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TMI Blog2021 (5) TMI 648X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provisions of the Companies Act, 1956, with the CIN:U29110KA2007PTC042432 and having its registered office at No. 323, Amulya Mansion, 8th Main, 2nd Cross, BEML Layout, Kundalahalli Main Road, Bangalore - 560066. The Authorised Capital is Rs. 2,00,00,000/- divided into 20,00,000 equity shares of Rs. 10/- each and the Issued, Subscribed and Paid-up Capital is Rs. 1,45,50,000/- divided into 14,55,000 equity shares of Rs. 10/- each. Its main objects inter alia are to carry on the business of trade, manufacture, deal, import, export in all types of engineering and non-engineering products including public guidance systems and accessories, etc. 2) The Board of Directors of the Demerged Company/Petitioner Company No. 1 at their meeting held on 01st June, 2020 have accorded the Scheme of Arrangement and inter alia resolved the following: "RESOLVED THAT pursuant to Section 230 to 232 and all other applicable provisions, if any, of the Companies Act, 2013 and enabling provisions of the Memorandum of Association and Article of Association of Prime Progression ICOM (India) Private Limited ('the Company' or 'The Demerged Company') and subject to the requisite approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged Company and Resulting Company, issued Certificates dated 13.07.2020 by inter alia certifying that the accounting treatment proposed in the Scheme of Arrangement is in conformity with the Accounting standard prescribed notified u/s. 133 of the Act, 2013. 6) The Rationale for the Proposed Scheme of Arrangement are as follows: i. The Demerged Company has three division i.e. Export Division, Packaging Products Division and Public Guidance System Division. ii. Each of the divisions of the Demerged Company has tremendous growth potential and is at a stage where they require focused leadership and management attention. Hence, the Demerged Company intends to re-organise the operations of different divisions and undertakings, to provide focused management attention and leadership required. iii. This Scheme facilitates the entities' exploration of new avenues and would also enhance growth prospects for the people and organizations connected with them. The arrangement under the Scheme will unlock shareholder value and create long term value for all the other stakeholders. iv. In this regard, it is proposed to demerge the Export Division and Packaging Products Division into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispensed with the convening and holding of the meeting of the Secured and Unsecured Creditors of the Applicant Company No. 1. 4. The Tribunal vide its Order dated 09.10.2020 directed the Registry to issue notice to all the statutory authorities viz. the Regional Director (SER), Registrar of Companies, Bangalore, The Principal Commissioner of Income Tax, Karnataka and Goa, the Secretary Competition Commission of India, and to file proof of the same. Pursuant to the above directions, the Petitioners have filed their compliance affidavit dated 02.11.2020 affirming compliance of the Order passed by the Tribunal dated 09.10.2020. Further, they have furnished the copies of the newspaper publication for having taken advertisement in the "The Hindu", English edition as well as in "Udayavani", Kannada edition on 16.10.2020. 5. The Competition Commission of India vide its letter No. N-20(13)/NF-593/2020/CD/6813 dated 23.10.2020 has inter alia stated that the Scheme has not been filed with the Commission under the provisions of the Competition Act, 2002 and that an undertaking may be sought from the Companies involved that CCI approval is not required for the said Scheme. In this regard, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets to be transferred to the Transferee Company may be furnished to the Hon'ble NCLT. 2) As per the Scheme, the Shareholders of Demerged Company and Resulting Company are common. However, it is noticed that there are eight shareholders in the Demerged Company and common shareholders are only four and no shares will be issued to them for demerging the two divisions of the Demerged Company. Hence, the Resulting Company shall obtain specific approvals of the remaining shareholders and furnish to the Hon'ble NCLT. 3) As per MCA records, it is found that the status of the Demerged Company has two open charges from Axis Bank Limited and the Company may be directed to obtain NOC from the Bank. 4) Subsequent to March 31, 2020 there has been increase in the issued and paid-up share capital of Resulting Company from 100,000/- to 25,00,000/- vide further allotment of shares made on 30.05.2020 and the share capital of the Resulting Company as on 01.06.2020. The Petitioner Companies may furnish detailed clarification to NCLT in this regard. 5) Both the Companies are having related party transactions during the years 2017-18 and 2018-19. The compliance of Section 188 of the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner Companies during the Financial Year 2017-18 and 2018-19 with related parties were in the ordinary course of business and on an arm's length basis. The said Related Party Transactions are in compliance with the applicable accounting standards and are disclosed in the Audited Financial Statements of the Petitioner Companies as well. 8) With regard to observation No. 6 of RD, it is stated that the Trade Payables pertains to the Unsecured Creditors of Demerged Company. Consent Affidavits of these Unsecured Creditors to the tune of 92.11% of the total Unsecured Debt as on 31.03.2020 was produced along with the Company Application. This Hon'ble Tribunal had considered the same and had dispensed with the meeting of the Unsecured Creditors of the Demerged Company. 10. Heard Mr. Saji P. John, learned Counsel for the Petitioners, Mr. Hemanth R. Rao, learned Standing Counsel for the ROC, and Mr. Ganesh R. Ghale for the Income Tax Department. We have carefully perused the pleadings of the parties and the extant provisions of the Companies Act, 2013 and the Rules made thereunder and the Law on the issue. 11. We have considered the facts of the case as mentioned in the Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct nevertheless, to all the charges now affecting the same; and (4) All the liabilities including taxes and charges, if any, and duties of the Demerged Company be transferred without further act or deed to the Resulting 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 Resulting Company; and (5) 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 Resulting Company; and (6) All the proceedings now pending by or against the Demerged Company be continued by or against the Resulting Company, if any; and (7) The Petitioner Companies shall within Thirty days of the date of the receipt of this Order cause a certified copy of this Order along with a copy of Scheme of Arrangement to be delivered to the Registrar of Companies for registration in accordance with the applicable rules and regulations; and (8) The acceptance of the Scheme is subject to compliance of the directions that the Petitioner Companies shall file all the due Statuto ..... 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