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TMI Blog2021 (5) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Scheme of Amalgamation, as approved by the Boards of Transferor Companies and the Transferee Company, is hereby sanctioned. The Scheme of Amalgamation is hereby sanctioned - application allowed. - C. P. (CAA) No. 37/BB/2020 - - - Dated:- 13-5-2021 - Rajeswara Rao Vittanala, Member (J) And Ashutosh Chandra, Member (T) For Appearing Parties: Saji P. John, Hemanth R. Rao and Ganesh R. Ghale, Advs. ORDER Ashutosh Chandra, Member (T) 1. This Company Petition was jointly filed by M/s. Hinduja Investments Private Limited (the 'Petitioner Company No. 1/Transferor Company No. 1') and M/s. Gokaldas Intimatewear Private Limited (the 'Petitioner Company No. 2/Transferor Company No. 2') and M/s. Dixcy Textiles Private Limited (the 'Petitioner Company No. 3/Transferee Company) under Sections 230 to 232 of the Companies Act, 2013, and other applicable provisions of the Companies Act, 2013, read with Companies (Compromises, Arrangements And Amalgamation) Rules, 2016, by inter alia seeking that the Scheme of Amalgamation be sanctioned by this Tribunal, so as to be binding on the Petitioner Companies and their respective shareholders, etc. 2. Brie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Scheme of Amalgamation of the Company and Gokaldas Intimatewear Private Limited ('Transferor Company 2') with Dixcy Textile Private Limited (Transferee 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. (3) M/s. Gokaldas Intimatewear Private Limited (the 'Petitioner Company No. 2/Transferor Company No. 2') was incorporated on 16.11.2001 under the provisions of the Companies Act, 1956, vide CIN: U18101KA2001PTC029774 under the name and style of 'Gokaldas Intimatewear Private Limited'. Its registered office is situated at 44/2A Vasant's Business Park, Bellary Road Hebbal, Bangalore - 560092. Its Authorized Share Capital is totally amounting to ₹ 31,00,00,000/- including 1,77,68,968 equity shares of ₹ 10/- and 1,32,31,032 Class A equity shares of ₹ 10/- each and the Issued, Subscribed and Paid-up Share Capital is totalling amounting to ₹ 30,52,38,130/- including 1,72,92,781 equity shares of ₹ 10/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at 28, 36/5, Ferns Icon, 5th Floor, Doddanekundi, Marathahalli Outer Ring Road, Bangalore-560037. Its Authorized Share Capital is totally amounting to ₹ 66,25,00,000/- including 4,00,00,000 equity shares of ₹ 10/- each and 26,25,000 Compulsorily Convertible Preference Shares of ₹ 100/- each and the Issued, Subscribed and Paid-up Share Capital is amounting to ₹ 34,42,49,760/- divided into 3,44,24,976 Equity Shares of ₹ 10/- each fully paid. Its main objects inter alia are to manufacture, spin, process, buy, sell and generally to deal in cotton, cotton waste, cotton yarn, Hosiery yarn, Hosiery Cloth, staple fibre yarn, viscose yarn, blended yarn, all types of hosiery garments including inner wears, whether as manufacturers, wholesalers, dealers, importers and exporters, etc. (6) The Board of Directors of the Petitioner Company No. 3/Transferee Company 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 thereund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough legal entity rationalisation; (g) Reduction of administrative responsibilities, multiplicity of records and legal regulatory compliances; and (h) To facilitate alignment of ERP systems and thus effective means of implementing Goods and Service Tax credit system for various vendors. (9) Upon coming into effect of the Scheme and upon vesting of the undertaking of the respective Transferor Companies (inclusive of all assets and liabilities thereof), into and with the Transferee Company by operation of law, the Transferee Company shall, without any further application or deed, issue and allot: I. 1,57,13,550 Compulsorily Convertible Debentures of the Transferee Company of ₹ 100/- each, fully paid up for 14,851 equity shares of ₹ 10/- each, fully paid up, held by the equity shareholders of the Transferor Company No. 1 ('HIPL CCDs') whose name appears in the register of members of the Transferor Company No. 1 as on the Effective Date 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; II. 29,74,625 Compulsorily Convertible Debentu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation proceedings are pending against the Petitioner Companies under Section 235 to 251 or any other provisions of the Companies Act, 1956 or Section 206 to 229 of the Companies Act, 2013 or any other provisions of the Companies Act, 2013. Further, there are no investigation pending against the Petitioner Companies under any law. (14) The Proposed Scheme is sought to be made under the provisions of Sections 230 to 232 of the Companies Act, 2013 and other applicable provisions of the Companies Act, 2013 and the same if sanctioned by this Tribunal will take effect from April 1st 2020, the Appointed Date. (15) It is stated that the Petitioner Companies are not required to issue notice of Combination to Competition Commission of India due to the exemption provided under Notification No. S.O. 988(E) dated March 27, 2017 issued by the Ministry of Corporate Affairs read with the Schedule I to the Competition Commission of India (procedure in regard to the transaction of business relating to combinations) Regulations, 2011, as amended from time to time. (16) It is also stated that the Petitioner Companies are not required to issue notice of Amalgamation to the Joint Dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of India due to the exemption provided under Notification No. S.O.988(E) dated March 27, 2017 issued by the Ministry of Corporate Affairs read with the Schedule I to the Competition Commission of India (procedure in regard to the transaction of business relating to combinations) Regulations, 2011, as amended from time to time. 6. The Office of the Deputy Commissioner of Income Tax, vide its letter No. F. No. Amalgamation/DCIT/C-3(1)(1)/2020-21 dated 11.11.2020 has inter alia stated that there is outstanding demands of ₹ 13,30,230/- for the Assessment Year 2011-12 in the name of M/s. Gokaldas Intimatewear Pvt. Ltd. and the above said demand is pending in the case of the assessee, necessary arrangements has to be made for the payment of the above demand. 7. The Registrar of Companies, Karnataka vide its report dated 11.12.2020 and The Regional Director (SER), Hyderabad vide Affidavit dated 25.02.2021 have inter alia pointed out the same following observations: (1) The appointed date mentioned in the Scheme is 16.09.2019 which is very odd and hence the Petitioner Company may be directed to explain the rational and specific reasons behind selecting such an odd dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Transferor Company No. 2 in the year 2019 after the scheme is proposed. (9) In the scheme it is stated that object of Transferor Companies and Transferee Company are the same and the business are of similar nature. However, the statement mentioned in the Scheme is wrong as far as the object and nature of business of Transferor Company and Transferee Company is concerned. (10) Clause 16 of Part III of the Scheme provides for Clubbing of Authorised Capital. However, as per the Clause, the authorised share capital of the Transferee Company shall automatically stand increased without any further fees payable to the Registrar of Companies. This term is in the Scheme is not in line with the provisions of Section 232(2)(i) of the Companies Act, 2013. In this regard the Transferee Company shall comply with provisions of the aforementioned section and pay the difference fee, after setting off the fee already paid by the Transferor Company on its respective capital. In case the Transferee Company intend to club the Authorised Capital of Transferor Company, a separate application to be made to ROC for clubbing within one month from the order or else interest will be levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r noncompliance of Section 135 r/w 134 of the Companies Act, 2013. (19) With respect to Transferor Company No. 2- for the year 2017-18 and 2018-19 has to spend on CSR ₹ 5,86,482/- and ₹ 7,26,331/- respectively. However, the Transferor Company No. 2 has not spent any amount during 2017-18 and only spent ₹ 6,51,000/- for the year 2018-19. Hence, amount unspent is ₹ 5,86,482/- for the year 2017-18 and ₹ 75,331/- for the year 2018-19. However, no specific reasons have been given for unspent amount and therefore violated Section 135 r/w Section 134 of the Companies Act, 2013. Need to file compounding application within 30 days from the Scheme, if approved. (20) With respect to Transferor Company No. 2, there is a delay in appointment of Company Secretary. Vacancy of Company Secretary was from 10.08.2015 and new Company secretary was appointed only on 24.03.2016. Hence, the Transferor Company No. 2 may be asked to file compounding application for violation of Section 203 of the Companies Act, 2013 duly singed by all the officers in default within 30 days from the date of approval of Hon'ble Tribunal. (21) There are no prosecutions, complai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as cleared the tax liability in a staggered manner and applied for waiver of interest. Considering the said facts, the Assessing Officer, vide order dated 17.12.2019 has granted waiver of interest and the liability stands fully discharged as on today's date. (5) Regarding the observation no. 6 of ROC RD, it is stated that the Transferor Company No. 1 is neither an NBFC nor a CIC. Currently Transferor Company No. 1 is engaged in the business of wholesale trading in garments. The Transferor Company No. 1 had operating revenues for the FYs 2018-19 and 2019-20. Hence, the Transferor Company No. 1 does not qualify to be a NBFC or CIC. (6) Regarding the observation no. 7 of ROC RD, it is stated that the Transferee Company undertakes to comply with all the relevant FEMA/RBI regulations for issuance of CCDs, pursuant to the scheme becoming effective. (7) Regarding the observation no. 8 of ROC, it is stated that any change in Management/Directors of the Transferor Company No. 1 and Transferor Company No. 2 in the year 2019 after the scheme was proposed, are in normal course of business and there is no impact in this regard for the implementation of the Scheme. (8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one month's salary (payable in 1st week of subsequent month) and the annual bonus (payable within 8 months from close of the year). The same has been duly paid by Transferor Company No. 2 within the due dates as in the normal course of business. Thus, the interest of the employees of the Transferor Company No. 2 are duly safeguarded by virtue of Clause 7 of the Scheme of Amalgamation also. (14) Regarding the observation no. 15 of ROC, it is stated that 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 business operations into a single entity i.e., Transferee Company. Further, the shareholding pattern of the Petitioner Companies was produced with the Company Application CA (CAA) No. 25/BB/2020. (15) Regarding the observation no. 16 of ROC RD, it is stated that the increase in Equity Share Capital is pursuant to conversion of CCPS and the said transaction is disclosed in Note 3C of the Audited Financial Statements of the Transferee Company for the year ended 31st March 2019. (16) Regarding the observation no. 17 of ROC RD, it is stated that the Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unding application under Section 441 of the Companies Act, 2013 to compound the offence in relation to default in appointment of Company Secretary. 9. Further to the above clarifications, on the issues raised during the course of hearing, the Petitioners have further clarified vide a separate Memo, as under: (1) Hinduja Investments Private Limited (HIPL), the Transferor Company No. 1 is an unlisted Indian company engaged in business of wholesale trading of readymade garments on B2B basis and holding company of GIPL as on 15 September 2019, and Gokaldas Intimatewear Pvt. Ltd. (GIPL), the Transferor Company No. 2 is an unlisted Indian company engaged in manufacturing and sale of foundation garments, lingerie, nightwear, at leisure and shape wear in India. (2) Varenna Holdings Limited (Varenna) is a foreign company owned by Advent International, one of the largest and most experienced global private equity investors which has invested $50 billion in 359 private equity transactions in 41 countries with investments in five core sectors, including business and financial services, healthcare, industrial, retail, consumer and leisure and technology. Varenna proposed to acquire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ationalization, standardization and simplification of business processes, productivity improvements, usage of common resource pool like human resource, administration, accounts, legal and other related functions leading to elimination of duplication etc., and facilitate alignment of ERP systems of GIPL and HIPL with Dixcy and thus effective means of implementing GST credit system for various vendors. (6) In consideration of the said merger, Varenna shall receive Compulsorily Convertible Debentures ('CCDs') in Dixcy for approximately same value as at the time of transaction on 16 September 2019. Also, on completion of merger, relevant filings under Foreign Direct Investment policy and various regulations shall be filed with prescribed regulatory authorities. There are no income-tax losses of HIPL and GIPL that will be transferred to Dixcy as a consequence of this merger. Hence the erstwhile shareholders of GIPL and HIPL have no ownership in the final structure pursuant to the Merger. 10. The Official Liquidator vide OLR No. 03 of 2021 dated 05.01.2021 in C.P. (CAA) No. 37/BB/2020 has inter alia stated that for scrutiny of the books of accounts and records of the Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e efficient treasury management, etc. On a consideration of the facts of the case as mentioned in the preceding paragraphs, which are not being elaborated here to avoid duplication and repetition, we are satisfied that the procedure specified in sub-sections (1) and (2) of section 232 of the Companies Act, 2013 has been complied with, and hence the Scheme of Amalgamation, as approved by the Boards of Transferor Companies and the Transferee Company, is hereby sanctioned, as prayed, and in view whereof, this Tribunal passes the following further Order: (1) The Scheme of Amalgamation, as contained in the present Petition, is hereby sanctioned and the Appointed Date shall be 01st April, 2020; (2) Sanctioning the Scheme of Amalgamation should not be construed as an order in any way granting exemption from payment of Stamp Duty, taxes or other charges, if any, and payment in accordance with law or in respect to any permission/compliance with any other requirement which may be specially required under any law, and the same shall be dealt with by the respective Authority in accordance with the extant Laws and Rules governing such Duty, taxes or other charges, as applicable; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmit Quarterly/Annual Status Reports of such compliances through an Affidavit by Managing Director/Director of the Company along with CA/ICWA/CS Certificates till the compliance is ensured; and (13) The Transferor Companies and their Authorized Signatories are directed that after the completion of the process of Amalgamation to handover the possession of the Books of Accounts and other relevant documents of the Transferor Company to the Transferee Company for the purpose of section 239 of the Companies Act, 2013; and (14) This Order is limited to the Scheme of Amalgamation, and it will not come in the way of Registrar of Companies or any other authority to take appropriate action(s) in accordance with law, for any other violations/offences, if any, committed by the Company or any of its personnel prior or during the approval of the Scheme; (15) If any of the Companies party to this Scheme contravene any of the provisions of section 232, they shall be liable to be punished with fine as contemplated in section 232(8) of the Act. (16) Any person shall be at the liberty to apply to the Tribunal in the above matter for any directions that may be necessary. (17) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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