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TMI Blog2014 (9) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... p in accordance with law and a certified copy be filed with the Registrar of Companies within 30 days of the same. The report of the Regional Director regarding the effective date as per Section 391(3) to be the date when certified copy filed with Registrar of Companies is accepted. - CP no. 203 of2013(O&M) - - - Dated:- 30-9-2014 - HON'BLE MR.JUSTICE MAHESH GROVER Ms. Munisha Gandhi, Sr. Advocate with Mr. Gaurav Goel, Advocate Mr. D.P.Ojha, Official Liquidator JUDGEMENT MAHESH GROVER, J. This is a petition under Sections 391 and 394 of the Companies Act, 1956 (hereinafter referred to as The Act ) seeking approval/sanction of the Scheme of Amalgamation (Annexure P-1). The following would be constituent participants in the Scheme. Transferor companies :- Sukh Realters Private Limited (hereinafter referred to as the Petitioner Company no.1), Ma-Ganga Builders Constructions Private Limited (hereinafter referred to as the Petitioner Company no.2.), Belisma Buildcon Private Limited (hereinafter referred to as the Petitioner Company no.3.), North Star Apartments Private Limited (hereinafter referred to as the Transferee Company no.1/Transferor Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nancial statements have been set out in the petition alongwith certified copies of the audited balance sheets for the financial year ending on 31.3.2012 and unaudited balance sheet for year ending 31.3.2013 are on record as Annexure P-10 collectively. It has been stated that equity shares of the petitioner company no.2 are not listed on any stock exchange. The Petitioner Company no.3 was incorporated on 18th January, 2010 in the State of Delhi under the name of Belisma Buildcon Private Limited but its registered office changed to State of Haryana w.e.f 4.5.2013. The aims and objects of the Company as contained in the memorandum and articles of association are on record as Annexure P-11. The authorized, issued, subscribed and paid up share capital of petitioner Company 1 as existing on 31.3.2012 as per the audited financial statements have been set out in the petition alongwith certified copies of the audited balance sheets for the financial year ending on 31.3.2012 and unaudited balance sheet for year ending 31.3.2013 are on record as Annexure P-12. It has been stated that equity shares of the petitioner company no.3 are not listed on any stock exchange. The Transferee Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no investigation or proceedings are pending against the constituents companies under the provisions of Section 235 to 251 of the Companies Act. Notice of this petition as well as Amended Scheme of Amalgamation was issued to the Official Liquidator and the Regional Director who have submitted their reports. Affidavits dated 7.8.2014 and 9.9.2014 have also been filled by Mrs. Dayawanti, Authorized Signatory of the petitioner Companies to the reports of the Official Liquidator and Regional Director. The Official Liquidator has submitted on the basis of the report of the Chartered Accountant that the Transferor companies are in default as far as their statutory dues of Income Tax Liability for more than 3 years are concerned. The relevant portion of the objections raised by the Official Liquidator are extracted herebelow:- 4. That M/s Anand Sabharwal Associates, Chartered Accountant has verified the Accounts of Transferor Companies and submitted his report to this office on 21.5.2014. The copy of report is enclosed and annexed as Annexure R-2. The learned Chartered Accountant has made following observations:- 4(1)(A) Pending statutory dues of Income Tax Liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Amalgamation, there is no uniformity in basis of proposed purchase consideration mentioned in the first Amalgamation between Transferor Company 1, 2 3 with Transferor Company 4 and the second Amalgamation between Transferor Company 4 Transferee Company 4(2) in the first Amalgamation between the Transferor Company 1, 2 3 with Transferor Company 4 the purchase consideration has been fixed for issuing of Equity/Preference shares of ₹ 10 lacs each to Transferor Company 1, 2 3 aggregating to worth ₹ 30 lacs only, whereas in the second Amalgamation between Transferor Company 4 Transferee Company 2 the purchase consideration has been fixed for issuing of 3,31,60,000 equity shares of the face value of ₹ 10/- each at a premium of ₹ 577/- each and 7000 non-cumulative redeemable preference shares of the face value of ₹ 1000/- each, aggregating to worth ₹ 1949.10 Crores. Whereas the management has worked out Purchase Consideration worth ₹ 1949.10 Crores on the basis of valuation of properties which largely belongs to Transferor Company 1, 2 3 and also have the right in the properties of Transferor Company 4 being its holding companies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of natural justice law. In the post merger the shareholders of Transferor Company 1 are taking purchase consideration worth ₹ 10 lacs as Preference Shares instead of having share in the properties worth ₹ 677.14 Crores. Secondly shareholders of Transferor Company 2 are taking purchase consideration worth ₹ 10 lacs as Preference Shares instead of having share in the properties worth ₹ 823.02 Crores. Similarly, shareholders of Transferor Company 3 are taking purchase consideration worth ₹ 10 lacs as Equity Shares instead of having share in the properties worth ₹ 441.36 Crores. Therefore in our opinion the criteria of calculation of purchase consideration adopted by the companies in the first Amalgamation the second Amalgamation is not uniform; therefore the Scheme is prejudicial to the interest of the members. 4(3) That while calculating the valuation of the properties, the Transferor Companies has taken value of assets which does not belong to the Transferor Companies exclusively. However, it includes 9 properties having aggregate valuation of ₹ 1014.66 crores which belongs to subsidiaries companies as well as associate companies. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. 11.42 Sector 83, Gurgaon Vacant Land 178.25 6 15 Sec 83-CI / Commercial A D Estates Pvt. Ltd. Goldline Build Tech Pvt. Ltd. 14.7 Sector 83, Gurgaon Vacant Land 209.72 7 16 Sec 83-C 2/ Commercial A D Estates Pvt. Ltd. 8.61 Sector 83, Gurgaon Vacant Land 118.71 8 18 Commercial / Agricultural Land North Star Towers P Ltd. North Star Apartments Pvt. Ltd. Matrix Buildwell Pvt. Ltd. 2.51 Sector 86, Gurgaon Vacant Land/License not yet granted 35.14 9 19 Agricultural land/ Residential Shive Profins Pvt. Ltd. North Star Towers Pvt. Ltd., North Star Apartments Pvt. Ltd., Matrix Buildwell Pvt. Ltd., Green Gem Estates Pvt. Ltd., Esteem Towers P. Ltd. Bluechip Properties Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d valuation report should have been placed in the Board Meeting of the Companies as well as in the General Meeting for the approval of the members and same should be placed before the Hon'ble High Court of Punjab Haryana while filing the petition of Amalgamation along with Scheme of Amalgamation. Therefore, in light of above said circumstances, this Scheme of Amalgamation is insufficient incorrect to purpose the purchase consideration between the companies under Amalgamation. In the absence of Independent Valuation Report basis of calculation of purchase consideration in the form of issuing of Equity Preference shares in the Scheme of Amalgamation, the Board of Directors has taken the Fairness Opinion Report from the M/s SSPA Co., Chartered Accountants, Gurgaon dated 12/08/2013 to justify the basis of calculation of purchase consideration prepared by the management. In this regard, we have noticed that the M/s SSPA Co. (Chartered Accountants), Gurgaon has given their Fairness Opinion Report only on the basis of management recommendations; for issuing of equity preference shares in lieu of purchase consideration without examining the valuation of properties, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (second motion petition) only filed by the companies In first motion petition (C.P.No.155 of 2013), the company has filed Scheme of Amalgamation, minutes of Board meetings, consent of the shareholders on affidavits, consents of creditors, approval/consent of the financial institutions affidavits of the directors and all necessary documents for approval of the Scheme of Amalgamation. The said first motion petition was allowed by this Hon'ble High Court on 20/12/2013 with Purchase Consideration for issue of: 33,16,000 equity shares of the face value of ₹ 10/- each at a premium of ₹ 577/- each of Transferee Company no.2 credited as fully paid up to all the equity share holders of the Transferor company no.4 as on the Record date, in proportion of their holding in the Transferor company no.4 and -7000 non-cumulative redeemable preference shares of the face value of ₹ 1000/- each of Transferee Company no 2 credited as fully paid up to all the preference shareholders of the Transferor company no.4, as on Record date, in proportion of their holding in the Transferor company no.4 While examination of records in respect to minutes of the Board Mee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first motion petition which was already approved by the Hon'ble High Court on 20/12/2013. Moreover, the contentions of company in said modification that it is typographical error in the clause 23.1.1 of the Scheme of Amalgamation is also incorrect because no such basis of the said calculation of shares under purchase consideration has been given in the Scheme of Amalgamation from which this typographical error has been occurred under modified second motion petition with Hon'ble High Court. In our opinion, such typographical error has not been occurred while drafting the first motion second motion petitions. However, it was a mistake in the calculation of purchase consideration. There is a difference of ₹ 1753.75 crore (1949.10 crore minus 195.35 crore) between the purchase consideration mentioned in lieu of issuing the shares in the first motion petition modified second motion petition. In these circumstances, to rectify the mistake by the management; the revised petition under first motion to be filed with the Hon'ble High Court with the modified Scheme of Amalgamation alongwith all revised necessary consents, approvals of the Creditors, financial insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public at large. It is evident that serious objections have been raised by the Official Liquidator to the Scheme of Amalgamation. The petitioner in turn has filed an affidavit assuring compliance of the statutory provisions of the Income Tax Act and adhering to the guidelines of the RBI. The Official Liquidator apart from raising objections to the Scheme which have been extracted hereinabove has opposed the motion as sought for by the Companies seeking Amalgamation. Learned counsel for the respondents responding to the objections of the Official Liquidator has placed reliance on judgment of the Hon'ble Supreme Court in case titled as Miheer H Mafatlal vs. Mafatlal Industries Ltd. reported as (1997) 1 SCC 579 where it has been observed as follows:- In view of the aforesaid settled legal position, therefore, the scope and ambit of the jurisdiction of the Company Court has clearly got earmarked. The following broad contours of such jurisdiction have emerged: 1 The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a Scheme has been complied with and that the requisite meeting as contemplated by Section 391(1) (a) have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anction such a Scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the Scheme rather than its supervisory jurisdiction. The aforesaid parameters of the scope and ambit of the jurisdiction of the Company Court which is called upon to sanction a Scheme of Compromise and Arrangement are not exhaustive but only broadly illustrative of the contours of the Court s jurisdiction. Reliance has also been placed upon a decision rendered by this Court in Company Petition no. 25 of 2014 connected with Company Petition no.166 of 2013 in the Scheme of Amalgamation between Ludhiana Holdings Limited with Oswal Woolens Mills where this Court observed as follows:- 19. Having gone through the Scheme of Amalgamation and taking into consideration the views of the Regional Director and the Official Liquidator, the resolutions passed by the Board of Directors, the consents given by the shareholders of the Transferor Company, and the unanimous approval of the Scheme by the shareholders, secured creditors and unsecured creditors of the Transferee Company and the submissions made by the learned counsel for the petitioner companies, I find no reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Companies who seek merger/Amalgamation for the complete support of the participants of the affairs of the Company. For this reason the objections of the Official Liquidator in this regard opposing the motion are rejected. For the aforesaid reasons and upon consideration of the entire material and keeping in view the provisions of Section 391 to 394 of the Companies Act and upon consideration of the reports of the Regional Director to the Northern Region, Ministry of Corporate Affairs, Noida and the Official Liquidator as also the affidavit that there are no investigation or proceedings pending against the constituent Companies to the Scheme on Amalgamation under Section 235 and 251 of the Companies Act, the Scheme of Amalgamation is hereby sanctioned and as a result thereof the assets and liabilities of the Transferor Companies 1, 2, 3 and 4 shall stand vested in the Transferee Company no.2 and the Transferor Companies shall be dissolved without being wound up. The Scheme shall be binding on the participants Companies and therefore, respective shareholders, creditors and all concerned. Let a formal order of sanction of the Scheme of Amalgamation be drawn up in accordan ..... 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