Vendor To Pay Private Limited vs Vay Network Services Private Limited

Shyam Babu Gautam, Member Technical

The Court is convened by videoconference today.

Heard Learned Counsel for the 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") and in the matter of Scheme of Merger by Absorption of Vendor To Pay Private Limited ("The Transferor Company" / "First Petitioner Company") by Vay Network Services Private Limited ("Transferee Company" / "Second Petitioner Company") and their respective Shareholders

The Learned Counsel for the Petitioner Companies submits that First Petitioner Company is in the business of online payment aggregation for vendor payments and supply chain management through an online platform. The Second Petitoner primarily engaged in the business of engaged is in the business of B2B services to corporates and financial institutions in the areas of (a) trade finance; (b) short term finance and working capital; and (c) GST and related compliance.

The Learned Counsel for the Petitioner Companies submits that following is the rationale of the Scheme;

I. The Scheme will benefit the shareholders and other stakeholders of both the Transferor Company and the Transferee Company by consolidating and simplifying the group structure, business operations, provide optimal utilization of various resources and eliminating cross holdings within the group, enhance growth prospects, reduce overheads, administrative, managerial and other costs and expenditure and remove inefficiencies and bring operational rationalization and organizational efficiency; and result in improved shareholder value for the shareholders of the Trans-feror Company and the Transferee Company and provide a stronger and wider capital and financial base for future growth / expansion of the busi-ness of the Transferor Company.

II. In view of the aforesaid, the Board of Directors of the Transferor Com-pany and the Transferee Company have considered and proposed the merger by absorption of the entire undertaking and business of the Trans-feror Company by the Transferee Company in order to benefit the stake-holders of both the companies. Accordingly, the Board of Directors of the Transferor Company and the Transferee Company have formulated this Scheme of Merger by Absorption for the transfer and vesting of the entire undertaking and business of the Transferor Company into the Transferee Company pursuant to the provisions of Section 230 to Section 232 and other relevant provisions of the Companies Act, 2013.

Both the Petitioner Companies have approved the Scheme by passing their respective Board Resolutions dated 26 September 2020 and 27 September 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 25.01.2021 passed by this Tribunal in CA(CAA)/1101/MB/2020.

The Regional Director has filed its report dated 9 September 2021 ("Report") praying that this Tribunal may pass such orders as it thinks fit, save and except as stated in paragraphs IV (a) to (g). In para IV 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 connection with the scheme to comply with other applicable Accounting Standards such as AS-5(IND AS-8) etc.

b) The Petitioners under provisions of section 230(5) of the Companies Act, 2013 have to serve notices to concerned authorities which are likely to be affected by Compromise or arrangement. Further, the approval of the scheme by this Hon'ble Tribunal may not deter such authorities to deal with any of the issues arising after giving effect to the scheme. The deci-sion of such Authorities is binding on the Petitioner Company(s).

c) The Hon'ble NCLT may kindly direct to the Petitioners to file an under-taking to the extent that the Scheme enclosed to the Company Application and the scheme enclosed to the Company Petition are one & same and there is no discrepancy or deviation.

d) As per Definition of the Scheme,

"Appointed Date" for the purpose of this Scheme and for Income Tax Act, 1961, 1 October 2019 or such other date directed or stipulated by NCLT, as may be applicable.

"Effective Date" means the date on which the certified copies of the Or-der(s) or last of the Orders, as the case may be, of the NCLT(s) sanctioning the Scheme, are filed with the Registrar of Companies. Any references in the Scheme to the words "date of coming into effect of the Scheme" or

"upon the Scheme becoming effective" or "Scheme coming into effect" shall mean the "Effective Date".

"Record Date" means the date as may be decided by the Board of the Transferee Company

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.

e) 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 author-ised capital subsequent to the amalgamation and therefore, petitioners to affirm that they comply the provisions of the section.

f) As per Clause 17 of the Scheme,

In case of any difference in accounting policy between the Transferor Company and Transferee Company, the impact of the same till amalgam-ation will be quantified and adjusted in the reserves of Transferee Com-pany to ensure that the financial statements of Transferee Company reflect the financial position on the basis of consistent accounting policy.

Petitioner Companies have to undertake that the surplus shall be credited to Capital Reserve Account arising out of amalgamation and deficits shall be debited to Goodwill Account.

Further Petitioner Companies have to undertake that reserves shall not be available for distribution of dividend.

g) ROC, Pune Report dated 23.07.2021 has interalia mentioned that there are no prosecution, no technical scrutiny, no inquiry, no inspection and no complaints pending against Petitioner Companies.

Further mentioned that :-

Interest of the Creditors shall be protected.

Hon'ble Tribunal may consider the observations pointed out by ROC,Mumbai in their report and decide the matter on merits.

In response to the above observations of the Regional Director, the Petitioner Companies have filed an Affidavit in Rejoinder dated 13 September 2021 and have clarified as follows:

a. In so far as the observation made in Paragraph IV (a) of the said Report is concerned, the Petitioner Companies undertake 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 all applicable Accounting Standards such as AS-5 (IND AS-8), to the extent applicable.

b. In so far as the observation made in Paragraph IV (b) of this Report is concerned , the Petitioner Companies confirm that as per the provisions of section 230(5) of the Companies Act, 2013, the Petitioner Companies have served notices to all the concerned authorities; Regional Director, Registrar of Companies, Reserve Bank of India, Official Liquidator and the Income Tax Department and the observations made by the concerned authorities have been duly responded and dealt with by the Petitioner Companies, wherever required.

c. In so far as the observation made in Paragraph IV (c) of this Report is concerned, the Petitioner Companies undertake and confirm that the Scheme enclosed to the Company Application and the Scheme enclosed to the Company Petition are one and the same and there is no discrepancy or deviation.

d. In so far as the observation made in Paragraph IV (d) of the said Report is concerned the Petitioner Company clarifies that the Appointed Date is 1 October 2019 as mentioned in the Scheme which is in compliance with the Companies Act, 2013 and that the Scheme shall take effect from such Appointed Date. Further, the Petitioner Companies undertakes to comply with the requirements clarified vide circular No.7/12/2019/CL-I dated 21.08.2019 issued by the Ministry of Corporate Affairs.

e. In so far as the observation made in paragraph IV (e) of the Report is concerned, the Petitioner Companies undertake to comply with the provisions set out in Section 232(3)(i) of the Companies Act, 2013 and that the fee, if any, paid by the Transferor Company on its authorized share capital shall be set off against any fees payable by the Transferee Company on its authorized share capital subsequent to the Merger, if applicable.

f. In so far as the observation made in paragraph IV (f) of the Report is concerned, the Petitioner Companies clarify that the in case of any difference in accounting policy between the Transferor Company and

Transferee Company the same will be quantified and adjusted in the reserves of Transferee Company so as to ensure that the financial statements of Transferee Company reflect the financial position on the basis of consistent accounting policy.

In this regard, the Petitioner Companies hereby undertake that the surplus shall be credited to Capital Reserve Account arising out of demerger and deficits shall be debited to Goodwill Account and also that such Capital Reserves shall not be available for distribution of dividend.

g. In so far as the observation made in paragraph IV (g) of the Report is concerned, the Petitioner Companies undertake that the interest of the creditors shall be protected on the merger of the Transferor Company with the Transferee Company.

The Regional Director has filed his Supplementary Report dated 14 September 2021 and has stated that basis the observations made by the Regional Director and the reply submitted by the Petitioner Companies, the Hon'ble Tribunal may decide the matter on its merit.

The observations made by the Regional Director have been explained in Para 8 above. The clarifications and undertakings given by the Petitioner Companies have been explained in Para 9 above. The clarifications and undertaking given by the Petitioner Companies are hereby accepted by the Tribunal.

The Official Liquidator has filed his report dated 10 August 2021 inter alia, stat-ing therein that the affairs of the Transferor Company have been conducted in a proper manner and that the Transferor Company may be ordered to be dissolved without winding up by the Hon'ble Tribunal.

From the material on record, the Scheme appears to be fair, reasonable and is not violative to any provisions of law nor is contrary to public interest.

Since all the requisite statutory compliances have been fulfilled, the Company Scheme Petition No. 93 of 2021 in Company Scheme Application No. 1101 of 2020 are made absolute in terms of it's prayer clauses.

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 Order duly certified by the Deputy Director or Assistant Registrar, of the National Company Law Tribunal, Mumbai Bench.

The Petitioner Companies to lodge a copy of this order and the Scheme duly certified by the Deputy Director or the Assistant Registrar, of the National Com-pany Law Tribunal, Mumbai Bench, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty payable, if any, on the same within a period of 60 working days from the date of receipt of the Order.

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

The Petitioner Companies shall take all consequential and statutory steps re-quired under the provisions of the Act in pursuance of the Scheme.

Any person interested in the above matter shall be at liberty to apply to the Tri-bunal for any directions that may be necessary.

The Scheme is hereby sanctioned with the Appointed Date of 1 October, 2019.

Ordered accordingly.