2017 (12) TMI 1105 - AT - Companies Law

Scheme of merger/amalgamation rejected - Held that - In the rejoinder affidavit, the appellants have taken a plea that the objection that MCA21 portal reflects the paid-up capital of the Transferee Company is different as per the scheme, is not based on record. The MCA21 portal of the Transferee Company s master data shows that the paid-up capital is ₹ 5,68,79,400/- and as such, there is no discrepancy in the issued subscribed and paid-up capital of the Company as alleged. The appellants have also taken a plea that the Transferee Company is not a Non-Banking Financial Company (NBFC). However, on perusal of the report of the Regional Director and letter forwarded to the Reserve Bank of India dated 28th April, 2017, it is clear that the Signature Global (India) Private Limited , namely, the Transferee Company is carrying NBFC s activities which, according to the Reserve Bank of India, is illegal activity, as no permission of the Reserve Bank of India has been taken. In view of the specific plea taken by the Reserve Bank of India and brought to the notice of the Tribunal by both Registrar of Companies and Regional Director, Northern Region, we are not inclined to interfere with the impugned order dated 11th August, 2017. Appeal dismissed.

Summary

Issues:
1. Rejection of scheme of merger/amalgamation by the National Company Law Tribunal.
2. Determination of whether the Transferee Company is a Non-Banking Financial Company (NBFC).
3. Compliance with capital structure requirements.
4. Discrepancy in paid-up capital information.
5. Allegations of illegal NBFC activities by the Transferee Company.

Analysis:
1. The appeal was filed against the rejection of the scheme of merger/amalgamation by the National Company Law Tribunal. The Hon'ble High Court transferred the case to the Tribunal due to a Central Government notification. The Tribunal rejected the scheme based on objections raised by the Registrar of Companies, Regional Director, and the Reserve Bank of India.

2. The key issue was whether the Transferee Company qualified as an NBFC. The Tribunal found that the financial assets of the Transferee Company exceeded 50% of their total assets, and income from financial assets constituted more than 50% of the total gross income. This led to the conclusion that the Transferee Company was indeed operating as an NBFC without the necessary approval from the Reserve Bank of India.

3. Concerns were raised regarding compliance with capital structure requirements. The Transferee Company had discrepancies in the information provided regarding its paid-up capital. The appellants argued that there was no discrepancy, but the Tribunal noted conflicting information between the scheme and the MCA21 portal.

4. The Tribunal highlighted the discrepancy in the paid-up capital information of the Transferee Company as per the scheme and the MCA21 portal. The appellants' plea that there was no discrepancy was not accepted, and the Tribunal emphasized the importance of accurate financial information in such cases.

5. The Reserve Bank of India confirmed that the Transferee Company was engaging in illegal NBFC activities without the required permission. This information, along with the objections raised by regulatory authorities, led the Tribunal to uphold the rejection of the scheme of merger/amalgamation. The appeal was dismissed due to the lack of merit in the case.