TaxTMI 
TaxTMI 
2021 (6) TMI 319
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....sferor Company - 2"), M/s. Mega Rubber Products Private Limited (hereinafter referred to as "Transferor Company - 3") and M/s. Polyhose Properties Private Limited (hereinafter referred to as "Resulting Company") under Section 230 to 232 and other applicable provisions of the Companies Act, 2013 (hereinafter referred to as 'the Act') read with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 (hereinafter referred to as 'the Rules') pursuant to the Scheme proposed between the Petitioner Companies and the said Scheme is also commonly annexed as Annexure "A4" to the typed set filed along with the CA/129 to 133/CAA/2020. 2. The Composite Scheme of Arrangement and Amalgamation as contemplated between the Petitioner Companies involves the following three steps: * The capital Reduction of the Transferor Company-2, wherein the paid up share capital would be cancelled, reduced and adjusted against the accumulated losses of the Company. * Amalgamation of Transferor Company - 1, Transferor Company - 2, Transferor Company - 3 into the Transferee Company. * Demerger of the Real Estate Business of Transferee Company/Demerged Company....
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....said resources and operational efficiency which would be beneficial to all stakeholders. 5. In the second motion application filed by the Petitioner Companies, this Tribunal vide order dated 27.02.2020 has directed the Petitioner Companies to issue notice to the Statutory/Regulatory Authorities viz. (i) Regional Director (Southern Region), (ii) RoC, Chennai, (iii) the Income Tax Department, (iv) Official Liquidator, (v) Reserve Bank of India and other sectoral regulators, who may govern the working of the respective companies in relation to the Scheme, as well as for paper publication to be made in "Business Standard", English (All India Edition) and "Maalai Chudar" Tamil (Tamil Nadu Edition). 6. In compliance to the said directions issued by this Tribunal, the Petitioner Companies have filed an affidavit of service before the Registry of this Tribunal vide Diary No. 2758 dated 05.10.2020 in relation to the compliance of the order passed by the Tribunal as noted above and a perusal of the same discloses that the Petitioner Companies have effected the paper publication as directed by the Tribunal in the issue of "Business Standard" (All India Edition) in English and "Maalai Ch....
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....l statements as well the figures mentioned in the financial statement already filed for the years 2017-18 and 2018-18 are not comparable since the scheme was given effect to with effect from 01.04.2017. 9. It is submitted that in Part B of the Scheme the Company has proposed to reduce the capital of the 2nd transferor company before amalgamating the company with the transferee/demerged company. Accordingly, the paid up equity share capital of Rs. 277,61,40,780 (Rupees two hundred and seventy seven crores, sixty one lakh forty thousand, seven hundred and eighty only) divided into 27,58,95,952 of Class A equity shares of Rs. 10 each will be reduced to 11,46,53,274 (Eleven crores, forty six lakh, fifty three thousand and two hundred and seventy four) equity shares of Rs. 10 each amounting to Rs. 114,65,32,740 (Rupees one hundred and fourteen crores, sixty five lakh, thirty two thousand, seven hundred and forty only) and the entire class B equity share capital amount to Rs. 1,71,81,260 (Rupees one crore, seventy one lakhs, eighty one thousand, two hundred and sixty only) divided into 17,18,126 will be reduced/cancelled. This reduction/cancellation of Part of the Class A equity....
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....12. It is submitted that in Part D para 31 of the Scheme has proposed to merge part of the Authorized capital of the demerged company at Rs. 62,73,00,000/- divided into 6,27,30,000 equity shares of Rs. 10/- each with the Authorized capital of the Resulting Company. The provisions of Section 61 and Section 230-232 of the Act does not provide for such division of the Authorized capital of the demerged company and merging it with the resulting Company. As provided under Section 232(3)(i) of the Act the transferee company can merge the authorized capital of the transferor company/companies with its Authorized capital in a merger/amalgamation only and no under demerger. The Hon'ble Tribunal may consider the above observation for forming part and parcel of its order. 13. It is submitted that the real estate business is being demerged to resulting company with the appointed date 23.05.2019 which is subsumed in the financial year 2019 - 20. The applicant companies have provided the list of assets and liabilities along with the book values as per their Affidavit of Undertaking filed before the Regional Director. The Hon'ble Tribunal is requested to incorporate the Affidavit....
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....ante date is for the following reasons; a. The Transferor Company is engaged in the manufacture of Construction Equipment such as Motor Grader of various capacities and sales are affected through dealer network and in some cases direct sales. The product is also exported to various countries. As the products manufactured and sold are large equipments with enduring life, they carry warranties both fixed and elongated. Therefore, in order to provide continuation in warranty and assure the dealers and end customers regarding such warranty arrangements, the Transferee Company has antedated the appointed date in the Scheme. This will provide enormous comfort to the domestic customers, dealers and overseas customers. b. The Company's products are used worldwide, some of the major critical parts such as engine, axle, transmission, etc., also carry worldwide warranty and in some cases extended warranties are given on case-to-case basis. These commitments also got to be adhered and protected going forward and after the approval of the Scheme by the Honourable National Company Law Tribunal. c. The new product pricing is heavily dependent on resale price being c....
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....#39;Business Combination of entities under common control' to the India Accounting Standard (IND AS) 103 on Business Combination prescribed under Section 133 of the Companies Act, 2013 as notified under the Companies (India Accounting Standard) Rules, 2015 and generally accepted accounting principles as may be amended from time to time. b) The difference between the value of assets and liabilities recorded pursuant to the clause (a) above and the value of investment in LeeBoy and Mega Rubber as reflected in the books of PIPL shall be credited/debited to Capital Reserve, in accordance with para 12 under Appendix C to Ind AS 103-Business Combinations. c) The difference between the value of assets and liabilities recorded pursuant to clause (a) above and the value of equity shares issued, pursuant to Clause 8.2 of the Scheme, by PIPL to shareholders of PAPL shall be credited/debited to Capital Reserve in accordance with the provisions of Ind AS 103. 7.1.8. Further, it is stated that on Demerger of the Real Estate Undertaking/Business of PIPL (Demerged Company) into Polyhose Properties Private Limited (Resulting Company), in addition to Clause 21 and Clause 22 ....
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....nies Act, 2013 as notified under the Companies (India Accounting Standard) Rules, 2015 and generally accepted accounting principles as may be amended from time to time. b) The Resulting Company shall, record the assets and liabilities of the PIPL Demerged Undertaking vested in it pursuant to this Scheme at their respective carrying amounts appearing in the books of the Demerged Company as at the Appointed Date c) The Resulting Company shall credit to its share capital, in its books of account, the aggregate face value of the equity shares issued by it to the members of the Demerged Company pursuant to this Scheme. d) The difference between the carrying amount of the assets and liabilities in the Resulting Company pursuant to this Scheme after adjusting the value of shares issued in accordance with Clause 20 of this Scheme, if any, shall be adjusted to Capital Reserve in accordance with para 12 under Appendix C to Ind AS 103 - Business Combinations. e) If considered appropriate for the purpose of application of uniform accounting policies and method or for compliance with the applicable accounting standards, the Resulting Company may make suitable....
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....he Demerged Company. 7.1.13. In so far as the observations made in para 13 of the Report of the RD, it is stated in the Affidavit that the Petitioner Companies have provided the list of assets and liabilities along with the book values as per their Affidavit of Undertaking enclosed with the Report of the Regional Director and the concerned Petition Companies at the time of filing certified copy of the present order shall also file the list of assets and liabilities as an Annexure to the order without fail. 7.1.14. In so far as the observations made in para 14 of the Report of the RD, it is stated in the Affidavit that the Transferee Company undertakes to comply with the requirements as specified in the para 14 by agreeing to file the amended MOA and AOA with RoC, Chennai in E-form so as to enable the RoC, Chennai to issue Certificate of Change of Objects as required under the Companies Act, 2013. 7.1.15. Further, it is stated in the Affidavit that the Transferee Company, pursuant to the Composite Scheme of Arrangement, the assets or turnover does not exceed the threshold limits specified under Section 5 of the Competition Act, 2002 as revised by S.O. No. 675(E) dated 4th M....
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...." until the date of conversion of ECB into equity shares. The Company has also paid royalty to its Foreign "Holding Company". * The above transactions are required to be reported under Transfer pricing Regulations under Income Tax Act, 1961, as to whether these transactions were carried out at "ARMS LENGTH PRICE" between the related parties. In the report issued by the Transfer Pricing Auditor, it was certified that the price at which the related party transactions with international related entities had been carried out at arm's length. Since the observations has been made by another firm of Chartered Accountants, the Chartered Accountants cannot provide further opinion on the correctness of the above transaction. * The 2nd Transferor Company has receivables from non - resident companies which are more than nine months and the Company is in the process of obtaining requisite approval from Reserve Bank of India for extension of the time frame for receipt of the said receivables. * The 2nd Transferor Company has payables in foreign currency which were outstanding for a period exceeding six months from the date they became payable and the Company is in ....
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....d in the Composite Scheme of Arrangements, become the wholly owned subsidiary of Transferee Company, hence share valuation has not been done and the question of issuing shares to the Transferor Company does not arise. * Since the 3rd Transferor Company is a wholly owned subsidiary of the Transferee Company, share valuation has not been done and the question of issuing shares to the 3rd Transferor Company does not arise. * The Chartered Accountants have not come across any discrepancy while carrying out the inspection of returns & forms filed by the Transferor Company and as available with the Registrar of Companies, Tamil Nadu. 7.2.2 From the above observations made by the Chartered Accountants, the Official Liquidator sought to take on record and consider the report of the Chartered Accountant and has also sought to fix the remuneration payable to the Auditor who has investigated into the affairs of Transferor Company. In this regard, this Tribunal hereby directs the Transferor Company-1, 2 and 3 to jointly pay a sum of Rs. 60,000 (Rupees Sixty Thousand Only) to the Official Liquidator for the payment of fees payable towards the Auditor who has investigated in....
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....ed as "1 (One) Equity Share of PIPL of Rs. 100/- each fully paid for every 20 (Twenty) equity shares of PAPL of Rs. 10/- each fully paid up". 8.3. In so far as arriving at Demerger Share Entitlement Ratio, for the purpose of Demerger, it has been arrived as "6,27,30,000 (Six Crore Twenty Seven Lakhs Thirty Thousand Only) equity shares of the PPPL of Rs. 10/- each fully paid up for acquiring the real estate business of PIPL" 9. Accounting Treatment 9.1. The Learned Counsel for the Petitioner Companies have stated that the Statutory Auditors of the Petitioner Companies have examined the Scheme and certified that the Petitioner Companies have complied with proviso to Section 230(7)/Section 232(3) and the Accounting Treatment contained in the proposed Scheme of Arrangement is in compliance with the Applicable Indian Accounting Standards. The Certificates issued by the Statutory Auditors certifying the Accounting Treatment of each of the Petitioner Companies are attached with the respective CP's filed along with the petition. 10. Observations of this Tribunal 10.1. After analyzing the Scheme in detail, this Tribunal is of the considered view that the scheme as contemp....
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....62,96,08,040/-. (iii) That the sanction of the scheme resulting in the reduction of the share capital of the Transferor Company - 2 as above shall be in accordance with the provisions of Section 230 of the Companies Act, 2013 without any further application, act or deed required by the Transferor Company - 2 or its shareholders. (iv) That all properties, right and interest of the Transferor Company - 1, 2 and 3 shall pursuant to section 232(3) of the Companies Act, 2013 without further act or deed be transferred to and vested in or be deemed to have been transferred and vested in the Transferee Company as per Part C of the Scheme. (v) That all the liabilities, powers, engagements, obligations and duties of the Transferor Company-1, 2 and 3 shall pursuant to Section 232(3) of the Companies Act, 2013 without further act or deed be transferred to the Transferee Company and accordingly the same become the liabilities and duties of the Transferee Company. (vi) That all proceedings now pending by or against the Transferor Company - 1, 2 and 3 be continued by or against the Transferee Company. (vii) That all the employees of the Transferor Comp....
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....ven such notice of dissent, as is required by Clause 8.2 of Part-C of the SCHEME in the following proportion; "1 (One) Equity Shares of Rs. 100/- each, to the equity shareholders of PAPL as on the Record Date for every 20 (Twenty) equity shares of Rs. 10/- each held by the equity shareholders of PAPL, in consideration for the amalgamation."; (xv) That upon the Scheme coming into effect, the Resulting Company shall, as per Clause 20.1 of Part-D of the Scheme, without any further application or deed, issue and allot 1,230 (One thousand two hundred and Thirty) equity shares of face value INR 10/- each, of the Resulting Company to the equity shareholders of the Demerged Company as on the Record Date for every 1 (one) equity shares of Rs. 100/- each held by the equity shareholders of the Demerged Company, in consideration for the Demerger. (xvi) That the Transferee Company and the Resulting Company shall file the revised Memorandum and Articles of Association with the Registrar of Companies, Chennai and further make the requisite payments of the differential fee (if any) for the enhancement of authorized capital of the Transferee Company after setting off the ....