixty-eight) Equity Shares of Rs. 10 each, credited as fully paid up, for every 100 (one hundred) Equity Shares of Rs. 10 each held in the Transferor Company No. 2-Capital Securities Ltd.

c. The Transferee Company-Shridhar Financial Services Ltd will issue 139 (one hundred thirty-nine) Equity Shares of Rs. 10 each, credited as fully paid up, for every 100 (one hundred) Equity Shares of Rs. 10 each held in the Transferor Company No. 3-Capital Stocks and Shares Ltd.

d. The Transferee Company-Shridhar Financial Services Ltd will issue 165 (one hundred sixty-five) Equity Shares of Rs. 10 each, credited as fully paid up, for every 100 (one hundred) Equity Shares of Rs. 10 each held in the Transferor Company No. 4-Pravith India Advisors Pvt. Ltd.

e. The Transferee Company-Shridhar Financial Services Ltd will issue 3 7 (thirty-seven) Equity Shares of Rs. 10 each, credited as fully paid up, for every 100 (one hundred) Equity Shares of Rs. 10 each held in the Transferor Company No. 5-Shiny Buildwell Pvt. Ltd.

f. The Transferee Company-Shridhar Financial Services Ltd will issue 675 (six hundred seventy-five) Equity Shares of Rs. 10 each, credited as fully paid up, for every 100 (one hundred) Equity Shares of Rs. 10 each held in the Transferor Company No. 6-Avika Developers Pvt. Ltd.

The Petitioner Companies have also annexed the valuation report dated 29th June, 2019 given by Mr. Sandeep Kumar Agrawal, Chartered Accountant and the Registered Valuer, in relation to the share exchange ratio.

A perusal of the present Petition discloses that initially the Petitioner Companies had filed Company Application No. 149 (ND) of 2019 seeking directions of this Tribunal to dispense/convene meetings of Shareholders, Secured Creditors and Un-secured Creditors of the Petitioner Companies for the purpose of the considering and approving, with or without modification, the aforesaid Scheme of Amalgamation. Accordingly, this Hon'ble Tribunal vide its order dated 23rd October, 2019, was pleased to dispense with the requirement of convening all the meetings of Shareholders and Un-secured Creditors of the Transferor Companies No. 1 to 6 and the Transferee Company. None of the Petitioner Transferor Companies No. 1 to 6 and the Transferee Company had any Secured Creditor.

This Tribunal vide its order dated 18th November, 2019 directed to issue notice of hearing in respect of present Company Petition to the Statutory Authorities and also to make paper publication in this respect in English Newspaper "Business Standard", Delhi Edition and Hindi Newspaper "Business Standard", Delhi Edition.

In compliance thereof, the Petitioner Companies have filed Affidavit of service and publication, confirming that notices have been duly published in English Newspaper "Business Standard", Delhi Edition and Hindi Newspaper "Business Standard", Delhi Edition. The Petitioner Companies have also served notice of the Company Petition to (a) the Central Government through the office of the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi; (b) the Registrar of Companies, Delhi and Haryana, New Delhi; (c) The Official Liquidator, New Delhi; and (d) the Income Tax Department; (e) the Securities and Exchange Board India; (f) the Multi Commodity Exchange of India Ltd (MCX); and (g) the National Commodity & Derivatives Exchange Ltd (NCDEX).

In response to the above stated notice, the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi submitted his report through a representation/affidavit, wherein under para No. 9 of his Affidavit, it is pointed out that the Petitioner Transferee Company may be directed to comply with the requirements of section 232(3)(i) of the Companies Act, 2013 with regard to payment of fee on its revised Share Capital. Learned Counsel of the Petitioner Companies confirmed that the Transferee Company undertakes to comply with the provisions of section 232(3)(i) of the Companies Act, 2013, and other applicable provisions, if any, with regard to the payment of balance fee on increase of authorised capital subsequent to the sanction of the Scheme of Amalgamation. The Petitioners have also filed Affidavits confirming the same on 28th January, 2020. No other objection has been raised by the RD and ROC to the proposed Scheme of Arrangement.

The Official Liquidator has also filed his report and no objection has been raised by him to the proposed Scheme of Amalgamation.

The Income Tax Department has also filed its reports with respect to the Petitioner Transferor Companies No. 2 to 6 and the Transferee Company. However, no report was filed by the Income Tax Department with respect to the Petitioner Transferor Company No. 1 despite several opportunities. In terms of the provisions of section 230(5), this Tribunal assumes that the Income Tax Department has no comments to make with respect to the Transferor Company No. 1. An Affidavit has been filed on behalf of the Transferor Company No. 1 confirming that there is no pending Income Tax dues or demand in the Transferor Company No. 1. A Certificate from the Chartered Accountants confirming the same has also been filed along with the aforesaid affidavit.

The Income Tax Department in its report pointed out that there was an outstanding demand of Rs. 5,429 and Rs. 2,126 in the Transferor Company No. 5-Shiny Buildwell Pvt. Ltd for the assessment year 2008-09 & 2009-10. An Affidavit has been filed on behalf of the Transferor Company No. 5 wherein it was confirmed that the aforesaid Income Tax demands for the assessment year 2008-09 & 2009-10 have already been adjusted against refund to be made by the Income Tax Department to the Company in subsequent financial year(s). A Certificate from the Chartered Accountants confirming the same has also been filed along with the aforesaid affidavit. No outstanding Income Tax Dues/Demands was pointed out by the Income Tax Department in the Petitioner Transferor Companies No. 2, 3, 4, 6 and the Transferee Company.

The Income Tax Department has submitted that the applicability of Sec 72A of the Income Tax Act, 1961 may be left open so that the claim of carry forward of losses and unabsorbed depreciation allowance in respect of the Petitioner Companies can be ascertained at the time of assessment/re-assessment proceedings as per the provisions of the Act.

Learned Counsel for the Petitioners submitted that all the Transferor Companies No. 1 to 6 are profit making Companies and hence none of the Petitioner Companies are going to claim any carry forward of losses and unabsorbed depreciation pursuant to the present amalgamation. Separate affidavits of all the Petitioner Companies have been filed to this effect. The Petitioner Companies have also undertaken and confirmed that any liability which may arise in future against any of the Petitioner Transferor Companies, will be paid by the Transferee Company in accordance with the provision of applicable law.

We have gone through the report of the Ld. Regional Director (Northern Region), Ministry of Corporate Affairs, New Delhi, the Official Liquidator, New Delhi and the Income Tax Department, New Delhi and after perusing the same, we are of the view that the sanction of the present Scheme is not against public policy, nor it would be prejudicial to the public interest at large.

In addition to above, all the statutory compliance either seems to have been complied with or further undertaken for making compliances by Petitioner Companies. Therefore, the present Company Petition deserves to be allowed in terms of its Prayer clause.

Consequently, sanction is hereby granted to the Scheme under Section 230 to 232 of the Companies Act, 2013.

The Petitioners shall 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 the concerned persons, directors 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 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

That the Transferor Companies shall stand dissolved without following the process of winding-up; and

That all the property, rights and powers of the Transferor Companies, 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 vest in the transferee company.

That all the liabilities and duties of the Transferor Companies, 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

That all proceedings now pending by or against all the Transferor Companies, be continued by or against the transferee company; and

That all the employees of the Transferor Companies 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 service and upon terms and condition not less favorable than those subsisting in the concerned Transferor Companies on the said date.

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 Companies for registration and on such certified copy being so delivered to the Transferor Companies shall be dissolved and the Registrar of Companies shall place all documents relating to the Transferor Companies 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

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.

Let copy of the order be served to the parties.