Famous Vanijya Pvt. Ltd Vs

This joint petition has been filed under sections 230-232 of the Companies Act, 2013 (the Act) by the petitioner companies seeking sanction of this Tribunal to a scheme of arrangement for amalgamation of M/s Famous Vanijya Private Limited (Transferor Company 1), M/s Flag Synthetics Limited (Transferor Company 2) and, M/s Navyug Vyapaar Private Limited (Transferor Company 3) with M/s Dwarkesh Finance Limited (Transferee Company) and their respective Shareholders and Creditors (hereinafter referred to as the “Scheme”).

It is stated that all the petitioner transferor companies are situated in the State of Madhya Pradesh, and the transferee company is situated in the State of Gujarat. Hence, all the petitioner transferor companies are under the jurisdiction of the National Company Law Tribunal Bench at Indore. A separate petition for the transferee company has been filed before National Company Law Tribunal, Ahmedabad Bench.

The petitioner companies filed a joint Company Application CA (CAA) No. 64 of 2018 along with the transferee company before NCLT, Ahmedabad Bench (at the time of filing the first motion application there was no separate bench for the companies registered under the ROC, Gwalior) seeking directions for dispensation of meetings of equity shareholders, and unsecured creditors. The Tribunal (Ahmedabad Bench) vide order dated 16.07.2018 dispensed the meetings of the equity shareholders, and unsecured creditors of all the transferor companies and transferee company. There were no secured creditors in any of the petitioner companies, so no meetings were required to be convened.

By the order dated 16.07.2018, passed in CA(CAA) no. 64 of 2018, the Tribunal (Ahmedabad Bench) had directed the petitioner companies to serve notice of the scheme in compliance with section 230(5) of the Companies Act, 2013 to (i) the Central Government through the Regional Director, North Western Region, (ii) the Registrar of Companies, (iii) the Income Tax Authorities; and (iv) the Official Liquidator (in respect of the transferor companies) stating that representations, if any, to be made within a period of 30 days from the date of receipt of such notice, and in case no representation is received by the Tribunal within the stipulated period of 30 days, it should be presumed that the authorities have no representation to make. In compliance with the order dated 16.07.2018, the petitioner companies served notices to the Central Government through the Reginal Director, North Western Region, the Registrar of Companies, Gwalior and Ahmedabad, the concerned Income Tax Authorities, and the Official Liquidator (in respect of the transferor companies).

The Petitioner Companies have jointly filed the present Petition CP (CAA) No. 125 of 2018 before NCLT, Ahmedabad Bench (later on NCLT, Indore Bench was formed and the matter was transferred to NCLT, Indore Bench) seeking sanction of the proposed Scheme of Amalgamation. The Tribunal (Ahmedabad Bench), by order dated 19.11.2018, admitted the aforesaid petition and directed the issuance of notices to the Regional Director, Registrar of Companies, Official Liquidator, and Income Tax Authority informing the date of hearing.

The Tribunal (Ahmedabad Bench) also directed the publication of notice of hearing of the petition in newspapers not less than 10 days before the fixed date of hearing, calling for objections, if any, on or before the date of hearing. Following are the newspapers in which publication was needed to be published:

(i) “Prabhat  Kiran”  Ujjain  edition  in  Hindi  and  “Free  Press” Ujjain Edition in English vernacular, in respect of M/s Famous Vanijya Pvt. Ltd. (petitioner transferor company 1).

(ii) “Free Press” Indore edition in respect of M/s Flag Synthetics Ltd. (petitioner transferor company 2).

(iii) “Prabhat  Kiran”  Ujjain  edition  in  Hindi  and  “Free  Press” Ujjain edition in English vernacular, in respect of M/s Navyug Vyapaar Pvt. Ltd. (petitioner transferor company 3).

(iv) “Indian  Express”  Ahmedabad  edition  in  English  and “Sandesh” Ahmedabad edition in Gujarati vernacular in respect of M/s Dwarkesh Finance Ltd. (transferee company).

The petitioner companies submitted that the notice of hearing of the petition was published as per the order of this Tribunal. The affidavit of service and publication along with necessary proof of services is filed and the same is placed on record.

In response to the notice received from the petitioner companies, the Official Liquidator (OL) has submitted his separate report dated 31.01.2018 with respect to the petitioner companies wherein the OL has made the following observations:

(i) At para 13, the OL has observed that the share exchange ratio as mentioned in clause 12 of the Scheme is not tallied with the valuation report submitted by the Chartered Accountant M/s Anand Maheshwari & Co. of the petitioner transferor companies and transferee company. Further, the net asset value taken in the valuation report is lower by an equivalent amount and consequently, the value per share is proportionately on the lower side.

(ii) At para 14, the OL has observed that a complaint was received from the Income Tax Department against the Scheme, in which the Income Tax Department had opined that: “the interconnection of various entities of the group and inter-circulation of transactions/amounts, if any, within the group and its possible future impact are to be examined. In view of the same, it would not be in the interest of the Revenue, if these companies are allowed to be amalgamated. Further, the amalgamation may be a colorable device to give legitimacy to the funds introduced through layering. Also, after amalgamation, the status of the entities will be changed forever, which may make an adverse impact on the ongoing and future proceedings against the said entities therefore, the Scheme of amalgamation may kindly not be allowed at least at this stage.”

(iii) At para 17, the OL has prayed that directions may be given to the petitioner companies to take the responsibility in respect of payment of Income tax and other taxes.

(iv) At para 19, the OL has prayed that direction may be given to the transferee company to preserve the Books of Accounts, papers, and other records of the transferor companies and not to dispose of without prior permission of the Central Government as per the provisions of section 239 of the Companies Act, 2013.

(v) At para 20, the OL has prayed that directions may be given to the transferee company to comply with the requirements of accounting standards under section 133 of the Companies Act, 2013.

(vi) At para 21, the OL has prayed that directions may be given to the transferee company to ensure statutory compliance of all applicable laws.

Submissions made by the petitioner companies in response to the observations of the Official Liquidator are as follows:

(i) In response to the observation at para 13 of the OL, the petitioner companies has stated that there has been a typographical error while mentioning the share exchange ratio in clause 12 of the scheme of amalgamation and adverse inference can be drawn against the petitioner companies merely on the typographical error.

(ii) Share valuation is done as per Rule 11UA of the Income Tax Rules, 1962 which states that while deriving the Net Asset Value of any share, the components of Income Tax in the form of Advance Tax/TDS/Provision for Tax payable should not be considered. Therefore, CA Anand Maheshwari while arriving at the share exchange ratio has clearly recommended the fair exchange ratio with reasons at point no. 6 of the certificate.

(iii) In response to the observation at para 14 of the OL, the petitioner companies has stated that the survey proceedings under section 133-A is conducted by the Income Tax Department during its regular course of work and thereafter a general assessment under section 143(3) is carried out after the survey proceedings. It is further submitted that the Income Tax Department can reopen the assessment proceedings against the assessee pursuant to survey under section 133-A only upon serving a notice under section 143(3) to that assessee for the relevant assessment year, whereas in the present matter the petitioner companies have not received any notice till date for the assessment year under survey. There is no assessment proceedings pending against the petitioner companies and thus the Income Tax liabilities qua the petitioner companies have been crystallized. Hence, it will not be prejudicial to the revenue if the present scheme of amalgamation will be allowed.

(iv) There is no block assessment under section 158BC of the Income Tax Act, 1961 against any of the petitioner companies initiated as the block assessment can only be initiated by the Income Tax Department only in case of search and seizure operations conducted under section 132 of the Income Tax Act, 1961. The petitioner companies and transferee company undertake full responsibility to cooperate and extend full support to the Income Tax Department in relation to the survey and reassessment proceedings against the petitioner transferor companies.

(v) In response to the observation at para 17 of the OL, the transferee company undertakes full responsibility in respect of payment of Income Tax or any other tax liability.

(vi) In response to the observation at para 19 of the OL, the transferee company undertakes full responsibility to preserve all the books, registers, papers, vouchers, etc. pertaining to all the petitioner transferor companies for future need and reference.

(vii) In response to the observation at para 20 of the OL, the transferee company undertakes responsibility to comply with the requirements of accounting standards under section 133 of the Companies Act, 2013.

(viii) In response to the observation at para 21 of the OL, the transferee company undertakes responsibility to ensure to comply with the statutory compliances of all applicable laws.

In response to the notice served upon the Regional Director (RD) and the Registrar of Companies (ROC), a combined representation was filed by the RD dated 25.01.2022 with respect to the petitioner companies and made the following observations:

(i) At para 2 (d), the RD has observed that the share exchange ratio reported in clause 12.1 of the Scheme is not in accordance with the share exchange ratio recommended by the valuer vide his valuation report dated 21.03.2018.

(ii) At para 2 €, the RD has observed that as per clause 11 of the scheme the authorized share capital of the transferor companies shall be added to the authorized share capital in the transferee company. Hence, the transferee company is to pay the fee on the enhanced share capital.

(iii) At para 2 (g) the RD has observed that the authorized share capital of the transferee company is not sufficient to issue the share to the shareholders of the transferor companies. Hence, the transferee company is required to enhance its authorized share capital and comply with the provisions of section 61 r.w. section 64 of the Companies Act, 2013, and make the payment of stamp duty, registration fees/additional fees, etc.

(iv) At para 2 (h) the RD has observed that the secured charge was created by the petitioner transferor company no. 3 on 24.05.2019, after the order dated 16.07.2018 of the Tribunal i.e, the first motion order. In this regard, the petitioner transferor company no. 3 is to take consent from secured creditor RBL Bank Ltd. and place on record all the relevant facts of the matter.

(v) At para 2 (j) the RD has observed that the transferee company being registered as NBFC was engaged in NBFI activities. In this regard, RBI had warned the transferee company vide letter dated 16.10.2015 to abide by the provisions of the RBI Act, 1934 and not to carry out any NBFI activities in the future, without obtaining a certificate of registration from the Bank.

(vi) At para 2 (k) the RD has observed that as per clauses 17.1 and 17.2 of the scheme proposed that the registered office of the transferee company without any further act, things or deed shall stand transfered and shifted to the state of Madhya Pradesh from the jurisdiction of Registrar of the Companies, Gujarat, Dadar & Nagar Haveli. The transferee company is required to follow all the procedures laid down under sections 12, 13, and 14 of the Companies Act, 2013, and other applicable rules for shifting the registered office.

(vii) ROC, Gwalior in its report dated 09.10.2018 submitted that there are no complaints against the petitioner transferor companies and there is no complaint/representation against the scheme of Amalgamation.

(viii) ROC, Ahmedabad in its report dated 25.09.2018 in respect of the transferee company submitted that there are no complaints against the transferee company and there is no complaint/representation against the scheme of amalgamation.

Submissions made by the petitioner companies in response to the observations of the Regional Director are as follows:

(i) In response to the observation at para 2 (d) of the RD, the petitioner company has stated that the equity shareholders of all the companies have approved the scheme unanimously and have approved the share exchange ratio as decided in the scheme. There is no substantial variation or derivation as suggested in the report of the RD.

(ii) In response to the observation at para 2 (e ) & (g) of the RD, it has been stated that all the transferor companies have paid the stamp duty on respective authorized capital and hence there is no requirement to pay further stamp duty on the same. Further in response to compliance with section 61 r.w. section 64 of the Companies Act, 2013, in this regards the transferee company undertakes to comply with the said provisions, and if the stamp duty and registration fees are required to be paid the same shall be paid for the purpose of allotment of equity shares.

(iii) In response to the observation of RD at para 2 (h), it has been submitted that the transferor company no. 3 is a going concern like other petitioner companies and in the ordinary course of business has availed the finance from RBL Bank Ltd which is admitted after the first stage order i.e. 16.07.2018. After sanctioning the scheme, the transferor companies shall get merged with the transferee company along with the assets and liabilities and the charge created shall not be getting modified. The consent of the secured creditor is not required as the banker/lender is fully conversant with the pending petition seeking sanction of the scheme of amalgamation. Moreover, the transferor company 3 in abundant caution has got no objection from the RBL Bank.

(iv) In response to the observation of RD at para 2 (j) it has been submitted that it has already complied with the RBI guidelines. Further, the transferee company is not engaged in NBFC activities.

(v) In response to the observation of the RD at para 2 (k), it has been submitted that the transferee company undertakes to comply with provisions of sections 12, 13, and 14 of the Companies Act, 2013 and applicable rules.

Regional Director as well as the Official Liquidator also submitted that the related legal fees/expenses, for submitting the report and representing the matter may be paid by the Petitioner Companies.

Considering the above reply filed by the petitioner companies, the observations made by the Regional Director, Registrar of Companies, and the representation of the Official Liquidator stand satisfied.

It has been submitted by the learned advocate appearing for the petitioner companies that the scheme is not against public policy. It has also been stated that it will not adversely impact any unsecured creditors, and there are no secured creditors of the petitioner companies. It has also been submitted that all statutory obligations under all applicable laws shall be complied with.

On the basis of the above facts and submissions made by the learned PCS and after considering the entire facts and circumstances of the aforesaid company petition and on perusal of the scheme and the proceedings, it is noted that the requirements of the provisions of section 230 and 232 are satisfied by the petitioner companies. We are of the considered view that the proposed scheme of amalgamation is bona fide and in the interest of the shareholders and creditors. As the result, company petition No. CP (CAA) No. 125 of 2018 is allowed. The Scheme envisaging the amalgamation of M/s Famous Vanijya Private Limited  (Transferor Company 1), M/s Flag Synthetics Limited (Transferor Company 2) and, M/s Navyug Vyapaar Private Limited (Transferor Company 3) with M/s Dwarkesh Finance Limited (Transferee Company) is hereby sanctioned. The said Scheme will have to be effective from the date of appointment as set out in the Scheme, subject to approval from NCLT, Ahmedabad Bench in respect of transferee company. It is declared that the said sanctioned scheme shall be binding on the petitioner companies and their shareholders, creditors, and all concerned under the scheme.

Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule, or regulation, the sanction granted by this Tribunal to the scheme 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 petitioners

While approving the Scheme as above, we further clarify that this order should not be construed as an order in granting any exemption from payment of stamp duty, taxes including income tax, GST, etc., or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance with any other requirement which may be specifically required under any law.

This Tribunal order as under:

I. The scheme of arrangement envisaging the amalgamation of M/s Famous Vanijya Private Limited (Transferor Company 1), M/s Flag Synthetics Limited (Transferor Company 2) and, M/s Navyug Vyapaar Private Limited (Transferor Company 3) with M/s Dwarkesh Finance Limited (Transferee Company) as annexed herewith as “Annexure A” is hereby sanctioned and it is declared that the same shall be binding on the petitioner companies and their shareholders and creditors and all concerned under the scheme. However, this sanction is subject to approval of the scheme from NCLT, Ahmedabad Bench in respect of transferee company.

II. It is declared that the petitioner transferor companies shall be dissolved without winding up.

III. All the property annexed herewith as “Annexure B”, rights and power of the petitioner transferor companies specified in the schedule hereto, and all the other property, rights, and powers of the petitioner transferor companies be transferred without further act or deed to the transferee company.

IV. All the liabilities and duties of the petitioner transferor companies be transferred without further act or deed to the petitioner transferee company and accordingly the same shall pursuant to section 232 of the Act become the liabilities and duties of the transferee company.

V. All proceedings, if any, now pending or against the petitioner transferor companies be continued by or against the transferee company.

VI. The petitioner companies within thirty days of the date of receipt of this order, cause a certified copy of this order to be delivered to the Registrar of Companies for registration and on such certified copy being so delivered, the entire undertaking of the petitioner transferor companies shall stand transferred to the transferee company and the Registrar of Companies shall place all documents relating to the petitioner transferor companies to the file kept by him in relation to the transferee company and the files relating to the said companies shall be treated accordingly.

VII. The petitioner companies are further directed to file a copy of this order along with the copy of the scheme with the concerned Registrar of Companies, electronically, along with e-form INC-28 in addition to a physical copy within 30 days from the date of issuance of the certified copy of the Order by the Registry as per relevant provisions of the Act.

VIII. All concerned Authorities to act on a copy of this order along with the scheme authenticated by the Registrar of this Tribunal, and the Registrar shall issue the certified copy of this order along with the Scheme immediately.

IX. The petitioner companies are directed to lodge a copy of this Order and the approved Scheme and Schedule of Assets of the petitioner transferor companies attached as Annexure-B with this order, duly authenticated by the Registrar of this Tribunal, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, within 60 days from the date of the Order.

X. The legal fees and expenses of the office of the Regional Director are quantified at Rs 10,000/- with respect to each of the petitioner companies. The said fees to the Regional Director shall be paid by the petitioner transferee company.

XI. The legal fees and expenses of the office of the Official Liquidator are quantified at Rs 10,000/- with respect to each of the petitioner transferor companies. The said fees to the Official Liquidator shall be paid by the petitioner transferor company.

Any person aggrieved shall be at liberty to apply to the Tribunal in the above matter for any direction that may be necessary.

The Company Petition CP (CAA) No. 125 of 2018 connected with CA (CAA) No. 64 of 2021 is disposed of. No order as to costs.