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TMI Blog2018 (12) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in the business of the Company and the interest of those ordinary public has to be taken care of while sanctioning the scheme. It is not in dispute that the Tribunal is empowered to sanction the Scheme. However, cases like the present one where the business lies with ordinary public, it is necessary for the Company to take permission/approval from the appropriate authorities - In the instant case, Registrar of Chits is the concerned authority to examine the issue in light of the terms and conditions proposed in the Scheme. In the interest of justice, the Scheme subject to condition that approval can be taken from the Registrar of Chits after the sanction of the Scheme, cannot be sanctioned - Therefore, the instant Petition is disposed off by granting liberty to the Petitioner to comply all observations/objections as raised by the Regional Director and the Registrar of Companies, especially the observation/objection with respect to approval of the Registrar of Chits in the interest of public/chit holders and thereafter file afresh. - C.P (CAA) No. 20/BB/2018 - - - Dated:- 17-12-2018 - Hon'ble Shri Rajeswara Rao Vittanala, Member (Judicial) And Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form of time, demand or call deposits and to allow interests in all such deposits at such rates as may be decided upon by the company from time to time subject to the Rules and Regulations under Banking Regulations 1949 (10 of 1949), etc. D. The latest authorised share capital of the Petitioner /Transferee Company as on 31 st March, 2017 is ₹ 5,00,00,000/- divided into 5,00,000 Equity Shares of ₹ 100/- each. The issued, subscribed and paid-up capital of the Petitioner /Transferee Company as on 31 st March, 2017 is ₹ 4,00,00,000/- divided into 4,00,000 Equity Shares of ₹ 100/- each. E. The Board of Directors of the Petitioner /Transferee Company have approved and adopted the Scheme of Amalgamation at its respective meeting held on 16.08.2017. F. The Petitioner /Transferee Company had filed Company Application No.(CAA) 78/BB/2017 before this Tribunal for dispensation of the meetings of Equity Shareholders of the Petitioner /Transferee Company. This Tribunal vide its orders dated 15 th January, 2018 allowed the Application and dispensed with convening of meeting of Equity Shareholders, Unsecured Creditors and Secured Creditors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence Transferee Company has to pay the differential fee if any after setting off the fee already paid by the Transferor companies on their respective authorised capital. f) Part Ill of the Scheme Method of Accounting Treatment to be followed by the transferee company has not provided and also there is no auditor's report stating as to which accounting standard/method is going to be adopted for the Scheme in conformity with Section 133 of the Companies Act, 2013. g) A share exchange ratio has been recommended by Mr. R. Thyagarajan, Chartered Accountant, vide valuation report dated 16/08/2017 to the proposed Scheme of Amalgamation as per Company's request. Whereas, Board of Directors vide resolution passed on 16/08/2017 have considered a different share exchange ratio and adopted the same in the Scheme (at Clause No.9 of Part-V) for the reasons that the entire share capital of the companies in the Scheme are held by single entity, i.e., Shriram Ownership Trust and in order to keep the Transferee Company at service levels. h) There are no prosecutions, complaints, and Technical Scrutiny pending in this office on the petitioner companies. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be pursued any further. d) ROC has observed that at Part Ill of the Scheme Method of Accounting Treatment to be followed by the transferee company has not provided and also there is no auditor's report stating as to which accounting standard/method is going to be adopted for the Scheme in conformity with Section 133 of the Companies Act, 2013. The petitioner company in its email letter dated 25.07,2018 and 30.07.2018 has referred to Certificate dated 04.06.2018 issued by M/S V. Narayan Company, Chartered Accountants, Chennai certifying that the scheme is in conformity with the Accounting Standards under section 133 of Companies Act, 2013. However, the scheme is silent on the same. e) As per section 232(6) of the Companies Act, 2013 the scheme under this section shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. However Clause 1. I (h) of the scheme is contrary to Section 232(6) and needs modification. The petitioner company vide e-mail letter dated 30.07.2018 has clarified that the effective date has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas, Board of Directors vide resolution passed on 16/08/2017 have considered a different share exchange ratio and adopted the same in the Scheme (at Clause No.9 of Part-V) for the reasons that the entire share capital of the companies in the Scheme are held by single entity, i.e., Shriram Ownership Trust and in order to keep the Transferee Company at service levels. The petitioner company has in its letter dated 25.07.2018 clarified that the entire share capital of all the three Transferor Companies and the Transferee Company has been owned by one single entity (except for number of shareholders required under law as applicable to private limited company/public limited company). Hence, any share exchange ratio would not have made any difference, as no other shareholders interest is affected in view of the share exchange ratio. In respect of petitioner companies reply for para No. (9) and (10) as stated above, it is submitted that the substantial shareholders in all the petitioner companies is Shriram Ownership Trust which is a holding company of all Petitioner companies. The petitioner company was called upon to submit full information on this Trust and its be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Government (Power delegated to the Regional Director, SER, Hyderabad) for such shifting, after the Scheme. Petitioner's Response: the Registrar of Companies observed that for the shifting of Registered Office of the Transferee Company from the state of Karnataka to the state of Tamil Nadu, the Transferee Company shall file necessary forms and obtain approval of the Central Government (power delegated to the Regional Director, SER, Hyderabad). We wish to state that we undertake to file necessary forms for the shifting of the Registered Office. As regards seeking approval from the Central Government, we submit that courts have repeatedly held that the approval u/s.391 of Companies Act, 1956 (equivalent to Section 232 of the Companies Act, 2013) is a self contained code and hence, no separate approval from any other provisions of the Companies Act is required. In this regard we rely upon the following decisions: (2010) 154 Comp Cas 476: in the matter of Intertek Testing Services Private Limited (2004) 122 Comp Cas 854: in the matter of Jaypee Cement Private Limited iii. Observation No.3: The Scheme at Clause No. 6(B) proposing to change the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Response: the Chartered Accountant certificate was duly enclosed in page No. 96 of the Petitioners letter to the RD dated 13 July 2018. The said letter to the RD dated 13 July 2018 is enclosed as Annexure I and the Chartered Accountant Certificate is enclosed as Annexure Il to this Affidavit. vii. Observation No. 7: A share exchange ratio has been recommended by Mr. R. Thyagarajan, Chartered Accountant, vide valuation report dated 16/08/2017 to the proposed Scheme of Amalgamation as per Company's request. Whereas, Board of Directors vide resolution passed on 16/08/2017 have considered a different share exchange ratio and adopted the same in the Scheme (at Clause No.9 of Part-V) for the reasons that the entire share capital of the companies in the Scheme are held by single entity, i.e., Shriram Ownership Trust and in order to keep the Transferee Company at service levels. Petitioner's Response: the entire share capital of all the three Transferor Companies and the Transferee Company has been by one single entity (except for number of shareholders required under law as applicable to private limited company/public limited company). Hence, any share exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 133. It is submitted Clause 3.1 of the Scheme specifically states that the accounting treatment shall be as prescribed in the Accounting Standard. Also, the certificate as required under the above proviso is already filed with you in page no. 96 of our letter dated 13 July 2018. x. Clarification No. 2: As per section 232(6) of the Companies Act, 2013 the scheme under this section shall clearly indicate an appointed date from which it shall be effective and the scheme shall be deemed to be effective from such date and not at a date subsequent to the appointed date. However Clause 1.1 (h) of the scheme is contrary to Section 232(6) and needs modification. Petitioner's Response: as per clause 1.1(c) of the Scheme the appointed date shall mean 01 st of April 2017. Clause 1.1 (h) of the Scheme defines Effective Date . The effective date has been specifically defined due to the reason that there will always some time gap between the Scheme is approved by the Board and the appropriate statutory authority, i.e., NCLT. It is humbly submitted that there is no inconsistency between provisions of Section 232(6) and Clause l.l(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner transferor and transferee companies. Also, submit copies of registration of this trust and subsequent changes made to its bye-laws from its origin till date. Petitioner's Response: Shriram Ownership Trust is a private trust with individual beneficiaries who are senior executive of the Transferor and Transferee Companies. The Trust is a tax paying entity as per the Income Tax law. The details of acquisition of the shares of the Applicant Company and the Transferee Company are as under: Investment in Shriram Chits Karnataka Private Limited S. no. Particulars Date No. of Shares 1 Purchase from Shriram Capital Ltd 28.12.2007 204,000 2 Purchase from Shri Pallavi Finance Investments 28.12.2007 195,929 3 Purchase from Shriram Capital Ltd. 26.07.2010 61 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Ragam Finance Investments 28.12.2007 584,998 3 Purchase from Shriram Capital Ltd. 26.07.2010 3,000 TOTAL 1,199,998 xiv. Regarding the specific queries of the Hon'ble NCLT during the hearing on 26 November 2018 regarding (a) a different share exchange ratio considered by the Board of Directors; and (b) why prior permissions of the Registrar of Chits is not required, the Petitioner, as explained to the RD vide the above communications, would like to reiterate its responses below: (i) Response to Query share exchange ratio The shareholding pattern for all four companies that are part of this scheme of amalgamation is provided for in Page 138 and 139 of the Company Petition. As the Hon'ble NCLT may note, 99.99% of the entire share capital of all the three Transferor Companies and the Transferee Company has been by one single entity i.e. the Shriram Ownership Trust. Hence, any sha exchange ratio would not have made any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approvals as required under law on sanctioning of the Scheme, wherever applicable. The Chit Fund Act however does not contemplate any requirement of prior approval from the Registrar of Chits or any other authority under the said Act. Further, it is important to note that Clause No. 3.2.4 of the Scheme includes within its ambit all agreements including the agreements entered into by the Petitioners with the Chit Subscribers. Thus, the interests of the Chit Subscribers are duly and adequately protected. We have, for ease of reference, reproduced the said clause in the Scheme below: All contracts of the Transferor Companies including in particular Agreements of Chit entered into by each of the Transferor Companies with subscribers and all agreements documents entered into pursuant to the same, including without limitation documents agreements relating to creation of security, subsisting or having effect immediately before the Effective Date, shall stand transferred to and vested in the Transferee Company and be in full force and effect in favour of the Transferee Company and may be enforced by or against it as fully and effectually as if, instead of the Transferor Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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