Rhodenium Surfaces Private Limited And Ors. vs Rhodenium Private Limited

This Court is convened via videoconference today.

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

The sanction of this Tribunal is sought under Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 ("Act"), to the Scheme of Amalgamation (Merger by Absorption) of Rhodenium Sur- faces Private Limited ("Transferor Company 1") and Laxminarayan Finance Private Limited ("Transferor Company 2") and Rhodenium Private Limited ("Transferee Company") and their respective share- holders (the "Scheme").

The Learned Counsel for the Petitioner Companies submits that RSPL was formed with an objective of carrying on the business of all types of man-made filaments; strip and the like of man-made textile materials. LFPL is engaged in the business of an investment company and registered as a Non-Banking Financial Company (NBFC) with the Reserve Bank of India (RBI). RPL is formed with an objective of carrying out business of manufacturing & trading of all description of polymer, plastic articles and pharmaceuticals products.

The Learned Counsel for the Petitioner Companies submits that the rationale mentioned in the Scheme is as under:

(a) Simplification of the group structure and alignment of group businesses and consolidation of the group companies in one entity.

(b) Consolidation of the investments made by the group into one single entity

(c) Creating a unified structure, instead of three separate entities and thereby maintaining a simple corporate structure and eliminate duplicate corporate procedures

(d) Rationalization and standardization of the business processes, economies of scale, reduction in overheads, administrative, managerial and other expenditure, organizational efficiency and optimal utilization of resources.

All the Petitioner Companies have approved the said Scheme by passing their respective Board Resolutions dated 27th January 2020 and subsequently on 27th February 2020 and have approached the Tribunal for sanction of the Scheme.

Learned Counsel for the Petitioner Companies submits that the Petition has been filed in consonance with the order dated 6th May 2020 passed by this Tribunal in CA(CAA) No. 754/MB/2020.

Learned Counsel for the Petitioner Companies states that the Petitioner Companies have complied with all the requirements as per the directions of this Tribunal.

The Learned Counsel for the Petitioner Companies states that the shares of the Petitioner Companies are not listed on any stock ex- changes.

The Regional Director has filed its Report dated 10th December 2020 ("Report") praying that this Tribunal may pass such orders as it thinks fit, save and except as stated in Paragraphs V (a) to (f). In para V of the Report, Regional Director has stated:

(a) In compliance of AS-14 (IND AS-103), the Petitioner Companies shall pass such accounting entries which are necessary in con- nection with the scheme to comply with other applicable Ac- counting Standards such as AS-5 (IND AS 8) etc.;

(b) As per Definitions of the Scheme,

"Appointed Date" means for the purpose of this Scheme as opening of business hours on 1st November 2019;

"Effective Date" means the date on which the authenticated copies or certified copies of the Orders of NCLT, Mumbai Bench sanctioning the Scheme are filed with the Registrar of Companies, Pune, Maharashtra by RSPL, LFPL and RPL;

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 and 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 com- pany 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.

(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) It is observed that Transferor Company-2 is a Non-Banking Finance Company and required to obtain prior approval from the RBI. However, Company has provided a copy of e-mail received from RBI dated 17.03.2020, in which RBI has asked some documents within 10 days, but company has not stated whether the documents as required by the RBI has been provided or not. Therefore, company may be asked to submit the same and only on receipt of NOC from RBI the scheme be considered by the Hon'ble NCLT.

(f) The scheme proposes accounting treatment at para 12.4 of the Scheme. It needs to be corrected that difference arising between the amount recorded as additional share capital issued by Transferee Company on amalgamation and the amount of share capital of Transferor Company-I and transferor Company- 2 in lieu whereof such additional share capital is issued shall, subject to the other provisions contained herein, be credited to Capital Reserve arising out of amalgamation or debited to Good- will Account. Further, this Reserve shall not be available for distribution of dividend.

In response to the above observations of the Regional Director, the Petitioner Companies have filed Affidavit in rejoinder dated 15th December 2020 and clarified as follows:

(a) In so far as observations made in paragraph V (a) of the Report of Regional Director is concerned, the Transferee Company undertakes that it shall pass necessary accounting entries in connection with the Scheme as per AS -14 as well as comply with other applicable Accounting Standards such as AS-5 (IND AS-8), etc. to the extent applicable.

(b) In so far as observations of the Regional Director made in paragraph V (b) is concerned, the Petitioner Companies clarify that the Appointed Date shall be 1st November 2019 and the Effective Date shall mean the date on which the authenticated copies or certified copies of the Orders of NCLT, Mumbai Bench sanctioning the Scheme are filed with the Registrar of Companies, Pune, Maharashtra by RSPL, LFPL and RPL. Further, the Petitioner Compa- nies undertake that they would comply with the provisions and requirements clarified vide circular no. F. No 7/12/2019/CL-I dated 21-08-2019 issued by the Ministry of Corporate Affairs, if required.

(c) In so far as observations of the Regional Director, Western Region, Mumbai, as stated in paragraph V (c) of his report are concerned, the Petitioner Company 1 and 2 are dissolved and the fee, if any, paid by such Petitioner Company 1 and 2 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 shall comply with all applicable provisions of section 232(3)(i) of the Companies Act, 2013.

(d) In so far as observations of the Regional Director, Western Region, Mumbai, as stated in paragraph V (d) of his report are concerned, the Petitioner Companies submit that the requisite ma- jority of members of the Petitioner Companies approved the Scheme 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 have been duly placed before the Tribunal. Fur- ther, there are no creditors in Petitioner 1 and Petitioner 2 Com- pany and the meeting for creditors of the Petitioner Company 3 was dispensed with vide the NCLT order dated 6th May 2020.

(e) In so far as observations of the Regional Director, Western Re- gion, Mumbai, as stated in paragraph V (e) of his report are concerned, the Petitioner Companies state that the Transferor Com- pany 2 has submitted the response to the e-mail received from RBI on 17th March 2020 vide letter dated 18th March 2020 along- with the documents requested by RBI. The Petitioner Companies also state that the RBI has advised the Companies to submit the final order of the NCLT as well as surrender the Certificate of Reg- istration of Petitioner Company 2 to the RBI upon amalgamation and that it has not directed the Companies to obtain any prior approval from the RBI.

(f) In so far as observations of the Regional Director, Western Region, Mumbai, as stated in paragraph V (f) of his report are concerned, the Petitioner Companies submits that the accounting treatment prescribed under Clause 12.4 of the Scheme is as per "Pooling of Interest" method and whereas the Report had suggested accounting treatment under "Amalgamation in the nature of purchase" method. Thus, the Petitioner Companies submit that the accounting treatment as per Clause 12.4 of the Scheme is correct under the provisions of Accounting Standard - 14. The Petitioner Companies have also submitted a certificate from their auditors to the effect that the accounting treatment is as per AS- 14.

The Regional Director has filed his Supplementary Report dated 4 February 2021 and in relation to the observation made by the Regional Director in IV (f) the Petitioner Company undertakes as per AS- 14 excess if any transferred to Capital Reserve if at all arising out of the amalgamation will not be available for distribution of Dividend. The clarifications and undertakings given by the Petitioner Companies are accepted by this Tribunal.

The Official Liquidator, High Court, Bombay, has filed his report dated 20th November 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 Com- pany and that the Transferor Company may be ordered to be dis- solved without winding up 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. All the assets and properties comprised in the Undertaking of whatsoever nature and wheresoever situated, shall, under the provisions of Sections 230 to 232 and all other applicable provisions, if any, of the Act, without any further act or deed, be and stand transferred to and vested in the Transferee Company or be deemed to be transferred to and vested in the Transferee Company as a going concern so as to become the assets and properties of the Transferee Company. Further, upon the coming into effect of this Scheme and with effect from the Appointed Date, all liabilities relating to and comprised in the Undertaking including all secured and unsecured debts (whether in Indian rupees or foreign currency), sun- dry creditors, liabilities (including contingent liabilities), duties and obligations and undertakings of the Transferor Company of every kind, nature and description whatsoever and howsoever arising, raised or incurred or utilised for its business activities and operations shall, pursuant to the sanction of this Scheme by the NCLT under and in accordance with the provisions of Sections 230 to 232 and other applicable provisions, if any, of the Act, without any further act, instrument, deed, matter or thing, be transferred to and vested in or be deemed to have been transferred to and vested in the Transferee Company, along with any charge, encumbrance, lien or security thereon, and the same shall be assumed by the Transferee Company to the extent they are outstanding as on the Effective Date so as to become as and from the Appointed Date the liabilities of the Transferee Company on the same terms and conditions as were applicable to the Transferor Company, and the Transferee Company shall meet, discharge and satisfy the same and further it shall not be necessary to obtain the consent of any third party or other person who is a party to any contract or arrangement by virtue of which such Liabilities have arisen in order to give effect to the provisions of this Clause.

As a consideration, the Transferee Company shall issue and allot 1 (One) 0.1% Redeemable Preference Shares (RPS) for every 1 (One) Equity Share held in the Transferor Company 1 and 217 (Two Hundred and Seventeen) 0.1% RPS for every 2 (Two) equity shares held in Transferor Company 2.

Since all the requisite statutory compliances have been fulfilled CP(CAA)/993/MB /2020 is made absolute in terms of the prayer clauses of the said Company Scheme Petition.

The Scheme is hereby sanctioned with the Appointed Date of 1st November 2019.

The Petitioner Companies are directed to file a copy of this Order along with a copy of the Scheme with the concerned Registrar of Companies, electronically along with E-Form INC-28 within 30 days from the date of receipt of the certified copy of Order by the Petitioner Companies.

The Transferee Company to lodge a copy of this Order along with the Scheme duly authenticated/certified by the Deputy Director or the Assistant Registrar, National Company Law Tribunal, Mumbai Bench, with the concerned Superintendent of Stamps for the purpose of ad- judication of stamp duty payable, if any, within 60 days from the date of receipt of the certified Order from the Registry of this Tribunal.

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

Any person interested is at liberty to apply to this Tribunal in the above matters for any directions that may be necessary.

Any concerned Authorities are at liberty to approach this Tribunal for any further clarification as may be necessary.

Ordered accordingly.