Frontier Steel Components Limited Vs

Shyam Babu Gautam, Member Technical

Heard the learned Counsel for the Petitioner Companies and the representative of the Regional Director Western Region, Ministry of Corporate Affairs, Mumbai. No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition.

The sanction of the Tribunal is sought under sections 230 to 232 of the Companies Act, 2013 read with the Composite Scheme of Arrangement between Frontier Steel Components Limited (Transferor Company 1) and Atubha Tech Limited (Transferor Company 2) and Edwell Infrastructure Hazira Limited (Transferor Company 3/ Transferee Company 1) and Bhagwat Power Salaya Limited (Transferor Company 4 having jurisdiction with NCLT Ahmedabad Bench) and Essar Steel Metal Trading Limited (Transferee Company 2 having jurisdiction with NCLT Ahmedabad Bench) and their respective Shareholders and Creditors. The Petitioner Companies are having its registered offices within the jurisdiction of this Hon’ble Tribunal, further the Transferor Company -4 and Transferee Company 2 are having the registered offices within the jurisdiction of Hon’ble Tribunal, Ahmedabad bench.

The Counsel for the Petitioner Companies further submitted that the First Petitioner Company was incorporated to carry on the business of manufacturing, fabricating, assembling, buying, selling, marketing, importing, exporting etc of all types of components parts of automobiles, vehicles, machineries, construction sites and projects, Ship and sea faring vessels. Currently it is not engaged in any business activities.

The Counsel for the Petitioner Companies further submitted that the Second Petitioner Company was incorporated to carry on the business providing information technology services including system integration, application development and managed services for contact centers, telecom companies and to design, develop, provide market, act as global consultant to carry on the business of export and to deal in computer and communication hardware, software including system software plant, and dealing in all types of information technology services software, hardware, applications etc. Currently it is not engaged in any business activities.

The Counsel for the Petitioner Companies further submitted that the Third Petitioner Company was incorporated to carry on the business of to develop multi-product Special Economic Zone at Hazira, obtain necessary approvals from concerned state and central government as is required, comply with local laws, rules and regulations, develop the SEZ, provide, maintain, operate infrastructure and other facilities for the smooth operation of unite in the SEZ, to assist units in obtaining approvals for operating as SEZ units in the said zone, to provide consultancy, engineering and operational help in operation of the SEZ and related activities, and also to carry on the business of proprietors, of lands, fiats, maisonettes, dwelling houses, shops, offices, Industrial Estates, Lessees of lands, flats and other immovable properties and for these purposes to purchase, take on lease or otherwise acquire and hold any lands or buildings of any tenure or description wherever situate, or rights or interest therein or connected therewith, to repair building sites and to construct reconstruct, pull down, alter improve decorate and furnish and maintain flats, maisonnettes, dwelling houses, shops, offices, buildings industrial estates, works and conveniences of all kinds, to lay out roads etc. Currently it is not engaged in any business activities.

The Board of Directors of the Petitioner Companies have approved the said Scheme in their respective Board Meetings held on 14th Day of March, 2022, the copies of the Board Resolution passed by the respective board of Directors of the Petitioner Companies are annexed to the Company Scheme Petition as Annexure D (Colly).

The Appointed Date as mentioned in the Scheme is 1st day of April 2021.

The Learned Counsel appearing on behalf of the Petitioner Companies stated that the Petition have been filed in consonance with the order dated 23rd Day of September, 2022, passed by this Tribunal in the connected Company Scheme Application bearing C.A.(CAA)/95/MB-II/2022.

The Learned Counsel appearing on behalf of the Petitioner Companies has stated that the Petitioner Companies have complied with all requirements as per directions of this Tribunal and they have filed necessary affidavits of compliance in this Tribunal. Moreover, the Petitioner Companies undertake to comply with all the statutory requirements, if any, as may be required under the Companies Act, 2013 and the Rules made there under. The said undertaking is accepted by the Petitioner Companies.

The Learned Counsel for the Petitioner Companies states that, by sanction of this The Amalgamation of the Transferor Company 1 and Transferor Company 2 with the Transferor Company 3/Transferee Company 1; And the Amalgamation of the Transferor Company 3 /Transferee Company 1 and Transferor Company 4 with the Transferee Company 2, would inter alia have the following benefits:

i. The Transferor Company 1, Transferor Company 2 are the wholly-owned subsidiaries of Transferee Company 1 and; the Transferor Company 3, Transferor Company 4 are the wholly-owned subsidiaries of Transferee Company 2;

ii. All the Companies are under the same management, the amalgamation of the Transferor Company 1 and Transferor Company 2 with the Transferor Company 3 /Transferee Company 1 and the Amalgamation of Transferor Company 3 and Transferor Company 4 with the Transferee Company 2 will remove inefficiencies and result in simplification, streamlining and optimization of the group structure and efficient administration;

iii. Benefit Shareholders and other stakeholders of the respective companies by consolidating and simplifying the group structure, business operations, provide optimal utilization of various resources and eliminating cross holdings within the group;

iv. Enhance growth prospects, reduce overheads, administrative, managerial and other costs and expenditure and remove inefficiency;

v. Result in improved shareholder value for the shareholders of the respective companies, thus providing a stronger and wider capital and financial base for future growth/expansion of the Transferee Company 2;

vi. Post-Amalgamation of Transferor Company 1 and Transferor Company 2 with the Transferor Company 3 /Transferee Company 1 and the Amalgamation of Transferor Company 3 and Transferor Company 4 with the Transferee Company 2, all the Transferor Companies shall stand dissolved. Consequently, there would be lesser regulatory and legal compliance obligations including accounting, reporting requirements, statutory requirements, tax filings, company law requirements, etc. and therefore reduction in administrative costs.

vii. Reduction in value of CCD’s will reduce liability to the extent of Rs. 60 per debenture and as proposed in the Composite Scheme it will get adjusted against accumulated losses which will result in more true and fair view of the financial position of ESMTL.

The Learned Counsel for the Petitioner Companies states as the Transferor Company 1 and Transferor Company 2 are the wholly-owned subsidiaries of the Transferee Company 1, no consideration shall be payable pursuant to the Composite Scheme of Arrangement for the Amalgamation of the Transferor Company 1 and Transferor Company 2 with the Transferee Company 1, and the shares held by the Transferee Company 1 in the Transferor Company 1 and Transferor Company 2 shall stand cancelled without any further act, application or deed, further as the Transferor Company 3 and Transferor Company 4 are the wholly-owned subsidiaries of the Transferee Company 2, no consideration shall be payable pursuant to the Composite Scheme of Arrangement for the Amalgamation of the Transferor Company 3 and Transferor Company 4 with the Transferee Company 2, and the shares held by the Transferee Company 2 in the Transferor Company 3 and Transferor Company 4 shall stand cancelled without any further act, application or deed.

The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai has filed its Report dated 25th Day of April, 2023, inter alia stating therein the observations on the scheme as stated in paragraph IV (a) to (g) of the said Report. In response to the observations made by the Regional Director, the Petitioner Companies have filed reply affidavit cum rejoinder on 26th Day of April, 2023 and have given necessary clarifications and undertakings. The observations made by the Regional Director and the clarifications and undertakings given by the Petitioner Companies are summarized in the table below:

Sr. No.

RD Report /Observations

Response of the Petitioner Companies

a)

In compliance of AS-14 (IND AS-103), the Petitioner Companies 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.

In so far as observations made in paragraph 2(a) of the Report is concerned, the Petitioner Companies undertake to pass necessary accounting entries in connection with the Scheme as per AS -14 (IND AS-103) for accounting treatment, to the extent applicable. The Petitioner Companies also undertake to comply with the other applicable Accounting Standards, such as AS-5 (IND AS-8) etc., to the extent applicable.

b)

As per Definition of the Scheme, "Appointed Date" means the 1st day of April, 2021 for the purposes of Section 230 and 232(6) of the Companies Act, 2013; And

"Effective Date" means the last of the dates, if applicable, on which the certified or authenticated copy(ies) of the order(s) sanctioning the Composite Scheme passed by the National Company Law Tribunal at Mumbai for Transferor Company 1, Transferor Company 2 and Transferor Company 3/ Transferee Company 1 and order(s) sanctioning the Composite Scheme passed by the National Company Law Tribunal at Ahmedabad for Transferor Company 4 and Transferee Company 2, is filed with the Registrar of Companies Maharashtra, Mumbai and Registrar of Companies, Ahmedabad respectively.

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.

Appointed date is antedated for more than 2 years; therefore, petitioner may be directed to alter appointed date.

The Petitioners may be asked to comply with the requirements as clarified vide circular no. F. No. 7/12/2019/CL-I dated 21.08.2019 issued by the Ministry of Corporate Affairs.

In so far as the observations made in paragraph 2(b) of the Report is concerned, the Petitioner Companies confirm and clarify as under:

i. As per the clause 1.5 of Part A of the Composite Scheme, “Appointed Date” means 1st day of April 2021, for the purposes of Section 230 and 232(6) of the Companies Act, 2013.

ii. As per the clause 1.10 at Part A of the Composite Scheme specifies the “Effective Date” means the last of the date, if applicable, on which the certified or authenticated copy(ies) of the order(s) sanctioning the Composite Scheme passed by the National Company Law Tribunal at Mumbai for Transferor Company 1, Transferor Company 2 and Transferor Company 3/ Transferee Company 1 and order(s) sanctioning the Composite Scheme passed by the National Company Law Tribunal at Ahmedabad for Transferor Company 4 and Transferee Company 2, is filed with the Registrar of Companies Maharashtra, Mumbai and Registrar of Companies, Ahmedabad respectively.

iii. The Petitioner Companies states that the original Composite Scheme was presented before this Tribunal on 31st day of March, 2022 by mentioning the Appointed Date as 1st day of April, 2021. As per circular no. F. No. 7/12/2019/CL-I dated 21.08.2019 issued by the Ministry of Corporate Affairs, the Scheme was filed/ presented before this Hon’ble NCLT within one year of the Appointed Date. i.e. 1 st Day of April, 2021, hence they are in compliance with the requirements of the Circular no. F. No. 7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs.

c)

Petitioner Company have to undertake to comply with section 232(3)(i) of Companies Act, 2013, where the transferor company is dissolved, the fee and stamp duty paid by the transferor company on its authorised capital shall be set-off against fees and stamp duty payable by the transferee company on its authorised capital subsequent to the amalgamation and therefore, petitioners to undertake that the transferee company shall pay the difference of fees and stamp duty.

In so far as observations made in paragraph 2(c) of the Report is concerned, the Petitioner Companies undertake that it shall comply with the provisions of Section 232(3)(i) of the Companies Act, 2013 as regards to the combination of Authorised share capital, where the Transferor Companies are dissolved and the fees, if any, paid by the Transferor Companies on their Authorised share capital shall be set-off against any fees payable by the Transferee Company 2 on its Authorised share capital subsequent to the Composite Scheme of Arrangement, the remaining fee, if any after setting-off the fees already paid by the transferor companies on their authorized capital, will be paid by the Transferee Company 2.

d)

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 7 subsection (3) to (5) of Section 230 of the Act and the Minutes thereof are duly placed before the Tribunal

In so far as observations made in paragraph 2(d) the Petitioner Companies states that the Hon’ble NCLT, Mumbai bench vides its Order dated 23rd Day of September, 2022 passed in C.A. (CAA)/95/MB/2022 directed the Petitioner Companies to dispensed from calling the Meeting of the Equity Shareholders of the First, Second and Third Petitioner Transferor Companies in view of the consent affidavit filed by the respective Equity Shareholders of the First, Second and Third Petitioner Transferor Companies, further this Hon’ble Tribunal directed the First, Second and Third Petitioner Transferor Companies to conduct the Meeting of the Unsecured Creditors of on 16th Day of November, 2022 at 10:00 A.M., 12:00 Noon and 3:00 P.M., respectively, and to conduct the Meeting of the Debenture Holders of First, Second and Third Petitioner Transferor Companies on 16th Day of November, 2022 at 11:00 A.M., 2:00 P.M., and 4:00 P.M., respectively, at the registered Office of the Petitioner Companies, accordingly the meeting of the Unsecured Creditors and Debenture Holders of the Petitioner Companies were held as per the given directions mentioned in the Order and the Composite Scheme was approved by the requisite majority of Unsecured Creditors and Debenture Holders at their respective Tribunal Convened Meeting. The Petitioner Companies further states that the Chairman’s report along with the scrutinizers’ report in form of minutes of the Tribunal Convened Meeting of the Unsecured Creditors and Debenture Holders were duly filed before this Hon’ble Tribunal on 7th day of December 2022.

Therefore, this Composite Scheme is approved by the requisite majority of Unsecured Creditors and Debenture Holders as per Section 230(6) of the Act in meetings duly held in terms of Section 230(1) read with 7 subsection (3) to (5) of Section 230 of the Act and the Minutes thereof are duly placed before the Tribunal.

e)

The Petitioner Company states that the Transferee Company shall be in compliance with provisions of Section 2(1B) of the Income Tax Act, 1961. In this regards, the petitioner company shall ensure compliance of all the provisions of Income Tax Act and Rules thereunder.

In so far as observations made in paragraph 2(e) the Petitioner Companies states that the Petitioner Companies shall be in compliance with provisions of Section 2(1B) of the Income Tax Act, 1961. In this regard, the petitioner companies shall ensure compliance of all the provisions of Income Tax Act, 1961 and Rules thereunder including provisions of Section 2(1B) of the Income Tax Act, 1961, to the extent applicable.

f)

It is observed that Transferor Company-4 and Transferee Company-2 are situated in the state of Gujarat and falls under the jurisdiction of Hon'ble NCLT of Gujarat, therefore, petitioner companies may be directed to take similar approval from Hon'ble NCLT of Gujarat.

In so far as observations made in paragraph 2(f), the Petitioner Companies states that the Registered Office of the Transferor Company - 4 and Transferee Company - 2 are situated in the state of Gujarat, hence the jurisdiction for filing the Application for approving the said Composite Scheme of Arrangement falls within the Hon'ble NCLT Ahmedabad bench, accordingly the Transferor Company - 4 and Transferee Company 2 have filed a joint Company Scheme Application and joint Company Scheme Petition on 1st Day of April, 2022 and on 22nd Day of August, 2022, respectively. Further, the Company Scheme Petition filed by the Transferor Company 4 and Transferee Company 2 was admitted by the Hon’ble NCLT, Ahmedabad bench on 6th Day of September, 2022 and the matter is listed for final hearing on 24th Day of April, 2023.

g)

That on examination of the report of the Registrar of Companies, Mumbai dated companies fall with the 10.01.2023 (Annexed as Annexure A-I) that all the Petitioner Companies fall within the jurisdiction of ROC, Mumbai except Transferor Company-4 and Transferee Company-2 jurisdiction of these two jurisdiction of ROC, Ahmedabad. It is submitted that no complaint and /or representation regarding the proposed scheme of Amalgamation has been received against the Petitioner Companies, which falls under the jurisdiction of ROC, Mumbai. Further, the petitioner companies (having jurisdiction of ROC, Mumbai) have filed Financial Statements up to 31.03.2021 further observations in ROC report are as under:- a) That the ROC Mumbai in his report dated 10.01.2023 has stated that no Inquiry, inspection, investigation & prosecution is pending against the subject applicant companies. b) It is submitted that as per the provisions of Section 232(3)(1) of the 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 authorized capital subsequent to the amalgamation. Therefore, remaining fee, if any after setting-off the fees already paid by the transferor company on its authorized capital, has to be paid by the transferee Company on the increased authorized capital subsequent to the amalgamation. c) Interest of the Creditors should be protected.

d) May be decided on its merit.

In so far as the observation under paragraph 2(g) of the Report is concerned, the Petitioner Companies herein below reply to the observation of the Registrar of Companies, Maharashtra, Mumbai, as stated in the Report of the Regional Director, Western Region Mumbai:

i. Response to observation in paragraph 2(g)(i): The Petitioner Companies state that the observation of Registrar of Companies, Maharashtra Mumbai is self-explanatory and clarifies that no Inquiry, inspection, investigation & prosecution is pending against the Petitioner Companies;

ii. Response to observation in paragraph 2(g)(ii): The Petitioner Companies undertake that it shall comply with the provisions of Section 232(3)(i) of the Companies Act, 2013 as regards to the combination of Authorised share capital, where the Transferor Companies are dissolved and the fees, if any, paid by the Transferor Companies on their Authorised share capital shall be set-off against any fees payable by the Transferee Company 2 on its Authorised share capital subsequent to the Amalgamation, the remaining fee, if any after setting-off the fees already paid by the Transferor Companies on their authorized capital, will be paid by the Transferee Company 2.

iii. Response to observation in paragraph 2(g)(iii): The Petitioner Companies state that the interest of the Creditors will be protected.

iv. Response to observation in paragraph 2(g)(iv): The Petitioner Companies state that the said Composite Scheme to be decided on its merit.

The Official Liquidator has filed his report on inter alia stating therein that the affairs of the Transferor Companies have been conducted in a proper manner and the Scheme is not prejudicial to the interest of public and the Shareholders of the Transferor Companies. Accordingly, the Transferor Companies may be ordered to be dissolved without winding up.

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 contrary to public policy.

All the assets and liabilities including taxes and charges, if any and duties of the Transferor Companies, shall pursuant to section 232 of the Companies Act, 2013, be transferred to and become the liabilities and duties of the Transferee Company 2.

Since all the requisite statutory compliances have been fulfilled, Company Petition bearing C.P.(CAA)/3/MB/2023 filed by the Petitioner Companies is made absolute in terms of prayers clause of the said Company Scheme Petition.

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, electronically, along with e-Form INC-28 in addition to physical copy, within 30 days from the date of receipt of order, duly certified by the Deputy Registrar or the Assistant Registrar, as the case may be, of this Tribunal.

The Petitioner Companies to lodge a certified copy of this order and the Scheme duly authenticated by the Deputy Registrar or the Assistant Registrar, as the case may be, of this Tribunal, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same within 60 days from the date of receipt of the order.

All concerned regulatory authorities to act on a copy of this order duly certified by the Registry of this Tribunal, along with a copy of the Scheme.

The Composite Scheme of Arrangement is hereby sanctioned, and the appointed date of the Scheme is fixed as 1st day of April, 2021. The Scheme shall be operative from the “Effective Date” as per the provisions of the Scheme.