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TMI Blog2018 (7) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid demergers, the amalgamation of residual Transferor Company into the Transferee Company, as a going concern basis. 2. The Scheme has been necessitated and adopted because the Transferor Company is engaged in multiple businesses in different sectors. It also acts as an investment company which holds and nurtures investments in different group companies as well as provides support services such as human resources, finance, treasury services to group companies. The Transferor Company believes that it would be beneficial to restructure its business interests as it would result in a simplified holding structure, sharper focus on underlying business and operational efficiencies. Thus, the Scheme seeks to attain the following objectives/purposes upon its implementation: (i) creation of separate and distinct entities housing the Real Estate Undertaking and the IT Support Services Undertaking respectively, with direct promoter participation at the operating levels; (ii) greater operational and regulatory efficiencies for the Real Estate Undertaking in view of changes in the recent regulatory climate including the increased liberalisation in foreign exchange laws and the passag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 and the Resulting Subsidiary No. 2 held by its shareholders, respectively, shall stand cancelled and simultaneous to such cancellation, each of the Resulting Subsidiary No. 1 and the Resulting Subsidiary No.2 shall issue to the shareholders of the Transferor Company, I (One) fully paid up equity share of Rs. 10/- (Rupees Ten Only) each for every 1 (One) fully paid up equity share of Rs. 100/- (Rupees One Hundred Only) each of the Transferor Company held by the shareholders of the Transferor Company as on the Demerger Record Date. Further, upon the Scheme becoming effective, the equity shares held by the Transferor Company in the Transferee Company shall stand cancelled and simultaneous to such cancellation, the Transferee Company shall issue to the shareholders of the Transferor Company, 65 (Sixty Five) fully paid up equity shares of Rs. 10/- (Rupees Ten Only) each for every 1 (One) fully paid up equity share of Rs. 100/- (Rupees One Hundred Only) each of the Transferor Company held by the shareholders of the Transferor Company as on the Merger Record Date. The Scheme specifies the Demerger Appointed Date and Merger Appointed Date as April, 2016. 4. A perusal of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations of RD & OL the Petitioner Companies have filed a rejoinder affidavit dated 01.12.2016. The Regional Director and the Official Liquidator, in the above context, while agreeing to the combination of the Authorized Share Capital (ASC) of the Transferor Company into the Transferee Company as per Clause 12 of Part D of the Scheme, has, still, objected to the combination of the Authorized Share Capital of the Transferor Company to the extent of Rs. 50,00,00,000/-into the Resulting Subsidiary No. 1 and separately, the combination of the ASC of the Transferor Company to the extent of Rs. 15,00,00,000/- into the Resulting Subsidiary No. 2 as per Clause 13 of Part B and Clause 13 of Part C, respectively of the Scheme. It has been submitted that legal position has now been accepted and clarified by the provisions of the Companies Act, 2013, where under Section 233(11) read with Section 233(12) it is now provided that the fees paid by a transferor company on its ASC prior to a demerger can be set off against the fees payable by the transferee company on its ASC enhanced by the demerger. Therefore, the Central Government also has accepted this legal position and on that basis learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re prescribed under the Companies Act, 2013 in relation to change of its name. The Regional Director has not raised any objection to change of name on the ground that it is already being used by the Transferor Company. The Transferor Company has already given its consent to the use of its name by the Transferee Company vide its board resolution dated 14.07.2017. The Transferee Company too has passed a board resolution dated 14.07.2017 approving the change of name to "InterGlobe Enterprises" post the Scheme becoming effective. It is further submitted that various High Courts have unanimously held that Sections 391-394 of the Companies Act, 1956 constitute a complete code by themselves on the subject of arrangement, compromise and reconstruction which is intended to be in the nature of a "single window clearance system". The provisions are comprehensive enough to be able to effectuate a change in the name of a company pursuant to a scheme of arrangement and amalgamation, which would be a deemed compliance of the relevant company law provisions. In this regard, reliance may be placed on the view taken by Bombay High Court in the case of PMP Auto Industries Ltd., In re [1994] 80 Comp C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheme. It is submitted that no reply has been received from the Income Tax Department in this regard. The Tribunal may therefore, be pleased to direct the Petitioner Companies to undertake compliance of Income-tax Act, 1961 and rules framed thereunder. In relation to paragraph 2(h) of the Report, the Petitioner Companies affirm and submit that they would comply with of the provisions of the Income-tax Act, 1961 and rules framed thereunder in so far as applicable to the Scheme. In fact the Scheme itself contains an undertaking to the effect that the Scheme will comply and be interpreted in accordance with applicable tax laws. In addition, as stated above, in view of the affidavit dated May 16, 2017, where under the Transferee Company has given an unequivocal undertaking that it shall meet and discharge any tax liabilities in accordance with applicable law, that stand transferred to it from the residual Transferor Company pursuant to the proposed merger and that the proposed merger shall not prejudice the rights of the Revenue Authorities to take appropriate recourse for recovering the existing or previous tax liability of the Transferor Company from the Transferee Company, in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eree Company as per its audited financial statements for March 31, 2016 is around Rs. 413,20,18,000/- Additionally, as a result of the proposed merger, net-assets of Transferor Company having a book value of around Rs. 740.90 crore would stand transferred to and vested with the Transferee Company. The Transferee Company would have significant net worth and financial capability. Therefore, even the contingent liabilities referred to above fructify/crystalize and are invoked, the same would not adversely affect the financial position of the Transferee Company nor would it impact its liquidity and continuance as a going concern concept. 12. The objections raised by the Regional Director and Official Liquidator would not survive, judicial scrutiny as combination of Authorised share Capital of the Transferor Company into the Transferee Company/Resulting Subsidiary No. 1 & Resulting Subsidiary No. 2 because by a string of judgments of various High Courts, it is now settled that Section 391 is a complete code and the principle of single window clearance permits all other formal requirements of the Companies Act, 2013 to be completed. It has been specifically held by Punjab & Haryana High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpact its liquidity as it would continue as a going concern. 16. Also, the second observation by OL is that M/s. N.C. Jain & Associates, Chartered Accountants in para 6 of their report submitted that the Transferor Company has evaluated the investment "Works of Art" (Paintings) at its book value. In the absence of said valuation certificate, the diminution in value of Painting items is unverifiable and as a consequence NAV of residual transferor company and exchange ratio proposed in the scheme is likely to be affected to that extent. In response to the observation of OL it has been submitted that there is no legal prohibition on valuation of works of art/paintings based on the book value method. Further, it is a settled principle of law that in the absence of anything shown highlighting that (he valuation has been obtained by fraud and/or it is otherwise mala fide, the mere fact that the valuation done by a different method might have led to a different conclusion would not warrant interference of Courts. Further, Courts have time and again held that valuation undertaken for determination of the share exchange ratio in an amalgamation is a highly technical and complex exercise co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Petitioner we are of the view that there is no legal prohibition on valuation of works of art and paintings based on the book value method. In any case, the difference in two valuations is insignificant. According to the valuation undertaken by B.Y, & Associates, Charted Accountants, it is 42.95 crores whereas the aggregate value of such works of art according to Dr. S. N. Bansal is Rs. 43 crores. We accept the submission advanced by Mr. Kathpalia that it is unlikely to have any impact on the share exchange ratio particularly when the net asset value (NAV) of the residual transferor company is fairly significant, even if there were to be any appreciation in the value of the work of art/painting over and above its book value. The Official Liquidator has also slated that no objection against the proposed Scheme of Amalgamation from any person or party interested in the Scheme in any manner has been received and that the affairs of the Transferor Companies do not appear to have been conducted in a manner prejudicial to the interest of its members, creditors or public interest. 17. In view of the foregoing, upon considering the approval accorded by the members and creditors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner/Resulting Company shall file within thirty days of the date of the receipt of this order cause a certified copy of tin's order to be delivered to the Registrar of Companies; and (e) That any person interested shall be at liberty to apply to the Tribunal in the above matter for any directions that may be necessary. 21. THIS TRIBUNAL DO FURTHER ORDER [with respect to Demerger of IT Support Services Undertaking of the Transferor Company into Resulting Subsidiary No. 2]: (a) That all the property, rights and powers of the IT Support Services Undertaking of the Transferor Company be transferred without further act or deed, to the Resulting Subsidiary No. 2 and accordingly the same shall pursuant to Section 232 of 2013 Act, be transferred to and vest in the Resulting Company for all the intents and interests of the Demerged Undertaking of Demerged Company therein but subject nevertheless to all charges now affecting the same; and (b) That all the liabilities and duties of IT Support Services Undertaking of the Transferor Company be transferred without further act or deed, to the Resulting Subsidiary No. 2 and accordingly the same shall pursuant to section 232 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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