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Judgment
Kishore Vemulapalli, Member (Judicial)
The Court is convened through video conferencing today.
Heard Learned Counsel for the Petitioner Companies. No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petitions to the said Scheme.
The sanction of the Tribunal is sought under sections Section 234 (read with Section 230-232 and Section 66) and Section 230-232 (read with Section 52 and Section 61 and 66) of the Companies Act, 2013 to the Composite Scheme of Amalgamation (Merger by absorption) and Arrangement of Trendsutra Client Services Private Limited, (Merger by Absorption) and Arrangement of Trendsutra Cyprus Limited (“the Transferor Company 1” or “TCL”) and Trendsutra Client Services Private Limited (“the Transferor Company 2” or “TSC”) and Trendsutra Cayman Holdings (“the Transferor Company 3” or “TCH”) with Pepperfry Private Limited (“the Transferee Company” or “PPL”) and their respective Shareholders and Creditors (‘Scheme’)
That the Board of Directors of the Petitioner Companies approved the Scheme in their respective board meetings held on 1st February 2021. The Appointed Date fixed under the Scheme is Appointed Date 1 or Appointed Date 2 or Appointed Date 3, as applicable (as defined in the Scheme).
Learned Counsel for the Petitioner Companies states that the First Applicant Company is engaged in the business of B2B sale of furniture and furniture related products, the Second Applicant Company is engaged in the business of online sales platform company (marketplace) which facilitates supply from vendors to the end consumers of goods and articles through its online web portal and mobile application.
Learned Counsel for the Petitioner Companies submits the rationale for the Scheme is that the companies believe that the restructuring would have following benefits:
a. The amalgamation of TCL and TCH with PPL will result in the shareholders of TCH directly holding shares in PPL, which will lead to simplification of the shareholding structure and reduction of shareholding tiers and also demonstrate the direct commitment and engagement of shareholders of TCH with PPL for pursuing a potential IPO in India.
b. The operations of TSC and PPL are complementary to each other and the proposed amalgamation of TSC with PPL shall simplify and eliminate the inter-company transactions and PPL would be better positioned to service customer needs.
c. It will create a simplified group and unified business structure, instead of multiple entities and thereby maintain a simple corporate structure and eliminate duplicate corporate procedures.
d. The proposed amalgamation will result in reduction in overheads, including administrative, statutory compliances, managerial and other expenditure, operational rationalization, organizational efficiency, and optimal utilization of resources by avoiding duplication of efforts at Cayman Islands, Mauritius, and India levels.
The Boards of Directors of the Transferee Company and the Transferor Companies thus believe that this Scheme is commercially viable, feasible, fair, and reasonable and in interest of the Pepperfry group and its customers, employees, shareholders, creditors and all other stakeholders. The Boards of Directors of the Transferee Company and the Transferor Companies further provide that this Scheme will not have any adverse impact on their respective stakeholders.
Learned Counsel for the Petitioner Companies states that the Company Petition is filed in consonance with Section 234 (read with Section 230-232 and Section 66) and Section 230-232 (read with Section 52 and Section 61 and 66) of the Companies Act, 2013 and with the Order passed in C.A. (C.A.A.) No. 74/MB/2021 by this Tribunal.
The Counsel appearing on behalf of the Petitioner Companies further states that the Petitioner Companies have complied with all requirements as per directions of the Tribunal and they have filed necessary affidavits of compliance, including additional affidavit in the Tribunal. Moreover, the Petitioner Companies through their Counsel undertake to comply with all statutory requirements if any, as required under the Companies Act, 2013 and the Rules made there under whichever is applicable. The said undertakings given by the Petitioner Companies are accepted.
The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, has filed its Report dated 21st December 2021, inter alia stating therein that save and except as stated in para IV (a) to (t) of the said report, the NCLT may pass such orders as deemed fit and proper in the facts and circumstances of the case. In response to the observation made by the Regional Director, the Petitioner Companies have also given necessary undertakings and clarification through a rejoinder affidavit dated 07th January 2022. Further the observation made by the Regional Director and the clarifications and undertakings given by the Petitioner Companies are summarized in the table below:
Sr.
No. Para (IV)
RD Report/Observation 21st December 2021
Response of the Petitioner Companies
Supplementary Report dated 21st January 2022
(Comments of
the Regional Director)
a)
In addition to compliance of
AS-14 (IND AS-103) the
As far as observations
made in paragraph II(a) of
The reply
submitted by
Transferee Company shall pass such accounting entries which are necessary in connection with the scheme to comply with other applicable Accounting
Standards such as AS-5(IND
AS-8) etc.
the Report of Regional Director is concerned, the Petitioner Companies undertake that they shall pass necessary accounting entries in connection with
the Scheme as per AS -14
(IND AS-103) as well as comply with other applicable Accounting Standards such as AS-5 (IND AS -8) etc., to the
extent applicable.
the Applicant / Petitioner Companies appears to be satisfactory
b)
As per Definitions Clause- 1(1.3, 1.4, 1.5, 1.6), Clause-
1(1.14) & Clause-1(1.19, 1.20
&1.21) of the Scheme.
1.3 "Appointed Date" shall mean the Appointed Date 1
or Appointed Date 2 or
Appointed Date 3, as applicable.
1.4 "Appointed Date 1" shall mean Effective Date.
1.5 "Appointed Date 2" shall
mean Effective Date +1(one)
Business Day.
1.6 "Appointed Date 3" shall mean Effective Date +2(Two) Business Day
1.14 "Effective Date" means the last date on which
sanctions/approvals/consents
and conditions specified in Clause No. 34 of this Scheme have been obtained/satisfied Reference in this scheme to the date “of coming into effect of this scheme” or
“effectiveness of this scheme”
shall mean the effective date.
1.19 "Record Date 1" means such date fixed by the Board of the Transferee Company for the purpose of determining the shareholders
of the Transferor Company 1
to whom shares of the Transferee Company shall be allotted pursuant to amalgamation under this Scheme.
1.20 "Record Date 2" means
such date fixed by the Board of the Transferee Company for the purpose of
determining the shareholders
of the Transferor Company 2.
1.21 "Record Date 3" means such date fixed by the Board of the Transferee Company for the purpose of determining the shareholders of the Transferor Company 3
to whom shares of the Transferee Company shall be allotted pursuant to amalgamation under this Scheme.
In this regard it is submitted
that Section 232(6) of the
Companies Act, 2013 states that the scheme under this section shall clearly indicate an appointed date from which it shall be effective, and the scheme shall be deemed to be
effective from such date and
not at a date subsequent to the appointed date. However, this aspect may be decided by the Hon’ble Tribunal taking into account its inherent
powers.
Further, the Petitioners may be asked to comply with the requirements and clarified
vide circular no. F. No.
7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs.
As far as observations made in paragraph II(b) of the Report of Regional Director is concerned, the Petitioner Companies states that in
accordance to Section
232(6) of the Companies
Act, 2013, the Scheme clearly indicates/ specifies-
In clause 1.3 that Appointed Date means, for purpose of the Scheme, Appointed
Date 1, Appointed Date 2
or Appointed Date 3, as applicable which is in compliance with Section 232(6) of the Companies Act, 2013, and the Scheme shall take effect from such
date.
In clause 1.4 that Appointed Date shall mean the Effective date.
In clause 1.5 Appointed Date 2 shall mean the
Effective Date + 1(One) Business Day.
In clause 1.6 Appointed Date 3 shall mean the Effective Date + 2 (Two) Business Day
In clause 1.14 Effective Date means the last date on which sanctions/approvals or order as specified in
Clause No. 34 of this
Scheme have been obtained. Reference in this Scheme to the date of ‘coming into
effect of this Scheme’ or
‘effectiveness of this Scheme’ shall mean the Effective Date
In clause 1.19 Record Date 1 means such date fixed by the Board of Directors of
Transferee Company for the purpose of determining the shareholders of Transferor Company 1 to whom the shares of the Transferee Company shall be allotted
pursuant to amalgamation
under this Scheme.
In clause 1.20 Record Date 2 means such date fixed by the Board of Directors of Transferee Company for the
purpose of determining the
shareholders of Transferor Company 2.
In clause 1.21 Record Date 3 means such date fixed by the Board of Directors of
Transferee Company for the purpose of determining the shareholders of Transferor
Company 3 to whom the
shares of the Transferee Company shall be allotted pursuant to amalgamation under this Scheme.
The Petitioner Companies further undertake that they
have complied with the
requirements as applicable, of the Ministry of Corporate Affairs General Circular No. F. No. 7/12/2019/CL-
I dated August 21, 2019, by mentioning the Appointed
Date in the Scheme and the
same is also complying with the provisions of Section 232(6) of the Companies
Act, 2013.
On the basis of observation made by the Regional Director and
reply submitted
by the
Petitioner Company
which appears satisfactory,
the Hon’ble
Tribunal may
pass appropriate orders/orders as deem fit on merit.
c)
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 Act in meetings duly held in terms of Section 230(1) read with subsection (3) to (5) of
Section 230 of the Act and the Minutes thereof are duly placed before the Tribunal.
As far as observation made
paragraph II(c) the Report
of Regional Director is concerned, the Petitioner Companies state that the meetings of the Equity Shareholders and Secured Creditors of the Petitioner
Companies have dispensed
with by the Order Tribunal dated 17th September 2021 in view of the consent affidavits received from all the Equity Shareholders and Secured Creditors of all the Petitioner Companies in this regard.
Further the present Scheme is an arrangement between the Petitioner Companies and their shareholders contemplated under section 230(1)(b) of the Companies Act, 2013 and there is no compromise or arrangement with Unsecured Creditors as no sacrifice is called for. The rights of the Unsecured Creditors are not affected as all Unsecured Creditors would be paid off in the ordinary course of business. In view of this, the meetings of the Unsecured Creditors in the Petitioner Companies were dispensed with vide Order dated 17th September 2021
The reply
submitted by
the Applicant / Petitioner Companies appears to be satisfactory
d)
Hon’ble NCLT may kindly direct the Petitioners to file an affidavit to the extent that the
Scheme enclosed to the
Company Application and the Company Petition are one & same and there are no discrepancy/ any change/ changes are made, for changes if any, liberty be
given to Central Government
to file further report if any
required.
As far as the observation made in paragraph II(d) of the Report of Regional
Director is concerned the
Petitioner Companies undertake that the Scheme enclosed to the Company Scheme Application & the Company Scheme Petition is one and the same there is
no discrepancy/ no changes
between the two.
The reply submitted by the Applicant /
Petitioner
Companies appears to be satisfactory
e)
The Petitioners under provisions of Section 230 (5) of the Companies Act, 2013
have to serve notices to
concerned authorities which are likely to be affected by Amalgamation. Further, the approval of the Scheme by this Hon’ble Tribunal may not deter such authorities to
deal with any of the issues
arising after giving effect to the scheme. The decision of such Authorities is binding on the Petitioner Company(s).
As far as the observation made in paragraph II(e) of the Report of Regional
Director is concerned the
Petitioner Companies undertake that, notices under Section 230(5) of the Companies Act, 2013 have been duly served upon the following authorities;
The Regional director
(western Region), Ministry of Corporate Affairs, Mumbai;
Registrar of Companies, Maharashtra, Mumbai;
The Income Tax
Authorities within whose
jurisdiction the Applicant Companies are assessed to tax i.e., for First Applicant Company, Income Tax Authority at 14(1)(2), Mumbai, having PAN AADCT9374Q, for Second Applicant Company, Income Tax Authority at Circle 14(1)(2), Mumbai having PAN
AADCT9282F.
GST Authority within whose jurisdiction the respective Applicant Companies are assessed to goods and service tax i.e., for First Applicant Company, Goods and Service Tax Authority at Zone –
MUMBAI_SOUTH_EAST,
Division – MUMBAI-LTU- 4, Charge MUMBAI-LTU-
548 having GSTIN 27AADCT9374Q1ZC, for Second Applicant Company, Goods and Service Tax Authority at MUMBAI-LTU-518,
Division – Mulund, Charge
– Vikroli_701 having GSTIN 27AADCT9282F1Z0.
The Reserve Bank of India and;
The Official Liquidator in case of First Applicant Company, pursuant to section 230(5) of the Companies Act, 2013 and rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016
The Petitioner Companies understand and confirm that the approval of the Scheme by the Tribunal may not deter any of the authorities from dealing with any of the issues as may arise after
giving effect to the Scheme.
The reply submitted by the Applicant /
Petitioner
Companies appears to be satisfactory
f)
Petitioner Company have to undertake to comply with section 232(3)(i) of Companies Act, 2013, where the transferor company is dissolved, the fee, if any, paid by the transferor company on
its authorized capital shall be
set-off against any fees payable by the transferee company on its authorised
capital subsequent to the
amalgamation and therefore, petitioners to affirm that they comply the provisions of the section.
As far as the observation made in paragraph II(f) of the Report of Regional Director is concerned the Petitioner Companies undertake to comply with section 232(3)(i) of
Companies Act, 2013,
where upon the dissolution of the Transferor Companies, the fee, if any,
paid by the Transferor
Companies on their authorised capital shall be set-off against any fees payable by the Transferee Company on its authorised capital subsequent to the
amalgamation, the
Petitioner Companies hereby undertake that they shall comply with the provisions of the said
section.
As far as the observation
made in paragraph II(g) of the Report of Regional Director is concerned the Petitioner Companies undertake that they shall ensure compliance of all the
provisions of the Income
Tax Act, 1961 including provisions of Section 2(1B) of the Income Tax Act, 1961, further Clause 16 of the Scheme mentions the following:
“The Amalgamation as
contemplated in this Scheme would be completed in a manner so as to comply with the conditions relating to ‘amalgamation’ as specified under section 2(1B) of the Income Tax Act, 1961. If any terms or provisions of the Scheme are found or interpreted to be inconsistent with the provisions of the said section at the later date including resulting from an amendment of law or for any other reason whatsoever up to the Effective Date, the provisions of the said section of the Income Tax Act, 1961 shall prevail and the Scheme shall be modified by obtaining necessary directions from the Appropriate Authority to the extent necessary to comply with Section 2(1B) of the Income Tax Act, 1961 or re-enactment thereof.”
The reply submitted by the Applicant / Petitioner Companies appears to be satisfactory
The reply
submitted by the Applicant / Petitioner Companies appears to be satisfactory
g)
The Petitioner Company may
be directed to submit undertaking that the petitioner company shall ensure compliance of all the provisions of the Income Tax Act, 1961 including
provisions of Section 2(1B) of
the Income Tax Act.
h)
As per Part III Clause 14(14.1 to 14.3) of the Scheme (Consolidation of Authorised
Capital and amendment to
the memorandum and article of Association of the Transferee Company); In this regard it is submitted that the fee payable by the transferee company shall be in
accordance with the provision
of Section 13, Section 14, Section 61 and Section 232(3)(i) of the companies Act, 2013 further if any stamp duty is payable the same should be paid in accordance
with applicable laws of the
state.
As far as the observation made in paragraph II(h) of the Report of Regional
Director is concerned the
Petitioner Companies undertake to comply with provisions of section 13, section 14, section 61 and section 232(3)(i) of Companies Act, 2013 and
in case of any stamp duty
fee payable the same shall be paid in accordance with applicable laws of the State;
The reply submitted by the Applicant /
Petitioner
Companies appears to be satisfactory
i)
As per Part-V clause 21(21.1) of the Scheme (Accounting Treatment), Upon the scheme became effective from the
Appointed date 1, Appointed
date 2 and Appointed date 3, respectively, the Amalgamation of Transferor Company with the Transferee Company shall be accounted as per below method:
The Transferee Company
shall account for the amalgamation of Transferor Companies as per “Pooling of
Interest” Method as stated in
Appendix C of Indian Accounting Standard (IND AS) 103 Business Combination and Indian Accounting Standards.
In this regard it is stated that
Indian accounting standard
(IND AS)103- prescribe application of pooling of interest method to account for common control business combination. Under this method any difference,
whether positive or negative,
shall be adjusted against capital reserves (or “Amalgamation Adjustment Deficit Account” in some cases). In view of the above it is submitted that the
difference so credited to
“Capital Reserve arising out of Amalgamation” shall not be available for distribution of dividend and other similar purposes.
As far as the observation made in paragraph II (i) of the Report of Regional Director is concerned, the
Petitioner Companies
submit that
The Transferee Company shall account for the amalgamation of the Transferor Companies on the basis of 'Pooling of
Interest' method as stated in
Indian Accounting Standard
103 – Business Combination.
Further, the Petitioner
Companies confirm and undertake, that the amount if any credited to Capital Reserves on Amalgamation shall not be available for distribution.
The reply submitted by the Applicant / Petitioner
Companies
appears to be satisfactory
j)
As per part-v-clause 21(21.2) of the scheme (Reduction in Security Premium Account).
Further, deficit as per sub-
clause(f) of clause 21.1, debited to “Amalgamation adjustment deficit account” shall be adjusted against Security Premium Account appearing in the books of
Transferee Company upon
the scheme become effective with effect from Appointed Date 3.
Further, the said reduction is Security Premium Account, pursuant to sub clause (a)
above, shall be effected as
integral part of this scheme with provision of section 230 to 232 read with section 52 and section 66 of Companies Act, 2013. The
approval/consent of
shareholder of transferee
company for the purpose of effecting above reduction in Security Premium Account and no further resolution under section 52 and 66 of
the Act and any other
applicable provision of the Act, would be requested to be passed separately. The
reduction in Security
Premium Account as aforesaid would not involve either a diminution in liability in respect to the unpaid share capital, if any, or payment of paid up share capital. In this
regard it is submitted that
petitioner company shall also comply with the provision of section 52 read with 66 and other relevant provision of
the Companies Act, 2013.
As far as the observation made in paragraph II (j) of the Report of Regional
Director is concerned, the
Petitioner Companies submit and hereby confirm that that the adjustment of the Amalgamation Adjustment Deficit account against the Securities
Premium Account would
not involve either a diminution in liability in respect of unpaid share capital, if any, nor will be treated as payment of paid- up capital. Further,
pursuant to the approval of
the Tribunal the company shall be in compliance with section 55 of the Companies Act, 2013 and no separate compliance is required. Since the reduction in
Securities Premium
Account is being done as integral part of scheme no separate provisions of section 66 of the Companies Act 2013 are required to be
complied with as per
explanation to Section 230 of the Companies Act 2013. The relevant extract of
Section 230 of the
Companies Act, 2013 is reproduced herein below; “Explanation: For the removal of doubts, it is hereby declared that the provisions of section 66
shall not apply to the
reduction of securities premium account in pursuance of the order of the Tribunal under this
section”
On the basis of observation made by the
Regional
Director and reply submitted by the
Petitioner Company which appears
satisfactory,
the Hon’ble Tribunal may pass appropriate orders/orders as deem fit on
merit.
k)
As per part-VII- clause
25(25.1 to 25.10) of the scheme (Reduction in Face Value and Consolidation of such series A and series B Non-cumulative compulsorily Convertible Preference Shares
of the transferee Company).
In this regard it is submitted that petitioner company may be directed to place on record of consents/approval of series A and series B non- cumulative compulsorily
convertible preference shares
as this clause of the scheme proposes selective reduction in nature. Further petitioner
company is also be directed
to submit that as the current Reduction in Share Capital is selective in determent and therefore why it is not to unjust and unfair to the rest of Shareholders/member
holding equity share capital
of the company
As far as the observation
made in paragraph II (k) of the Report of Regional Director is concerned, the Petitioner companies hereby submit and confirm that it has obtained written
consent affidavit from the
Series A and Series B Non- Cumulative Compulsorily Convertible Preference Shareholders and the same was annexed to the Company Scheme
Application. Further, since
there is no consideration being paid to the Preference Shareholders upon
reduction of capital
accordingly, there is no outflow of cash from the Transferee Company, thus there is no question of being unjust or unfair to the rest of the shareholders /
members of the Transferee
Company.
On the basis of
observation made by the Regional Director and reply submitted by the
Petitioner
Company which appears satisfactory,
the Hon’ble Tribunal may pass
appropriate
orders/orders as deem fit on merit.
l)
Since the transferor company
2 and transferee company have foreign/nonresident shareholders, it is subject to the Compliance of Section 55
of the companies Act, 2013 the FEMA regulation/RBI guidelines by the transferee company.
As far as the observation made in paragraph II (l) of the Report of Regional Director is concerned, the
Petitioner Companies
submit that it shall comply with the provision section 55 of Companies Act, 2013 along-with the FEMA Regulation/Guidelines as applicable upon issue of
shares pursuant to merger
by the Transferee Company.
The reply submitted by the Applicant / Petitioner
Companies
appears to be satisfactory
m)
Trendsutra Cyprus Limited (Transferor Company No. 1) is foreign company incorporated in Cyprus.
Further, the present registrar
office of above-mentioned
company is situated at Aspen Trust Group, Elia House, 77 Limassol Avenue, 2121
Nicosia, Cyprus and does not
fall within the Hon’ble Tribunal. Accordingly, similar approvals be obtained by the above said Transferor Company in accordance with the law of Cyprus.
As far as the observation made in paragraph II (m) of the Report of Regional Director is concerned, the
Petitioner Companies
submit that as mentioned in
the Clause 22 of the Scheme the Transferor Company has obtained the approval
for transfer of the
registration office from Cyprus and accordingly obtained approvals in accordance with the laws of Cyprus.
On the basis of observation made by the Regional
Director and
reply submitted
by the
Petitioner Company which appears
satisfactory,
the Hon’ble Tribunal may pass appropriate orders/orders as deem fit on
merit.
n)
Since the company is presently situated in Cyprus the FEMA Regulation and prior approval of the RBI
hove to be taken on place
before approval of scheme.
As far as the observation made in paragraph II (n) of the Report of Regional Director is concerned, the
Petitioner Companies
submits that the Transferor Company 1 being an entity incorporated outside India is in compliance with Section 234 of the Companies Act, 2013 and is
in compliance with the
conditions specified in Inbound Merger under the Foreign Exchange Management (Cross Border Merger) Regulations 2018 and accordingly a
Certificate of Compliance
under Rule 9 of FEMA (Cross Border Merger) Regulations is obtained by the Directors of the Petitioner Company dated 2nd February 2021 and the same is annexed to the Company Scheme Application. Further, the proposed merger amounts to deemed approval of the Reserve Bank of India under rule 9 of the aforementioned regulations, thus no separate RBI approval is required. Petitioner Company confirms that it has submitted a notice u/s 230(5) to RBI as directed by the Tribunal, no objections have been raised by the RBI in relation to the Scheme.
On the basis of observation made by the Regional
Director and
reply submitted by the
Petitioner Company which appears satisfactory,
the Hon’ble
Tribunal may pass appropriate orders/orders as deem fit on merit.
o)
Trendsutra Cyprus Limited (TCL) (Transferor Company No. 1) stated that TCL is in the process of registered under the laws of Mauritius, pursuant to shifting/re- domiciliation of the registered
office of TCL from Cyprus to
Mauritius and will be therefore known as Trendsutra Mauritius
Limited. The transferor
company 1 will concurrently seek approval from the Financial Services Commission in Mauritius to operate as an Authorized Company (as define
hereinafter). In Present
Composite Scheme of Amalgamation and Arrangement (Merger by absorption), petitioner
company Trendsutra Mauritius Limited is not
transferor company in this
scheme as it is not in present petition since it has not transferred their registered office from Cyprus to Mauritius. In this regard it is submitted that the petitioner
company shall also place on
record full facts before approval of the scheme regarding shifting/re- domiciliation of registered office from Cyprus to
Mauritius and also petitioner
company also undertake that petitioner company shall comply with the applicable law of Mauritius or Hon’ble NCLT may pass appropriate orders/orders as deem fit and direct petitioner company companies to place on record
full facts.
As far as the observation made in paragraph II (o) of the Report of Regional Director is concerned, the Petitioner Companies submit that it has received the approval for shifting/re-
domiciliation of registered
office from Cyprus to Mauritius as mentioned in Clause 22 of the Scheme.
Further, Petitioner
Companies, hereby confirm and undertake that it shall comply and obtain the approval for the Scheme in Mauritius in accordance with the applicable law of
Mauritius, pursuant to the
approval received by this Tribunal.
On the basis of observation made by the Regional Director and reply submitted by the
Petitioner
Company which appears satisfactory,
the Hon’ble
Tribunal may pass appropriate orders/orders as deem fit on merit.
p)
Trendsutra Cayman Holdings (Transferor Company No. 3) is foreign company incorporated in Cayman Island. Further, the present registrar office of above- mentioned company is situated at 2nd Floor, The Grand Pavilion Commercial Centre, 802 West Bay Road, PO Box 10338, Grand Cayman KY1-1003, Cayman Islands and does not fall within the Hon’ble Tribunal. Accordingly, similar approvals be obtained by the above said Transferor Company in accordance with the law of Cayman Island.
As far as the observation made in paragraph II (p) of the Report of Regional Director is concerned, the Petitioner Companies hereby confirm and undertake that it shall comply and obtain the approval for the Scheme in Cayman in accordance with applicable laws of Cayman Island for Trendsutra Cayman Limited (Transferor Company 3).
On the basis of observation made by the Regional Director and reply submitted by the
Petitioner Company which appears satisfactory,
the Hon’ble Tribunal may pass appropriate orders/orders as deem fit on merit.
q)
Since the company is presently situated in Cayman
Island the FEMA Regulation
and prior approval of the RBI hove to be taken on place before approval of scheme.
As far as the observation made in paragraph II (q) of
the Report of Regional
Director is concerned, the Petitioner Companies submits that the Transferor
Company 3 being an entity
incorporated outside India is in compliance with Section 234 of the Companies Act, 2013 and is in compliance with the conditions specified in
Inbound Merger under the
Foreign Exchange Management (Cross Border Merger) Regulations 2018 and accordingly a Certificate of Compliance under Rule 9 of FEMA
(Cross Border Merger)
Regulations is obtained by the Directors of the Petitioner Company dated 2nd February 2021 and the same is annexed to the Company Scheme
Application. Further, the
proposed merger amounts to deemed approval of the Reserve Bank of India under rule 9 of the aforementioned regulations,
thus no separate RBI
approval is required. Petitioner Company confirms that it has submitted a notice u/s 230(5) to RBI as directed by the Tribunal, no objections have been raised by the RBI
in relation to the Scheme.
On the basis of observation
made by the
Regional Director and reply submitted
by the
Petitioner Company which appears satisfactory,
the Hon’ble
Tribunal may pass
appropriate orders/orders as deem fit on merit.
r)
As regards the complaints
indicated at para 32 above,
under the head- Status of Complaint as per MCA portal- Screen shot, it is submitted that both the petitioners be directed to mention the current position
regarding complaints
redressed by the company and to file an undertaking accordingly; Further the complaint relates to Accounting Fraud, the Petitioner Company to place
on record that no
unaccounted money is involved in the present scheme neither scheme is devised to circumvent the tax laws of the countries.
As far as the observation
made in paragraph II (r) of
the Report of Regional Director is concerned, the Petitioner Companies hereby submit that a Complaint Form vide SRN no 100006014 was filed by
one of its creditor Anand L
Makhija (A J Marketing), the Petitioner Companies in its reply to Registrar of Companies dated 05th February 2019 has confirmed that the
Complaint was completely
resolved and satisfied by the Transferor Company 2 i.e. Trendsutra Client Services Private Limited and that there are no further pending disputes, queries, claims by
the Creditor against the
Company. A letter from the Creditor was also obtained with respect to the same and is attached herewith as Annexure C. Further, the Petitioner Companies submit that there is no unaccounted money being involved in the present scheme and the scheme is not devised to circumvent
the tax laws of the countries
On the basis of
observation
made by the Regional Director and reply submitted by the
Petitioner
Company
which appears satisfactory,
the Hon’ble Tribunal may pass appropriate
orders/orders
as deem fit on merit.
s)
In view of the above observation raised by ROC Mumbai, mentioned at para 33 above Hon’ble NCLT may pass appropriate orders/orders as deem it and direct petitioner companies to place on record full fact. However, as regard to observation(a) of the ROC, Mumbai report, Inquiry against transferor company 2 and complaint are pending regarding accounting fraud as per MCA portal.
As far as the observation made in paragraph II (s) and (t) of the Report of Regional Director is concerned the Petitioner Companies hereby submits that there is no accounting fraud on part of the Transferor Company 2 i.e. Trendsutra Client Services Private Limited, the notice issued by the RoC u/s 206(4) pursuant to the Complaint filed by a Creditor has been duly resolved and satisfied. Further, Transferee Company hereby confirms and undertake to comply
with further information / inquiry if any required by the RoC and shall duly comply with the documents and information as required by the RoC. Further, sanction of the Scheme by this Tribunal will not deter the right of the authorities to undertake any inquiry or proceedings. In any event, the Transferee Company is the surviving entity and the proceedings, if any, against the Transferee Company shall continue to exist. In this regard, the Petitioner Companies place reliance on the judgement passed by the Hon’ble High Court of Bombay in case of Mirasu Marketing Limited vs. Fem Care Pharma Limited (Company Petition No.350 of 2008 connected with Company Application No.
108 of 2008) that held as follows,
“Needless to state that no
penal proceedings or action initiated against the
transferor or transferee company or their director or officers in default shall be prejudiced in any manner merely because this Court has sanctioned the scheme.” Further, the National Company Law Tribunal, Mumbai Bench in case of following has upheld similar view; Scheme of Arrangement between Macrotech Developers Limited and Grandezza Supremous Thane Private Limited (CP (CAA) 2852/MB.V/2019
connected with CA (CAA) 2201/MB.V/2019) ;
Scheme of Arrangement between Mahalasa Acoustic Private Limited and Power Engineering Spares and Services (India) Private Limited and Power Engineering (India) Private Limited (CP (CAA) No.2921/MB.III/2019
connected with CA (CAA) No.1796/MB.III/2019).
On the basis of observation made by the Regional Director and reply submitted by the
Petitioner Company which appears satisfactory,
the Hon’ble Tribunal may pass appropriate orders/orders as deem fit on merit.
t)
It is seen that the ministry order inquiry under u/s.206(4) of the companies Act, 2013 in respect of Trendsutra Client Service Private Limited (Transferor Company 2) on the basis of Accounting Fraud. The Inquiry report is still pending. If the scheme of Amalgamation is considered, it is difficult to process the inquiry and examine the issue/basis of inquiry and also to correspondence with other government authorities without the existence of transferor company 2 i.e., Trendsutra Client Service Private Limited. In view of above Hon’ble NCLT may not allow the present scheme and arrangement (Merger by absorption) of Trendsutra Client Service Private Limited (Transferor Company 2) with Pepperfry Private Limited (Transferee Company).
It is seen that the Ministry Ordered inquiry u/s 206(4) of the Companies Act, 2013 in respect of the Trendsutra Client Service Private (Transferor Company 2) on the basis of Accounting Fraud. The Inquiry report is still pending. If the scheme of amalgamation is considered, it is difficult to process the
inquiry and
examine the issue / basis of inquiry and
also to
correspondence with the
Government authorities without existence of the Transferor Company 2 i.e Trendsutra Client Services Private Limited. In view of the above Hon’ble NCLT may not allow the present scheme of amalgamation and arrangement (merger by absorption) of Trendsutra Client Service Private Limited (Transferor Company 2) with Pepperfry Private Limited (Transferee Company)
The Official Liquidator has filed his report dated 3rd January, 2022 on inter alia stating therein that the affairs of the Transferor Companies have been conducted in a proper manner and that his representation may be taken on record.
The Learned Counsel for the Petitioner Companies further submit that in terms of clause 11.1 & 11.2 of the Scheme, all legal proceedings of whatsoever nature by or against the Transferor Company 2 would continue and be enforced by the Transferee Company in the manner and to the same extent as would or might have been continued and enforced by or against the Transferor Company 2 before this Tribunal. The Transferee Company also undertakes to have all legal or other proceedings initiated by or against the Transferor Company 2 in its name respectively and to have the same continued, prosecuted and enforced by or against the Transferee Company to the same extent as would or might have been continued and enforced by or against the Transferor Company 2.
The observations made by Regional Director have been explained by the Petitioner Company in paragraph 9 and 10 above. The clarifications and undertaking given by the Petitioner Company are hereby accepted by the Tribunal. Moreover, the Petitioner Company undertakes to comply with all statutory requirements as may be required under the Companies Act, 2013 and the Rules made thereunder.
From the material on record, the Scheme appears to be fair and reasonable and does not violate any provisions of law and is not contrary to public policy.
Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No. C.P. (C.A.A)/155/MB/2021 is made absolute in terms of prayer made in the Company Petition. Hence Ordered.
ORDER
The Petition be and the same is allowed subject to the following.
i. The Scheme, with the Appointed Date 1 fixed as Effective Date and Appointed Date 2 fixed as Effective Date + 1(One) Business Day and Appointed Date 3 fixed as Effective Date + 2(Two) Business Day placed at Page Nos. 290 to 349 of the CP (CAA) No. 155/MB/2021 is hereby sanctioned. It shall be binding on the Petitioner Companies involved in the Scheme and all concerned including their respective Shareholders, Secured Creditors, Unsecured Creditors/Trade Creditors and Employees.
ii. Transferor Company 1, Transferor Company 2 and Transferor Company 3 shall be Amalgamated (Merged by Absorption) with the Transferee Company. However, the Transferor Company 1 and Transferor Company 3 shall have to comply with the Laws of the Land of their respective Company of origin and also the Laws of the Land of India, for the time being in forcer including Tax Laws and FEMA Regulations.
iii. The Registrar of this Tribunal shall issue the certified copy of this order along with the Scheme forthwith. The Petitioners are directed to file a copy of this Order along with a copy of the Scheme with the Registrar of Companies Mumbai, electronically in E-Form INC-28, within 30 days from the date of receipt of the Order from the Registry.
iv. The Petitioner Companies to lodge a 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, if any, payable within 60 days from the date of receipt of the Order.
v. The Petitioner Companies shall comply with the undertakings given by them.
vi. All concerned shall act on a copy of this Order along with Scheme duly authenticated by the Deputy/Assistant Registrar of this Tribunal.
vii. The Petitioner Companies shall take all consequential and statutory steps required under the provisions of the Act in pursuance of the Scheme.
viii. Any person interested in above matter shall be at liberty to apply to the Tribunal for any directions that may be necessary.