Broadway Oils & Chemicals Privatelimited Vs

Balraj Joshi, Member (Technical)

The instant petition has been filed under Sections 230 read with section 232 of the Companies Act, 2013 (“Act”) for sanction of the Scheme of Amalgamation of Zenith Mercantiles Private Limited, being the Petitioner No.2 above named (Transferor Company or “Petitioner No.2”) with Broadway Oils & Chemicals Private Limited being the Petitioner No.1 above named (Transferee Company or “Petitioner No.1”). whereby and whereunder the Transferor Companies are proposed to be amalgamated with the Transferee Company from the Appointed Date, fixed as 01st 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 a final hearing. Ld. Authorised Representative for the Petitioners submits as follows: -

(a) The Scheme was approved unanimously by the respective Board of Directors of the Petitioner Nos. 1 and 2 at their meetings held on13th March 2021.

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

i. The Transferor Company and the Transferee Company belong to a common group and common management. There are common shareholders and common directors in the Transferor Company and the Transferee Company. In order to integrate the fields of activities of the companies and for improving overall business efficiency, streamline the administration of the Companies and in the overall interest of future growth and diversification of the business of the Companies, the present Scheme is proposed to amalgamate the Transferor Company with the Transferee Company. The scheme will be complimentary to the companies for their mutual benefit and interest.

ii. The proposed Scheme will result in economies of scale, reduction in overheads and other expenses, reduction in administrative and procedural work, elimination of duplication of work, better and more productive and effective utilization of the combined resources of all the companies and will enable the amalgamated company to effect internal economies and optimize productivity.

iii. The said Scheme will result in optimum growth and development of the business of the companies concerned and exploitation of the potential thereof. The said Scheme will enable the undertaking and business of all the companies to obtain greater facilities for raising capital, securing and conducting trade on favorable terms, and other benefits.

iv. The said Scheme will enable the companies concerned to rationalize and streamline their management, business, and finances and will pave way for better, more productive, and economical control of the running of the operations.

v. The businesses of all the Companies will be carried on more economically and profitably under the Scheme.

vi. The said Scheme will contribute to furthering and fulfilling the objectives of the companies concerned and, in the growth, expansion, and development of their business.

vii. The said Scheme will have beneficial results for the companies concerned, their shareholders, employees, and all concerned.

(c) The Statutory Auditors of the Petitioner Companies have by their certificates dated 17.03.2021 annexed and marked as Annexure-M confirmed that the accounting treatment in the Scheme is in conforms 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) The exchange ratio of shares in consideration of the Amalgamation has been fixed on a fair and reasonable basis and based on the Valuation Report thereon prepared by a firm of Chartered Accountants annexed and marked as Annexure-L

By an order dated 22nd September 2021 in Company Application No. C.A. (CAA) No. 115/KB/2021, this Tribunal made the following directions with regard to the meetings of Shareholders and Creditors under section 230 (1) [read with Section 232(1) of the Act]: -

a) Meeting Dispensed:

Meeting of Equity Shareholders of both the Petitioner Companies, for considering the Scheme are dispensed with in view of the fact that all the shareholders of both the Petitioner Companies have respectively given their consent to the Scheme by way of affidavits.

Meeting of the Unsecured Creditors of Petitioner No. 1, for considering the Scheme are dispensed with in view of the fact that Unsecured Creditors representing 97.39 % in value of the Unsecured Creditors of Petitioner No. 1 have respectively given their consent to the Scheme by way of affidavits.

Meeting of the Unsecured Creditors of Petitioner No. 2, for considering the Scheme are dispensed with in view of the fact that Unsecured Creditors representing 99.99 % in value of the Unsecured Creditors of Petitioner No. 2 have respectively given their consent to the Scheme by way of affidavits.

b) No meetings required:

The Petitioner Companies have NIL Secured Creditors. The NIL Secured Creditors of both the Petitioner Companies have been verified by the Auditors’ Certificate.

(f) Consequently, the Petitioners presented the instant petition for sanction of the Scheme. By an order dated 14th December 2021, the instant petition was admitted by this Tribunal and fixed for hearing on 14th February 2022 upon issuance of notices to the Statutory / Sectoral Authorities and advertisement of the date of hearing. In compliance with the said order dated 14th December 2021, the Petitioners have duly served such notices on the Regulatory Authorities viz through The Regional Director, (Eastern Region); Registrar of Companies, Ministry of Corporate Affairs; Official Liquidator, High Court Judicature at Calcutta; Income-Tax Department having jurisdiction over the respective companies by hand and by Speed Post at their respective addresses on 05/01/2022, 06/01/2022 and 07/01/2022 respectively and obtained the acknowledgment receipts for the same. The Petitioners have also published such advertisements once each in English Newspaper i.e., “Business Standard”, Kolkata edition dated 18th January 2022, and in the Bengali Newspaper., “Aajkal”, Kolkata edition in its issue dated 18th January 2022. An affidavit of Compliance duly affirmed has also been filed, annexed, and marked as Annexure-K.

(g) All statutory formalities requisite for obtaining the 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.

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

(5) The Official Liquidator has filed his report dated 09.02.2022 and concluded as under: -

At Para 10

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

The Regional Director has filed his reply- affidavit dated 11th February 2022 (“RD affidavit”) which has been dealt with by the Petitioners by their Rejoinder affidavit dated 12th February 2022 (“Rejoinder”) and 2nd Rejoinder affidavit dated 11th April 2022. The observations of the RD and responses of the Petitioners are summarized as under: -

Paragraph No 2(b) of the RD Affidavit:

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

Paragraph No. 3 of Rejoinder

With regard to paragraph 2(b) of the said affidavit, I say that the petitioner companies undertake that they shall comply with the provisions of Section 232(3)(i) of the Companies Act, 2013 in regard to adjustment of fees upon clubbing of Authorized Share Capital of the Transferor Company with the Authorized Share Capital of the Transferee Company in post-amalgamation and shall file a detailed statement thereof with the Registrar of Companies at the time of filing of INC – 28.

Paragraph No 2(c) of the RD Affidavit

That the Transferee Company should be directed to pay stamp Duty, if any, applicable on the transfer of the immovable properties from the transferor Companies to it.

Paragraph No. 4 of Rejoinder

With regard to paragraph 2(c) of the said affidavit, I say that the Transferee Company undertakes that it shall pay applicable stamp duty on the transfer of the immovable properties from the Transferor Company to it.

Paragraph No 2(d) of the 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.

Paragraph No. 5 of Rejoinder

With regard to paragraph 2(d) of the said affidavit, I say on behalf of all the petitioner Companies that the Scheme filed with the Company Application and Company Petition is the same and there is no discrepancy or change made in the scheme.

Paragraph No 2(e) of the RD Affidavit

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 the Amalgamation or arrangement. Further, the approval of the scheme by the Hon’ble Tribunal may not deter such authorities to deal with any of the issues arising after giving such effect to the Scheme. The decision of such authorities shall be binding on the petitioner Company(s) concerned.

Paragraph No. 6 of Rejoinder

With regard to paragraph 2(e) of the said affidavit, I say that the petitioner Companies have duly served the Notice under section 230(5) of the Companies Act, 2013 along with all the annexures to all the statutory Authorities as per the Order of the Hon’ble NCLT which are likely to be affected by the Scheme of Amalgamation.

Paragraph No 2(f) of the RD Affidavit

The Transferor Company, Zenith Mercantiles Private Ltd reported in its financial statement for 2020-21, being the latest financial statement filed in MCA portal public domain, the figures in the profit and loss account for the preceding year 2019-20 differently from what was originally reported in the profit and loss account for 2019-20 which formed part of the financial statement for 2019- 20 earlier filed by the company. The changed figures, which are of material incidence, are as follows:

Item of Profit & Loss Account

As    reported    in    the financial  statement  for 2020-21        for        the corresponding    figures of  the  preceding  year 2019-20 (Rs)

As    reported    in    the financial statement for 2019-20

Other Income

64,15,167

59,40,333

Cost      of      Material

Consumed

7,43,39,878

6,87,60,722

Changes                   in

Inventories of finished goods

8,70,985

65,59,591

Other expenses

1,02,42,592

96,58,306

Paragraph No. 7 of Rejoinder

With regard to paragraph 2(f) of the said affidavit, I say that the difference in the figures of Statement of Profit & Loss Account of the Transferor Company i.e., Zenith Mercantile Private limited for the year ended 2020-2021 as compared to the figures as mentioned in the Statement of Profit & Loss Account for the year ended 2019-2020 was due to regrouping/rearrangement in order to make them comparable with the figures for the year ended 2020-2021. However, the same does not affect the profitability of the company for the F.Y. 2019-2020 and this change is merely a change in the presentation of the previous year’s figures. The Auditor also makes the declaration for regrouping/rearrangement of figures in Note No 28 in the Financial Statement for the year ended 2020-2021. Thus, there is no change in the approved figures for 2019-2020 and there is no requirement for obtaining the necessary order for revising the financial statement from the Hon’ble NCLT in this matter.

Paragraph No. 3 of 2nd Rejoinder

With regard to paragraph 2(f) of the said affidavit I say that the details of the changes are as under:

Under the head ‘Other Income’ there was a Long-Term Capital Loss of Rs. 4,74,834.35 which was shown as a negative figure in the Financial Statements for the Financial Year 2019-2020 under the head Other Income. In the Financial Year 2020-2021 for the corresponding Previous Year Figure, the same had been shown as a positive figure under the head Other Expenses and there is no impact of the same on the profitability of the company for the F.Y. 2019-2020.

Under the head “Cost of material consumed [” Note 10 “Inventories”] of both the Financial Statements show that there is no change in the value of closing inventory  at  the  end  of  the  Financial  Year  2019-2020.[*-5688606- 66780+176231 = - 5579155,66 because of the following:

a. Packing Material Consumed Rs.1,76,231/- shown in F.Y. 2020-2021 for the corresponding Previous Year Figure i.e., for F.Y. 2019-2020 under Note-20 “Other Expenses”, the same was shown as part & parcel of Note-

16 “Change in Inventories” and “Purchase” in the F.Y. 2019-2020.

b. Transportation Charges Rs.66,780/- was shown under Note-18 “Other Expenses” in the Financial Year 2019-2020 and the same were regrouped under Note 16 “Cost of Material Consumed” in the F.Y. 2020-2021 for the corresponding Previous Year Figure.

The difference is represented as follows:

S.N.

Item in Statement of Profit and Loss

As reported for F.Y. 2020-21

As reported for F.Y. 2019-20

Difference

1

Other Income

64,15,167.91

59,40,333.56

4,74,834.35

2

Cost of Material

Consumed

7,43,39,878.16

6,87,60,722.50

(55,79,155.66)

3

Change in

inventory

8,70,985.00

65,59,591.00

56,88,606.00*

4

Other Expense

1,02,42,592.04

96,58,306.69

-5,84,285.35

The above statement was certified by the auditor along with the certificate. It is further stated by the Ld. Authorized Representative that the previous year’s figures were regrouped and rearranged in the balance sheet to make it comparable with the current year’s figures.

It is stated in the SCHEDULE III of the Companies Act, 2013 that in the financial statement the corresponding amounts (Comparatives) for the immediately preceding reporting period for all items shown in the financial statements including notes shall also be given. In the Guidance note on Non-Ind AS Schedule III of the Companies Act, 2013 issued by the Institute of Chartered Accountants of India (ICAI) it is further clarified that in point no. 6.5 of general instructions for preparation and presentation of Financial Statement that the comparatives for the previous years should be prepared on the same lines of guidance as provided for the preparation of current schedules.

Heard submissions made by the Ld. Authorized Representative appearing for the Petitioner and that of the Joint Director appearing on behalf of the Regional Director (ER). 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 the petition being Annexure “A” hereto, be and is hereby sanctioned by this Tribunal with the appointed date fixed on 1st April 2020 to be binding on Zenith Mercantiles Private Limited, being the Petitioner No.1 abovenamed (“Transferor Company” or “Petitioner No.2”) with Broadway Oils & Chemicals Private Limited being the Petitioner No.1 abovenamed ("Transferee Company" or “Petitioner No.1”), and their shareholders and all concerned;

b. All the properties, interests, rights, and powers of the Transferor Company, including those described in the Schedule of Assets and liabilities 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 Scheme;

c. All the debts, liabilities, duties, and obligations of the Transferor Company, 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. All legal proceedings and/or suits and/or appeals now pending by or against the Transferor Companies be continued by or against the Transferee Company, as provided in the Scheme;

e. Further, the approval of the scheme by the Hon’ble Tribunal shall not deter authorities to deal with any of the issues, including any non-compliances as per the Companies act -2013, arising after giving such effect to the Scheme as is their jurisdiction. The decision of such authorities shall be binding on the petitioner Company(s) concerned.

f. Leave is granted to the Petitioners to file the Schedule of Assets and 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;

g. 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, West Bengal for registration and on such certified copies being so delivered, the Transferor Company shall be dissolved without winding up with effect from the date or last of the dates 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 about the Transferee Company and the files relating to the said companies shall be consolidated accordingly.

The Petitioners shall supply a legible copy of the scheme; schedule of assets and liabilities in an acceptable form to the registry and the registry will append the copy, upon verification to the certified copy of the order.

Company Petition No. CP (CAA) No. 198/KB/2021 is disposed of accordingly.

Urgent certified copy of this order, if applied or, be supplied to the parties, subject to compliance with all requisite formalities.