Merger Scheme Approved: Companies Act Compliance for Precious Trading & Sheth Developers

The Tribunal approved the Scheme of Merger between Precious Trading and Investments Limited (Transferor Company) and Sheth Developers Private Limited (Transferee Company) under Sections 230 to 232 of the Companies Act, 2013. The Tribunal found the merger fair and reasonable, compliant with statutory requirements, and not against public policy or interest. The Petition was allowed, and orders were issued for compliance, dissolution of the Transferor Company without winding up, filing of necessary documents, and publication of the Scheme's approval.

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Issues Involved:
1. Approval of the Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013.
2. Compliance with statutory requirements and directions of the Tribunal.
3. Observations and objections from the Regional Director and Official Liquidator.
4. Clarifications and undertakings provided by the Petitioner Companies.
5. Valuation and financial implications of the merger.

Issue-Wise Detailed Analysis:

1. Approval of the Scheme of Merger under Sections 230 to 232 of the Companies Act, 2013:
The Tribunal sanctioned the Scheme of Merger between Precious Trading and Investments Limited (Transferor Company) and Sheth Developers Private Limited (Transferee Company) under Sections 230 to 232 of the Companies Act, 2013. The Scheme was approved by the Board of Directors of both Petitioner Companies on 17th September 2019, with modifications approved on 3rd June 2020. The Appointed Date for the Scheme is fixed as 1st April, 2019.

2. Compliance with statutory requirements and directions of the Tribunal:
The Petitioner Companies complied with all statutory requirements and directions of the Tribunal, including filing necessary affidavits of compliance. The Tribunal accepted the undertakings provided by the Petitioner Companies to comply with all statutory requirements under the Act and the Rules made thereunder.

3. Observations and objections from the Regional Director and Official Liquidator:
The Regional Director (Western Region), Ministry of Corporate Affairs, Mumbai, filed a report with observations, which were addressed by the Petitioner Companies through necessary undertakings and clarifications. The Official Liquidator also filed a report with observations from M/s. R. D. Kundalia & Co., Chartered Accountants. The Tribunal reviewed and addressed these observations and clarifications as follows:

- Accounting Standards Compliance: The Petitioner Companies undertook to pass necessary accounting entries as per AS-14 (IND AS-103) and comply with other applicable Accounting Standards.
- Appointed Date Clarification: The Scheme shall be effective from 1st April, 2019, and the Appointed Date is not based on any trigger event.
- Pending Complaint: The Transferee Company had compounded the offence against a pending complaint, and no prejudice will be caused post-merger.
- Compliance with Section 232(3)(i): The Petitioner Companies undertook to comply with the provisions regarding the combination of the Authorised Share Capital.
- Approval by Members and Creditors: The Scheme was approved by the requisite majority of members and creditors as per Section 230(6) of the Act.
- Jurisdiction: The registered office of both Companies is in Mumbai, Maharashtra, under the jurisdiction of the National Company Law Tribunal, Mumbai Bench.
- RERA Compliance: The Transferee Company undertook to comply with applicable provisions of the Real Estate Regulation and Development Act, 2016.
- Non-Resident Equity Shareholders: The Transferee Company confirmed it does not have any non-resident equity shareholders, making FEMA guidelines inapplicable.
- Compliance with BSE Directions: The First Petitioner Company complied with the directions issued by BSE.
- Scheme Consistency: The Petitioner Companies confirmed that the Scheme enclosed to the Company Application and Petition is the same with no discrepancies.
- Submission of Documents: The Petitioner Companies submitted the necessary documents, including the Chairman’s Report and admitted copy of the Petition, to the Regional Director.

4. Clarifications and undertakings provided by the Petitioner Companies:
The Petitioner Companies provided detailed clarifications and undertakings in response to the observations made by the Regional Director and Official Liquidator. These included compliance with Income Tax liabilities, filing of E-forms, addressing valuation concerns, and justifying investments and loans to related parties.

5. Valuation and financial implications of the merger:
The Tribunal reviewed the valuation of shares and the financial implications of the merger. The shareholders in their commercial wisdom accepted the valuation, and the Tribunal found no scope for interference. The Tribunal also addressed concerns regarding investments in associated companies and loans to related parties, concluding that there were no violations of statutory provisions, and the investments and loans were neither uncommon nor per se illegal.

Conclusion:
The Tribunal found the Scheme of Merger to be fair and reasonable, not violating any provisions of law, and not contrary to public policy or public interest. The clarifications provided by the Petitioner Companies were justified and accepted. The Petition was allowed, and the Scheme was sanctioned with the following orders:

1. The Scheme is binding on the Petitioners and all concerned.
2. The Transferor Company is dissolved without being wound up.
3. The Petitioners are directed to file a copy of the Order with the Registrar of Companies electronically within 30 days.
4. The Petitioner Companies to lodge a copy of the Order and the Scheme with the Superintendent of Stamps for adjudication of stamp duty.
5. The Petitioner Companies to comply with their undertakings.
6. The Petitioner Companies to issue newspaper publications regarding the approval of the Scheme.
7. The Petitioner Companies to take all consequential and statutory steps required under the Companies Act, 2013.
8. All concerned to act on a copy of the Order along with the Scheme.
9. Any interested person may apply to the Tribunal for necessary directions.

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