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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 ..... imited (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 appearing on behalf of the Petitioner Company stated that the Petition has been filed in consonance with the order passed in their CA (CAA) No. 1027/2018 filed before this Bench. Learned Counsel appearing for the Petitioner Company submitted that the National Stock Exchange of India Limited and BSE Limited have through their respective observation letters dated 21 March 2018 (annexed to the Company Scheme Petition), granted their 'No objection' to the Scheme and have stated in their respective letters that the Petitioner Company is not required to send notice for representation as mandated under section 230(5) of Companies Act, 2013 to the Securities and Exchange Board of India again for its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 efficiently and economically and the same is also in the interest of all stakeholders. The Petitioner Company's existing management expertise and quality systems & controls will enhance the performance of the business of the Demerged Company. (c) It shall facilitate the revival of the Manufacturing Business of the Demerged Company upon its consolidation with the Petitioner Company. (d) It shall lead to greater administrative efficiency and shall enable the Demerged Company to focus on and enhance its remaining business operations by streamlining operations and cutting costs. (e) It will increase the ability to leverage financial and operational resources of each business and will streamline the group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 clarified vide circular No. 7/12/2019/CL-1 dated 21.08.2019 issued by the Ministry of Corporate Affairs. (c) That appointed date for the Scheme is 31st day of March, 2014 and the Petitioner Company has filed Company application in the year 2018. Therefore, the Petitioner may be asked reason for the same. (d) ROC, Mumbai Report dated 10.02.2020 has inter alia mentioned that as per MCA Master Data the paid-up Share Capital of the Resulting Company is Rs. 20,49,59,502/- and as per para No. 3 of the scheme the paid-up share capital of the Resulting Company is Rs. 20,25,80,352/-which is not agreed with the MCA master data. (e) The Registered Office of the Demerged Company is situated in the state of Uttar Pradesh i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 liabilities assumed pertaining to the Demerged Undertaking vested in it pursuant to this Scheme, at their acquisition date fair values. Accordingly, if the fair values of identifiable assets acquired, separately from goodwill, are less than the fair values of liabilities assumed and the consideration issued as per Clause 11 on account of demerger of Demerged Undertaking, then as per Ind AS 103, the Resulting Company shall on the acquisition date recognise the identifiable assets acquired and the liabilities assumed at their acquisition date fair values and accordingly determine the difference as goodwill. Conversely, if the fair values of identifiable assets acquired are more than the fair values of liabilities assumed and the consideration i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 liabilities of the Demerged Company being transferred to the Resulting Company shall be transferred at values appearing in the books of account (ignoring revaluation) of the Demerged Company at the Appointed Date; e. The net difference between the assets and liabilities as transferred under sub-clause (d) above shall be adjusted to capital reserve in the books of the Demerged Company. 14. In so far as the observation made in paragraph IV(b) of the Report submitted by the Regional Director, Western Region, Mumbai is concerned, the Petitioner Company stated that a similar observation was made by Regional Director, Northern Region, New Delhi, which was raised before National Company Law Tribunal, Allahabad Bench where the Company Scheme Petition No. 277/ALD/2019 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 Company in terms of Section 3(1)(o) of Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "SICA") by the Board for Industrial & Financial Reconstruction (hereinafter after referred to as BIFR") vide its order dated 29 May 2003 in Case No. 9 of 2002. On declaration of the Demerged Company as a Sick Industrial Company, the Demerged Company filed a revival scheme with the BIFR. The revival scheme of Demerged Company was sanctioned by the BIFR on 11 January 2012 being MDRS (MS-12) (hereinafter referred to as "Sanctioned Scheme"). In the review hearing dated 19 November 2013, the BIFR directed the Government of Uttar Pradesh to grant reliefs in terms of the Sanctioned Scheme within 2 (two) months. As the Government of Uttar Pradesh did not gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Agreement and/or Regulation 37 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as the "SEBI LODR") and SEBI circulars No. CIR/CFD/DIL/5/2013 dated 4 February 2013 and CIR/CFD/CMD/16/2015 dated 30 November 2015 (hereinafter referred to as "SEBI Circulars"), in respect of filing of draft scheme of arrangement with the Stock Exchange(s)/Securities and Exchange Board of India ("SEBI") for obtaining Observation Letter or No-Objection Letter were not applicable to the Petitioner Company. (f) During the pendency of the case before the BIFR, the Central Government vide Notification No. S.O. 3568(E) dated 25 November 2016 notified the Sick Industrial Companies (Special Provisions) Repeal Act, 2003 (1 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hartered 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 Business of the Demerged Company into the Petitioner Company, as at the relevant date, shall be 97 equity shares of the Petitioner Company of Rs. 2 each fully paid-up for every 1,000 equity shares of the Demerged Company of Rs. 25 each fully paid-up. Accordingly, the shareholders of the Demerged Company, except the Petitioner Company, shall now be issued 471,420 fully paid-up equity shares of the Petitioner Company of the face value of Rs. 2 each, as against 529,740 equity shares proposed earlier in consideration for the demerger, in compliance with the provisions of Section 2(19AA) of the Income Tax Act, 1961. (k) The Stock Exchanges have vide their observation letters dated 21 March 2018, conveyed their 'No-objection' to the Petitioner Company, in terms of Regulation 94 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting 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 Company. 19. In so far as the observation made in paragraph IV(g) of the Report submitted by the Regional Director is concerned, the Petitioner Company submitted that the details of the observation letters mentioned in the said report pertains to Godrej Industries Limited and not in respect of the Petitioner Company. The Petitioner Company submitted that the BSE Limited issued observation letter No. DCS/AMAL/AC/R37/1072/2017-18 and National Stock Exchange of India Limited issued observation letter No. NSE/LIST/13505, both dated 21 March 2018, to the Petitioner Company. The Petitioner Company through its counsel confirms and undertakes that it has duly complied with all the directions of the said observation letters. 20. In so far as the observation made in paragraph IV(h) of the Report submitted by the Regional Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic 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 of Arrangement annexed to the said Petition is duly approved and sanctioned. 26. The Petitioner Company is directed to lodge a copy of this Order along with a copy of the Scheme of Arrangement with the concerned Registrar of Companies, Mumbai electronically in e-form INC-28 within 60 days from the issuance of a certified copy of this Order, duly certified by the Deputy Registrar or the Assistant Registrar, as the case may be, of this Bench. 27. All concerned regulatory authorities to act on a copy of this Order along with the Scheme duly authenticated by the Deputy Registrar or the Assistant Registrar of this Bench. 28. In the result, the proposed Scheme of Arrangement annexed to the Company Petition is duly approved and hereby sanctioned from the Appointed Date i.e., 31 March 2014. The Petitioner Company to act upon as per te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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