TaxTMI 
TaxTMI 
2021 (5) TMI 580
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....heir respective shareholders, etc. 2. Brief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows: (1) M/s. Hinduja Investments Private Limited (the 'Petitioner Company No. 1/Transferor Company No. 1') was incorporated on 03.02.2006 under the provisions of the Companies Act, 1956, vide CIN: U65993KA2006PTC038372 in the name and style "Hinduja Investments Private Limited". Its registered office is presently situated at 44/2A Vasant's Business Park, Bellary Road Hebbal, Bangalore - 560092. Its Authorised Share Capital is Rs. 2,00,000/- divided into 20,000 Equity Shares of Rs. 10/- each and the Issued, Subscribed & Paid-up Capital is Rs. 1,48,510/- divided into 14,851 Equity Shares of Rs. 10/- each fully paid up. The Company is carrying on the business of an investment company involving investing, selling, transferring, dealing in, and disposing of any shares, stocks, debentures, whether perpetual or redeemable debenture, debentures, stocks, securities of any kind including securities, bonds and certificates of any government, local and municipal authority, etc. (2) The Board of Directors o....
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....1 equity shares of Rs. 10/- each fully paid and 1,32,31,032 Class A equity share of Rs. 10/- each fully paid. Its main objects inter alia are to engage in the business of designers, manufacturers, importers, exporters, and dealers, distributors in all kinds of Readymade garments including Lingerie and Women foundation garments and of all articles similar thereto or connected therewith, etc. (4) The Board of Directors of the Petitioner Company No. 2/Transferor Company No. 2 at its meeting held on 05.03.2020 have approved and accepted the Scheme of Amalgamation and inter alia resolved as under: "RESOLVED THAT pursuant to the provisions of Sections 230 to 232 and other applicable provisions, if any, of the Companies Act, 2013 ('Act') and the rules framed thereunder (Act') and subject to applicable provisions of the Memorandum and Article of Association of the Company and also subject to the sanction of the National Company Law Tribunal, Bangalore Bench ('NCLT'), constituted under the provisions of the Act and approval of the members and creditors (as applicable) through NCLT convened meetings unless the same are dispensed with, under Sections 230 ....
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.... rules framed thereunder (Act') and subject to applicable provisions of the Memorandum and Article of Association of the Company and also subject to the sanction of the National Company Law Tribunal, Bangalore Bench ('NCLT'), constituted under the provisions of the Act and approval of the members and creditors (as applicable) through NCLT convened meetings unless the same are dispensed with, under Sections 230 to 232 of the Act, and subject to approval of any other statutory/regulatory authorities as may be required and subject to completion of the change of the Company's registered office from the state of Tamil Nadu to the state of Karnataka and the issuance of a new/revised certificate of incorporation of the company by the Registrar of Companies in Bangalore and consequent change in the address of the Company, the Scheme of Amalgamation of the Hinduja Investment Private Limited ('Transferor Company V) and Gokaldas Intimate wear Private Limited('Transferor Company 2') with the Company and their respective shareholders and creditors ('Scheme') on the terms and conditions as stated in the Scheme placed before the Board and initialed by the Direc....
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....ate basis; II. 29,74,625 Compulsorily Convertible Debentures of the Transferee Company of Rs. 100/- each, fully paid up for 2,752,518 equity shares (other than Class A equity shares) of Rs. 10/- each, fully paid up, held by the equity shareholders (other than Class A equity shareholders) of the Transferor Company No. 2 whose name appears in the register of members of the Transferor Company No. 2 as on the Effective Date (other than the Transferor Company No. 1) or to their respective heirs, executors, administrators or other legal representatives or the successors-in-title, as the case may be on a proportionate basis; III. 1,42,98,675 Compulsorily Convertible Debentures of the Transferee Company of Rs. 100/- each fully paid up for 13,231,032 Class A equity shares of Rs. 10/- each, fully paid up, held by the Class A equity shareholders of the Transferor Company No. 2 whose name appears in the register of members of the Transferor Company No. 2 as on the Effective Date (other than the Transferor Company No. 1) or to their respective heirs, executors, administrators or other legal representatives or the successors-in-title, as the case may be on a proportionate basis....
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....Petitioner Companies are not required to issue notice of Amalgamation to the Joint Director, Enforcement Directorate and the Directorate of Enforcement as there are no ongoing investigations against the Petitioner Company or its Directors. 3. The Petitioners herein had filed CA (CAA) No. 25/BB/2020 before this Tribunal seeking directions to dispense with the meeting of the equity shareholders of the Applicant Companies and to direct the meeting of the Secured Creditors of the Applicant Companies No. 2 and Unsecured Creditors of the Applicant Companies to be held on such date and time as this Tribunal deems fit. The Tribunal vide its Order dated 12.06.2020 has directed to dispense with the convening and holding of the meetings of the Equity Shareholders of the Applicant Companies; directed to convene the meeting of the Secured and Unsecured Creditors of the Applicant Company No. 2; directed to convene the meeting of Unsecured Creditors of the Applicant Company No. 1; and directed to convene the meeting of Unsecured Creditors of the Applicant Company No. 3 at specific date, time and venue and also appointed the Chairperson and Scrutinizer. 4. The Tribunal vide its Order dated 0....
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....directed to explain the rational and specific reasons behind selecting such an odd date as appointed date. (2) More than 50% of shares of Transferor Company No. 2 are held by Transferor Company No. 1 and it is a subsidiary of Transferor Company No. 1. The facts about the same is not mentioned in the same. (3) As per the Balance Sheet as at 31.12.2019 attached to the Petition of Transferor Company No. 1, it is seen that after the merger proposal with Transferee Company, the Transferor Company No. 1 has issued 4850 equity shares of Rs. 10/- each at a huge premium of Rs. 1,06,526 totalling Rs. 5,167 Lakhs to a new investor viz., Varenna Holdings Limited. First of all Transferor Company No. 1 is a continuous loss making company with meagre turn over. The net worth of the Company has been eroded. During this period entire shareholding held by Pushpa Hinduja (9,999) were transferred to the above named investor. If the Scheme is approved the new investor would get Rs. 157.13 Crores worth of CCDs in the Transferee Company which looks very abnormal. Hence, Hon'ble Tribunal may order for independent Valuation Report of the Transferor Company No. 1 and opinion of Indepen....
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....application to be made to ROC for clubbing within one month from the order or else interest will be levied as per the provisions of Section 403 of the Companies Act, 2013. (11) As per the Scheme the Transferee Company will be issuing CCDs in substantial number to the shareholders of Transferor Companies No. 1 and 2. The Petitioners have to comply with Section 71 of Companies Act, 2013 r/w rules made thereon and other applicable provisions. Necessary undertaking to this effect may be obtained from the Petitioners. (12) The Transferee Company did not appoint a qualified Company Secretary as per requirement of Section 383 A read with Section 203 of the Companies Act, 1956/2013 till 27.03.2018 though the threshold paid up capital limit crossed Rs. 5 Crore long back. The Company need to file compounding application u/s. 441 of the Companies Act, 2013 to compound the offence by the Hon'ble Tribunal. (13) The Transferor Company No. 2 has disputes over dues payable to Customs Department, Bangalore; (14) As per Transferor Company No. 2, Balance Sheet as at 31.03.2019 huge amount of Rs. 5.95 Crore is payable to employees/workers. Hon'ble Tribunal m....
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....rom the date of approval of Hon'ble Tribunal. (21) There are no prosecutions, complaints, technical scrutiny/inspections pending in this office against the petitioner Companies. The petition may be decided on merits. 8. In response to the aforesaid RD/ROC observations the Petitioners herein vide Compliance Affidavit, dated 19.12.2020, have inter alia stated as follows: (1) Regarding the observation no. 1 of ROC, it is stated that the shares of the Transferor Company No. 1 and the Transferor Company No. 2 was acquired by Varenna Holdings Limited on 16.09.2019. To consolidate the business operations into a single entity, it was decided to merge the Transferor Company No. 1 and Transferor Company No. 2 with the Transferee Company with effect from 16.09.2019 i.e., the Appointed Date. (2) Regarding the observation no. 2 of ROC, it is stated that the rationale of the Scheme mentions the fact that the Petitioner Companies are part of the same group, having the same ultimate parent entity and are desirous to consolidate their business operations into a single entity i.e., Transferee Company. The Shareholding pattern of the Petitioner Companies were produce....
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....proposed, are in normal course of business and there is no impact in this regard for the implementation of the Scheme. (8) Regarding the observation no. 9 of ROC & RD, it is stated that the background of the Transferor Companies and Transferee Company are mentioned in the Scheme. The Transferor Company No. 1 is engaged in the business of wholesale trading of ready made garments on B2B basis and the Transferor Company No. 2 is authorized to carry on the business of manufacturing and trading in women's innerwear through the flagship brand Enamor. The Transferee Company is also engaged in the business of manufacturing for innerwear for men. Accordingly, the object of the Transferor Companies and Transferee Company are the same and the business are of similar nature. (9) Regarding the observation no. 10 of ROC & RD, it is stated that by virtue of Clause 16 of Part III of the Scheme, the authorised capital of the Transferee Company shall stand increased by the authorised capital of the Transferor Companies pursuant to the Scheme. The Transferee Company undertakes to comply with the provisions of Section 232(3)(1) of the Companies Act, 2013 in relation to clubbing o....
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.... of the Transferee Company for the year ended 31st March 2019. (16) Regarding the observation no. 17 of ROC & RD, it is stated that the Petitioner Companies have Related Party Transactions which as disclosed in their respective Audited Financial Statements. The said Related Party Transactions are as per the applicable accounting standards. The same is disclosed in Form AOC-2 of the Board's Report also. All Related Party Transactions are entered at arm's length and are in the ordinary course of business. Details of related party transactions of the Petitioner Companies are reflecting in the Notes forming part of Financial Statements. The extract of the same along with Form AOC-2 of the Board's Report are already produced with the Company Petition. (17) Regarding the observation no. 18 of ROC & RD, it is stated that the CSR spend for the year 2018-19 by the Transferee Company is Rs. 11.40 million as stated in the Directors Report for the period ended 31st March 2019. The Note 34 of the Audited Financial Statements for the period ending 31st March 2019 states that the amount spent for CSR is Rs. 11.40 million which includes an arrangement made with the Ta....
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.... in five core sectors, including business and financial services, healthcare, industrial, retail, consumer and leisure and technology. Varenna proposed to acquire entire equity stake in GIPL from its existing shareholders. It already held 100% equity shares of Dixcy Textiles Pvt. Limited (Dixcy), the Transferee Company an unlisted company engaged in manufacturing and sale of innerwear, casual wear and thermal wear (for men, women and children) in India. (3) On 16 September 2019, Varenna acquired entire stake (direct/indirect) in GIPL by way of a Share Purchase Agreement with the sellers of GIPL and its parent company HIPL in the following manner: Varenna acquired total 100% stake directly from its earlier shareholders and also indirectly in GIPL from shareholders of GIPL's parent company i.e., HIPL for Rs. 250.44 crore: * The valuation was arrived at basis an independently agreed price between 2 unrelated set of parties i.e., Advent and various sellers in GIPL. * Relevant valuation reports along with relevant forms prescribed under Foreign Direct Investment policy have already been filed with various regulatory authorities prescribed by Reserve Bank o....
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....cial Liquidator vide OLR No. 03 of 2021 dated 05.01.2021 in C.P. (CAA) No. 37/BB/2020 has inter alia stated that for scrutiny of the books of accounts and records of the Transferor Companies, he has engaged M/s. ANKH & Associates, Chartered Accountants, which after examining the affairs of the Transferor Companies, has inter alia concluded in its report dated 24.11.2020 that the Transferor Company 2 has maintained proper Books of account and records and the affairs of the Transferor Company 2 have not been conducted in a manner prejudicial to the interest of its members creditors and the From the above, they concluded by saying that to take note of the remarks given in para 4.1 to 5.2 supra for suitable orders. Therefore, the Official Liquidator prays that pass such order(s) on the merits of the case subject to objection, if any, by other Sectoral Regulators. 11. Heard Mr. Saji P John, learned Counsel for the Petitioner Companies and Mr. Hemanth R Rao, learned standing Counsel for the ROC and Mr. Ganesh R. Ghale, learned Standing Counsel for the Income Tax. We have carefully perused the pleadings of the Parties and the extant Provisions of the Companies Act and various Rules mad....
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.... any law, and the same shall be dealt with by the respective Authority in accordance with the extant Laws and Rules governing such Duty, taxes or other charges, as applicable; and (3) The Transferor Companies be transferred without further act or deed to the Transferee Company and accordingly, the same shall, pursuant to section 232 of the Companies Act, 2013, be transferred to and vest in the Transferee Company for all the state and interest of the Transferor therein, but subject nevertheless, to all the charges now affecting the same; and (4) The Transferor/Transferee Companies shall strictly comply with the provisions of the FEMA and RBI Regulations; and (5) The Transferor/Transferee Companies shall, on completion of the merger, ensure relevant filings under Foreign Direct Investment policy and various other regulations with the concerned regulatory authorities; (6) All the liabilities including taxes, levies and charges, if any, and duties of the Transferor Companies be transferred without further act or deed to the Transferee Company and accordingly the same shall, pursuant to section 232 of the Companies Act, 2013, be transferred to and bec....