Wadhwa Infracore Steel Private Limited vs Nasik Ispat Private Limited

This Bench convened via video conferencing today.

Heard the Learned Authorised Representative for parties. No objector has come before this Tribunal to oppose the Scheme and nor has any party controverted any averments made in the Petition.

The sanction of the Tribunal is sought under Sections 230 to 232 of the Companies Act, 2013 to a Scheme of Amalgamation of WADHWA INFRACORE STEEL PRIVATE LIMITED, the Transferor Company with NASIK ISPAT PRIVATE LIMITED the Transferee Company.

The Learned Authorised Representative for the Applicants states that the Board of Directors of the respective Applicant Companies at their Board Meetings held on 10th October, 2020 approved the Scheme.

The Petitioner Companies further submits the rationale for the Scheme is as under:

a) Horizontal line of Business: WADHWA INFRACORE STEEL PRIVATE LIMITED and NASIK ISPAT PRIVATE LIMITED are into the business of manufacturing and dealing in steel and other metal products and other incidental activities and are owned and controlled by the same management i.e. Directors and promoters belong to the same family.

b) Rationalization: The proposed amalgamation shall lead to a single company with rationalized structure, greater integration, financial strength and flexibility aiding in achieving economies of scale, sourcing benefits, vendor rationalization, more focused operational efforts, standardization and simplification of business processes and productivity improvements

c) Enhanced Reach: Creation of a single 'go-to-market' strategy, benefit of scale, enhanced depth and breadth of capabilities to result in increased business opportunities and reduced administration and management expenses.

d) Better Positioning: Combined Company shall be better positioned to serve the market.

e) Strengthening the financial position and ability to raise resources for conducting the business.

f) Consolidation of the managerial expertise of the companies involved, thereby giving additional strength to the operations and management of the Transferee Company post-amalgamation.

g) Elimination of duplication in administrative cost and multiple record keeping thus resulting in cost savings for the Companies

The Learned Authorised Representative for the Applicants states that the Transferor Company is in the business as manufactures, processors, fabricators, drawers, rollers and re-rollers of ferrous and non-ferrous metals and the Transferee Company is engaged in the Business of manufacturing and trading of mild steel and alloy steel products by employing the processes of casting of ingots, billets, Hot Rolling of the ingots, billets, Cold Drawing or deforming of the Rolled Products and related activities.

The Learned Authorised Representative for the Petitioner Companies further submits that the present Company Petition is filed in consonance with Sections 230 to 232 of the Companies Act, 2013.

In terms of the Order dated 29.10.2020 passed in CA(CAA) No. 1129 of 2020 the convening and holding meeting of the Equity Shareholders of the Transferor Company and Transferee Company were dispensed with in view of the consent on affidavit given by all the Equity Shareholders of the respective Petitioner Companies.

The Learned Authorised Representative submits that there are no secured Creditors in the Transferor Company.

In terms of the said Order, the convening and holding meeting of the secured creditor of the Transferee Company was dispensed with in view of the consent given by the lone secured creditor.

In terms of the said Order, the convening and holding meeting of the Unsecured Creditors of the Transferor and Transferee Companies were dispensed with. Further, in compliance with the said Order the Transferor and Transferee Companies served individual notice along with the Scheme to their respective unsecured creditors for inviting representations/objections, if any.

The Learned Authorised Representative appearing on behalf of the Petitioner Companies further states that the Petitioner Companies have complied with all requirements as per directions of the National Company Law Tribunal, Mumbai Bench, Mumbai and that they have filed the Affidavit of Service confirming the Compliance of the said Order on 26th November, 2020 with the Hon'ble Tribunal. Moreover, Petitioner Companies undertake to comply with all the statutory requirements, if any, as required under the Companies Act, 2013 and the Rules made thereunder. The said undertaking is accepted.

The Regional Director vide its Report dated 27th January, 2021, stated under paragraph no. IV, the following observations:

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 comply with other applicable Accounting Standards such as AS-5(IND AS 8) etc.

b) As per Definition of the Scheme,

"Appointed Date" means 1st April, 2020 or such other date as the National Company Law Tribunal (Tribunal) or other competent authority may otherwise direct/fix.

"Effective Date" means the date on which certified copies of the Order(s) of the National Company Law Tribunal (Tribunal) 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, Maharashtra, Mumbai, after obtaining the necessary consents, approvals, permissions, resolutions, agreements, sanctions and orders in this regard 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 und 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-1 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 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) As per clause 13.4 of accounting treatment clause of the scheme, any difference arising on account of clause 13.1 to 13.3 above will be adjusted to free reserves.

In this regard it is submitted that as per Accounting Standard 14, the surplus if any arising out of the scheme shall be credited to Capital Reserve arising out of amalgamation and deficit if any arising out of the same shall be debited to Goodwill Account of the Transferee. 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 stated that the scheme is in compliance with the conditions relating to "Amalgamation" as specified u/s 2(IB) of the Income Tax Act, 1961. In this regard, the petitioner company shall ensure compliance of all the provisions of Income Tax Act and Rules thereunder;

g) As per Balance Sheet of the petitioner Company, it is observed that the Transferor Company is showing negative Net Worth for last 3 years or more. Therefore, the Petitioner Company may be asked to submit that how the proposed object of the scheme shall be achieved.

In response to the observations made by the Regional Director, the Petitioner Companies have given necessary clarifications and undertakings. The observations made by the Regional Director and the clarifications and undertakings given by the Petitioner Companies are summarized in the table below:

(a) Apropos observation made in paragraph IV (a) of the report of Regional Director is concerned, the Petitioner Company undertakes to comply with AS-14 (IND AS-103) and pass such entries as per applicable accounting standards for Amalgamation and as per applicable provisions of Companies Act, 2013 while passing necessary entries in connection with the Scheme.

(b) Apropos observation of the Regional Director, Western Region, Mumbai, as stated in paragraph IV (b) of his report concerned, the Petitioner Companies confirms that the definition "Appointed Date" means 1st April, 2020. Further, Clause 3.2 of the Scheme specifies that the appointed date shall be 1st April, 2020 or such other time and date as the tribunal may direct / fix. Further, the Petitioner Companies confirms that the "Effective Date" means the later of the date on which the certified copies of the order (s) sanctioning scheme by the Mumbai Bench of National Company Law Tribunal is filed with the Registrar of Companies, Mumbai Maharashtra by the Transferor Company and the Transferee Company as required under the provisions of the Companies Act, 2013. The petitioners further undertake to comply with the circular no. F. No.7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs. The Petitioner clarifies that the amalgamation as embodied in the Scheme shall take effect from the Appointed Date i.e. 1st April 2020.

(c) Apropos observation made in paragraph IV (c) of the report of Regional Director is concerned, the Petitioner Companies undertakes to comply with the provisions of Section 232(3)(i) of the Companies Act, 2013.

(d) Apropos observation made in paragraph IV (d) of the report of Regional Director is concerned, the Petitioner Companies submits that the Hon'ble Tribunal vide their order dated October 29, 2020 had dispensed with the convening of meeting of Shareholders of the Petitioner Companies in view of the consents on affidavit given by them. The Hon'ble Tribunal also dispensed the holding of meeting of secured creditor of the Transferee Company in view of the consent given by them. Further, the Hon'ble Tribunal also dispensed the meetings of unsecured creditors of the Petitioner Companies as the present Scheme does not involve an arrangement with the creditors. However, it was directed that individual notice to the said Creditors be issued by the clearly indicating therein that in case they have any objection, they may file the same before the Hon'ble Tribunal with a copy to the respective petitioner Companies, within a period of thirty days from the date of receipt of such intimation of said Companies. The said intimation was duly served upon the said creditors and an Affidavit of service was duly filed before the Hon'ble Tribunal confirming the Compliance of the said Order. In view of the aforesaid submission, the question of preparation of Minutes thereof does not arise. Therefore, Petitioners Companies submits that there is no requirement for issuance of an undertaking that the scheme is approved by the requisite majority of members and creditors as per section 230 (6) of the Act.

(e) Apropos observation made in paragraph IV (e) of the report of Regional Director is concern with regards to clause 13.4 of the scheme, the Petitioner Company undertakes that Surplus shall be credited with capital reserve account arising out of Amalgamation and shortfall shall be debited to Goodwill Account and not to the Capital Reserve Account in accordance with applicable accounting standard.

(f) Apropos observation made in paragraph IV (f) of the report of Regional Director is concerned, the Petitioner Companies undertakes to comply with the provisions of Section 2(1B) of the Income Tax Act, 1961.

(g) Apropos observation made in paragraph IV (g) of the report of Regional Director, Western Region, Mumbai is concern the Petitioner Companies hereby states that both the transferor and transferee Company are in the same line of business and are owned by the same set of shareholders. The Transferor Company owns industrial land and factory building which is located adjacently to those of the Transferee Company. Also, the main source of income of the Transferor Company is from job work orders given by the Transferee Company. Therefore, the said Amalgamation shall achieve its rationale comprising of strengthening the financial position and ability to raise resources for conducting the business and Elimination of duplication in administrative cost and multiple record keeping thus resulting in cost savings for the Companies.

The Official Liquidator has filed his report stating therein that the affairs of the Second Transferor Company have been conducted in proper manner and have not been conducted in the manner prejudicial to the interest of its members/creditors or to the public interest and the matter may be decided on merits.

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

Since all the statutory compliances have been fulfilled in C.P. (CAA)/1087/2020 Connected with C.A.(CAA)/1129 /2020, this bench hereby sanctions this Scheme in its absolute terms.

The Scheme, with the Appointed Date fixed as 1st April, 2020 is hereby sanctioned.

The Transferee Company shall issue 10,000 Equity Shares of Rs. 10/- each to the shareholders of the Transferor Company in the same proportion of their shareholding in the equity share capital of the Transferor Company.

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

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

The Petitioner Companies shall comply with the undertakings given by it.

All concerned shall act on a copy of this Order along with Scheme duly authenticated by the Deputy/Assistant Registrar of this Tribunal.

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

Any person interested shall be at liberty to apply to the Tribunal in above matter for any direction that may be necessary.

Pronounced today i.e., 11.02.2021 in Open Court. File be consigned to records.