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TMI Blog2020 (11) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The Court convened via videoconferencing today. 2. Heard the Learned Counsel appearing for the Petitioner Company. No objector has come before this Tribunal to oppose the Scheme nor has any party controverted any averments made in the Petition to the Scheme of Arrangement between Hind Lamps Limited (Demerged Company) and Bajaj Electricals Limited (Resulting Company) and their respective shareholders. 3. The sanction of the Scheme is sought under Sections 230-232 read with other applicable provisions of the Companies Act, 2013 and Rules framed thereunder as in force from time to time to a Scheme of Arrangement between Hind Lamps Limited (Demerged Company) and Bajaj Electricals Limited (Resulting Company) and their respective shareholders creditors whereby and where under the Manufacturing Business of the Demerged Company will be demerged into the Resulting Company. 4. The Petitioner Company and the Demerged Company have approved the Scheme of Arrangement between Hind Lamps Limited (Demerged Company) and Bajaj Electricals Limited (Resulting Company) by passing the necessary board resolutions which are annexed to the Company Scheme Petition. 5. Learned Counsel appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the business of sales, distribution and marketing of electrical appliances, manufacture of fans and high masts, poles and towers and products relating to industrial, commercial, and domestic lighting, undertaking turnkey, commercial and rural lighting projects, design, manufacture, erection and commissioning of high masts, poles and towers. The Demerged Company is primarily engaged in the manufacturing of glass bulbs, HID bulbs and aluminium caps. The Scheme of Arrangement shall have beneficial results for both the companies, their shareholders and their creditors. 9. The Learned Counsel for the Petitioner Company submitted that the demerger of the Manufacturing Business of the Demerged Company into the Resulting Company would have the following benefits: (a) The Scheme of Arrangement between the Petitioner Company and the Demerged Company will result in various benefits including synergies in administration, marketing and business operations. (b) The transfer and vesting of the manufacturing business of the Demerged Company into the Petitioner Company will enable both the Demerged Company and the Petitioner Company to achieve and fulfil their objectives more efficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following: (a) In compliance of AS-14 (IND AS-103), the Petitioner Companies shall pass such accounting entries which are necessary in connection with the scheme to comply with other applicable Accounting Standards such as AS-5 (IND-AS8) etc. (b) As per Definitions of the Scheme: Appointed Date means date for all tax and other regulatory purposes, i.e., 31st day of March 2014; and Effective Date means the last of the dates on which the certified copies of the orders of the respective NCLTs are filed with the Registrar of Companies at Mumbai and Kanpur. Any references in the Scheme to upon the Scheme becoming effective of effectiveness of the Scheme shall be a reference to the Effective Date . In this regard, it is submitted that section 232(6) of the Companies Act, 2013 states that 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, this aspect may be decided by the Tribunal taking into account its inherent powers. Further, the Petitioners may be asked to comply with the requirements as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS-103, the Petitioner Company shall pass such accounting entries which are necessary in connection with the Scheme to comply with other applicable Accounting Standards including IND AS-8 and shall give treatment in the accounting books of the Resulting Company as per Clause 12 of the Scheme, which is reproduced herein below: 12. Accounting Treatment 12.1. Treatment in the accounting books of the Resulting Company The Indian Accounting Standards (Ind AS) as notified under Section 133 of the Companies Act, 2013, read together with paragraph 3 of The Companies (Indian Accounting Standard) Rules, 2015 is applicable to the Resulting Company from the year ended March 31, 2017 with transition date of 1st April, 2015. In the statutory books of account of the Resulting Company, the scheme will be accounted from effective date in accordance with the Indian Accounting Standard (IND AS) 103 - Business Combination. Hence, on the Scheme becoming effective, the Resulting Company shall account for the Scheme and its effects in its books of account as under: (a) The Resulting Company shall, upon the Scheme coming into effect, record all the identifiable assets acquired and liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes. 12.4. Accounting Treatment for Tax Purposes The Scheme set out herein in its present form duly approved by the NCLT shall be effective from the Appointed Date, including for regulatory tax purposes. Accordingly, the Resulting Company and the Demerged Company shall, for tax and other regulatory purposes, account for the Scheme and all its effects with effect from the Appointed Date viz. 31st March, 2014 as under:- a. The Resulting Company will record all assets, liabilities and reserves pertaining to the Demerged Undertaking vested in it pursuant to this Scheme, at the respective book values thereof (ignoring revaluation) and in the same form as appearing in the books of the Demerged Company at the Appointed Date. b. The Resulting Company shall credit its share capital account with the aggregate face value of shares issued by it to the shareholders of HLL pursuant to Clause 11 of the Scheme. c. The difference between the net assets of the Demerged Undertaking under sub-clause (a) above and the consideration issued as per Clause 11 on account of demerger shall be adjusted to the reserves in the books of the Resulting Company. d. The assets and liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onditions of the sanctioned Company Scheme and the same is binding on the shareholders, secured creditors and unsecured creditors of the abovenamed Petitioner Companies and also on the said Petitioner with effect from the appointed date, i.e. 31.03.2014. The Scheme shall be given effect from effective date, with fair values as at acquisition as defined in the Scheme in the books of account of the Resulting Company (Petitioner Company) and there will be no change in the statutory accounts already filed by the Resulting Company (which is a listed company) with the Registrar of Companies, Mumbai for previous years. For tax and other regulatory purposes, the Scheme shall be accounted from the Appointed Date as defined in the Scheme. Accordingly, the Demerged Company and Resulting Company shall prepare financial statements for previous years for tax purposes and file revised tax audit reports and return of income with the respective tax authorities. 15. In so far as the observation made in paragraph IV(c) of the Report submitted by the Regional Director is concerned, the Petitioner Company submitted the following: (a) The Demerged Company was declared as a Sick Industrial Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in compliance with the provisions of Section 2(19AA) of the Income Tax Act, 1961, which was based on the Share Entitlement Ratio (i.e. 109 equity shares of the Petitioner Company of the face value of ₹ 2 each for 1,000 equity shares of the Demerged Company of the face value of ₹ 25 each), as recommended by M/s. S.R. Batliboi Co. LLP, Chartered Accountants, who were appointed as an Independent Valuer by the Petitioner Company and Demerged Company. (d) Since the Demerged Company was declared as a sick industrial company within the meaning of Section 3(1)(o) of the SICA by the BIFR, the said Scheme of Arrangement was required to be filed only with the BIFR for its approval and accordingly, on 22 April 2016, the Demerged Company had filed the said Scheme of Arrangement with the BIFR under the BIFR Case No. 09/2002 (hereinafter referred to as BIFR Case ). (e) As the Scheme of Arrangement was not required to be filed with the High Court or Tribunal for its approval when it was approved by the Board of Directors of the Demerged Company and Petitioner Company, and was required to be filed only with the BIFR, the provisions of erstwhile Clause 24(f) of the Listing Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considering the fact that the Scheme of Arrangement was approved by the Board of Directors of the Demerged Company and Petitioner Company, well before the issue of the said Revised SEBI Circular. However, the Stock Exchanges requested the Petitioner Company to amend the Scheme of Arrangement and the valuation report to meet with the requirements of the Revised SEBI Circular vide their letter dated 6 October 2017 and 26 October 2017. (j) Accordingly, the Board of Directors of the Petitioner and Demerged Company, in their respective meeting held on 9 November 2017, considered and approved the revised valuation/share entitlement ratio, as per the valuation report dated 31 October 2017 (hereinafter referred to as the Revised Valuation Report ), issued by M/s. Katre Barwe Associates, Chartered Accountants, Mumbai, the independent valuation firm, for demerger of the manufacturing business of the Demerged Company into the Petitioner Company and made consequential amendment to the Scheme of Arrangement (which hereinabove referred to as Scheme ). As per the Revised Valuation Report, the revised share entitlement ratio of equity shares for the proposed demerger of the Manufacturing B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is indicated on the website of Ministry of Corporate Affairs. 17. In so far as the observation made in paragraph IV(e) of the Report submitted by the Regional Director is concerned, the Petitioner Company submitted that the Scheme filed in respect of the Demerged Company in Company Scheme Petition 277/ALD/2019 has been approved and sanctioned without modifications by the NCLT Allahabad vide order dated 18 December 2019 (Form CAA-7 dated 7 January 2020). 18. In so far as the observation made in paragraph IV(f) and paragraph IV(j) of the Report submitted by the Regional Director is concerned, the Petitioner Company undertakes through its Counsel that the Scheme has been approved by the requisite majority of equity shareholders, secured creditors and unsecured creditors as per Section 230(6) of the Act in the meeting duly held in terms of Section 230(1) read with subsection (3) to (5) of the said Act and the Petitioner Company has filed the Chairman's report in Form CAA-4 dated 20 March 2019 (copy annexed to the Company Scheme Petition) to report the outcome of the meeting of the equity shareholders, secured creditors and unsecured creditors of the Petitioner/Resulting Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies in paragraphs 13 to 21 above. The clarifications and undertakings given by the Petitioner Company are accepted. 23. The accounting treatment mentioned in the Scheme will be incorporated in the books and in the financials drawn up there from for tax and regulatory purposes and related compliances. These shall be approved by the Board of Directors of Demerged Company and Resulting Company and furnished to the authorities as may be applicable upon audit thereof from the tax auditors of both the Companies. The drawn-up financials will be furnished along with the returns/filings to be made with the tax authorities and will form the basis of tax assessments and tax compliances. 24. From the material on record, the Scheme appears to be fair and reasonable and does not violate any provisions of law, nor contrary to the public policy, nor prejudicial to the interest of shareholders or detrimental to public interest at large. 25. Since all statutory compliances have been fulfilled or further undertaken to be fulfilled, the Company Scheme Petition No. 1263/2019 filed by the Petitioner Company is made absolute in terms of prayer clause (a) of the said Petition and the Scheme o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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