Quartile Exim Limited. vs Netizen Engineering Private Limited

P.N. Deshmukh, Member (Judicial)

The Bench is conveyed through videoconference.

Heard the Learned Counsel for the Petitioner Companies. No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petitions to the said Scheme.

The sanction of the Tribunal is sought under Sections 230 to 232 of the Companies Act, 2013 and other relevant provisions of the Companies Act, 2013 and the rules framed there under for the Scheme of Amalgamation of QUARTILE EXIM LIMITED, the First Transferor Company and QUARTILE COMMERCE AND MARKETING LIMITED, the Second Transferor Company with SARANSH TRADE AND COMMERCE PRIVATE LIMITED, the Transferee Company.

The Petitioner Companies have approved the said Scheme of Amalgamation by passing the Board Resolutions dated 23rd December, 2019 and 1st February, 2021 which are annexed to the respective Company Scheme Petitions.

The Learned Advocate appearing on behalf of the Petitioners states that the Petitions have been filed in consonance with the Order passed in the Company Scheme Application No. 953 of 2020 of the Hon’ble Tribunal.

The Learned Advocate appearing on behalf of the Petitioners further states that the Petitioner Companies have complied with all requirements as per directions of the National Company Law Tribunal, Mumbai Bench and they have filed necessary affidavits of compliance in the National Company Law Tribunal, Mumbai Bench.

The Learned Counsel for the Petitioner Companies states that the First Petitioner Company presently carrying on business of buying and selling of goods and that the Second Petitioner Company presently is carrying on business of buying and selling of goods and that the Third Petitioner Company presently is carrying on business of buying and selling of goods..

The rationale for the Scheme of Amalgamation of the Petitioner Companies is in the interests of the stakeholders of these companies and shall result in the following benefits:

a. The amalgamation will enable the Transferee Company to consolidate the businesses and lead to synergies in operation and create a stronger financial base.

b. It would be advantageous to combine the activities and operations of all the companies into a Single Company for synergistic linkages and the benefit of combined financial resources. This will be reflected in the profitability of the Transferee Company.

c. This Scheme of amalgamation would result in merger in the nature of Merger as per the paragraphs 36 to 39 of the Accounting Standard 14 on Accounting for Amalgamations issued by the Institute of Chartered Accountants of India and thus on consolidation of business of the Transferor Company and the Transferee Company in one entity, all the shareholders of the merged entity will be benefited by result of the amalgamation of Business and availability of a common operating platform.

d. The Amalgamation of the Transferor Companies with the Transferee Company will also provide an opportunity to leverage combined assets and build a stronger sustainable business. Specifically, the merger will enable optimal utilization of existing resources and provide an opportunity to fully leverage strong assets, capabilities, experience, expertise and infrastructure of all the companies. The merged entity will also have sufficient funds required for meeting its long term capital needs as provided for in the scheme.

e. The Scheme of amalgamation will result in cost saving for all the companies as they are capitalizing on each other’s core competency and resources which are expected to result in stability of operations, cost savings and higher profitability levels for the Amalgamated Company.

The Regional Director has filed his Report dated 10th day of November, 2021 inter-alia making the following observations in Paragraphs IV (a) to (h) which are reproduced hereunder:

Para

Observation  by  the  Regional Director

Undertaking of the Petitioner Company/ Rejoinder

IV(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 AS8) etc.

So far as the observation in paragraph IV (a) of the Report of the Regional

Director is concerned, the Petitioner Companies submits that in addition to Compliance of AS-14, 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 etc.

IV(b)

As per Definition of the Scheme.

“The Appointed Date” means the 1st April, 2019 or such other date as the National Company Law Tribunal (Tribunal) or other competent authority may otherwise direct/fix and “Record Date” means the date to be fixed by the Board of Directors of SARANSH TRADE AND  COMMERCE  PRIVATE

LIMITED  for  the  purpose  of issue and allotment of shares of SARANSH TRADE AND COMMERCE  PRIVATE

LIMITED as may be applicable and relevant in accordance with the Scheme of Amalgamation.

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.

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.

So far as the observation in paragraph IV (b) of the Report of the Regional

Director is concerned, the Petitioner Companies submits that the Appointed Date is 1st April 2020. In CA 55 of 2021 the Petitioner Company has moved an application to change the Appointed Date from 1st April, 2019 to 1st April, 2020. The Hon’ble NCLT was pleased to change the Appointed date vide Order dated 5th  August, 2021.

The  Petitioner  Companies  further submits that the Appointed Date is 1st April 2020 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.

IV (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 authorised capital shall be set- off against any fees payable by the transferee company on  its authorised capital subsequent to the amalgamation and therefore, petitioners  to  affirm  that  they comply the provisions  of the section.

So far as the observation in paragraph IV (c) of the Report of the Regional Director is concerned, the Petitioner Companies submits that the setting off of  fees  paid  by  the  Transferor

Company  on  its  Authorised  Share Capital shall be in accordance with provisions of section 232(3)(i) of the Companies Act, 2013.

IV (d)

The scheme proposes to combine the Authorised Capital of both the Transferor Companies in the Transferee Company. However, the Transferor Company-1 and Transferor Company-2 has equity share capital of face value of  Re.  1  and  the  Transferee Company   has   equity   share capital  of  Rs.  10  each.  The equity  share  capital  being  the same class of share cannot have different nominal value of the same each shares as Re.1 and Rs. 10/- each. Therefore, the Petitioner  Company  may  be directed  to  submit  full  facts regarding the same.

So far as the observation in paragraph IV (d) of the Report of the Regional Director is concerned, the Petitioner Companies submits that the Transferee  Company  undertakes  to that   they   will   consolidate   the authorize  capital  of  the  Transferor companies  from  Re.  1/-  each  to

Rs.10/- each and file necessary forms for the same with the Registrar of companies, Mumbai after the Scheme is sanctioned by the NCLT, Mumbai Bench.

IV (e)

As per clause 15 of the Scheme, the applicant company wants to change its object clause, in this regard petitioner companies may be  directed  to  file  necessary forms with the ROC.

So far as the observation in paragraph IV (e) of the Report of the Regional Director is concerned, the Petitioner Companies undertakes to file e-form INC-28 with  ROC,  Mumbai which will give effect to the Scheme and it will also alter the main object clause

of the MOA.

IV (f)

The  Hon’ble  Tribunal   may kindly seek undertaking that this scheme  is  approved  by  the requisite  majority  of  members and  creditors  as  per  Section 230(6) of the Act in the meeting 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.

So far as the observation in paragraph IV  (f)  of  the  Report  of  Regional Director is concerned, the Petitioner Companies submits that this Scheme is approved by the requisite majority of members and creditors as per the consent  affidavit  submitted  to  the NCLT.

IV (g)

Clause 13.3 of the Accounting Treatment of the Scheme of the Scheme, stated that if there is a surplus  arising  as  a  result  of difference, if any in value of the

assets  over  the  value  of  the liabilities   of   the   Transferor Companies, 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  Account arising out of amalgamation and deficit  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.

So far as the observation in paragraph IV  (g)  of  the  Report  of  Regional Director is concerned, the Petitioner Companies submits that the surplus shall be credited to Capital Reserve

Account arising out of amalgamation and  deficit  shall  be  debited  to Goodwill Account.

Petitioners Companies further submits that the reserves shall not be available for distribution of dividend.

IV(h)

The Petitioner Company states that  the  Transferee  Company shall be in compliance with the 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 the Income Tax Act and Rules thereunder.

So far as the observation in paragraph IV (h) of the Report of the Regional Director is concerned, The Petitioner Company  states  that  the  Petitioner Companies submits that the scheme is in compliance of Section 2(1B) and shall comply with other provisions of the  Income  Tax  Act  and  Rules thereunder.

IV(i)

The  Hon’ble  Tribunal   may kindly  consider  the  report  of ROC as narrated in Para III (12) above  and  pass  appropriate order.

So far as the observation in paragraph IV (i) of the Report of the Regional Director is concerned, the Petitioner Company  states  the  interest  of creditors will be protected.

The observations made by the Regional Director have been explained by the Petitioner Companies in Para 9 above. The Representative of the RD has submitted that the explanations and clarifications given by the petitioner companies are found satisfactory and that they have no objection to the Scheme.

The Official Liquidator has filed his report on 16th August, 2021 in the Consolidated Company Scheme Petition No. 982 of 2020, inter alia, stating therein that the affairs of the Transferor Company have been conducted in a proper manner not prejudicial to the interest of the Shareholders of the Transferor Companies and that the Transferor Companies may be ordered to be dissolved by this Tribunal.

From the material on record, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy.

Since all the requisite statutory compliances have been fulfilled, Company Scheme Petition No. 982 of 2020 is made absolute in terms of clauses (a) to (c).

Petitioners are directed to file a copy of this Order along with a copy of the Scheme of Amalgamation 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 the Order from the Registry.

The Petitioner Companies to lodge a copy of this Order and the Scheme duly authenticated by the Deputy Registrar or Assistant Registrar, National Company Law Tribunal, Mumbai Bench, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable within 60 days from the date of receipt of the Order, if any.

All authorities concerned to act on a copy of this Order along with Scheme duly authenticated by the Deputy Director or Assistant Registrar, National Company Law Tribunal, Mumbai.

The Appointed Date is 1st April, 2020.

The Scheme is Sanctioned. Ordered Accordingly. Pronounced in open court today.