Tastetaria Foods Private Limited Vs

Balraj Joshi, Member (Technical)

The instant petition has been filed under Section 230(6) read with Section 232(3) of the Companies Act, 2013 (“Act”) for sanction of the Scheme of Amalgamation of Tastetaria Foods Private Limited, being the Petitioner No.1 abovenamed ("Transferor Company") with Choicest Enterprises Limited, being the Petitioner No.2 abovenamed ("Transferee Company") whereby and whereunder the entire undertaking of the Transferor Company is proposed to be transferred to and vested in the Transferee Company from the Appointed Date, viz 1st April, 2020 in the manner and on the terms and conditions stated in the said Scheme of Amalgamation (“Scheme”).

The Petition has now come up for final hearing. Ld. Counsel for the Petitioners submits as follows:-

(a) The Scheme was approved unanimously by the respective Board of Directors of the Petitioner Company Nos.1 and 2 at their meetings held on 8th March, 2021.

(b) The circumstances which justify and/or have necessitated the Scheme and the benefits of the same are, inter alia, as follows:-

i. The Transferee Company is engaged primarily in the business of operating, managing and running clubs, restaurants and hospitality units under several well known brands which include Conclave, Montana Vista, Verde Vista, Ecovista and Afraa amongst others. The Transferor Company is engaged in the business of operating restaurants, inter alia, making and selling the well known “UNO” brand of Chicago style deep-dish pizzas pursuant to a franchise agreement with Pizzeria Uno Corporation, Chicago.

ii. In view, inter alia, of the portfolio fit and potential of the said business of the Transferor Company, the Transferee Company had acquired a 75% Equity stake in the Transferor Company in 2018. The Transferee Company has since acquired the balance 25% Equity stake in the Transferor Company. Accordingly, the Transferor Company is presently a wholly owned (100%) subsidiary of the Transferee Company. The respective businesses of the Transferor Company and the Transferee Company were impacted by the Covid-19 pandemic but such businesses have since improved appreciably with the easing of curbs and implementation of various mitigation measures, including the ongoing vaccination drive, by the Central and State Governments to deal with the pandemic. As such, the said businesses of both the companies have good potential and can be combined and carried on together more conveniently and advantageously.

iii. In view, inter alia, of the aforesaid, including commonality of business interests, portfolio fit and objectives of the Transferor Company and the Transferee Company and synergies between them, it is considered desirable and expedient to amalgamate the Transferor Company with the Transferee Company in the manner and on the terms and conditions stated in this Scheme.

iv. The amalgamation will enable appropriate consolidation and integration of the undertakings of the Transferor Company and the Transferee Company.

v. The business of the amalgamated entity will be carried on more efficiently and economically as a result, inter alia, of pooling and more effective utilisation of the combined resources of the said companies, elimination of duplication of work and reduction in overheads, costs and expenses which will be facilitated by and follow the amalgamation. As such the amalgamation of the Transferor Company with the Transferee Company will enable greater realisation of the potential of their business in the merged entity.

vi. The Scheme is proposed accordingly and will have beneficial results for the said Companies, their shareholders, employees and all concerned.

(c) The Statutory Auditors of the Transferee Company have by their certificate dated 25th March, 2021 confirmed that the accounting treatment in the Scheme is in conformity with the accounting standards prescribed under Section 133 of the Companies Act, 2013.

(d) No proceedings are pending under Sections 210 to 227 of the Companies Act, 2013 against the Petitioners.

(e) Since all the Equity Shares of the Transferor Company are held by the Transferee Company, and the Transferee Company, being the holding company, cannot issue or allot any shares to itself, no shares whatsoever shall be issued by the Transferee Company in consideration of the amalgamation. Accordingly, there is no valuation or exchange ratio of shares under the Scheme.

(f) The shares of the Petitioners are not listed on the stock exchanges.

(g) By an order dated 6th July, 2021 in Company Application (CAA) No.99/KB/2021, this Tribunal made the following directions with regard to meetings of shareholders and creditors under Section 230(1) read with Section 232(1) of the Act:-

(i) Meetings dispensed: Meetings of Equity Shareholders and Unsecured Creditors of the Transferor Company and Debentureholders of the Transferee Company for considering the said Scheme of Amalgamation were dispensed with in view of the consents given by all Equity Shareholders of the Transferor Company, 91.62% in value of Unsecured Creditors of the Transferor Company and the sole Debentureholder of the Transferee Company.

(ii) Meetings directed to be held: Separate meetings of Secured Creditors of the Transferor Company and Equity Shareholders, Unsecured Creditors and Secured Creditors of the Transferee Company were directed to be held on 10th September, 2021.

(h) Notice of the said meetings directed to be held was duly sent to all the Secured Creditors of the Transferor Company and Equity Shareholders, Unsecured Creditors and Secured Creditors of the Transferee Company individually by courier service and public notice of the said meetings was duly advertised in the “Financial Express” in English and in “Aajkal” in Bengali in their respective issues dated 9th August, 2021. Pursuant to the said order dated 6th July, 2021 of this Tribunal a notice under Section 230(5) of the Companies Act, 2013 was also sent by speed post on 9th August, 2021 to the statutory authorities, being the (i) the Regional Director, Eastern Region, Ministry of Corporate Affairs, Kolkata; (ii) Registrar of Companies, West Bengal; (iii) the Official Liquidator, Kolkata and (iv) Income Tax Authorities having jurisdiction over the Petitioners. Affidavit proving service, as aforesaid, has been duly filed by the Petitioners

(i) While the said meetings of the Equity Shareholders and Unsecured Creditors of the Transferee Company were concluded on 10th September, 2021, the said meetings of the Secured Creditors of the Transferor Company and Transferee Company were adjourned to and concluded on 30th November, 2021. The said meetings of the Equity Shareholders, Secured Creditors and Unsecured Creditors of the Transferor Company, duly approved the Scheme unanimously. The said meeting of the Secured Creditors of the Transferor Company which was adjourned to 30th November, 2021 was terminated and treated as closed on the said date as the sole Secured Creditor of the Transferor Company had since been paid off and there was no Secured Creditor in the Transferor Company

(j) Consequently, the Petitioners presented the instant petition for sanction of the Scheme. By an order dated 28th January, 2022, the instant petition was admitted by this Tribunal and made returnable on 4th March, 2022. On 4th March, 2022, hearing of the petition was adjourned to 7th April, 2022. In compliance with the said order dated 28th January, 2022, the Petitioners have duly sent notices afresh to the Statutory Authorities, being

(i) the Regional Director, Eastern Region, Ministry of Corporate Affairs, Kolkata; (ii) Registrar of Companies, West Bengal; (iii) the Official Liquidator, Kolkata and (iv) Income Tax Authorities having jurisdiction over the Petitioners on 10th February, 2022. Further, the Petitioners in compliance with the said order have also duly published the notice of hearing once each in the “Financial Express” in English and “Aajkal” in Bengali in their respective issues dated 18th February, 2022. An affidavit of compliance in this regard has also been filed by them on 1st March, 2022.

(k) All statutory formalities requisite for obtaining sanction of the Scheme have been duly complied with by the Petitioners. The Scheme has been made bona fide and is in the interest of all concerned.

Pursuant to the said advertisements and notices, the Regional Director, Ministry of Corporate Affairs, Kolkata (“RD”) and the Official Liquidator, Kolkata (“OL”) have filed their representations before this Tribunal.

The Official Liquidator has filed its report on 3rd March, 2022 before this Tribunal. Paragraph 11 of the said Report of the Official Liquidator reads as follows:-

“11. That the Official Liquidator on the basis of information submitted by the Petitioner Companies is of the view that the affairs of the aforesaid Transferor Companies do not appear to have been conducted in a manner prejudicial to the interest of its members or to public interest as per the provisions of the Companies Act, 1956/the Companies Act, 2013 whichever is applicable.”

The RD has made his representation by his reply affidavit on 5th April, 2022 (“RD Affidavit”). The observations of the RD have been dealt with by the Petitioners by their Rejoinder affidavit on 6th April, 2022 (“Rejoinder”). The observations of the RD and responses of the Petitioner are as under:-

A. Paragraph 2(a) of RD Affidavit:

It is submitted that on examination of the report of the Registrar of Companies, West Bengal, it appears that no complaint and/or representation regarding the proposed Scheme of Amalgamation has been received against the Petitioner Companies, Further, as per available records all the petitioner companies are updated in filing their Statutory Returns for the year ended 31/03/2021. However, the Registrar of Companies, West Bengal in the said report, it is state4d that the Transferee Company namely M/s Choicest Enterprises Limited has not filed MGT-14 under section 179(3)(g) read with section 117 of the Companies Act, 2013 for the financial year ended 31.03.2017 in MCA-21 Portal and there is active charges pending against the Transferee Company. (Copy of the said report of ROC, WB marked as Annexure-I is enclosed herewith for perusal and ready reference).

Response as per paragraph 5  of Rejoinder:

With reference to paragraph 2(a) of the said Affidavit, we say that the Transferee Company has duly filed Form MGT 14 for the financial year ended 31st March, 2017 in MCA portal on 18th July, 2017. Copies of the said form MGT 14 and challan evidencing filing of the same, bearing SRN G48512693, are annexed hereto collectively and marked “A”. All other observations in the paragraph under reference are admitted. I further say that the charges in respect of the Transferee Company have been duly created and recorded and will be satisfied in the usual course.

B. Paragraph 2(b) of RD Affidavit:

Petitioner company should undertake to comply with the provisions of section 232(3)(i) of the Companies Act, 2013 through appropriate affirmation.

Response as per paragraph 6 of Rejoinder:

With reference to paragraph 2(b) of the said Affidavit, we state that Section 232(3)(i) of the Companies Act, 2013 (“Act”) will be duly complied with, if and to the extent applicable.

C. Paragraph 2(c) of RD Affidavit:

That the Transferee Company should be directed to pay applicable stamp duty on the transfer of the immovable properties from the Transferor Companies to it.

Response as per Paragraph 7 of Rejoinder:

With reference to paragraph 2(c) of the said Affidavit, we state that the stamp duty consequent to transfer of properties under the Scheme shall be paid, if applicable.

D. Paragraph 2(d) of RD Affidavit:

The Hon’ble Tribunal may kindly seek the undertaking that this scheme is approved by the requisite majority of members and creditors as per section 230(6) of the Companies Act 2013 in meeting duly held in terms of section 230(1) read with sub-sections (3) to (5) section 230 of the said Act and the Minutes thereof are duly placed on record.

Response as per Paragraph 8 of Rejoinder:

With reference to paragraph 2(d) of the said Affidavit, we state and submit that by an order dated 6th July, 2021 in Company Application CA(CAA) No.99/KB/2021, meetings of Equity Shareholders and Unsecured Creditors of the Transferor Company and Debentureholders of the Transferee Company for considering the said Scheme of Amalgamation were dispensed with in view of the consents given by all Equity Shareholders of the Transferor Company, 91.62% in value of Unsecured Creditors of the Transferor Company and the sole Debentureholder of the Transferee Company by way of affidavits. In view of the aforesaid, it is stated and submitted there is no further requirement of holding meetings for obtaining approval of the said shareholders and creditors as per Section 230(6) of the Act read with Sub-sections (3) to (5) of Section 230 of the Act or placing the minutes thereof. By the said order, this Hon’ble Tribunal, was pleased to give directions for convening and holding of separate meetings of Secured Creditors of the Transferor Company and Equity Shareholders, Unsecured Creditors and Secured Creditors of the Transferee Company for the purpose of their considering and, if thought fit, approving, with or without modification, the said Scheme of Amalgamation. The said meetings of the Equity Shareholders, Unsecured Creditors and Secured Creditors of the Transferee Company duly approved the said Scheme unanimously without any modification as per Section 230(6) of the Act read with Sub-sections (3) to (5) of Section 230 of the Act. The meeting of the Secured Creditors of the Transferor Company was however adjourned to 30th November, 2021 and was terminated and treated as closed as the sole Secured Creditor of the Transferor Company had since been paid off and there was no Secured Creditor in the Transferor Company. Pursuant to the said order dated 6th July, 2021, the Chairperson appointed by the Hon’ble Tribunal, Mr. Niladri Khanra, Advocate has duly filed his reports along with the affidavits verifying the same and the minutes of the meetings held before this Tribunal.

E. Paragraph 2 (e) of RD Affidavit:

The Hon’ble Tribunal may kindly direct the Petitioners to file an affidavit to the extent that the Scheme enclosed to the Company Application and Company Petition are one and same and there is no discrepancy or no change is made.

Response as per Paragraph 9 of Rejoinder:

With reference to paragraph 2(e) of the said Affidavit, the Petitioners confirm that the Scheme enclosed to the Company Application and the Company Petition are one and same and there is no discrepancy and no change is made.

F. Paragraph 2(f) of RD Affidavit:

The Transferor Company, Tastetaria Foods Private Limited, has stated in the cash flow statement for 2020-21, which forms part of the financial statements, purchase of intangible assets Rs.346.09 thousand. But in the Asset schedule to the balance sheet as at 31.3.2021 it is stated that there was no addition of intangible assets during 2020-21. The divergence in the figures should be clarified by the applicant.

Response as per Paragraph 10 of Rejoinder:

With reference to paragraph 2(f) of the said Affidavit, I, Ketan Sharma, say that there is no divergence between the cash flow statement and asset schedule of the balance sheet of the Transferor Company for the financial year 2020-21. The cash flow statement is prepared on cash basis and not accrual basis. The cash out flow of Rs.346.09 thousand towards intangible assets as stated in the cash flow statement for the financial year 2020-21 represents payment made in such financial year 2020-21 for intangible assets purchased in the previous financial year 2019-20. The value of the intangible asset purchased has already been accounted for and included in the balance sheet for the previous financial year 2019-20 on accrual basis and hence there is no requirement or question of showing the same again as an addition in the balance sheet for the financial year 2020-2021.

G. Paragraph 2(g) of RD Affidavit:

The Transferor Company, Tastetaria Foods Private Limited, has a vehicle loan of Rs.405.73 thousand as on 31.3.2020 and Rs.63.94 thousand as on 31.3.2021, as it is found from the financial statement of the company. The loan is against hypothecation of vehicle. But the particulars of the charge created was never filed with registrar of companies in terms of section 77 of the Companies Act 2013. The Company should file the said pending statutory documents with Registrar of Companies in prescribed manner before the merger, since once merged, the status of the company in MCA portal would no more be ACTIVE and hence the Company would become free from the responsibility of fling the pending statutory documents. This would result in the MCA portal continuing with the contravening gap in filing beside loss of filing fee to the Government.

Response as per Paragraph 11 of Rejoinder:

With reference to paragraph 2(g) of the said Affidavit, I, Ketan Sharma, say that the non-filing of particulars of charge as per Section 77 of the Companies Act 2013 in relation to the vehicle loan of the Transferor Company, as observed, was wholly unintentional and inadvertent. In this regard, the Petitioners undertake to take necessary steps to deal with the same in accordance with law. Save as aforesaid, all other observations in the paragraph under reference are denied and disputed. It is further respectfully stated and submitted that the observations in the paragraph under reference do not affect the merits of the Scheme.

H. Paragraph 2(h) of RD Affidavit:

Regarding deferred tax assets Rs.21.083 thousand as on 31.3.2021 of the Transferor company, Tastetaria Foods Private Limited, no disclosure made in accordance with para 82 of IND-AS 12:

An entity shall disclose the amount of a deferred tax asset and the nature of the evidence supporting its recognition, when: (a) the utilization of the deferred tax asset is dependent on future taxable profits in excess of the profits arising from the reversal of existing taxable temporary differences; and (b) the entity has suffered a loss in either the current or preceding period in the tax jurisdiction to which the deferred tax asset relates.

Response as per Paragraph 12 of Rejoinder:

With reference to paragraph 2(h) of the said Affidavit, I Ketan Sharma, say that it is duly stated in financial statements of the Transferor Company for the financial year 2020-21 read with note 37 of the notes to accounts that no deferred tax asset has been created for the financial year 2020-21 considering the non-existence of the probable future taxable profit against which the company can use the benefit therefrom. I further say that all disclosures with regard to deferred tax assets under paragraph 82 of IND AS 12,to the extent applicable, have been duly given and included in the said financial statements read with note 37 of the notes to accounts, a copy whereof is also annexed to the petition as Annexure “C” thereto.”

I. Paragraph 2(i) of RD Affidavit:

“It is submitted that as per instructions of the Ministry of Corporate Affairs, New Delhi, a copy of the scheme was forwarded to the Income Tax Department on 31/08/2021 with a request to forward their comments/observations/objections, if any, However, the same is still awaited.”

Response as per Paragraph 13 of Rejoinder:

“With reference to paragraph 2(i) of the said Affidavit, we say that the same are matters of record. It is evident from the same, that the Income Tax Department has no objection to the sanction of the Scheme.”

Heard submissions made by the Ld Counsel appearing for the Petitioners and the Joint Director in the Office of R.D.(E.R), MCA, Kolkata. We are satisfied with the explanations given by the Petitioners. Upon perusing the records and documents in the instant proceedings and considering the submissions, we allow the petition and make the following orders:-

(a) The  Scheme  of  Amalgamation  mentioned  in  paragraph  1  of  this  petition,  being Annexure "A" thereto, is hereby sanctioned by this Tribunal with the Appointed Date fixed as 1st April, 2020, so as to be binding on Tastetaria Foods Private Limited (“Transferor Company”) and Choicest Enterprises Limited (“Transferee Company”), their shareholders, creditors and all concerned;

(b) All the property, rights and powers of the Transferor Company, including those described in the Schedule of Assets herein, be transferred from the said Appointed Date, without further act or deed, to the Transferee Company and, accordingly, the same shall pursuant to Section 232(4) of the Companies Act, 2013, be transferred to and vest in the Transferee Company for all the estate and interest of the Transferor Company therein but subject nevertheless to all charges now affecting the same, as provided in the said Scheme;

(c) All the debts, liabilities, duties and obligations of the Transferor Company be transferred from the said Appointed Date, without further act or deed, to the Transferee Company and, accordingly, the same shall pursuant to Section 232 (4) of the Companies Act, 2013, be transferred to and become the debts, liabilities, duties and obligations of the Transferee Company;

(d) Leave is granted to the Petitioners to file the Schedule of Assets & liabilities of the Transferor Company in the form as prescribed in the Schedule to Form No.CAA7 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 within three weeks from the date of receiving a copy of this order.

(e) The employees of the Transferor Company shall be engaged by the Transferee Company as provided in the Scheme;

(f) All proceedings and/or suits and/or appeals now pending by or against the Transferor Company be continued by or against the Transferee Company as provided in the Scheme;

(g) All other matters covered by the Scheme shall take effect subject to and in terms of the Scheme;

(h) Any person shall be at liberty to apply to the Tribunal in the above matter for any directions that may be necessary.

(i) The Transferor Company and the Transferee Company shall each within thirty days of the date of the receipt of this order, cause a certified copy thereof to be delivered to the Registrar of Companies for registration and on such certified copies being so delivered, the Transferor Company shall be dissolved without winding up with effect from the date of filing of the certified copies of the order, as aforesaid (Effective Date) and the Registrar of Companies shall place all documents relating to the Transferor Company and registered with him on the file kept by him in relation to the Transferee Company and the files relating to the said company shall be consolidated accordingly.

(j) The Petitioners shall supply legible print out of the scheme and schedule of assets and liabilities in acceptable form to the Registry and the Registry will append such printout, upon verification to the certified copy of the order.

(k) Company Petition (CAA) No.1/KB/2022 connected with CA (CAA) No. 99/KB/2021 is disposed of accordingly.

(l) The Registry is directed to send e-mail copies of the order forthwith to all the parties and their Ld. Counsel for information and for taking necessary steps.

(m) Urgent certified Copy of this order, if applied for, be supplied to the parties, subject to compliance with all requisite  formalities.