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TMI Blog2021 (8) TMI 757X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with the provisions of Sections 230 to 232 of the Companies Act, 2013 and the Rules made thereunder and the Petition/Application is filed in accordance with law. The scheme is sanctioned - application allowed. - C. P. (CAA) No. 17/BB/2021 - - - Dated:- 6-8-2021 - Bhaskara Pantula Mohan, Actg. President and Hemant Kumar Sarangi, Member (T) For Appearing Parties: Sudipto Sarkar, Krishnendu Datta, V.G. Prashanth and Prema Hatti JUDGMENT Bhaskara Pantula Mohan, Actg. President 1. C.P. (CAA) No. 17/BB/2021 is filed by the Demerged Company and the Resulting Company (Petitioner Companies No. 1 2), under Sections 230 to 232 of the Companies Act, 2013, by inter alia seeking to sanction the Scheme of Arrangement between the Demerged Company and the Resulting Company. 2. Brief facts of the case, as mentioned in the Company Petition, which are relevant to the issue in question, are as follows: (1) IBM India Private Limited , the Demerged Company (hereinafter referred as Petitioner No. 1 ) is an unlisted Private Company incorporated on 13th June 2017 under the provisions of the Companies Act, 1956. The registered office is situated at No. 12, Subramanya Arc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme of Arrangement. (6) R.G.N. Price Co., Chartered Accountants, the Statutory Auditors of the Petitioner Company No. 1 has issued Auditors Certificate dated 15.01.2021 has inter alia stated that the accounting treatment contained in Paragraph 15.1 of the Scheme is in compliance with applicable Indian Accounting Standards notified u/s. 133 of the Act r/w. Rules thereunder and other India GAAP. (7) Price Waterhouse Co., Chartered Accountants, the Statutory Auditors of the Petitioner Company No. 2 has issued an Auditors Certificate dated 01.04.2021 has inter alia confirmed that the accounting treatment contained in draft scheme is in compliance with the applicable Accounting Standards specified u/s. 133 of the Companies Act, 2013. (8) The benefits sought to be achieved by the Arrangement inter alia to enable creation of two industry leading companies each with strategic focus and flexibility to drive client and shareholder value. Enabling more efficient, effective, focused strategy for management and utilization of resources and talent for both the Demerged Company and Resulting Company and the financial position of each of the Demerged Company and the Resulting Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.07.2021 and Regional Director vide their report dated 20.07.2021 have filed a Report by inter alia pointed out following observations: (1) The Resulting Company is the wholly owned subsidiary of the Demerged Company and the ultimate holding Company of the Demerged Company is M/s. IBM Corporation, USA. The Resulting Company is incorporated only on 08.01.2021. (2) As per clause 19 of the Scheme, it is started that as part of the Scheme the Resulting Company will change the name of the Company. As per the reply of the Company, the Company has changed its name to Kyndryl Solutions Private Limited (formerly known as Grand Ocean Managed Infrastructure Services Private Limited) on 24.05.2021. (3) Since the Resulting Company was incorporated in January, 2021, the filing of Financial Statement is not yet due. (4) As per Section 232(3)(i) of the Companies Act, 2013, the Resulting Company shall comply with the said provisions and pay the differences fee, after setting off the fee already paid by the Transferor Company on its respective capital. In this regard, the Resulting Company shall furnish an undertaking before the Hon'ble NCLT; (5) As per clause 14 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by RD inter alia explaining as below: (1) In respect of the increase in authorized capital of the Resulting Company under clause 18.1(a) of the Scheme, the Resulting Company shall file the requisite forms with the Registrar of Companies for increase of its authorized share capital and pay requisite fees, as is also specified in Clause 18.1(b) of the Scheme. (2) The Resulting Company is a wholly owned subsidiary of the Demerged Company and the Demerged Company presently holds 10,000 shares of face value INR 10 in the Resulting Company. As per Clause 14.1 of the Scheme, upon the Scheme becoming effective, the existing shareholding of the Demerged Company in the Resulting Company shall stand cancelled immediately following the issuance of the new equity shares to the shareholders of the Demerged Company (pursuant to Clause 13 of the Scheme). (3) It is stated and clarified that the unspent amount of INR 76.06 cores relates to financial year 2017-18, for which the reasons for not spending the said amounts have been suitably disclosed in the Board's report made under Section 134(3) of the Companies Act, 2013, Additionally for the financial year 2018-19 and 2019-20, the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidiary company, associate company, and other subsidiaries of holding company. Given that Section 2(76)(viii) of the Companies Act, 2013 does not apply to private Companies, the said transactions undertaken by the Demerged Company do not fall within the purview of Section 188 of the Companies Act, 2013. Accordingly, it is hereby stated and clarified the Demerged Company is not in non-compliance with provisions of section 188 of the Companies Act, 2013. It is further stated and clarified that the auditors of the Demerged Company have also confirmed this in their report attached to the financial statements for the financial year FY 2017-18, FY 2018-19 and FY 2019-20, as is stated on pages 6, 15 and 24 respectively of Annexure C. (8) The amounts payable by the Demerged Company to MSMEs form a part of day-to-day transactions undertaken by the Demerged Company and are paid in the ordinary course of its business. Upon the Scheme becoming effective, all current liabilities as of the effective date of the Scheme (including any pending dues towards MSMEs) which pertains to the MIS Business would be settled by the Resulting Company in the ordinary course of its business. As of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avit dated 20.07.2021 stating that the Petitioner No. 2 undertakes to comply with the provisions of Section 232(3)(i) of the Companies Act, 2013 and pay all the requisite fee and shall also file requisite forms with the Registrar of Companies, in accordance with applicable law. Further also undertakes to comply with applicable regulations issued the RBI or rules framed under the FEMA, 1999 upon issuance of shares by the Resulting Company to shareholders of the Demerged Company. The Petitioner No. 2 undertakes that statutory dues in respect of the transferred undertaking i.e., the managed infrastructure services (MIS) business operations of the Demerged Company which become due and payable by the Resulting Company will be taken care and paid as and when demanded by the concerned statutory authorities in accordance with applicable laws. Further also undertakes that all current liabilities in respect of the Demerged Undertaking as of the effective date of the Scheme of Arrangement including such amounts as may be due to the Micro Small and Medium Enterprises, will be taken care of and be paid by the Resulting Company in the ordinary course of its business. 7. It is relevant to stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtifying that the accounting treatment contained in the proposed Scheme of Arrangement is in conformity with accounting standards notified by Central Government under Companies Act, 2013. 12. It is a settled position of law that any Scheme of Arrangement or Amalgamation/demerger, under the extant provisions of Companies Act, would not contemplate to waive any liability or legal action for any violation of provisions of Companies Act, so as to prevent Statutory Authorities from initiating any action against violation of provisions of Companies Act, in respect of the Companies involved, in accordance with law. In the instant case also, the Petitioner No. 2 would inherit all the responsibilities. With reference to various observations made by the Statutory Authorities as briefly detailed supra, they are at liberty to initiate appropriate legal action against the Company for any violation of any provisions of law. The Tribunal, in the instant proceedings, cannot examine every alleged violation committed by the Petitioner Companies, since the issue here is only to sanction of the Scheme, subject to compliance of extant provisions of Companies Act and to make them to comply all terms ..... X X X X Extracts X X X X X X X X Extracts X X X X
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