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Judgment
Subrata Kumar Dash, Member (Technical)
This is a second motion application filed by Petitioner Company namely; PepsiCo India Holdings Private Limited, (Transferee Company/ Petitioner Company) in relation to the Scheme of Amalgamation between PepsiCo Panimex Inc (Transferor Company No. 1) and PepsiCo Investments Ltd. (Transferor Company No. 2) with PepsiCo India Holdings Private Limited, (Transferee Company/ Petitioner Company) and under Section 230-232 and 234 of Companies Act, 2013 (the Act) and other applicable provisions of the Act read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (the Rules).
The Petitioner Company has prayed for sanctioning of the Scheme of Amalgamation between the respective companies. The said Scheme is attached as Annexure A-1 of the petition.
The first motion application seeking directions for dispensing with the requirement for convening the meetings of the Equity Shareholders, secured and unsecured creditors of the Applicant/Transferee Company was filed before this Tribunal vide Company Application No. CA (CAA) No. 58/Chd/Hry/2022 and based on such application, necessary directions were issued on 16.01.2023. In the order dated 16.01.2023, the meetings of Equity Shareholders and Secured creditors of the Transferee Company were dispensed with for the reasons mentioned in the aforesaid order. It is further directed to convene the meetings of unsecured creditors of Transferee Company on 18.03.2023.
In compliance of the directions issued by this Tribunal, the Chairperson, Alternate Chairperson and Scrutinizer were also appointed and they have filed their reports which are as under:
Sr.
No.
Meeting of
Chairpersons
/Alternate Chairperson/Scrutinizer
Chairperson's Report
Date meeting
of
Date of filing
Date of Report
Justice Mr. R.P. Nagrath (Retd.) Chairperson,
Unsecured
Diary No.
1.
Creditors Applicant
of
Mr. Yogesh Putney, Advocate, Alternate Chairperson
02360/2
dated
18.03.2023
18.03.2023
Company
20.03.2023
Mr. Gurvinder Singh Company Secretary,
Sarin,
As per Chairperson’s Reports, the unsecured creditors of Applicant Company present and voting in the meeting have unanimously passed the resolution approving the Scheme.
The main objects, date of incorporation, authorized and paid-up share capital and the rationale of the Scheme had been discussed in details in the order dated 18.06.2021.
In the second motion proceedings, certain directions were issued by this Tribunal by order dated 31.03.2023 and the same were compiled by filing an affidavit of compliance by diary No. 00965/01 dated 05.06.2023. The notice of hearing was published in “Financial Express” (English) and “Jansatta” (Hindi) both in All India Edition on 11.05.2023. The original copies of the newspapers are attached as Annexure-A of the aforesaid affidavit. It has also stated in the affidavit that copies of notices were served upon the (a) Central Government through the Regional Director (Northern Region), Ministry of Corporate Affairs; (b) Registrar of Companies, Chandigarh and Registrar of Companies, NCT of Delhi and Haryana; (c) the Official Liquidator (attached to Punjab and Haryana High Court); (d) Reserve Bank of India (RBI); and (e) the jurisdictional Income Tax Department, by way of hand delivery/speed post. Original acknowledgement receipts of service of notice and postal receipts along with tracking report are attached as Annexure-B of the aforesaid affidavit.
It is deposed by the authorised signatories of the petitioner company that the Petitioner Company has not received any objection to the proposed Scheme of Amalgamation from any party or general public pursuant to the newspaper publication. The aforesaid affidavit is filed by Diary No. 00965/01 dated 05.06.2023.
In response to the abovementioned notices, the statutory authorities have furnished their replies.
8.1 Registrar of Companies (RoC)/Regional Director (RD)
8.1.1 The petitioner company has filed the report of the Regional Director (RD) along with the report of the Registrar of Companies (RoC) by Diary No.00971/6 dated 02.06.2022. The R.D. in its report at Para 10 :
““10. That as per Clause 29 of ROC, New Delhi report dated 29.05.2023 following observations have been made :-
•Different parts of the Scheme will be effective from different appointed dates. However, section 232(6) of the Companies Act, 2013 requires that there would be one appointed date for the Scheme.
•The company may be asked to ensure the compliances of the FEMA regulation(s).
•The Transferee company may kindly be directed to comply with the provisions of Section 232(3)(i) of the Companies Act, 2013 regarding fee payable of its revised Authorized Share Capital.”
8.1.2 It is further stated in the report of Regional Director that “as per the proposed Scheme of the Petitioner Company not mentioning about the protection of the interest of the employees and employee benefits of the Petitioner Company. However, in the NCLT order dated 16.01.2023, para 12 of the order states that with respect to the interest of workmen and staff (employees), this is a case of inbound cross-border merger of a holding company into a Wholly-Owned subsidiary. The Transferor Companies shall follow the law of Mauritius as part of the scheme.”
8.1.3 In response to the observations of RD/RoC, the Petitioner Companies have replied that Clause 6.3 of Part IV of the Scheme, reads as under:-
“6.3 In terms of Section 4(2)(a) of Part II of the Fourteenth Schedule of the Mauritius Companies Act, Transferor Companies must comply with the laws of Mauritius regarding the merger of Transferor Companies with Transferee Company.”
8.1.4 The scheme at Part iii (pg 56 of the Company Petition), provides for the Amalgamation of the Transferor Company 1 into and with the Petitioner/Transferee company. The Scheme at part iv (pg 59 of the Company Petition), provides for the Amalgamation of the Transferor Company 2 into and with the Petitioner/Transferee Company. As a consequence of the above, Clause 7.3 of Part vii of the Scheme provides that the following acts shall be deemed to have occurred in the sequence and in the order stated hereunder:
a. Amalgamation of Transferor Company 1 into and with the Petitioner/Transferee Company in accordance with part iii of the scheme;
b. Issue and allotment of equity shares of the Petitioner/Transferee Company to the shareholders of the Transferor Company 1;
c. striking off Transferor Company 1 from the Register of Companies maintained by the Registrar of Companies in mauritius;
d. Amalgamation of Transferor Company 2 into and with the Petitioner/Transferee Company in accordance with part iv of the scheme;
e. issue and allotment of equity shares of the Petitioner/Transferee Company to the shareholders of the Transferor Company 2; and
f. striking off Transferor Company 2 from the register of companies maintained by the Registrar of Companies in Mauritius.
8.1.5 The sequential effectiveness of the scheme in relation to the amalgamation of (i) Transferor Company 1 into and with the Petitioner/Transferee Company with effect from the appointed date 1, and the subsequent amalgamation of (ii) Transferor Company 2 into and with the Petitioner/Transferee Company with effect from the appointed date 2, is to ensure compliance with the conditions to qualify as “Amalgamation” It is further submitted that as per the provisions of the Income Tax Act, 1961 (“IT Act”), specifically Section 2(1)(b) of the IT Act which inter alia prescribes that shareholders holding not less than three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) are required to become shareholders of the amalgamated company by virtue of the amalgamation.
8.1.6 It is also averred by the petitioner company that Section 232(6) of the 2013 act (read with circular dated 21st August, 2019 issued by the Ministry of Corporate Affairs) does not stipulate that there cannot be multiple appointed dates in an arrangement under Section 230(1)(b) of the Companies Act, 2013. In this regard, learned counsel for the Petitioner Company/Transferee Company placed reliance on the judgment of the Hon’ble National Company Law Tribunal, Mumbai bench in the matter of Lodha Housing finance private limited (reported in 2019 SCC online nclt 1810), judgement dated 25th November, 2022 of the Hon’ble National Company Law Tribunal, Bengaluru bench in the matter of Microin Services Private Limited and judgment dated 15th February, 2022 of the National Company Law Tribunal, Mumbai Bench, in a cross border in-bound merger in the matter of Pepperfry Private Limited.
8.1.7 In respect of Para 10 of the RD report in respect of Fee payable on increased authorised share capital, the Petitioner Companies have stated that “the said observations are misconceived in as much as the Scheme does not provide for the transfer of the authorised share capital of the Transferor Company 1 or Transferor Company 2 (both of which are companies incorporated in Mauritius) to that of the Petitioner/Transferee Company and the effectiveness of the Scheme shall not result in an increase in the authorised share capital of the Petitioner/Transferee Company.”
This case was relisted vide our administrative order dated 11.09.2023 for seeking clarification on the following:
It is submitted in the scheme that there will be two appointed dates to comply with the provision of Section 2(1)B of the Income Tax Act, 1961. It is, however, not clearly stated as to how two appointed dates would help in complying with the Section 2(1)B of the Income Tax Act, 1961. In the course of the proceedings, it is also submitted that the Appointed Date 1 and Appointed Date 2 in the scheme could be one Single Appointed date.
8.1.8 We have carefully considered the submissions made by the petitioner companies regarding the necessity of having Two Appointed dates including the short note filed by Diary no. 0965/9 dated 11.09.2023. As per the shareholding patterns of company, Pepsicola Bermuda holds 100% in Pepsico Investements Ltd. (Transferor Company No. 2) which in turn holds 100% of Pepsico Panimax Inc. (Transferor Company No. 1). The shareholding company of the Transferor Company No. 1 and Transferor Company No. 2 is 99.92% and 0.8% respectively. We have also analysed the provisions of Section 2(1)(b) of the Income Tax Act, 1961. We also note that the learned counsel in his submission filed by Dairy No. 00965/07 dated 21.08.2023 has made an alternate submission for treating the appointed date No. 1 as defined in the scheme to be adopted for the merger of both the transferor companies. After going through the provisions of the Scheme and the relevant provisions of the Income Tax Act, we hold that compliance with the provisions of Income Tax Act, 1961 can only be made by having one appointed date instead of two, as prayed for by the petitioners. In view of the same, we direct that appointed date no. 1 (as defined in the Scheme) be adopted for both: (i) merger of Transferor Company No. 1 into and with the petitioner/Transferee company; and (ii) merger of Transferor Company No. 2 into and with the petitioner/ Transferee Company.
8.2 Income Tax Department
8.2.1 The Income Tax Department has filed its report by Diary Nos. 00965/06 dated 21.07.2023 wherein, it has been stated that the Income Tax Department has no objection to the proposed scheme of Amalgamation and the department reserves its right to initiate and continue any proceedings under the Income Tax Act, 1961.
8.2.2 Thus, no adverse observation can be inferred from the report of the Income Tax Authorities in respect of the Petitioner Company.
8.3 Reserve Bank of India
8.3.1 The Reserve Bank of India has filed its report by Diary Nos. 912 dated 02.05.2023 wherein, it has been mentioned that it is the duty of the companies undergoing amalgamation to comply with the requirements of various laws including the rules, regulations and guidelines prescribed by RBI, viz, the companies may have to comply with Foreign Exchange Management Act, 1999, and the rules and regulations made thereunder.
8.3.2 Thus, there is no adverse observation raised by the Reserve Bank of India in respect of the Petitioner Company.
In pursuance of Section 234 of the Companies Act, 2013 read with Rule 25A of the Companies (Compromises, Arrangement and Amalgamations) Rules, Mr. Rinkesh Satija Director of the Petitioner Company has issued a certificate to the effect that the scheme of amalgamation is in compliance with Section 230 to 232 and Section 234 of the Companies Act, 2013 read with Companies (Compromises, Arrangement and Amalgamations) Rules, 2016 along with the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 under the Foreign Exchange Management Act, 1999 and the same is attached as Annexure- P-18 of the petition.
The certificate of the Statutory Auditors with respect to the Scheme between the Companies to the effect that the accounting treatment proposed in the Scheme is in compliance with applicable Indian Accounting Standards (Ind AS) as specified in Section 133 of the Act, read with rules thereunder and other Generally Accepted Accounting Principles is attached as Annexure-P-20 of the petition.
We have heard the learned Counsel for petitioner companies and learned Senior Standing Counsel for the Income Tax Department and perused the record carefully.
In the context of the above discussion, the Scheme contemplated between the petitioner companies, appears to be prima facie in compliance with all the requirements stipulated under the relevant Sections of the Companies Act, 2013. As the objections from the Statutory Authorities have been duly addressed by the Petitioner Companies and since all the requisite statutory compliance have been fulfilled, this Tribunal sanctions the scheme of amalgamation appended as “Annexure-P-1” with the petition.
Notwithstanding the submission that no investigation is pending against the petitioner companies, if there is any deficiency found or, the violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal 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, it is clarified 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, payment is due or required 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:
i. 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 sections 230 to 232 and 234 of the Companies Act, 2013, be transferred to and vested in the Transferee Company for all the estate and interest of the Transferor Companies but subject nevertheless to all charges now affecting the same;
ii. 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 sections 230 to 232 and 234 of the Companies Act, 2013, be transferred to and become the liabilities and duties of the Transferee Company;
iii. That Appointed Date no. 1 (as defined in the Scheme) is adopted for both: (i) merger of Transferor Company No. 1 into and with the petitioner/Transferee Company and (ii) merger of Transferor Company No. 2 into and with the petitioner/ Transferee Company.
iv. That the Transferee Company shall comply with Reserve Bank of India guidelines and provisions of Foreign Exchange Management Act, 1999, Reserve Bank of India Act, 1934; and Foreign Exchange Management (Cross Border Merger) Regulations, 2018;
v. That the employees of the Transferor Company shall be transferred to the Transferee Company in terms of the 'Scheme';
vi. That the Transferor Companies shall follow the necessary procedure as laid down under the laws of the Republic of Mauritius; and
As per the aforesaid directions, Form No. CAA-7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, formal orders be issued to the petitioners for the filing of the Schedule of Properties within three weeks from the date of receiving a certified copy of this order.
All the concerned Regulatory Authorities to act on a copy of this order annexed with the Scheme duly authenticated by the Registrar of this Bench.
The Company Petition CP (CAA) No. 13/Chd/Hry/2023 is allowed and disposed of accordingly.