9911796707
TMI Blog2021 (5) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... rief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows: (1) M/s. Hinduja Investments Private Limited (the 'Petitioner Company No. 1/Transferor Company No. 1') was incorporated on 03.02.2006 under the provisions of the Companies Act, 1956, vide CIN: U65993KA2006PTC038372 in the name and style "Hinduja Investments Private Limited". Its registered office is presently situated at 44/2A Vasant's Business Park, Bellary Road Hebbal, Bangalore - 560092. Its Authorised Share Capital is Rs. 2,00,000/- divided into 20,000 Equity Shares of Rs. 10/- each and the Issued, Subscribed & Paid-up Capital is Rs. 1,48,510/- divided into 14,851 Equity Shares of Rs. 10/- each fully paid up. The Company is carrying on the business of an investment company involving investing, selling, transferring, dealing in, and disposing of any shares, stocks, debentures, whether perpetual or redeemable debenture, debentures, stocks, securities of any kind including securities, bonds and certificates of any government, local and municipal authority, etc. (2) The Board of Directors of the Petitioner Company No. 1/Transferor Company No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uity share of Rs. 10/- each fully paid. Its main objects inter alia are to engage in the business of designers, manufacturers, importers, exporters, and dealers, distributors in all kinds of Readymade garments including Lingerie and Women foundation garments and of all articles similar thereto or connected therewith, etc. (4) The Board of Directors of the Petitioner Company No. 2/Transferor Company No. 2 at its meeting held on 05.03.2020 have approved and accepted the Scheme of Amalgamation and inter alia resolved as under: "RESOLVED THAT pursuant to the provisions of Sections 230 to 232 and other applicable provisions, if any, of the Companies Act, 2013 ('Act') and the rules framed thereunder (Act') and subject to applicable provisions of the Memorandum and Article of Association of the Company and also subject to the sanction of the National Company Law Tribunal, Bangalore Bench ('NCLT'), constituted under the provisions of the Act and approval of the members and creditors (as applicable) through NCLT convened meetings unless the same are dispensed with, under Sections 230 to 232 of the Act, and subject to approval of any other statutory/regulatory authori ..... 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Association of the Company and also subject to the sanction of the National Company Law Tribunal, Bangalore Bench ('NCLT'), constituted under the provisions of the Act and approval of the members and creditors (as applicable) through NCLT convened meetings unless the same are dispensed with, under Sections 230 to 232 of the Act, and subject to approval of any other statutory/regulatory authorities as may be required and subject to completion of the change of the Company's registered office from the state of Tamil Nadu to the state of Karnataka and the issuance of a new/revised certificate of incorporation of the company by the Registrar of Companies in Bangalore and consequent change in the address of the Company, the Scheme of Amalgamation of the Hinduja Investment Private Limited ('Transferor Company V) and Gokaldas Intimate wear Private Limited('Transferor Company 2') with the Company and their respective shareholders and creditors ('Scheme') on the terms and conditions as stated in the Scheme placed before the Board and initialed by the Director or Company Secretary for the purpose of identification be and is hereby accepted and approved." (7) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 10/- each, fully paid up, held by the equity shareholders (other than Class A equity shareholders) of the Transferor Company No. 2 whose name appears in the register of members of the Transferor Company No. 2 as on the Effective Date (other than the Transferor Company No. 1) or to their respective heirs, executors, administrators or other legal representatives or the successors-in-title, as the case may be on a proportionate basis; III. 1,42,98,675 Compulsorily Convertible Debentures of the Transferee Company of Rs. 100/- each fully paid up for 13,231,032 Class A equity shares of Rs. 10/- each, fully paid up, held by the Class A equity shareholders of the Transferor Company No. 2 whose name appears in the register of members of the Transferor Company No. 2 as on the Effective Date (other than the Transferor Company No. 1) or to their respective heirs, executors, administrators or other legal representatives or the successors-in-title, as the case may be on a proportionate basis; and IV. Compulsorily Convertible Debentures issued under clause (ii) and Clause (iii) shall together be referred as ('GIPL CCDs'). (10) There are no Related Party Transactions in the Petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein had filed CA (CAA) No. 25/BB/2020 before this Tribunal seeking directions to dispense with the meeting of the equity shareholders of the Applicant Companies and to direct the meeting of the Secured Creditors of the Applicant Companies No. 2 and Unsecured Creditors of the Applicant Companies to be held on such date and time as this Tribunal deems fit. The Tribunal vide its Order dated 12.06.2020 has directed to dispense with the convening and holding of the meetings of the Equity Shareholders of the Applicant Companies; directed to convene the meeting of the Secured and Unsecured Creditors of the Applicant Company No. 2; directed to convene the meeting of Unsecured Creditors of the Applicant Company No. 1; and directed to convene the meeting of Unsecured Creditors of the Applicant Company No. 3 at specific date, time and venue and also appointed the Chairperson and Scrutinizer. 4. The Tribunal vide its Order dated 09.10.2020 directed the Petitioners to issue notice prepared by the Registry to the Regional Director (SER), Hyderabad, Registrar of Companies Karnataka, the Office of Official Liquidator, Designated Nodal Officer, the Principal Commissioner of Income Tax, Karnata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is not mentioned in the same. (3) As per the Balance Sheet as at 31.12.2019 attached to the Petition of Transferor Company No. 1, it is seen that after the merger proposal with Transferee Company, the Transferor Company No. 1 has issued 4850 equity shares of Rs. 10/- each at a huge premium of Rs. 1,06,526 totalling Rs. 5,167 Lakhs to a new investor viz., Varenna Holdings Limited. First of all Transferor Company No. 1 is a continuous loss making company with meagre turn over. The net worth of the Company has been eroded. During this period entire shareholding held by Pushpa Hinduja (9,999) were transferred to the above named investor. If the Scheme is approved the new investor would get Rs. 157.13 Crores worth of CCDs in the Transferee Company which looks very abnormal. Hence, Hon'ble Tribunal may order for independent Valuation Report of the Transferor Company No. 1 and opinion of Independent auditors before the Scheme is allowed in particular about tax point of view. (4) The Petitioners need to explain how the Company has complied with Section 42 of the Companies Act, 2013 for such allotment. (5) The statutory auditor of Transferor Company No. 1 in the report dated 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mply with Section 71 of Companies Act, 2013 r/w rules made thereon and other applicable provisions. Necessary undertaking to this effect may be obtained from the Petitioners. (12) The Transferee Company did not appoint a qualified Company Secretary as per requirement of Section 383 A read with Section 203 of the Companies Act, 1956/2013 till 27.03.2018 though the threshold paid up capital limit crossed Rs. 5 Crore long back. The Company need to file compounding application u/s. 441 of the Companies Act, 2013 to compound the offence by the Hon'ble Tribunal. (13) The Transferor Company No. 2 has disputes over dues payable to Customs Department, Bangalore; (14) As per Transferor Company No. 2, Balance Sheet as at 31.03.2019 huge amount of Rs. 5.95 Crore is payable to employees/workers. Hon'ble Tribunal may kindly be noted that financial interest may be safeguarded. The Petitioner may be directed to settle the workers dues before the Scheme is allowed. (15) Verenna Holding Ltd. is holding 60% shares in the Transferee Company and it is the Holding Company. The Holding Company also has 100% interest in Transferor Company No. 1 in the year 2019 as detailed above. (16) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ROC, it is stated that the shares of the Transferor Company No. 1 and the Transferor Company No. 2 was acquired by Varenna Holdings Limited on 16.09.2019. To consolidate the business operations into a single entity, it was decided to merge the Transferor Company No. 1 and Transferor Company No. 2 with the Transferee Company with effect from 16.09.2019 i.e., the Appointed Date. (2) Regarding the observation no. 2 of ROC, it is stated that the rationale of the Scheme mentions the fact that the Petitioner Companies are part of the same group, having the same ultimate parent entity and are desirous to consolidate their business operations into a single entity i.e., Transferee Company. The Shareholding pattern of the Petitioner Companies were produced with the Company Application CA (CAA) No. 25/BB/2020. (3) Regarding the observation no. 3 & 4 of the ROC & RD, it is stated that the Transferor company No. 1 is engaged in the business of wholesale trading in garments and holds 52.36% stake in the Transferor Company No. 2. Further, the Transferor Company No. 2 is authorised to carry on the business of manufacture and sale of lingerie under its own Brand "Enamor" and has a considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing and trading in women's innerwear through the flagship brand Enamor. The Transferee Company is also engaged in the business of manufacturing for innerwear for men. Accordingly, the object of the Transferor Companies and Transferee Company are the same and the business are of similar nature. (9) Regarding the observation no. 10 of ROC & RD, it is stated that by virtue of Clause 16 of Part III of the Scheme, the authorised capital of the Transferee Company shall stand increased by the authorised capital of the Transferor Companies pursuant to the Scheme. The Transferee Company undertakes to comply with the provisions of Section 232(3)(1) of the Companies Act, 2013 in relation to clubbing of authorised share capital including payment of any additional fees, if required. (10) Regarding the observation no. 11 of ROC & RD, it is stated that the Transferee Company undertakes to comply with Section 71 of the Companies Act, 2013, r/w rules made thereon and other applicable provisions, as may be required, in relation to the issue of CCDs pursuant to the sanction of the Scheme. (11) Regarding the observation no. 12 of ROC & RD, it is stated that the Transferee Company unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... related party transactions of the Petitioner Companies are reflecting in the Notes forming part of Financial Statements. The extract of the same along with Form AOC-2 of the Board's Report are already produced with the Company Petition. (17) Regarding the observation no. 18 of ROC & RD, it is stated that the CSR spend for the year 2018-19 by the Transferee Company is Rs. 11.40 million as stated in the Directors Report for the period ended 31st March 2019. The Note 34 of the Audited Financial Statements for the period ending 31st March 2019 states that the amount spent for CSR is Rs. 11.40 million which includes an arrangement made with the Tamil Nadu Electricity Board for power generated in windmill wherein the power generated is adjusted against its power consumption amounting to Rs. 5.79 million. The same has been shown as credit under Power and Fuel in the Profit and Loss account. Therefore, there is no violation in the given case and thereby no compounding Application is required to be filed. In any event if the ROC initiates any action in relation to the above, the Transferee Company hereby undertakes to take appropriate steps as per applicable laws, post the sanction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with the sellers of GIPL and its parent company HIPL in the following manner: Varenna acquired total 100% stake directly from its earlier shareholders and also indirectly in GIPL from shareholders of GIPL's parent company i.e., HIPL for Rs. 250.44 crore: * The valuation was arrived at basis an independently agreed price between 2 unrelated set of parties i.e., Advent and various sellers in GIPL. * Relevant valuation reports along with relevant forms prescribed under Foreign Direct Investment policy have already been filed with various regulatory authorities prescribed by Reserve Bank of India with the aforesaid valuation. (4) In addition, Varenna infused money into GIPL and its holding company by way of primary subscription to fresh issue of equity shares of Rs. 81.62 crore. Relevant valuation reports along with relevant forms prescribed under Foreign Direct Investment policy have also been filed with various regulatory authorities prescribed by Reserve Bank of India. Hence, total consideration paid by Varenna for acquisition of entire direct or indirect stake in GIPL (primary + secondary) is Rs. 332.08 crore. (5) Hence, Varenna proposes that GIPL and its parent co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded by saying that to take note of the remarks given in para 4.1 to 5.2 supra for suitable orders. Therefore, the Official Liquidator prays that pass such order(s) on the merits of the case subject to objection, if any, by other Sectoral Regulators. 11. Heard Mr. Saji P John, learned Counsel for the Petitioner Companies and Mr. Hemanth R Rao, learned standing Counsel for the ROC and Mr. Ganesh R. Ghale, learned Standing Counsel for the Income Tax. We have carefully perused the pleadings of the Parties and the extant Provisions of the Companies Act and various Rules made thereunder and the Law on the issue. 12. We have considered the facts of the case as mentioned in the Petition, the reports of the Regional Director, MCA, the ROC, the Income Tax Department, the CCI as well as the comments offered by the Official Liquidator, and the relevant provisions contained in the Companies Act, 2013 and other related Acts and Rules. We may mention that a Scheme of Amalgamation proposed by a Company for commercial expediency and in its commercial wisdom cannot ordinarily be interfered with. However, it is a settled position of law that any sanction to a Scheme of Amalgamation under the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e FEMA and RBI Regulations; and (5) The Transferor/Transferee Companies shall, on completion of the merger, ensure relevant filings under Foreign Direct Investment policy and various other regulations with the concerned regulatory authorities; (6) All the liabilities including taxes, levies and charges, if any, and duties of the Transferor Companies be transferred without further act or deed to the Transferee Company and accordingly the same shall, pursuant to section 232 of the Companies Act, 2013, be transferred to and become the liabilities and duties of the Transferee Company; and (7) The tax implications, if any, arising out of the Scheme are subject to final decision of Concerned Income Tax Authorities and the decision of the Concerned Tax Authorities shall be binding on the Transferee Company; and (8) All the proceedings now pending by or against the Transferor Companies be continued by or against the Transferee Company, if any; and (9) The Transferor Company No. 2 and Transferee Company shall file Compounding Application under Section 441 of the Companies Act, 2013, to compound the offence in relation to default in appointment of Company Secretary, with the Regist ..... 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