TaxTMI 
TaxTMI 
2021 (11) TMI 482
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....representations from some of its shareholders and unsecured creditors in respect of the Scheme, and Petitioner Company 3 has dealt with such objections by filing requisite responses which are on record. 3. The Petitioner Companies have jointly filed the present Company Scheme Petition seeking sanction of this Tribunal to the Composite Scheme of Amalgamation of Bamnipal Steel Limited and Tata Steel BSL Limited into and with Tata Steel Limited ("Scheme") under Sections 230 to 232 of the read with other applicable provisions Companies Act, 2013 ("Act"). 4. The Learned Senior Counsels for the Petitioner Companies stated that the Petitioner Company 1 is engaged in the business of manufacturing steel and offers a broad range of steel products including a portfolio of high value-added downstream products such as hot rolled, cold rolled and coated steel, rebars, wire rods, tubes and wires. The Petitioner Company 1 also has a well-established distribution network. The Petitioner Company 2 is a wholly owned subsidiary of Petitioner Company 1 and was incorporated inter alia for the purpose of completing the acquisition of the Petitioner Company 3 pursuant to corporate insolvency resolut....
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....trative, operational, financial, and managerial and such other costs. (b) Commercial rationale for amalgamation of the Petitioner Company 3 with the Petitioner Company 1 (i) The Petitioner Company 3 and the Petitioner Company 1 are engaged in the business of manufacture and sale of steel and steel products. The amalgamation will ensure focused management in the combined entity, thereby resulting in efficiency of management and maximizing value for the shareholders. Such restructuring will lead to simplification of group structure by eliminating multiple companies in similar business. (ii) The proposed amalgamation of the Petitioner Company 3 with the Petitioner Company 1 in accordance with the terms of this Scheme would enable both the companies to realize benefits of greater synergies between their businesses, yield beneficial results and pool financial resources as well as managerial, technical, distribution and marketing resources of each other in the interest of maximizing value to their shareholders and the stakeholders. (iii) The proposed amalgamation will be beneficial to both the Petitioner Company 3 and the Petitioner Company 1 in the fo....
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....bution channel and dealer network of the Transferee Company. Further, the Petitioner Company 3 could also have access to the Petitioner Company 1's branded product portfolio and marketing capabilities. The Petitioner Company 1 would benefit from complementary product offerings of the Petitioner Company 3, resulting in a strong presence across market segments. The proposed amalgamation will result in access to new markets and product offerings as well as increased export volumes. * Improving Customer Satisfaction and Services: The proposed amalgamation would make it easier to address needs of customers by providing them uniform product and service experience, on-time supplies, and improved service levels thereby improving customer satisfaction. With common credit management, the customers are expected to benefit from the channel financing benefits from the combined entity. * Improved safety, environment and sustainability practices: Increased coverage of plant automation can be achieved across plants of the Petitioner Company 3, by using the Petitioner Company 1's information technology applications and systems. Thus, the proposed amalgamation is b....
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....hat this Tribunal may consider the observations made at Serial No. IV (a) to (r) of the said Report, and pass such other order or orders as deemed fit and proper in the facts and circumstances of the case. The observations made by the RD, Mumbai, in paragraph IV of the Report are, reproduced hereunder, for sake of ready reference: "IV. The observations of the Regional Director on the proposed Scheme to be considered by the Hon'ble NCLT are as under:- (a) In addition to compliance of AS-14 (IND AS-103) the Transferee Company 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) As per Part-I-Definitions Clause 111(1.4), 111(1.9) & 111(1.18) of the Scheme "Appointed Date" means April 1, 2019 or such other date as approved by the NCLT; "Effective Date" means the date on which the last of conditions referred to in Clause 25.1 hereof have been fulfilled. Any reference in this Scheme to the date of "coming into effect of the/this Scheme" or Scheme becoming effective" shall be construed accordingly; "Record Date" mea....
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....to the amalgamation and therefore, petitioners to affirm that they comply the provisions of the section. (g) The Petitioner Company may be directed to submit undertaking that the petitioner company shall ensure compliance of the all provisions of the Income Tax Act, 1961 including provisions of section 2(1B) of the Income Tax Act. (h) As per Part-II - (Amalgamation of The Transferor Company 1 into and with The Transferee Company) Clause 7(7.1) of the Scheme (Accounting Treatment).Upon coming into effect of this scheme, the transferee company shall account for the amalgamation of the transferor company 1 in its books of accounts in accordance with pooling of interest method of accounting as laid down in Ind AS 103 (Business Combinations) and relevant clarifications issued by institute of chartered accountants of India (ICAI). In this regards it is stated that in Indian Accounting Standard (Ind AS) 103 - prescribes application of pooling of Interest Method to account for common control business combinations. Under this method:... Any difference, whether positive or negative, shall be adjusted against the capital reserves (or "Amalgamation Adjustment Deficit....
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.... Stock Exchange have been obtained and whether the meeting of the Shareholders/class of shareholders have been convened as per the listing/SEBI guidelines. (m) Since the Transferee Company listed on Luxembourg Stock Exchange and the London Stock Exchange, the Petitioner Company de directed to undertake to comply with all Rules and Regulations as stipulated by London Stock Exchange. (n) The Petitioner Companies to place on record and to provide details regarding meeting of Shareholders other than Promoters, has been convened or not. (o) Since the Transferor Company 2 and The Transferee Company have foreign/nonresident shareholders, therefore, it is subject to the compliance of section 55 of the Companies Act, 2013 the FEMA Regulations/RBI Guidelines by the Transferee Company. (p) As regards the complaints indicated at para 21 above, under the head -Complaint received against the propose Scheme, it is submitted that the petitioners be directed to mention all the facts in this regard about complaints and explain about the allegations made therein, before approval of the scheme. (q) In view of the observation raised by the ROC Mumbai, mentio....
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....een approved by an over-whelming majority of the equity shareholders (99.99% of the equity shareholders present and voting at the NCLT convened shareholders' meeting) of the Petitioner Company 1. The report of the Chairperson appointed by this Tribunal, setting out the result of the meeting, along with the Affidavit in support thereof, has been filed with this Tribunal on April 13, 2021, and is annexed to the Company Scheme Petition as Exhibit "X". Learned Senior Counsels further submit that are the minutes of the NCLT convened meeting of equity shareholders of Petitioner Company 1 held on March 26, 2021 are annexed as Exhibit "A" to the P1 and P2 RD Response, and in terms of the CSA Orders, the convening and holding of meeting of the creditors of the Petitioner Company 1 was dispensed with. (b) Petitioner Company 2: In terms of the CSA Orders, there was no requirement of convening of meeting of the equity shareholders of the Petitioner Company 2, in view of the consent affidavits obtained from its equity shareholders, and the question of convening and holding of meetings of the creditors of the Petitioner Company 2 didn't arise since Petitioner Company 2 didn'....
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.... far as the observations in paragraphs IV (h) and (i) of the P1 and P2 RD Report are concerned, the Petitioner Company 1 undertakes that the Capital Reserves, if available, with the Transferee Company, shall not be utilized for distribution of dividends and other similar purposes. 21. So far as the observation in paragraph IV (j) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 states that the Petitioner Company 1 is not undertaking any amendment to its memorandum of association, pursuant to the Scheme, and Clause 21 is merely an enabling provision in the Scheme to facilitate such amendment, in case required. In this regards, the Petitioner Company 1 undertakes to comply with the applicable provisions of the Act, if and when such need arises. Petitioner Company 1 further undertakes to pay applicable stamp duty payable in accordance with the applicable laws. 22. So far as the observation in paragraph IV (k) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 and Petitioner Company 2 submit that since the registered office of the Petitioner Company 3 (Transferor Company 2) is situated at Delhi, the Petitioner Company 3 had filed its Company Scheme....
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....t the Scheme. 24. So far as the observation in paragraph IV (m) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 (i.e. Transferee Company) states that the Global Depository Receipts of the Transferee Company are listed on the Luxembourg Stock Exchange and the London Stock Exchange. In this regard, Petitioner Company 1 undertakes to comply with applicable rules and regulations as stipulated by Luxembourg Stock Exchange and the London Stock Exchange pertaining to matters in relation to the Scheme. 25. So far as the observation in paragraph IV (n) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 submits that pursuant to the CSA Orders, the meeting of equity shareholders of Petitioner Company 1 was held on Friday, March 26, 2021 at 11:00 a.m. (IST) to seek their approval to the Scheme. The resolution proposed for the Scheme was passed with requisite majority of the equity shareholders (which also included the public shareholders of Petitioner Company 1). The Petitioner Company 1 further clarifies that the provisions of paragraph 9(b) of Annexure I of the Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017 issued by the Securities and Exchange ....
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....ner Company 1 states that in spite of the fact that the said complainant is not a shareholder of the Petitioner Company 1, Petitioner Company 1 responded to the said complaint by its letter dated May 24, 2021 enclosed to an e-mail dated May 28, 2021 sent to the Registrar of Companies, Mumbai ("ROC") and RD. The copies of the letter dated June 25, 2021 and the e-mail dated May 28, 2021 along with a copy of the letter dated May 24, 2021, both sent to the ROC, are annexed to the P1 and P2 RD Response as Exhibit "B" and Exhibit "C", respectively. In any event, the above complainants have also filed an Application before this Tribunal, on the same subject matter which is on the records of this Tribunal. It is pertinent to mention that the Scheme has been approved by an overwhelming majority of equity shareholders of the Petitioner Company 1 (99.99% of the equity shareholders present and voting at the NCLT convened shareholders' meeting) at the NCLT convened meeting held on March 26, 2021. 28. So far as the observations in paragraph IV (q) of the P1 and P2 RD Report is concerned, the Petitioner Companies state as under: (a) Petitioner Company 1 states that as mentioned in....
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....ed in the P1 and P2 RD Response, as detailed in paragraphs 12 to 29 hereinabove, the office of RD, Mumbai filed a supplementary report dated July 13, 2021 with this Tribunal ("Supplementary Report"). The Supplementary Report, inter alia states that the Petitioner Company 1 and Petitioner Company 2 have submitted their replies by way of the P1 and P2 RD Response, and a copy of the same was annexed as Annexure A to the Supplementary Report. As regards the replies of the Petitioner Company 1 and Petitioner Company 2 to paragraphs (IV) (a), (b), (d), (e), (g) to (j), (l) and (m), the officer appearing for the RD submits that the replies submitted by the Petitioner Companies in P1 and P2 RD Response are satisfactory. As regards the replies of the Petitioner Companies 1 and 2 to paragraphs (IV) (c), (f) (k), (n) (o) (p) (q) and (r) of the P1 and P2 RD Report, the Supplementary Report states that the Tribunal may pass appropriate orders as deem fit. 31. The observations made by the RD, Mumbai in its report dated June 17, 2021, have been reproduced in paragraph 11 above. The clarifications and undertakings given by the Petitioner Company 1 and Petitioner Company 2 to the P1 and P2 RD Re....
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....pproved on 25.04.2019. But the Scheme could not be implemented due to reasons beyond the control companies involved. A gap of almost 2 years is enough for the change of matrices of the Valuation report, which is being relied upon now. The said scheme now is against the public/minority shareholdings interest holding 27.35% equity share in Tara Steel BSL Limited f or the following reasons. A. Fair Exchange ratio of 15 Tata Steel BSL Limited (FV Rs. 21/-) for 1 share of Tata Steel Limited (FV Rs. 101/-), is based on valuation reports which is almost 2 years old and hence cannot be the basis as on date. And as an icon group Tata 's cannot accept the valuation report which his more than 6 month old, which is against all norms of Corporate Governance. B. Public/Minority shareholding 27.35% share capital of Tata Steel BSL Limited as on date will be left with only 1.6285% of holding in amalgamated company Tata Steel Limited. The Scheme, if implemented as such will cause huge loss to the Public/Minority shareholders of Tata Steel BSL Limited. The complainant has requested that as fresh swap ratio should be computed by considering recent valuations of the compa....
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....mplaint of Mr. Vijesh Viswanathan and sought a response from the Petitioner Company 3 on the same. The Petitioner Company 3 vide its letter dated July 11, 2021, Petitioner Company 3 has appropriately responded to the said complaint. Further, as regards the complaint filed by Mr. Jatinder Singh Ahuja, Petitioner Company 3 states that it is not in receipt of the representation dated April 28, 2021 from Mr. Jitender Ahuja, through the RoC. However, apart from the aforesaid letter, Mr. Jitender Ahuja has written several representations regarding the Scheme and the share exchange ratio to various regulators including SEBI, and the Petitioner Company 3 has appropriately responded to such representations on numerous occasions. Vide email dated June 10, 2021 in response to the reply of the Petitioner Company 3 dated May 31, 2021 to the complaint of Mr. Jitender Singh Ahuja on the SCORES platform dated May 12, 2021, SEBI affirmed that the response of the Petitioner Company 3 was satisfactory and closed the complaint. 37. The observations made by the RD, New Delhi in its Report have been reproduced in paragraph 32 above. The clarifications and undertakings given by the Petitioner Company ....
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.... rights, approvals, licenses and powers, leasehold rights and all its debts, outstanding liabilities, duties, obligations and employees. Clause 18(i) of the Scheme provides that upon the Scheme coming into effect, the Undertaking 2 shall without any further act, instrument or deed be and stand transferred to and vested in and/or be deemed to have been and stand transferred to and stand vested in the Transferee company, as a going concern, so as to become the undertaking of the Transferee Company, with effect from the Appointed Date. 41. Therefore, as per above submissions and clear position of law the grievances of the objector is addressed accordingly and nothing survives in CA 156 of 2021 and CA 261 of 2021, Accordingly both CA 156 of 2021 and CA 261 of 2021 disposed of as dismissed. 42. From the material on record and after perusing the clarifications and submissions of the Petitioner Companies to the Reports filed by the Regional Directors, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. 43. Since all the requisite statutory compliances have been fulfilled, the Company Scheme Petition file....