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Judgment
Kishore Vemulapalli, Member (Judicial)
The Court convened through video-conference.
We have heard the Ld. Authorised Representative for the Petitioner Companies and the Representative of the Regional Director, Western Region, Ministry of Corporate Affairs, Mumbai (“Regional Director”). No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition to the Scheme.
The sanction of the Tribunal is sought under Sections 232 read with Section 230 and Section 66 of the Companies Act, 2013 (the Act) and the Rules framed thereunder for the Scheme of Merger of Priyadarshani Investment and Finance Company Private Limited (‘Transferor Company 1’) and Maya Infin Private Limited (‘Transferor Company 2’) with Casuals Trading Private Limited (‘Transferee Company’) and their respective shareholders (hereinafter referred as to “Scheme”) and Reduction of Share capital of Transferee Company.
The Representative for the Petitioner Companies submits that Board of Directors of the Petitioner Companies approved the Scheme in their respective Board Meetings held on 26th March, 2021. The Appointed Date fixed under the Scheme is 1st January, 2021.
The Petitioner Company 1 is a Non-Banking Finance Companies (NBFC) registered with the Reserve Bank of India. It is currently earning interest income from loans and bank FDR’s on a small scale. The Petitioner Company 2 is a Non-Banking Finance Companies (NBFC) registered with the Reserve Bank of India. It is currently earning interest income from loans and bank FDR’s on a small scale. The Petitioner Company 3 is engaged in the business of sale of computers and accessories as well as earn commission and brokerage along with other income in the nature of interest.
The rationale of the Scheme of Merger is summarised as follows:
a) The Scheme of Merger shall result in consolidation of businesses of the Transferor Companies with the Transferee Company.
b) Casuals Trading Private Limited is engaged in the business of sale of computers and accessories. Casuals Trading Private Limited is presently earning income from sale of computers & accessories as well as commission and brokerage along with other income in the nature of interest.
c) The Transferor Companies are Non-Banking Financial Companies
(‘NBFC’) registered with the Reserve Bank of India under Section 45IA under the Reserve Bank of India (‘RBI’) Act, 1934. They are currently earning interest income from loans & interest income from bank/ FDR’s on a small scale.
d) Now the management of the Companies are evaluating integration of businesses while surrendering the NBFC licenses of the Transferor Companies to bring in strategic focus on the business operations of the Transferee Company and also to build a single entity with strengthened resources, asset base and economies of scale for growth of current business meanwhile also evaluating other business opportunities and growth options and not to engage in NBFC activities going forward.
e) Transferee Company holds 1,49,000 equity shares (33.71%) of Transferor Company 1 and 16,40,600 equity shares (47.11%) of the Transferor Company 2; and Transferor Company 2 holds 72,000 equity shares (16.29%) of Transferor Company 1.
f) Merger of Transferor Companies with Transferee Companies shall result in and reap benefits of –
i. Consolidation of businesses and business resources and activities;
ii. Integration of operations and management under a single unified entity;
iii. Facilitate optimum utilization of assets and other resources supporting future growth;
iv. Reduce the managerial overlaps involved in operating multiple entities and therefore ease operational and managerial efficiency and integrate business functions;
v. Avoid duplication of efforts and resources by economies of scale; 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 Scheme will enable these companies to combine and build a wider capital and financial base and to promote and secure overall growth; and
vi. Rationalizing the group structure to ensure optimized legal entity structure more aligned with business.
The Representative for the Petitioner Companies further submits that the Present Company Scheme Petitions is filed in consonance with Sections 232 read with Section 230 and Section 66 of the Companies Act, 2013 and in terms of order dated 17th August, 2021 passed in C.A. (CAA) / 128 / MB-IV / 2021 by this Tribunal.
The Representative appearing on behalf of the Petitioner Companies submits that the Petitioner Companies have complied with all requirements as per directions of this Tribunal and they have made requisite filings to demonstrate compliance with this Tribunal. Moreover, the Petitioner Companies undertake to comply with all statutory / regulatory requirements, if and to extent applicable, as may be required under the Companies Act, 2013 and the Rules made thereunder to give effect to the Scheme.
The Authorised, Issued, Subscribed and paid-up Share Capital of the Petitioner Company 1 / Transferor Company 1 as on 31st December, 2020 is as under:
Particulars
Amt. in Rs.
Authorised Share Capital
4,96,000 Equity Shares of Rs.1/- each
4,96,000
4,000 Redeemable Non-Cumulative Preference Shares of Rs. 1/- each
4,000
TOTAL
5,00,000
Issued, Subscribed and Paid–Up Share
Capital:
4,42,000 Equity Shares of Rs. 1/- each fully paid up
4,42,000
TOTAL
4,42,000
The Authorised, Issued, Subscribed and paid-up Share Capital of the Petitioner Company 2 / Transferor Company 2 as on 31st December, 2020 is as under:
Particulars
Amt. in Rs.
Authorised Share Capital
35,00,000 Equity Shares of Rs.1/- each.
35,00,000
TOTAL
35,00,000
Issued, Subscribed and Paid–Up Share
Capital:
34,82,200 Equity Shares of Rs.1/- each fully paid up.
34,82,200
TOTAL
34,82,200
The Authorised, Issued, Subscribed and paid-up Share Capital of the Petitioner Company 3 / Transferee Company as on 31st December, 2020 is as under:
Particulars
Amt in Rs.
Authorised Share Capital:
2,92,00,000 Equity Shares of Rs.1/- each
2,92,00,000
3,60,00,000 1% Redeemable Non-Cumulative
Non- Convertible Non-Participating Preference
3,60,00,000
Shares of Rs. 1/- each
Total
6,52,00,000
Issued, Subscribed and Paid –Up Share
Capital:
9,54,318 Equity Shares of Rs.1/- each fully paid up
9,54,318
3,54,00,000 1% Redeemable Non-Cumulative
Non-Convertible Non-Participating Preference Shares of Rs. 1/- each fully paid up
3,54,00,000
Total
3,63,54,318
11,000 equity shares and 55,965 equity shares of the Petitioner Company 3 are held by Petitioner Company 1 and Petitioner Company 2 respectively.
Consideration for merger of the Transferor Company 1 and the Transferor Company 2 with the Transferee Company:
i. 75 New Equity Shares or 7% Optionally Convertible Redeemable Non-cumulative Preference Shares in the Transferee Company of face value of Rs.1 (Rupee One) each per share, credited as fully paid up, for every 7 equity share of face value of Rs.1/- (Rupee One) each fully paid up held by them in the Transferor Company 1 other than equity shares held by the Transferor Company 2 and the Transferee Company.
ii. 19 New Equity Shares or 7% Optionally Convertible Redeemable Non-cumulative Preference Shares in the Transferee Company of face value of Rs.1 (Rupee One) each per share, credited as fully paid up, for every 14 equity share of face value of Rs.1/- (Rupee One) each fully paid up held by them in the Transferor Company 2 other than equity shares held by the Transferor Company 1.
The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, has filed his Report dated 25th January, 2022. In paragraph IV (a) to (m) of the Report, the RD has made certain observations. In response to the observations made by the Regional Director, the Petitioner Companies have given necessary undertakings and clarification as per affidavit in rejoinder dated 10th February, 2022. The Transferee Company has submitted that :-
(a) The Transferee Company shall pass such accounting entries as may be necessary in connection with the Scheme of Merger to comply with accounting standards AS-14 (IND AS-103) and any other applicable accounting standards including AS-5(IND AS-8) to the extent applicable.
(b) The Appointed Date i.e. 1st January, 2021 for merger of Transferor Companies with the Transferee Company has been clearly indicated in the Scheme in accordance with provision of Section 232(6) of the Companies Act, 2013 and the scheme shall become effective from the appointed date and shall comply with the requirements and clarification of circular no. F. No. 7/12/2019/CL-I dated 21.08.2019 issued by the Ministry of Corporate Affairs.
(c) The Scheme enclosed to the Company Scheme Application and Company Scheme Petition are one and same, and there is no discrepancy or deviation or changes.
(d) The Petitioner Companies have not received any representations or objections from any of the Regulatory/Sectoral/Tax/other Government Authorities and the approval of the Scheme by this Tribunal will not deter any such authorities to deal with any of the issues arising after giving effect to the scheme.
(e) The Transferee Company shall comply with proviso of section 232(3)(i) of the Companies Act, 2013, as applicable, in respect of setting–off of fee payable by the Transferee Company while giving effect to increase in authorized share capital of the Transferee Company.
(f) The Transferee Company undertakes to comply with provisions of section 2(1B) of the Income Tax Act, 1961, as applicable.
(g) The Transferee Company shall pay requisite fees and stamp duty payable as per applicable laws of the states, if any need arises, in accordance with provisions of Sections 13 and 62 of the Companies Act, 2013 does not arise.
(h) The Transferee Company shall not consider Capital Reserves arising out of the Amalgamation, if any, as free reserve for distribution of dividends.
(i) The Transferee Company undertakes to pay the fees as in accordance with the provisions of Section 13 and Section 232(3)(i) of the Companies Act, 2013 and stamp duty in accordance with the law of the States, if any, arising on reclassification of its share capital.
(j) The Transferee Company will comply with Income Tax Provisions in relation to proceedings/claims under Income Tax Act against the Transferor Company.
(k) The Transferee Company undertakes to file a copy of the order sanctioning the Scheme within 30 days from the date of receipt of the order with Reserve Bank of India in relation to merger of the Transferor Companies and submit their Certificate of Registration (CoR) for cancellation after the proposed Scheme of merger comes into effect.
(l) the interests of the aforesaid creditors for Petitioner Companies are duly protected.
The Regional Director has filed Supplementary Report dated 29th March, 2022 stating that the replies of the Petitioner Companies are satisfactory and has submitted through Representative that RD has no further observations/objections to the proposed Scheme.
The Official Liquidator has filed his report dated 17th January, 2022 inter alia, stating therein that the affairs of the Transferor Companies have been conducted in a proper manner and the Scheme is not prejudicial to the interest of the public and the Shareholders of the Transferor Companies. Accordingly, the Transferor Companies may be ordered to be dissolved without winding up.
The Income Tax Department will be at liberty to examine the aspect of any tax payable as a result of this scheme and in case it is found that the scheme ultimately results in tax avoidance under the provisions of Income Tax Act, it shall be open to the income tax authorities to take necessary action as possible under the Income Tax Law.
From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy considering that no objection has so far been received from any authority or creditors or members or any other stakeholders.
Since all the requisite statutory compliances have been fulfilled, consolidated Company Scheme Petition in C.P.(CAA)/227/MB/2021 filed by Petitioner Companies are made absolute in terms of clause (a) to (e) of the said Company Scheme Petition.
The Scheme is hereby sanctioned and the Appointed Date of the Scheme is fixed as 1st January, 2021.
The Petitioner Companies are directed to lodge a certified copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically in E-Form INC-28 within 30 days from the date of receipt of the Order from the Registry.
The Petitioner Companies are directed to lodge a certified copy of this order and the Scheme duly authenticated by the Deputy / Assistant Registrar of this Tribunal, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, payable, if any, within 60 clear working 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 Deputy Registrar / Assistant Registrar of this Tribunal along with copy of the Scheme.
Any person or any Authority, whose interest is adversely affected, shall be at liberty to approach appropriate Forum or to take appropriate action as permissible under law.
Further heard, Ms. Rupa Sutar, Dy. Director, Office of the Regional Director, MCA (WR), Mumbai, is present and reported no objections for allowing the above Company Scheme Petition.
Ordered Accordingly. C.P.(CAA)/227/MB/2021 is allowed and disposed-off.