Himratna Terpenes Private Limited vs Registrar of Companies

Shyam Babu Gautam, Member Technical

The court is convened by video conferencing.

Heard the learned counsel for the Petitioner Companies. None appears before this Tribunal to oppose the Scheme of Amalgamation between Himratna Terpenes Private Limited (“the Transferor Company”) with Himalaya Terpenes Private Limited (“the Transferee Company). The sanction of this Tribunal is sought under Section 230 to 232 of the Companies Act, 2013, to a Scheme of Amalgamation between Himratna Terpenes Private Limited (“the Transferor Company”) with Himalaya Terpenes Private Limited (“the Transferee Company.

The Transferor Companies and Transferee Company have approved the said Scheme of Amalgamation by passing the Board Resolutions at their respective board meetings held on 3rd January, 2018, which are annexed to the Petitioner’s Joint Company Scheme Petitions. The Learned Counsel for the Petitioner Companies state that the Joint Company Scheme Petition has been filed in consonance with the order dated 8th March, 2019, wherein NCLT Order dated 8th March, 2019 was rectified by NCLT Court No. II having Coram of Hon’ble Shri H.P. Chaturvedi, Hon’ble Member (Judicial) & Hon’ble Shri Ravikumar Duraisamy, in Company Application 50/2021 on 8th June, 2021 in the Company Application bearing C.A.(C.A.A.)/797/2018.

The main objects of the Transferee as set out in its Memorandum of Association is to manufacture, produce, process, use, buy, sell, supply distribute or otherwise acquire store, stock, maintain or otherwise handle deal in and dispose of engage in business of import export and manufacture all kind and varieties of pharmaceutical intermediate or chemicals fine chemical heavy chemical natural and synthetic chemical of organic and inorganic types other chemical products and trading of various chemicals, related products and allied activities for the various industries, consumers & end users.

The amalgamation of the Transferor Company with the Transferee Company would, inter-alia, have the following benefits:- achieving operational and management efficiency by way of consolidation of business; consolidation and simplification of the group structure; lesser regulatory and legal compliance obligations including accounting, reporting requirements, statutory and internal audit requirements, tax filings, company law requirements at present to be carried out by the Transferor Companies and the Transferee Company. The merger of the Transferor Company with the Transferee Company shall provide greater financial strength to the business of the Petitioner Companies. The financial resources of the Petitioner Companies will be conveniently merged and pooled together leading to a more effective and centralized management and reduction of administrative and manpower expenses and overheads, which are presently being multiplicated because of separate entities.

The capital structure of the Transferor Company is as below:

Authorized

Amount(Rs.

50,000 Equity Shares of Rs.100/-each.

TOTAL

50,00,000

Issued, Subscribed & Paid-up 2,000 Equity Shares of Rs.100/- each fully paid-up

2,00,000

TOTAL

2,00,000

The capital structure of the Transferee/Amalgamated Company is as given below:

Authorized

Amount(Rs.)

25,000 Equity Shares of Rs.100/-each

25,00,000

TOTAL

25,00,000

Issued, Subscribed & Paid-up

25,000 Equity Shares of Rs. l00/-each fully Paid-up

25,00,000

TOTAL

25,00,000

The averments made in the petitions and the submissions made by the Learned Counsel for the Petitioners that the Petitioner Companies had complied with all the requirements as per directions of the Tribunal and they have filed necessary Affidavits of compliance in this Tribunal. Moreover, the Petitioner Companies undertakes to comply with all statutory requirements, if any, as required under the Companies Act, 2013 and the Rules made there under whichever is applicable.

The Regional Director has filed its report on 31st January 2022 stating therein that save and except as stated in paragraph IV (a) to (h) of the said Report, it appears that the Scheme is not prejudicial to the interest of shareholders and public.

Paragraph IV, of the said report reads as follows:

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.

b) As per Definition of the Scheme,

"Appointed Date" means 3rd January 2018 or such other date as the Hon’ble Tribunal Mumbai or other competent authority may otherwise direct/fix.

"Effective Date" means the date on which certified copies of the Order(s) of the Hon’ble Tribunal Mumbai vesting the assets, properties, liabilities, rights, duties, obligations and the like of the Transferor Company in the Transferee Company are filed with the Registrar of Companies, Maharashtra, Mumbai, after obtaining the necessary consents, approvals, permissions, resolutions, agreements, sanctions and orders in this regard.

It is observed that proposed Appointed date 3-1-2018 is antedated for almost 4 years, therefore, petitioner company may be directed to amend its Appointed date.

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.

Further, 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.

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, 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 and therefore, petitioners to affirm that they comply the provisions of the section.

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

e) Clause-11.2 of Accounting Treatment of the scheme; stated that If there is any surplus arising as a result of the difference, if any, of the value of the assets over the value of the liabilities of the Transferor Company, in accordance with this Scheme, the same shall be credited to the Capital Reserve Account of the Transferee Company and in the event of deficit, if any, the same shall be debited to the Goodwill Account of the Transferee Company.

In this regard it is submitted that as per Accounting Standard 14, such surplus if any arising out of the scheme should be credited to the Capital Reserve arising out of amalgamation and deficit if any arising out of the same shall be debited to Goodwill Account of the Transferee Company. Such Capital Reserve, arising out of the amalgamation shall not be considered as free reserve and not available for distribution of dividend.

f) 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;

g) It is observed that the Transferor Company is not showing revenue from operation for last 3 years of more, therefore, petitioner companies may be directed to submit that as to why transferor company should not be strike of u/s 248 of the Companies Act, 2013.

h) The Hon’ble Tribunal may kindly consider the report of ROC as narrated Para III (10) above and pass appropriate order.

In response to the report of the Regional Director, the Petitioner Companies have filed Affidavit in Reply/Rejoinder dated 31st January, 2022 & Additional Affidavit dated 27th June, 2022 submitted with NCLT vide e-filing No.- 2709138040882021 and have clarified as under:

a) As regards observations made in paragraph IV (a) of the Report of Regional Director is concerned, the Petitioner Companies undertakes that in addition to 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. to the extent applicable.

b) As regards observations made in paragraph IV (b) of the Report of Regional Director is concerned, the Petitioner Companies in so far as observations made in paragraph IV (b) of the Report of Regional Director is concerned, the Petitioner Companies clarify that the scheme shall be effective from the Appointed Date which is a specific date i.e., 03-01-2018.The scheme shall be effective from such Appointed Date but operative from Effective Date as defined in the Scheme. Further the scheme is in compliance with the circular no. F. No. 7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs, as the Scheme stated Appointed Date - 03-01-2018 in the present Scheme of Amalgamation. The Petitioner Companies again confirm that there is specific calendar date as ‘appointed date’ in the captioned matter which was also confirmed by the NCLT Order dated 8th June, 2021 of Court No. 2 in Company Application (CA) 50/2021 In C.A. (CAA) 797/MB/2018, which was attached as an "Annexure -1" to the Affidavit in Reply/Rejoinder dated 31st January, 2021 submitted with NCLT, wherein Hon'ble NCLT -Court No. 2 recorded the following observations:

"Further he brought to our notice that the appointed date was mentioned as 01.04.2019 be deleted which has been inadvertently noted and the correct appointed date is 03.01.2018 as per the scheme and be read as in the order. This prayer is also accepted by this Bench, in the Order dated 08.03.2019 henceforth the appointed date be read as 03.01.2018 instead of 01.04.2019."

Accordingly, the Petitioner Companies request to keep the Appointed Date as 03-01-2018. The Petitioner Companies confirm that the financial accounts of the Transferor Company have been merged with the Transferee Company w.e.f. 31st March, 2018 and "the Transferee Company" is continuous filing merged accounts of the Transferor & Transferee Company w.e.f. from the financial years ending/ended on 31-3-2018 with the Offices of Registrar of Companies & Income Tax and whereas "the Transferor Company" is also filing Zero/Nil returns w.e.f. from the financial years ending/ended on 31-3-2018 with the Offices of Registrar of Companies & Income Tax .

As regards observations of the Regional Director, as stated in paragraph IV (b) of the Supplementary Report of Regional Director is concerned, the Petitioner Companies confirm that that the appointed date is 03.01.2018.

c) As regards observations made in paragraph IV (c) of the Report of Regional Director is concerned, the 2nd Petitioner Company undertakes to comply with section 232(3)(i) of Companies Act, 2013 as regards to the combination of Authorized share Capital, 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 and therefore, the Second Petitioner affirms that it shall comply with the provisions of the said section;

d) As regards observations made in paragraph IV (d) of the Report of Regional Director is concerned, the Petitioner Companies submits that in accordance with the directions of NCLT vide order dated 8th March, 2019:

(i) On the 12/04/2019, meeting of equity shareholders of Petitioner/ Petitioner Companies was duly convened in accordance with the said NCLT Order, at the Registered Office of the company wherein National Company Law Tribunal, Mumbai Bench by an order dated 8-3-2019 was pleased to issue directions for convening of the meeting of the shareholders & secured creditors, to be presided over by Mr Shishir Anil Agarwal, as Chairman of the meeting. Accordingly, Mr. Shishir Anil Agarwal was the Chairperson in the meetings of equity shareholders and also one meeting of Secured Creditors of 2nd Petitioner Company and the Scrutinizer for the said meetings of the above Petitioner Companies were Mrs. Taruna Kumbhar, Practicing Company Secretary.

(ii) The Petitioner Companies have reported the result of the meeting of equity shareholders of all the Petitioner Companies and meeting of Secured & Unsecured Creditors of 2nd Petitioner Company/ Transferee Company to this Hon'ble Tribunal on 26.4.2019 wherein copies of the Chairman Reports of the said meetings of the equity shareholders and one meeting of Secured Creditors of 2nd Petitioner Company was annexed as an

Exhibit-'D' with the Company Scheme Petition 147 of 2021. In accordance with the Meeting of the Equity shareholders convened by NCLT of all the respective Petitioner Companies & and Secured Creditors of Transferee Company held on 12th April 2019, the respective Petitioner Companies have approved the Scheme of Amalgamation subject to the sanction of the National Company Law Tribunal, Mumbai Bench.

(e) As regards observations made in paragraph IV (e) of the Report of Regional Director is concerned, the Petitioner Companies to comply with Accounting Standard 14, such that the surplus if any arising out of the scheme that would be credited to the Capital Reserve Account arising out of amalgamation shall not be considered as free reserve and will not be available for distribution of dividend.

(f) As regards observations of the Regional Director, as stated in paragraph IV (f) of the Report of Regional Director is concerned, Section 2(1B) of the Income Tax Act, 1961 states that "amalgamation", in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that—

(i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation;

(ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation;

(iii) shareholders holding not less than three-fourths in value of the shares in the amalgamating/transferor company (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated/transferee company by virtue of the amalgamation, otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the Transferor company.

In this regard, Petitioner Companies confirm and clarify that the Transferee Company shall issue and allot its equity shares to the shareholders of the Transferor Company in the following proportion:

“Upon the Scheme becoming finally effective, in consideration of the transfer and vesting of the Undertaking of the Transferor Company in the Transferee Company in terms of the Scheme ,the Transferee Company shall, subject to the provisions of the Scheme and without any further application or deed, issue at Par and allot 23 (Twenty Three) Equity Share (s) of the face value of Rs.100/-(One Hundred ) each credited as fully Paid up in the Capital of the Transferee 'Company to the Shareholders of the Transferor Company whose names are recorded in its Register of Members, on a date to be fixed by the Board of Directors of the Transferee Company, for Every 5(Five) Equity Shares of the face value of Rs.100/-(Rupees One Hundred) each held by the said Shareholders in the Transferor Company.”

Therefore, pursuant to the Amalgamation all the shareholders of the Amalgamating Company shall become shareholders in the Amalgamated Company. Further as per clause 5(b) of the scheme provisions of Section 2(1B) of the Income Tax Act, 1961 shall prevail and the Scheme shall stand modified to the extent necessary to comply with Section 2(1B) of the Income Tax Act, 1961; such modifications to not affect other parts of the scheme. Hence, the scheme is fully in compliance of the Section 2(1B) of the Income Tax Act,1961.

(g) As regards observations of the Regional Director, as stated in paragraph IV (g) of the Report of Regional Director is concerned, the Petitioner Companies confirm that the accounts of the Transferor Company have been merged with the Transferee

Company w.e.f. 31st March, 2018 and "the Transferee Company" is continuous filing merged accounts of the Transferor & Transferee Company w.e.f. from the financial years ending/ended on 31-3-2018 with the Offices of Registrar of Companies & Income Tax and whereas "the Transferor Company" is also filing Zero/Nil return w.e.f. from the financial years ending/ended on 31-3-2018 with the Offices of Registrar of Companies & Income Tax . The Petitioner Companies confirm that they are filing merged accounts & continuously complying with the provisions of Companies Act & Income Tax Provisions as the Transferor Company has no revenue in its books of accounts.

As regards observations of the Regional Director, as stated in paragraph IV (g) of the Supplementary Report of Regional Director is concerned, the Petitioner Companies confirm that initially in the year 2012, the Petitioner Companies had planned to establish the new chemical manufacturing facility in the Transferor Company with the purchase of Agricultural land with an aggregate purchase consideration of Rs. 43,43,500. Thereafter, the Transferor Company was required to start the production in the said agricultural land within a period 10 years i.e. latest by the year 2022- 23, after completing the all the procedural & regulatory compliances including change of land use to industrial use otherwise the said agricultural land would have vested with the State Government with penalty to the Transferor Company & its Directors for non- starting the manufacturing activities by the year 2022- 23. Keeping in view of the size of the business of the Companies & to reduce the costs of the new project, the combination of the activities of the Transferor Company with the Transferee Company would result in administration and operational rationalisation, rationalisation in economics of scale, reduction in overheads and other expenses and more optimal utilization of various resources, as both the Companies are under the same Management and it would be advantageous to combine the activities and operations in a single Company. The amalgamation will enable the Transferee Company to consolidate the businesses and lead to synergies in operation and create a stronger financial base. The Transferee Company is also an MSME company vide Udyog Aadhaar Memorandum - MH18A0001628 and the Petitioner Companies are part of same Family. There is no outsider shareholding in the Petitioner Companies and the public interest are not affected at all. In order to take various regulatory & statutory approvals and business loans from HDFC Bank, the Petitioner Companies had to merge the financial statements/accounts of Transferor Company with Transferee Company which is subject to approval of NCLT Mumbai Bench in due course. Along with merging of these accounts, the transferor company has also maintained their separate accounts which were regularly filed with ROC Mumbai. Earlier, Business Loan was applied to Yes Bank but Yes Bank refused to sanction the loan on project due to the fact that Land was not in the name of Transferee Company. Hence, the Petitioner Companies approached HDFC Bank & they agreed if land is merged in name of Transferee Company by giving the Collateral Security since Plant is to be put on this land only & then HDFC Bank sanctioned the loan of INR 10.00 crore on 04/05/2019. Hence due to compulsion from the sanctioning bank, the Petitioner Companies have merged the account of Transferor Company with Transferee Company & also maintained separate accounts of Transferor Company for its filing with ROC office since the Petitioner Companies have already placed the order for plant & machinery etc.

After merging of the abovesaid financial statements/accounts of Transferor Company with Transferee Company, the Transferee Company obtained business loans from HDFC Bank on 04/05/2019 and took regulatory approvals from Directorate of Maharashtra Fire Safety, MSEDC, Maharashtra Pollution Control Board, Change of Land Use Permission from Agricultural to Industrial Use, NOC for Ground Water Abstraction from Government of India, Ministry of Jal Shakti, Department of Water Resources, Gram Panchayat, Jamghar village, Vada Tehsil, Dist. Palghar, Water Sewage (CGWA), Collector Wada, Factory License (already applied) Directors of Boilers, ESIC & PF, ,Professional Tax, Factory Layout Nagar Rachna & Director of Industrial Safety & Health, Legal Metrology Department etc. Initially, as the Petitioner Companies were Small Companies, they had applied for fast track merger in accordance with the Section 233 of Companies Act to the office of Regional Director vide SRN: G79222337 dated 13-03-2018. Even ROC office had given report to the RD office that the Petitioner Companies were Small Companies but due to some technical issue RD took a view that the Petitioner Companies were not Small Companies, hence the Petitioner Companies submitted the merger in accordance with the Section 230-232 of Companies Act to this Hon'ble NCLT Bench in 2018. Keeping in view of above requirements, the Petitioner Companies merged their financial statements. Hence, the scheme is fully in compliance of the law of the India, as the manufacturing activities were required to be commenced by year 2022- 23 in the said matter.

(h) As regards observation of the Regional Director, as stated in paragraph IV (h) of the Report of Regional Director is concerned, the Petitioner Companies confirms and undertakes to protect the interest of its creditors. The Petitioner Companies further submits that the sanction of the Scheme of Arrangement will be for the benefit all the stakeholders of the Petitioner companies. The interests of the creditors of the Petitioner Companies will not be affected. The interests of both the secured and unsecured creditors, as stated hereinabove are not affected by the Scheme of Arrangement as no compromise or sacrifice has been called from the said creditors.

The Regional Director has filed its Supplementary Report dated 4th March, 2022 and stated that the Petitioner Companies have replied satisfactory to all the observations of Para IV -a, c, d, e, f, h. Further the Regional Director had stated in the report that the Regional Director is not convinced with the reply filed by the Petitioner Companies with regard to para IV- b & g and to be considered on merit by the Tribunal. The observations made by the Regional Director mentioned in para IV- b & g have been explained by the Petitioner Companies in para 12 (b) & 12 (g) above. Further, the Petitioner Companies have also filed affidavit in rejoinder dated 31-01-2022 to the report of Regional Director. The clarifications and undertakings given by the Petitioner Companies are accepted by the Tribunal.

The observations made by the Regional Director have been explained by the Petitioner Companies in paragraph 12 above. The Representative of the RD has submitted that the explanation and clarifications given by the Petitioner Companies are found satisfactory and they have no objection to the Scheme. The Affidavit dated 31st January, 2022 filed by the Petitioner Companies, the clarifications and undertakings given by the Petitioner Companies are accepted by this Tribunal, and the Petitioner Companies are directed to comply with the same.

The Official Liquidator, High Court, Bombay (OL) has filed his Report dated 1st February, 2022 stating that the affairs of the Petitioner Company 1 have been conducted in a proper manner. Further, the Learned Counsel for the Petitioner Companies submits that neither the Petitioner Companies nor the Tribunal has received any objection to the said Scheme of Amalgamation between the Transferor Companies and the Transferee Company.

From the material on record, the Scheme of Amalgamation appears to be fair and reasonable and is not in violative of any provisions of law and is not contrary to public policy. And hereby this bench, to the Petitioner Companies, do order that:

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

b) The clarifications and undertakings given by the Learned Counsel for the Petitioner Companies to the observations made in the Report of the Regional Director are considered by this Bench and those are hereby accepted. Subsequently, this Bench hereby directs Petitioners to comply with the provisions / statements, which the Petitioners undertakes herein.

c) The Transferor Company to be dissolved without winding up from the date of said Scheme becomes effective.

d) The Petitioner Companies are directed to file a copy of this order along with the Scheme of Amalgamation with the concerned Registrar of Companies, electronically, along with e-form INC-28 in addition to the physical copy within 30 days from the date of issuance of the Order by the Registry, duly certified by the Deputy Director or the Assistant Director/Registrar, as the case may be, of the National Company Law Tribunal, Mumbai Bench.

e) The Petitioner Companies to lodge a copy of this Order and the Scheme of Amalgamation duly certified by the Deputy Director or the Assistant Director/Registrar, as the case may be, National Company Law Tribunal, Mumbai Bench with the concerned Collector of Stamps/Superintendent of Stamps for the purpose of adjudication of stamp duty payable, if any, on the same within 60 working days from the date of the receipt of the Order.

f) Any person interested is at liberty to apply to the Tribunal in these matters for any directions or modifications that may be necessary.

g) The Scheme is hereby sanctioned and the appointed date of the Scheme is fixed as 3rd January 2018.

Ordered accordingly.