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TMI Blog2017 (7) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... Official Liquidator : Ms. Chetana Kandpal, Company Prosecutor, Office of the Official Liquidator, Delhi. ORDER 1. This Petition filed by the companies above named is coming up finally before us on 01.3.2017 for the purpose of approval of the scheme of arrangement, as contemplated between the companies and its shareholders by way of amalgamation of the Transferor Company 1/Petitioner Company I, Transferor Company II / Petitioner Company II with the Transferee Company / Petitioner Company IV and in addition, the transfer of Demerged undertaking of the Demerged Company/Transferor Company III, being that of Forging Other Services Undertaking into the Transferee Company/Petitioner Company IV/ Resulting Company. A perusal of the petition discloses that initially the application seeking the dispensation of the meetings of equity shareholders, secured and unsecured creditors were filed before the Hon'ble High Court of Delhi in CA No.89/2016. The Hon'ble High Court of Delhi vide its order dated 27.7.2016 was pleased to dispense with the requirement of convening the meetings of the equity shareholders and secured creditors of each of the Petitioner companies and for dispen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the above, the petition of Second Motion as above filed by the petitioners jointly before the Hon'ble High Court and subsequently transferred is taken up for final consideration by us. The petitioners, it is seen from the records have filed an affidavit dated 10.02.2017 in relation to the compliance of the orders passed by the Hon'ble High Court of Delhi dated 30.09.2016 and a perusal of the same discloses that the petitioners have effected the paper publication as directed by the Hon'ble High Court of Delhi in one issue of the 'Statesman' in English edition on 16.11.2016 and 'Veer Arjun' in the Hindi Edition again on 16.11.2016. Further, the affidavit also discloses that notices have been issued to the Regional Director, Northern Region as well as to the Official Liquidator attached to the High Court, Delhi in compliance with the order dated 30.09.2016 and in proof of the same acknowledgement made by the respective offices have also been enclosed. The Counsel for the Petitioners had filed the Affidavit of Compliance dated 23.02.2017 stating that they have not received any objections from the third party and public at large for the purpose of sanct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inancial Officer (CFO) in the demerged Company. The second one relates to non-filing of annual Returns and Balance Sheet for the financial year 2015-2016 leading to violation of Sections 129/134/137 of the Companies Act, 2013 and thirdly and more pertinently in relation to non-compliance with the Accounting Standards (AS)-13 for 'Accounting for Investments' in relation to the Demerged Company for the financial year 2015-2016 as per the report of the statutory Auditors of the Demerged Company. In relation to the first of the observations of the RD relating to appointment of a Chief Financial Officer the petitioners submit in their reply dated 28.02.2017 that as per Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the provisions of Section 203 will be applicable only to listed companies and every other public company having a paid up-capital of ten crore rupees or more. Since the Demerged Company is a private limited company though having paid-up capital in excess of the prescribed limits, it is contended that Section 203 is not attracted to it. There is credence in relation to the submission of the petitioners and in the circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. The perusal of the representation of the Regional Director shows following observations: The statutory auditors of the Demerged Company have raised a concern in their report for the financial year 2015-16 that the Demerged Company continued to hold Investment in BBM Heavy Machinery Private Limited (Joint Venture) at cost despite of having accumulated losses of INR 206,783,889 of the joint venture, as per the unaudited financial statements for the year ended March 31, 2016. As per Accounting Standard (AS) - 13 'Accounting for Investments', when there is a decline other than temporary, the carrying amount is reduced to recognize the decline in the Statement of Profit and Loss. Had such decline being recognized the net loss for the year would have been higher by INR 272,278,651 and reserves and surplus as at the Balance Sheet date would have been lower by INR 272,278,651. The Regional Director requires that the Petitioner Companies be directed to comply with the applicable provisions of the Companies Act, 1956/2013 and relevant accounting standards issued by ICAI. b. The reply to the said observation made by the Petitioner Company-Ill being the Demerged Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a certificate, as other than the management and staff of the Companies, it is the statutory auditor or Company's auditor who has access to the books and accounts and other financial aspects of the respective Companies. Further in view of their specialized knowledge with respect to accounting standards they are in a position to ascertain as to whether the treatment of various financial transactions and their accounting arising out of the Scheme adhere to the Accounting Standards prescribed, as to whether the contemplated accounting treatment differs from the hitherto adopted accounting treatment and as to the proposed treatment in the scheme it will have impact on true and fair disclosure of the accounts of the respective companies. Thus the Company's auditor, as compared to others, are in a unique and privileged position to issue such a certificate which is appropriately recognized by the Companies Act, 2013 and seems to be the raison d'etre for the mandatory requirement of such a certificate to be obtained from the Company's Auditor, and not from any independent auditor in practice, and the same to be produced before this Tribunal as a condition precedent for sa ..... 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