Bhagyashree Infrastructure Private Limited Vs

Shyam Babu Gautam, Member (Technical)

Heard learned Counsel for parties. No objector has come before this Hon’ble Tribunal to oppose the Scheme or Petition and nor has any party controverted any averments made in the Petitions to the Scheme of Amalgamation of Abhikaran Trading Private Limited, Middlemist Agro Tech Private Limited, Itisha Developers Private Limited, Maxworth Leafin and Investment Private Limited, Satguru Iron & Steel Company Private Limited (Transferor Companies) with Bhagyashree Infrastructure Private Limited (the Transferee Company) and their respective shareholders and creditors.

The sanction of the Tribunal is sought under Section 230 to 232 of the Companies Act, 2013, to the Scheme of Amalgamation of Abhikaran Trading Private Limited, Middlemist Agro Tech Private Limited, Itisha Developers Private Limited, Maxworth Leafin and Investment Private Limited, Satguru Iron & Steel Company Private Limited (Transferor Companies) with Bhagyashree Infrastructure Private Limited (the Transferee Company) and their respective shareholders and creditors.

The Petitioner Companies have approved the said Scheme of Amalgamation by passing the Board Resolutions in their respective Board Meetings of the First Transferor Company was held on 23/01/2020 and the Second Transferor Company was held on 24/01/2020 and the Third Transferor Company was held on 24/01/2020 and the Fourth Transferor Company was held on 22/01/2020 and the Fifth Transferor Company was held on 21/01/2020 and the Transferee Company was held on 24/01/2020. The appointed date fixed under the Scheme is 01st day of April, 2019.

The Learned Counsel appearing on behalf of the Petitioners further states that all the Petitioner Transferor Companies and the Petitioner Transferee Company have complied with all the requirement as per the directions of National Company Law Tribunal, Mumbai Bench and they have filed necessary affidavit of compliance with the Tribunal. Moreover, the said Petitioner Companies undertake to comply with all the statutory requirements, pending, if any, as required under the Companies Act, 1956/2013 and rules made thereunder whichever is applicable.

The Learned Counsel appearing on behalf of the Petitioners further states that the all the Transferor Companies and the Transferee Company comes under the jurisdiction of the National Company Law Tribunal, Mumbai Bench.

The Learned Counsel for the Petitioner Companies submit that the First Transferor Company is engaged in the business to carry on in India and abroad as the traders, sellers, buyers, resellers, distributors, exporters, importers, merchants, commission agents and to buy, sell, import, export or otherwise deal in goods produce, ware, articles, things, merchandise, materials and deal in all kinds of goods for the above and no money circulation will be carried out by the company. The Second Transferor Company is engaged in the business to carry on all or any type of business such as buyers, sellers, suppliers, traders, merchants, importers, exporters, distributors, dealers, brokers, sub-brokers, stockiest, commission agent, and dealers of all & any kinds of agricultural products goods, hardware and stores, commercial, natural and man-made fiber, textile and yarn of all kinds, ready-made garments, cements, chemicals, Iron & Steel, drugs, building materials, glass & glass products, rubber & rubber products, paper & paper products, handicraft articles, gift articles, movable or immovable properties of all types, marble, granites, bricks and other stones of all types, wire and wire products, insulating, all types of electrical goods, all types of automobile, machinery and their parts, industrial components, plastics and electronics parts and devices, petrochemical items, bullion, precious stones, jewellery, ornaments and plantation crops such as tea, coffee and forest product. The Third Transferor Company is engaged in the business to develop, construct, purchase, sale, otherwise deal in all kinds of properties including lands, buildings, shops, flats, godown, sheds, fixtures on land and buildings. The Fourth Transferor Company is engaged to carry on the business as an Investment Company and to underwrite, sub-underwrite, invest in, hold, sell, buy or otherwise deal in shares, share broking, debentures, debenture-stocks, bonds, units, obligations and securities issued and guaranteed by Indian or Foreign governments, state, dominions, sovereigns, municipalities or public authorities or bodies and in shares, stocks, debentures, debenture-stocks, bonds, obligations and securities issued by any Company, Corporation, Firm or person, whether incorporated or established in India or elsewhere and to manage investment pools, mutual funds, syndicate in shares, stocks, securities, finance and real estate subject to the necessary government approval and to carry on all kinds of finance business including lease, hire-purchase, lending, accepting deposits, bill discounting, credit rating, project finance. The Fifth Transferor Petitioner Company is engaged to carry on the business in India or elsewhere as manufacturers, traders, importers, exporters, dealers, distributors, commission agent and wholesale and retail dealers in all type of Hot Rolled Steel Sheets, Coils, Cold Rolled Steel Coils, Galvanized Steel Sheets, Electrical Steel, Gal-valume, Continuous Slab Casting, Steel Products, E.R.W. Steel Tubes (Electric Resistance Welded Steel Tubes), I.W Steel Tubes (including Welded Steel Tubes), Pre Engineered Buildings (PEB), Iron ore, Iron ore pallets, Pig Iron, Sponge Iron and other Metal (ferrous and non-ferrous), Alloys, Scrap, Pipes, Wire drawing of any metal and all types of Steel and Steel Products. The Transferee Petitioner Company is engaged in the business to develop, construct, purchase, sale, otherwise deal in all kinds of properties including lands, buildings, shops, flats, godown, sheds, fixtures on lands and buildings.

The Rationale for the Scheme as follows:

“1. It would be advantageous to combine and merge the activities and operations of all the transferor companies into a single company. The amalgamation would provide synergistic linkages besides economies in costs by combining the total business functions.

Most of the objects of the Transferor Companies and the Transferee Company are common which will further help in objectives of the amalgamation.

The proposed amalgamated company is situated at Mumbai, Maharashtra which will give more conducive to better and more efficient and economical control and conduct of the businesses of all the transferor companies.

The amalgamation will provide for consolidation of the businesses of the companies and thereby facilitating smooth functioning, long term fulfilment of their objectives, growth and viability of these businesses.

Greater efficiency in financial management of the amalgamated entity, and unfettered access to cash flow generated by the combined business which can be deployed more efficiently to fund organic and inorganic growth opportunities, to maximize shareholder value.

Cost savings are expected to flow from more focused operational efforts, rationalization, standardization and simplification of business processes, and the elimination of duplication, and rationalization of administrative expenses.”

The Learned Counsel for the Transferee Petitioner Company states that the Petition has been filed in consonance with the order passed in Company Scheme Application No. CA (CAA)/1023/MB-II/2020 by this Hon’ble Tribunal dated 24th July, 2020.

The Regional Director, Western Region, Mumbai has filed his report dated 07th January, 2021, with the Hon’ble Tribunal, inter alia, stating, therein that save and except as stated in paragraph IV of the said report, it appears that the Scheme is not prejudicial to the interest of the shareholders and public. In Paragraph IV of the said report, the Regional Director has stated that:

a) In addition to compliance of AS-14 (IND AS-103) the 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.;

b) As per Definitions of the Scheme,

“Appointed Date” means 01st April, 2019 or such other date as may be approved by the Hon’ble NCLT or any other appropriate authority having jurisdiction over respective Companies. It is clarified that the intention of the companies to amalgamate as on 01st April, 2019 so that consolidated accounts may be prepared and returns of income and annual returns or other statutory returns may be furnished by the consolidated entity for Financial Year 2019-20. In this regard, it is submitted in terms of provisions of section 232(6) of the Companies Act, 2013 it should be 01st April, 2019.

“Effective Date” means the dates on which certified copies of the Orders of the Hon’ble NCLT or any other appropriate authority having jurisdiction over respective Companies sanctions the Scheme are filed with the Registrar of Companies, Gwalior and Registrar of Companies, Mumbai;

Further, the Petitioners may be asked to comply with the requirements and clarified vide circular no. F. No. 7/12/2019/CL-I dated 21/08/2019 issued by the Ministry of Corporate Affairs;

c) Petitioners Companies have to undertake to comply with section 232(3)(i) of the Companies Act, 2013, where the transferor company is dissolved, the fee, if any, paid by the transferor company on its authorised 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;

d) ROC, Mumbai Report dated 03.12.2020 has interalia mentioned that there are no prosecution, no technical scrutiny, no inquiry, no inspection, no complaint are pending.

Further mentioned that:-

It is observed that the financial statements of the Transferor companies and Transferee Company as at 31/03/2019 are not showing true and fair view of the state of Affairs as at the said date.

In case of 1st Transferor Company i.e. Abhikaran Trading Private Limited, Revenue from operation as at 31/03/2019 is Rs.84.73 Lacs whereas there is of Rs.10.76 Crores in trade receivable, which does not match with the revenue from operation and raises Abhikaran Trading Private increases doubt on the said amount.

As at 31/03/2018, Long Term Loans and advances of the Company was Rs.16.98 Crores which was reduced to Rs.2 Lacs at 31/03/2020

However, appropriation of the loan on its realisation is not clearly reflected in the said financial statement except investment of Rs.2.63 Crores. The Company has also not attached the cash flow statement with the said financial statement to ascertain the appropriation;

In case of 2nd Transferor Company i.e. Middlemist Agro Tech Private Limited (Formerly known as Ruchi Agrotech Private Limited), the revenue from operation as at 31/03/2019 is Rs.23.39 Crores but there is no expenditure relating to employee’s salary etc. which indicates that there are no employees in the company but the company has achieved revenue of Rs.23.39 Crores. The Company is engaged in the business of trading of goods and as appears, it is doing the business of break even or having only minimum profit.

In case of 3rd Transferor Company, the company has shown revenue from trading operation of Rs.8.89 crores which is almost at break-even but no expenditure relating to employees are shown.

In case of 4th Transferor Company i.e. Maxworth Leafin and Investment Private Limited, there is increase in trade payable of Rs.7.32 crores at 31/03/2019 without any corresponding purchase. Further, there is increase in trade receivables of Rs.11 crores but there is not sales as at 31/03/2019.

In case of the 5th Transferor Company, the revenue from traded good is Rs.13.20 Crores which is almost at break even and there is no expenditure relating to employees.

The Transferee Company is also engaged in the business of Trading of goods and as at 31/03/2019, the revenue from operation is shown as Rs.2.66 crores which is at break even and there is no expenditure relating to employees.

All the companies are engaged in the business of trading of goods which is done almost at break even.

There are no employees in the companies.

Shareholders of all these companies are private limited companies and all these companies have issued shares at high premium.

For the above points the Petitioner Company is directed to place on record full facts, before the approval of the scheme;

e) The object of the Petitioner Company are of varied nature from trading agricultural, produce of iron and steel developers of properties, investment activities, manufactures of steel product etc. However, in clause B rational of the scheme in sub para 2 it is mentioned that most of the object of the petitioner companies are common. This amount to mis-statement. Further it is not justified how the amalgamation will provide synergistic linkage, economies in cost, consolidation of business, smooth functioning, elimination of duplication etc., as mentioned in Rationale of the scheme;

f) Transferor company – 4, Maxworth Leafin and Investment Private Limited has an activity of investment, underwriting securities, falling under NBFC. Approval of SEBI and RBI may be obtained by the petitioner companies for amalgamation;

g) In clause 3.2 of the scheme staff workmen and employees it is mentioned that all staff workmen and employees of transferor companies as on effective date shall be deemed to have become a staff workman employees of transferee company with effect from appointed date.

Protection to all such employees’ staff and workmen shall be provided till the effective date by the petitioner companies. Tribunal may satisfy itself regarding this;

h) In Clause 7 of the scheme it is proposed to alter the object of Transferee Company by insertion of object clause of Investment Company and underwriting securities. Petitioner may be directed to obtain approval of RBI and SEBI for carrying out this activity as same falls under NBFC;

i) As per the financial statement for financial year 2018-19 of all the petitioner companies, the trade payable in balance sheet as at 31.03.2019 is not classified into outstanding towards MSME and other than MSME. This result into violation of section 129 read with the schedule II of the Companies Act, 2013. Respective Petitioner Company have to undertake to get the offence compounded;

The Counsel for the Petitioner Companies submits that the notices have been duly served on all the authorities i.e. Regional Director, Western Region, Mumbai Registrar of Companies, Mumbai, concerned Income Tax Department and Official Liquidator, High Court, Mumbai on 29th of July, 2020. The further submits that as directed by the Tribunal, publication of notice of hearing of Petition of the final hearing have been made in two local newspaper viz. ‘Business Standard’ in English and ‘Navshakti’ in Marathi both having vide circulation in Mumbai as per Rule 16 of the Companies (Compromises, Arrangements and Amalgamation) Rules, 2016. The Petitioner Companies are aware that the decisions given by the authorities shall be binding on all the Petitioner Companies and the approval by the Hon’ble Tribunal may not deter any such authorities to deal with any of the issues arising after giving effect to the Scheme.

In so far as observation made in the Paragraph IV(a) of the Report of the Regional Director is concerned, the Petitioner Companies undertake that in addition to the compliance of AS-14 (IND AS-103) the Petitioner Companies shall pass such accounting entries which are necessary in connection with the Scheme and undertake to comply with other applicable Accounting Standards such as AS-5 (IND AS-8) to the extent applicable.

In so far as observation made in the Paragraph IV(b) of the Report of the Regional Director is concerned, the Petitioner Companies clarify that the Appointed Date fixed in the Scheme is 01st April, 2019 and clarify that the Scheme will be effective from the Appointed Date.

In so far as observation made in the Paragraph IV(c) of the Report of the Regional Director is concerned, the Petitioner Companies undertakes that they comply with the provisions of section 232(3)(i) of the Companies Act, 2013 and the fees paid, if any, by the Transferor Company on increase in its Authorised Capital shall be set-off against any fees payable by the Transferee Company on its Authorised Capital subsequent to the Amalgamation.

In so far as observation made in the Paragraph IV(d) of the Report of the Regional Director is concerned, the Petitioner Companies undertakes that they complied or comply with all the applicable provisions of the Companies Act, 2013 in regards to the observation of the Regional Director. In the report, some of the observations are made by the Registrar of Companies for which the Petitioner Companies have given satisfactory reply and undertakes to comply with all the observations of the report if applicable.

In so far as observation made in the Paragraph IV(e) of the Report of the Regional Director is concerned, the Petitioner Companies undertakes that having different objects of business does not affect the rationale of the scheme and stated as the Memorandum of Association of all the Petitioner Companies were adopted in such a sense, in order to enable/authorize the company to undertake all types of business activities which the company may anticipate to pursue, by incorporating in the main objects, other objects and objects ancillary or incidental thereto. Though, all the Companies have been incorporated with different objects. However, all the companies were engaged in the trading of agro commodities. Accordingly, the objects of the Petitioner Companies contain all the objects including in the other objects which has synergistic linkage, economies in cost, consolidation of business, smooth functioning, elimination of duplication etc. Additionally, all the Petitioner Companies shares common board of directors and are under the same management which will further lead to efficiently accomplish the purpose of the scheme of amalgamation. The Petitioner Companies also quoted some of the judgements which support their reply

In Morarjee Goculdas Spg. and Wvg. Company Ltd. (1995) 5 Comp LJ 598 (Bom): (1994) 80 Comp Cases 289 (Bom).

Canara Bank Ltd. In re (1973) 43 Comp Case 157 (Mysore)

In so far as observation made in the Paragraph IV(g) of the Report of the Regional Director is concerned, the Petitioner Companies undertakes to protect the rights of employee’s staff and workmen, if required, in future. However, the Company currently does not have any employees in the Company.

In so far as observation made in the Paragraph IV(h) of the Report of the Regional Director is concerned, the Petitioner Companies undertakes to take license from SEBI/RBI, if required by the Transferee Company.

In so far as observation made in the Paragraph IV(i) of the Report of the Regional Director is concerned, the Petitioner Companies stated that they have complied with the observation of the report and outstanding in the trade payables are now duly reflected and classified towards MSME and other than MSME in the balance sheets filed for the F.Y. 2018-19;

The observation made by the Regional Director have been explained in Paragraphs 11 to 17 above. The clarification and undertakings given by the Petitioner Companies are hereby accepted.

This matter was first Reserved for Orders on 30.11.2021, thereafter the matter was notified on Board for the purpose of clarification on 21.01.2022. In compliance of queries posed by the bench Petitioner filed Affidavit on record on 05.04.2022 clarified the queries. This bench is satisfied with the submissions made by Petitioner.

From the material on record, the Scheme appears to be fair and reasonable and is not in violation of any provisions of law and is not a contrary to public policy. None of the parties concerned have come forward to oppose the Scheme.

Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No.1080 of 2020 is made absolute in terms of prayers clauses 22(a) and (b).

The Petitioner Companies to lodge a copy of this order and the Scheme duly certified by Assistant Registrar, National Company Law Tribunal, Mumbai Bench with the concerned Superintendent of Stamps for the purpose of adjudication of stamps duty payable, if any, on the same within 60 days from the date of receipt of the order.

The Petitioner Companies are directed to file a certified copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, Gwalior and Mumbai electronically, along with the E-Form 28 within 30 days from the date of issuance of the order by the Registry.

All the authorities concerned to act on a certified copy of this order along with Scheme duly certified by Assistant Registrar, National Company Law Tribunal, Mumbai Bench.