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TMI Blog2020 (12) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... angement be sanctioned by this Tribunal so as to be binding on the Petitioner Companies, its Shareholders and Creditors etc. 2. Brief facts of the case, as mentioned in the Company Petition, are as follows: (1) M/S. Embassy Real Estate Developments and Services Pvt. Ltd. (hereinafter referred to as 'Petitioner Company No. 1/Demerged Company') is a Private Limited Company limited by shares incorporated under the provisions of the Companies Act, 2013 on 27.06.2019 under the name and style of "Embassy Energy Management Services Private Limited" with CIN: U70100KA2019PTC125712. Subsequently, the Company has changed its name to 'Embassy Real Estate Developments and Services Private Limited' pursuant to the fresh certificate of incorporation dated February 11, 2020. Its Authorised Capital as on 16.09.2020 is Rs. 5,00,000/- divided into 50,000 Equity Shares of Rs. 10/each and its Issued, Subscribed and Paid-up Capital is Rs. 5,00,000/- divided into 50,000 Equity Shares of Rs. 10/- each. Its main objects inter alia are to acquire land and other immovable properties or any interest therein by purchase or otherwise and to carry on all or any other busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HAT pursuant to the provisions of Sections 230 to 232 and other applicable provisions, if any, of the Companies Act, 2013 and the rules framed thereunder, as amended or re-enacted from time-to-time and in accordance with the provisions of the Memorandum of Association of the Company, and subject to the approval of the National Company Law Tribunal ("NCLT"), and subject to such terms and conditions and modification(s), as may be imposed, prescribed or suggested by the appropriate authority, and subject to the approvals, consents, permissions, and/or sanctions of the appropriate authority, body, institution, shareholders, debenture holders, or other security holders of the Company, creditors of the Company, the consent of the Board of Directors of the Company be and is hereby accorded to the Scheme of Arrangement ('Scheme'), whereby the Services undertaking of Embassy Real Estate Developments and Services Private Limited be demerged into the Company from the Appointed Date specified in the Scheme. " (5) It is stated that the proposed Scheme would, inter alia, have the following benefits: a. Focused and concentrated approach in maintaining Embassy Tech Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed, stand transferred to and be deemed to be transferred to the Transferee Company shall meet, discharge and satisfy the same to the extent they are outstanding as on the Effective Date. b. The Scheme if approved will be effective from the Appointed which is the Effective Date. Effective Date shall mean the last of the dates on which the conditions and matters referred to in Clause 33.2 hereof occur or have been fulfilled or waived upon occurrence of the Effective Date, the Scheme shall deemed to the effected from the Appointed Date. c. Upon the coming into effect of the Scheme, the Employees shall become the employees of the Transferee Company with effect from the Appointed Date, and, subject to the provisions hereof, on terms and conditions not less favourable than those on which they are employed by the Demerged Company and without any interruption of, or break in, service as a result of the transfer of the Services Undertaking. The Transferee Company agrees that for the purpose of payment of any compensation, gratuity and other terminal benefits, the past services of the Employees with the Demerged Company shall also be taken into account and agrees and undertakes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hief Commissioner of Income Tax and Nodal Officer, Reserve Bank of India and to the CCI and also permitted to cause paper publication in 'The Hindu', in English language and 'Udayavani', in Kannada language and to file proof of the same. Pursuant thereto, the Petitioners vide Affidavit dated 20.11.2020 affirmed compliance of the aforesaid Order passed by the Tribunal and also caused paper publication in 'The Hindu' and 'Udayavani' on 11.11.2020. 5. Pursuant to the notice issued, the Registrar of Companies, Karnataka vide its letter dated 12.11.2020 have furnished a report which inter alia observed as under: (1) It is observed as per the Scheme, the Services Undertaking of the Demerged Company will be transferred to the Resulting Company with all related liabilities. The Scheme did not specify the nature of service activities which is going to be merged with the Resulting Company (2) It is observed that the Petitioner Companies has not clearly mentioned the 'Appointed Date' in the Scheme. Instead it is mentioned that Appointed Date is Effective Date. The Scheme need to be specified appointed date and effective date. (3) It is also obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Limited and he has also observed that the Companies needs to appoint a Company Secretary as per the provisions of Section 203 of the Companies Act, 2013. The Company needs to compound the offence for the defaulting period and the Transferee Company shall file compounding application with the ROC, Bangalore and get the offence compounded. 7. In response to aforesaid observations, the Petitioner Companies vide reply Affidavits dated 25.11.2020, have inter alia stated as follows: (1) As regards the shareholding of the Petitioner Companies it is stated that Demerged Company was in the process of acquiring equity shares and CCDs of Transferee Company and the same was consummated on November 9, 2020 i.e., after the scheme of Arrangement was filed before this Tribunal and accordingly, there has been a change in the shareholding pattern of the Transferee Company from the previous cut-off date (i.e. September 11, 2020) as on which the shareholding pattern was certified by an independent Chartered Accountant and submitted before this Tribunal along with the company application. In this regard, the current list of equity shareholders and CCD holders of the Transferee Company Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held by the Demerged Company in the Transferee Company shall stand cancelled upon the Scheme becoming effective in terms of Clause 23 of Section-5 of the Scheme. Certificate of the Independent Chartered Accountant has been placed on record (5) As regards the appointment of Company Secretary, it is stated that the Transferee Company has filed an adjudication application U/s 454, R/w Section 203 of the Companies Act, 2013 through Form GNL-I on November 21st, 2020 vide SRN : R71754881 with the ROC, Bengaluru for compounding the delay in filing vacancy of whole time Company Secretary as per Section 203(4) of the Companies Act, 2013. (6) As regards the Shareholding of the Demerged Company, it is stated that the Scheme is intended to consolidate the business of owning, operating and maintaining the Embassy Tech Village Business Park at the Resulting Company with a long term objective of strengthening the operations and financials of the Embassy Tech Village Business Park to enable suitable investments into the same by potential investors. The transfer of Services Undertaking of the Demerged Company by way of the Scheme is intended to achieve, inter alia, greater eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany has served the notice along with a copy of the Company Petition to the RBI, Bengaluru vide e-mail as well as speed post. Copy of the e mail and acknowledgement of the speed post have been placed on record. 8. The Petitioners have filed a Clarificatory Affidavit dated 01.12.2020 in support of the Reply Affidavit (which is taken on record), which reads as under: a. It is stated that the Demerged Company has initiated the process of acquiring equity shares and Compulsorily Convertible Debentures ('CCDs') of the Transferee Company from its holding company viz. Embassy Property Developments Private Limited ('EPDPL') vide an agreement dated August 20, 2020, (i.e. before the date of filing of the Company Application seeking dispensation from convening shareholders and creditors meeting and for approval of the Scheme of Arrangement before this Tribunal on September 17, 2020. b. The transfer of equity shares and CCDs held by EPDPL in the Transferee Company to the Demerged Company were subject to satisfaction of certain condition precedents, inter alia obtaining no-objections from the lenders of EPDPL and removal of pledge/ charge created on such equity shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is stated that after the Scheme is filed before the Tribunal, the entire shares held by Embassy Property Development (P) Ltd and CCD of 10 lakhs were transferred in the name of Demerged Company. The Tribunal has dispensed with the meeting of shareholders of both Demerged Company and the Resulting Company. (e) As regards the compounding it is stated that the Petitioner Company has filed an adjudication application u/s 454 r/w Sec. 203 of Companies Act, 2013. (f) As regards the shareholding it is stated that the 64% shares held in Resulting Company by Embassy Property Development (P) Ltd. had been transferred in the name of Demerged Company. It is seen that Demerged Company, Resulting Company and Embassy Property Development (P) Ltd. are the group companies and they want to consolidate the business by restructuring. It is clarified by the Petitioner that Embassy Property Development (P) Ltd. continues to be the Parent Company of the Demerged Company and Resulting Company. (g) As regards the related party transactions it is stated that the Company has entered into related party transactions in its ordinary course of business and complied with the provisions of Sec. 188 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petition and the relevant provisions contained in the Companies Act, 2013 and the Rules made thereunder. From a perusal of the material brought on record, it appears that the Scheme of Arrangement is fair, reasonable and is not detrimental to the Members or Creditors. The Scheme has not been opposed by the RD. As per the ROC, there are no prosecutions, complaints, technical scrutiny/ inspections pending against the Petitioner Companies. Further, as per the Petition, the Scheme in question will enable a focussed and concentrated approach; maximize opportunities for strategic partnership; help in fundraising and future growth; help in expansion and take advantage of market opportunities; induct new investors and reorganise its capital structure etc. Hence, the Scheme appears to have been framed for commercial expediency and in the interest of the Petitioner Companies and all stakeholders. 14. A Scheme of Arrangement proposed by a Company for commercial expediency and in its commercial wisdom cannot ordinarily be interfered with and has to be sanctioned if the relevant provisions of the Companies Act, 2013 are met and no prejudice is caused to any of the stakeholders. The Board of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without further act or deed to the Transferee Company and accordingly the same shall, to the extent they relate to the Services Undertaking of the Demerged Company, pursuant to section 232 of the Companies Act, 2013, be transferred to and become the liabilities and duties of the Transferee Company; and (5) The tax implications, if any, specially under the Income tax Act, 1961, arising out of the Scheme, to the extent they relate to the Services Undertaking of the Demerged Company, are subject to the final decision of Concerned Tax Authorities and the decision of the Concerned Tax Authorities shall be binding on the Transferee Company; and (6) All the proceedings now pending by or against the Services Undertaking of the Demerged Company be continued by or against the Transferee Company, if any; and (7) The Petitioner Companies shall ensure all requisite compliances under the FEMA / RBI Regulations, Guidelines, as may be applicable; and (8) Liability, if any, arising from non-compliance to the provisions contained in section 135 by the Demerged Company, to the extent they relate to the Services Undertaking of the Demerged Company, shall stand transferred to and be the liabili ..... 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