Confirm Ticket Online Solutions Private Limited Vs

Subrata Kumar Dash, Member (Technical)

Harnam Singh Thakur, Member(Judicial)

This is a Joint Second Motion Petition filed by Petitioner Companies namely; Confirm Ticket Online Solutions Private Limited (referred to as  “Petitioner Company No.. 1/ Transferor Company”) and Le Travenues Technology Limited (referred to as “Petitioner Company No. 2/ Transferee Company”) under Sections 230-232 of the Companies Act, 2013 (“the Act”) and other applicable provisions of the Act read with Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016 (“the Rules”) seeking sanction of the Scheme of Amalgamation between the Companies.

The Petitioner Companies have prayed for sanctioning of the Scheme of Amalgamation between the respective companies. The said Scheme is attached as Annexure -P1 of the petition.

It is submitted that the registered offices of the Petitioner Companies are situated in the State of Haryana and therefore, the jurisdiction of the Petitioner Companies lies with this Bench.

The first motion application seeking directions for dispensing/convening with the meetings of the Equity Shareholders, Secured and Unsecured Creditors of the Transferor Company and the Transferee Company was filed before this Tribunal vide CA (CAA) No.37/Chd/Hry/2023 and based on such an application necessary directions were issued on 30.08.2023. As per the order dated 30.08.2023, the meetings of Equity Shareholders, Secured Creditors and the Unsecured Creditors of the Transferor Company and the Transferee Company were dispensed with for the reasons recorded in the aforementioned order.

The main objects, date of incorporation, and rationale of the Scheme have been discussed in detail in the order dated 30.08.2023.

In the second motion proceedings, certain directions were issued by this Tribunal by order dated 15.09.2023 and the same were compiled by filing affidavit vide Diary No. 02873/1 dated 02.11.2023. The notice of hearing was published in newspapers namely ‘Financial Express’ (English) and ‘Jansatta’ (Hindi) both Delhi NCR editions on 21.09.2023. The original newspaper cuttings are produced and annexed as Annexure-B with the aforesaid affidavit. It is also stated in the aforesaid affidavit that copies of notices were served upon the (1) Central Government through the Regional Director (Northern Region), Ministry of Corporate Affairs; (2) Registrar of Companies for New Delhi and Haryana; (3) Official Liquidator (attached to the Hon’ble High Court of Punjab and Haryana); and (4) jurisdictional Income Tax Departments by both the Petitioner Companies. The proof of service through email as well as original speed post receipts are produced and annexed as Annexure-A of the aforesaid affidavit.

It is also deposed by way of affidavit filed vide Diary No. 02873/6 dated 21.11.2023 the authorised signatory of the Petitioner Companies that they have not received any objections in relation to the Scheme from the any person or member of the public.

In response to the aforementioned notices, the statutory authorities have furnished their responses:

8.1. Registrar of Companies (ROC)/Regional Director (RD)

8.1.1. The Regional Director, Northern Region (RD) has filed its report along with the report of the Registrar of Companies (ROC) vide Diary No. 02873/4 dated 22.11.2023. In para 9 of its report, the Ld. The Regional Director has stated that no prosecution has been filed and no inspection or investigation has been conducted with respect to the Petitioner Company. Further, para 10 of the report of the Regional Director sets out certain observations which were raised as per clause 31 of the Registrar of Companies report dated 06.11.2023 and are reproduced below:-

a) “As per auditor's report for the F.Y. 2022-23 of Transferee Company it has provided loans (in the form of advances) to its employees and company. In this regard companies may be directed to ensure compliance of provisions of section 185 and 186 of the Companies Act, 2013.

b) As per annexure I of auditor's report for the F.Y. 2022-23 of Transferee Company, it has arrears of statutory dues outstanding more than six months (Provident Fund) amounting Rs.22,500.

c) As per annexure I of auditor's report for the F.Y. 2022-23 of Transferee Company, it has not incurred cash losses in the current F.Y. but in the immediately preceding F.Y. it has cash losses to INR 131.57 million.

d) As per e-form CSR-2 filed by Transferor Company, amount spent by the company during the year is Rs.15,24,600. However, in the notes to financial statements for the year ended 31.03.2023, it is stated that company has not earned average net profit in three immediately preceding financial years, therefore, there was no amount as per section 135 of the Act which was required to be spent on, CSR activities in each of the respective financial years. In this regard company may be asked to furnish clarification.

e) As per Clause G of the scheme (consideration) 1 fully paid up 0.01 % redeemable preference share of INR 10 will be issued and allotted for every 1 equity share of INR 10 each held in Transferor company by shareholders of the Transferor company. A clarification regarding compliance of section 230(7)(c) of the Companies Act, 2013 may be sought.

f) Refer to Clause 1 of Paragraph A of Part V of the scheme, the Transferee company may kindly be directed to comply with the provision of section 232(3){i) of the Companies Act, 2013 in regard to fee payable on its revised authorized share capital if applicable”.

8.1.2. In response to the report as filed by the Regional Director, the authorised representatives of the Petitioner Companies have filed affidavit vide Diary No. 02873/5 dated 21.11.2023 providing various clarifications and undertakings as follows:

a) In response to the first observation of the Regional Director, it is stated that Section 185 of the Companies Act, 2013 lays down compliances for provision of loans to entities in which directors of the company are interested. However, in the present case, loans/ advances have been provided to employees of the Transferee Company, and not to any person or entity in which directors of the Transferee Company are interested. Therefore, Section 185 of the 2013 Act is not attracted and the question of complying with the same does not arise. It is further stated that the Transferee Company is exempted from complying with Section 186 of the 2013 Act in terms of General Circular No. 04/2015 issued by the Ministry of Corporate Affairs on 10.03.2015 as per which "loans and/ or advances made by the companies to their employees, other than the managing or whole time directors (which is governed by section 185) are not governed by the requirements of section 186 of the Companies Act, 2013" provided that "such loans/advances to employees are in accordance with the conditions of service applicable to employees and are also in accordance with the remuneration policy, in cases where such policy is required to be formulated". In the present case, the advances/ loans provided by the Transferee Company to its employees are in accordance with the conditions of service and the remuneration policy applicable to them (annexed with the aforesaid affidavit as Annexure-C). Therefore, as per the General Circular, the provision of such advances/ loans is not governed by Section 186 of the 2013 Act and the question of ensuring compliance with the same does not arise. In any event, if Sections 185 and 186 of the 2013 Act are found to be applicable to the loans/ advances provided by the Transferee Company to its employees, the Transferee Company will duly comply subject to applicable law.

b) In response to the second observation of the Regional Director, it is clarified that the delay in payment of provident fund dues is not attributable to the Transferee Company since the concerned employee has not linked his KYC with his UAN due to which the Company is not able to deposit his PF. The same is duly disclosed in the Transferee Company’s Board's Report for the FY ended 31.03.2023 (relevant extract from which is annexed and produced as Annexure-D of the aforesaid affidavit). It is further stated that the Transferee Company is not allowed to file ECR (i.e. it is prevented from making payment of provident fund dues) for employees whose UANs are not linked and verified with their KYC details as per Notification No. BKG-27/7/2020-G/Pt.file issued by the Ministry of Labour & Employment on 01.06.2021 and that the Transferee Company undertakes to deposit/ pay the said dues once the concerned employee updates and links his UAN with his KYC details.

c) In response to the third observation of the Regional Director, it is stated that the statement made by the auditors is in compliance with the provisions of the Companies (Auditor's Report) Order, 2020 ("CARO"), which provides for certain matters on which auditors of companies are required to make statements in their reports, which includes statement on whether companies have incurred cash losses in the present or the preceding FY. It is in compliance of this provision that the auditors of the Transferee Company have made the statement regarding cash losses incurred by the Transferee Company and the same is neither relevant for the present proceedings nor has any bearing on the aspect of the Scheme since the Petitioner Companies have complied with all applicable provisions of the 2013 Act and the Rules thereunder.

d) In response to the fourth observation of the Regional Director, it is stated that the amount spent by the Transferor Company towards CSR activities is in compliance with Section 135 of the 2013 Act. It is stated that the Transferor Company did not satisfy any of the thresholds provided under Section 135(1) of the 2013 Act in the previous FY’s and, therefore, was not required to spend any amount in terms of Section 135(5) of the 2013 Act. In the FY ended 31.03.2022, the Transferor Company earned a net profit of more than INR 5 crores and became liable to spend the amount stipulated under Section 135(5) in the FY ended 31.03.2023, i.e., the Transferor Company was required to spend 2% of the average net profits made during the three preceding FYs, which amount was duly spent by the Transferor Company on account of CSR activities in the FY ended 31.03.2023. In any event, it is submitted that if it is found that any obligation in relation to CSR has not been complied with by the Transferor Company, the Transferee Company undertakes to fulfil the same in accordance with Section 135 of the 2013 Act.

e) In response to the fifth observation of the Regional Director, it is stated that the present Scheme is not an internal scheme of restructuring or conversion, and it does not contemplate the variation of any rights of existing shareholders at all and therefore, Section 230(7)(c) of the 2013 Act is not attracted in this case. It is further stated that even if it is assumed that Section 230(7)(c) of the 2013 Act would be applicable, the condition of compliance with Section 48 of the 2013 Act (as provided in Section 230(7)(c)) stands fulfilled since shareholders of the Transferor Company representing 99.99% of the total shareholding (by value) and shareholders of the Transferee Company representing 93.08% of the total shareholding (by value) have already consented to the Scheme by way of affidavits.

f) In response to the sixth observation of the Regional Director, it is stated that in the event any additional/ differential fees is found payable in terms of Section 232(3)(i) of the 2013 Act, the Transferee Company shall pay the same in accordance with the Scheme and applicable law.

8.1.3. Keeping in view the aforementioned responses to the observations in the Regional Director’s Report, no adverse observations need be made with regard to the proposed Scheme of Amalgamation.

8.2. Official Liquidator

8.2.1. The Official Liquidator has filed his report vide Diary No. 02873/2 dated 02/11/2023. The Official Liquidator in its report has reproduced the information on the incorporation of the Petitioner Companies, their capital structure, financial highlights, shareholding, etc. The Official Liquidator has also reproduced the extracts of Reports of the Statutory Auditors of the Petitioner Companies on the Financial Statements.

8.2.2. Thus, the Official Liquidator has made no adverse observations with regard to the proposed Scheme of Amalgamation.

8.3. Income Tax Department

8.3.1. The Income Tax Department has filed report vide Diary No. 02873/7 dated 23.11.2023 in which the following observations have made in respect of the Transferee Company:

“4. ….. It is seen that the assessee company M/s Le Travenues Technology Limited (PAN : AABCL1932G) has no outstanding demand at present, however, this office is not in a position to determine the outcome of the scrutiny assessment proceedings pending with the Faceless Assessment Unit for the AY 2022-23. Hence, the assessee company has to be directed to pay the demand, if any, arises in the future on account of scrutiny assessment pending before NeFAC.therefore, amalgamation of the companies may be considered only on the condition of payment of demand arises, if any, after disposal of scrutiny assessment pending at the level of NeFAC.

Further, if upon coming in to effect of this scheme of amalgamation, the Hon'ble National Company Law Tribunal may kindly direct that :

All the compliances under the Income Tax Act, 1961 shall be made by the Transferee Company or resultant company after the appointed date. All the tax liabilities and all the pending appeals and proceedings under the Income Tax Act shall be enforced and continued against the Transferee Company”.

8.3.2. The counsel for petitioner has filed report received from the Income Tax Department vide Diary No. 02873/6 dated 21.11.2023 in which following observations have made in respect of the Transferor Company:

“2. Upon verification of Income portal ITBA it is noticed that there are no outstanding demands pending in the case of M/s Confirm Ticket Online Solutions Pvt. Ltd. However, for the A.Y 2022-23 M/s Confirm Ticke Online Solutions Pvt Ltd case is selected for scrutiny and assessment proceedings are pending with NeFAC, New Delhi. The outcome of scrutiny proceedings shall be binding on the resultant / transferee company. Subject to above there is no objection for sanctioning of the Scheme of Amalgamation between Confirm Ticket online Solutions pvt. Ltd and Le Travenues Technology Ltd''.

8.3.3. In response to the report as filed by the Income Tax Department, the authorised representatives of the Petitioner Companies have filed affidavit vide Diary No. 02873/6 dated 21.11.2023 providing various clarifications and undertakings as follows:

a) In response to the observation in para 8.3.1, it is submitted that the Transferee Company will continue its operations as a going concern, and all tax demands, proceedings or liabilities pertaining to the Transferor Company shall be transferred to the Transferee Company in terms of the present Scheme, which shall be fulfilled by the Transferee Company. If, pursuant to scrutiny proceedings, any tax liability is found payable or any income tax/ dues are found payable to the Income Tax Department in respect of the Transferor Company in the future, the same will be met by the Transferee Company, as per the provisions of applicable law.

b) Further, it is submitted that to the extent required under law, all compliances provided under the Income Tax Act, 1961 in respect of the Scheme and the Petitioner Companies will be fulfilled by the Transferee Company.

c) It is submitted that any liabilities or proceedings arising out of tax laws shall not be prejudiced by the Scheme and they may be continued or enforced against the Transferee Company in accordance with applicable law. As such, the interests of the Income Tax Department are not adversely affected in any manner. Rather, the interest of the revenue is sufficiently protected by the provisions of the Scheme itself.

8.3.4. Thus, no adverse observation can be inferred from the reports of the Income Tax Department.

The certificate by the Chartered Accountant with respect to the Scheme to the effect that the accounting treatment proposed in the Scheme is in compliance with applicable Indian Accounting Standards (Ind AS) as specified in Section 133 of the Act, read with rules thereunder and other Generally Accepted Accounting Principles is produced and annexed with the Company Petition as Annexure P-12.

We have heard the learned counsel for Petitioner Companies and have perused the record carefully.

In the context of the above discussion, the Scheme contemplated by the Petitioner Companies appears to be prima facie in compliance with all the requirements stipulated under the relevant Sections of the Companies Act, 2013. Since, the observations made by the Statutory Authorities have been duly addressed by the Petitioner Companies and all the requisite statutory compliances have been fulfilled, Accordingly, this Tribunal sanctions the Scheme of Amalgamation of the Petitioner Company as produced and annexed as Annexure P-1 along with Company Petition.

Notwithstanding the submission that no investigation is pending against the Petitioner Companies, if there is any deficiency found or, the violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Tribunal will not come in the way of action being taken, albeit, in accordance with the law, against the concerned persons, directors and officials of the Petitioner Companies.

While approving the scheme as above, it is clarified that this order should not be construed as an order in any way granting exemption from payment of stamp duty, taxes, or any other charges, if any, payment is due or required in accordance with law or in respect to any permission/compliance with any other requirement which may be specifically required under any law.

THIS TRIBUNAL DO FURTHER ORDER THAT:

i. That all the property, rights and powers of the Transferor Companies be transferred, without further act or deed, to the Transferee Company and accordingly, the same shall pursuant to Sections 230 & 232 of the Act, be transferred to and vested in the Transferee Company for all the estate and interest of the Transferor Companies but subject nevertheless to all charges now affecting the same; and

ii. That all the liabilities and duties of the Transferor Companies be transferred, without further act or deed, to the Transferee Company and accordingly the same shall pursuant to Sections 230 to 232 of the Act, be transferred to and become the liabilities and duties of the Transferee Company;

iii. All benefits, entitlements, incentives and concessions under incentive schemes and policies that the Transferor Companies are entitled to include under Customs, Excise, Service Tax, VAT, Sales Tax, GST and Entry Tax and Income Tax laws, subsidy receivables from Government, grant from any governmental authorities, direct tax benefit/exemptions/deductions, shall, to the extent statutorily available and along with associated obligations, stand transferred to and be available to the Transferee Company as if the Transferee Company was originally entitled to all such benefits, entitlements, incentives and concessions;

iv. All contracts of the Transferor Companies which are subsisting or having effect immediately before the Effective Date, shall stand transferred to and vested in the Transferee Company and be in full force and effect in favour of the Transferee Company and may be enforced by or against it as fully and effectually as if, instead of the Transferor Companies, the Transferee Company had been a party or beneficiary or obliged thereto;

v. All the employees of the Transferor Companies shall be deemed to have become the employees and the staff of the Transferee Company with effect from the Appointed Date, and shall stand transferred to the Transferee Company without any interruption of service and on the terms and conditions no less favourable than those on which they are engaged by the Transferor Companies, as on the Effective Date, including in relation to the level of remuneration and contractual and statutory benefits, incentive plans, terminal benefits, gratuity plans, provident plans and any other retirement benefits;

vi. That the Appointed Date for the Scheme shall be 01.04.2023 as specified in the Scheme;

vii. That the proceedings, if any, now pending by or against the Transferor Companies be continued by or against the Transferee Company;

viii. That the Transferee Company shall, without further application, allot to the existing members of the Transferor Companies shares of Transferee Company to which they are entitled under the said Scheme;

ix. That the fee, if any, paid by the Transferor Companies on their authorized capital shall be set off against any fees payable by the Transferee Company on its authorized capital subsequent to the sanction of the ‘Scheme’;

x. That the carry forward and set off of accumulated losses in the Petitioner Company, if any, shall be subject to applicable provisions of Income Tax including Section 72A and Section 79 of the Income Tax Act, 1961;

xi. That the assessment under the Income Tax Act will be in accordance with the provisions of Section 170 (2A) of the Income Tax Act, 1961;

xii. That the Transferee Company shall file the revised memorandum and articles of association with the concerned Registrar of Companies and further make the requisite payments of the differential fee (if any) for the enhancement of authorized capital of the Transferee Company; after setting off the fees paid by the Transferor Companies;

xiii. That the Petitioner Company shall, within 30 days after the date of receipt of this order, cause a certified copy of this order to be delivered to the concerned Registrar of Companies for registration; and

xiv. That any person interested shall be at liberty to apply to this Tribunal in the above matter for any directions that may be necessary.

As per the aforesaid directions, formal orders in Form No. CAA-7 of Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 be issued after the filing of the Schedule of Properties within three weeks from the date of receiving a certified copy of this order by the petitioners.

All the concerned Regulatory Authorities are to act on a copy of this order annexed with the Scheme duly authenticated by the Registrar of this Bench.

The Company Petition CP (CAA) No.35/Chd/Hry/2023 is allowed and disposed of accordingly.