Saibaba Trading Private Limited And Ors. vs Mukund Fashion Private Limited

This is an order in the Joint Application filed by the Transferor Companies and Transferee Company under section 230-232 of the Companies Act, 2013, seeking sanction of this Tribunal to the Composite Scheme of Merger and Amalgamation of M/s. Saibaba Trading Private Limited ["Applicant-1/Transferor Company-1"], M/s. Shyam Cotfab Private Limited ["Applicant-2/Transferor Company-2"] with M/s. Mukund Fashion Private Limited ["Applicant-3/Transferee Company"] with effect from the appointed date as mentioned in the Scheme.

The Petitioner Companies have filed before this Tribunal a joint application bearing CA(CAA) No. 45 of 2020 and seeking orders of this Tribunal to convene meetings of Shareholders of the Applicant Company Nos. 1, 2 and 3 and, if deem fit, to approve the proposed Scheme of Arrangement; and to dispense with the requirement of convening meetings of the unsecured creditors of the Applicant Company Nos. 1 to 3; to dispense with the requirement of convening meetings of Secured Creditors of the Transferee Company and alternatively for directions to convene the meeting of the Secured Creditor of the Transferee Company.

The registered offices of the Applicant Companies are situated in the state of Gujarat and are under the jurisdiction of the National Company Law Tribunal, Bench at Ahmedabad.

It is stated that the Scheme of Amalgamation would inter-alia be beneficial for the applicant companies due to following reasons:

a. All Companies are closely held Group Companies under common shareholding, management and control.

b. To streamline the current organization structure and to realize commercial synergies,

c. Further it would result in enhancement of shareholder value and operational efficiencies, benefit of scaling up, greater focus and would enable the management to vigorously pursue revenue growth and expansion opportunities. In view of the abovementioned reasons, it is considered desirable and expedient to implement the proposed scheme of arrangement.

d. The present Scheme of Arrangement will impart better management focus, will facilitate administrative convenience and will ensure optimum utilization of various resources by these Companies.

e. It is further clarified that no creditor of the Applicant Company Nos. 1 to 3 will be adversely affected.

The Board of Directors of the Applicant Companies in their respective Board Meetings held on 15.06.2020 passed a resolution approving the proposed scheme as placed before the respective Board. The Applicant Companies have filed their audited balance sheet as on 31.03.2019 and the same are annexed with the application.

The applicant company has stated that there is no winding up petition pending in any Court or Tribunal in India in respect of (any of the) Applicant Company.

The applicant companies have submitted that, no investigation, inquiry or proceeding is pending against the Applicant Companies under Section 210 to 226 of the Companies Act, 2013.

It is stated by the Applicant Companies that the proposed Scheme of Arrangement does not envisage any buy back of shares.

It is further submitted by the Applicant Companies that notice to Reserve Bank of India ("RBI") is not required as none of the Companies were Non-Banking Finance Companies ("NBFC"). It was submitted that present scheme do not attract provisions of the Competition Act, 2002, hence the consent of Competition Commission of India was not required.

The learned Counsel for the Applicant Companies filed details of Shareholders, Secured Creditors and Un-secured Creditors detailed below:

i. The Transferor Company No. 1 has Thirty Five (35) Equity Shareholders holding aggregate 24,76,150 shares. The Consent Affidavits could not be obtained due to operational difficulties.

ii. The Transferor Company No. 2 has Thirty Five (35) Equity Shareholders holding aggregate 19,48,600 shares. The Consent Affidavits could not be obtained due to operational difficulties.

iii. The Transferee Company has Thirteen (13) Equity Shareholders holding aggregate 7,89,500 shares. The Consent Affidavits could not be obtained due to operational difficulties.

iv. The Transferor Company Nos. 1 and 2 have no Secured Creditors.

v. The Transferee Company 1 (One) Secured Creditor aggregating to a sum of Rs. 2,49,29,245/-.

vi. The Transferor Company No. 1 has Two (2) Un-Secured Creditors aggregating a sum of Rs. 3,99,330/-. Consents affidavits of One (1) whose debt is aggregating to Rs. 3,89,330/- (viz. 97.50% of the total debt) has been obtained and filed.

vii. The Transferor Company No. 2 has Three (3) Un-Secured Creditors aggregating a sum of Rs. 17,53,410/-. Consent affidavits of Two (2) whose debt is aggregating to Rs. 17,46,547/- (viz. 99.61% of the total debt) has been obtained and filed.

viii. The Transferee Company has Nineteen (19) Un-Secured Creditors aggregating a sum of Rs. 5,43,32,993/-. Consents affidavits of Three (3) whose debt is aggregating to Rs. 5,07,11,400/- (viz. 93.33% of the total debt) has been obtained and filed.

The Applicants have stated that the accounting treatment proposed in the Scheme of Arrangement is inconformity with the accounting standards prescribed under Section 133 of the Companies Act, 2013. Certificates from the respective Statutory Auditors of the Applicant Companies have been filed along with the Application.

Learned Counsel, appearing for the Applicants, made the following contentions with respect to the dispensation of the requirement of convening meetings of the following persons:

a) There are no Secured Creditor in the Transferor Company Nos. 1 and 2. Therefore, there is no need to convene meeting of the Secured Creditors of the Transferor Company Nos. 1 and 2.

b) The Transferee Company has One (1) Secured Creditor and the Outstanding as on 29.02.2020, an amount of Rs. 2,49,29,245/- is due and payable by the Transferee Company.

c) The Transferor Company No. 1 has Two (2) Un-Secured Creditors aggregating a sum of Rs. 3,99,330/-. Consents affidavits of One (1) Unsecured Creditors, whose debt is aggregating to Rs. 3,89,330 has been obtained and filed. Therefore almost 97.50 % of the total unsecured creditors in value have given their written consent by way of Affidavits. However, Therefore, the requirement of convening meeting of the Unsecured Creditors of the Transferor Company No. 1 be dispensed with.

d) The Transferor Company No. 2 has Three (3) Un-Secured Creditors aggregating a sum of Rs. 17,53,410/-. Consents affidavits of Two (2) Un-secured Creditors, whose debt is aggregating to Rs. 17,46,547 has been obtained and filed. Therefore almost 99.61 % of the total unsecured creditors in value have given their written consent by way of Affidavits.

e) The Transferee Company has Nineteen (19) Un-Secured Creditors aggregating a sum of Rs. 5,43,32,993/-. Consents affidavits of Three (3) Unsecured Creditors, whose debt is aggregating to Rs. 5,07,11,400/- has been obtained and filed. Therefore almost 93.33 % of the total unsecured creditors in value have given their written consent by way of Affidavits.

Further, Learned Counsel appearing for the Applicants, requested to convene the following meetings under the supervision of this Tribunal, for the purpose of considering and if deem fit, approving the Scheme of Arrangement:

a) To convene a meeting of the Shareholders of all the Applicant Companies.

b) To convene a meeting of the Unsecured Creditors of all the Applicant Companies.

c) A meeting of the Secured Creditor of the Transferee Company is required then the same may also be convened.

This Tribunal directs that, in view of the fact that there are no Secured Creditors in the Transferor Company No. 1 and 2 and the certificate of the CA in respect of the same there is no need of convening a meeting of the secured creditors in the Transferor Company No. 1 and 2.

Further as prayed by the learned Counsel of the Applicants, a meeting of the Shareholders of the Applicant Nos. 1, 2 and 3 Companies will be held on 28th September, 2020, at 10:00 A.M., 10:30 and 11:00 A.M. respectively at 1301, Addor Aspire, Nr. Jhanvi Restaurant, University, Panjarapole Cross Road, Ahmedabad, Gujarat-380015 or through video conferencing for the purpose of considering and if, thought fit, approving, with or without modification(s), the Scheme of Arrangement.

Further as prayed by the learned Counsel of the Applicants, a meeting of the Unsecured Creditors of the Applicant Nos. 1, 2 and 3 will be held on 28th September, 2020, at 11:30, 12:00 and 12:30 A.M. respectively at 1301, Addor Aspire, Nr. Jhanvi Restaurant, University, Panjarapole Cross Rd, Ahmedabad, Gujarat 380015 or through video conferencing for the purpose of considering and if, thought fit, approving, with or without modification(s), the Scheme of Arrangement.

Further as prayed by the learned Counsel of the Applicants, a meeting of the Secured Creditors of the Transferee Company will be held on 28th September, 2020, at 1:30 A.M. at 1301, Addor Aspire, Nr. Jhanvi Restaurant, University, Panjarapole Cross Rd, Ahmedabad, Gujarat 380015 or through video conferencing for the purpose of considering and if, thought fit, approving, with or without modification(s), the Scheme of Arrangement.

At least one month before the date of aforesaid meetings, an advertisement about convening of the said meeting, indicating the day, date, place and time, as aforesaid, shall be published in English daily, i.e., "Business Standard," Ahmedabad edition and in Gujarati daily, i.e., "Navgujarat Samay," Ahmedabad Edition. The publication shall indicate the time within which copies of the Scheme of Arrangement shall be made available to the concerned persons free of charge from the registered office of the Applicant Companies. The publication shall also indicate that the explanatory statement required to be furnished pursuant to Sections 230 and 232 read with Section 102 of the Companies Act, 2013 and the prescribed form of proxy can be obtained free of charge at the registered office of the Applicant Companies in accordance with second proviso to sub-section (3) of Section 230 and Rule 7 of the Companies (CAA) Rules, 2016.

At least one month before the date of the meeting to be held as aforesaid, a notice in Form No. CAA 2 convening the said meeting, indicating the day, date, place and time aforesaid, together with a copy of the Scheme of Arrangement, a copy of statement required to be furnished pursuant to Sections 230 and 232 read with Section 102 of the Companies Act, 2019, and Rule 6 of the Companies (CAA) Rules, 2016 and the prescribed form of proxy shall be sent by Registered Post or Speed Post or Registered Post or by Courier or E-Mail or Hand Delivery, addressed to each of the shareholders of the Applicant Companies, as the case may be, at their respective registered or last known addresses or e-mail addresses as per the records of the Applicant Companies. The Notice shall be sent to all the shareholders of the Applicant Companies with reference to the list of the persons appearing on the record of the respective Company as on the date not preceding the date of the meeting by a period of more than 6 months. The aforesaid date would be the date determining the eligibility to vote by the shareholders.

Mr. Anuj Aggarwal, CMA (Address: 11, Dharamyug Colony, Ved Mandir Road, Near, Ekta Club, Kankaria, Ahmedabad-380022; Mobile No 9825098895) shall be the Chairperson for the above said meeting to be held on 28th September, 2020 or in respect of any adjournment thereof.

Mr. Shyamsundar Nanwal, CA (N-11 Asmakam Phase-II, B/h Torrent Power Sub Station, Makarba Prahaladnagar Road Vejalpur, Ahmedabad- 380051; Mobile: 9974534855) is appointed as the Scrutinizer for the above said meetings to be held on 28th September, 2020 or in respect of any adjournment thereof.

The Applicant Companies will make suitable arrangements for travel and stay of the Chairperson and the Scrutinizer.

The quorum for the aforesaid meetings of the Shareholders and Unsecured Creditors of the Applicant Companies Nos. 1 to 3 shall be 25% of total value. Valid Proxies and Authorised Representatives shall be counted for the purpose of quorum.

In case the quorum as noted above for the meetings of the Unsecured Creditors and Shareholders of the Applicant Companies Nos. 1 to 3 is not present in the meetings, then the meetings shall be adjourned for half an hour and thereafter the person present shall be deemed to constitute the quorum.

The number and value of the Shareholders and Unsecured Creditors shall be in accordance with the records or registers of the Applicant Companies and where the entries in the records or registers are disputed, the Chairperson of the meetings shall determine the number or value, as the case may be for purpose of the meetings.

The Transferee has only one Secured Creditor and therefore the quorum for the meeting of the Secured Creditor of the Transferee Creditor shall be 1 in number, if the said Secured Creditor is not present the meeting shall be adjourned for half an hour. Valid Proxies and Authorised Representatives shall be counted for the purpose of quorum.

The Chairperson appointed for the aforesaid meetings shall issue the advertisements and send out the notices of the meetings referred to above. The Chairperson is free to avail the services of the Applicant Companies or any agency for carrying out the aforesaid directions. The Chairperson shall have all the powers under the Articles of Association of the Applicant Companies and also under the Rules in relation to the conduct of the meetings, including to decide any procedural questions that may arise at the meetings or adjournment(s) to the aforesaid scheme or resolution, if any, proposed at the aforesaid meetings by any person(s) and to ascertain the decision of the sense of the meetings of the Shareholders of the Applicant Companies by ballot/polling paper at the venue of the meetings.

Voting by proxy/authorised representatives is permitted provided that the proxy in the prescribed form duly signed by the person entitled to attend and vote at the aforesaid meetings is filed with the Applicant Companies at their Registered Office, not later than 48 hours before the meeting vide Rule 10 of the Companies (CAA) Rules, 2016 read with Section 105 of the Act. Valid Proxies and Authorised Representatives shall be counted for the purpose of quorum.

The Chairperson to file an Affidavit not less than 7 (seven) days before the date fixed for the holding of the meetings and to report to this Tribunal that the directions regarding issuance of notices and advertisement of the meetings have been duly complied with as per Rule 12 of the Companies (CAA) Rules, 2016.

It is further ordered that the Chairperson shall report to this Tribunal on the result of the meeting in Form No. CAA-4, duly verified by his affidavit, as per Rule 14 of the Companies (CAA) Rules, 2016 within 7 (seven) working days from the date of conclusion of the aforesaid meetings.

In compliance of sub-section (5) of Section 230 and Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, the Applicant Companies shall send a notice in Form No. CAA.3 along with disclosures mentioned under Rule 6, to, (i) the Central Government through the Regional Director, North-western Region, (ii) the Registrar of Companies, Gujarat, (iii) the Income Tax Authorities concerned and (iv) the Official Liquidator, stating that representations, if any, to be made by them shall be made within a period of 30 days from the date of receipt of such notice, failing which it shall be presumed that they have no objection to make on the proposed scheme. The said notices shall be sent forthwith by registered post or by speed post or by courier or by had delivery or by an e-mail at the office of the authority as required by sub-rule (2) of Rule 8 of the Companies (CAA) Rules, 2016. The aforesaid authorities, who desire to make any representations under sub-section (5) of Section 230, shall send the same to the Tribunal within a period of 30 days from the date of receipt of such notice, failing which, it will be deemed that they have no representation to make on the proposed arrangement.

With the above directions, CA (CAA) No. 45 of 2020 is allowed and stands disposed of accordingly.