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TMI Blog2021 (11) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... Partners and P A Law Offices, Advocates For the Respondents : Rupa Suttar, Assistant Regional Director ORDER Shyam Babu Gautam, Member (T) 1. The court convened via videoconferencing. 2. Heard the Learned Senior Counsels for the Petitioner Companies, the Officer of the Regional Director, Western Region, Mumbai ( RD, Mumbai ) and Regional Director, Northern Region, New Delhi ( RD, New Delhi ). No Objections have been filed qua Petitioner Companies 1 and 2 before this Tribunal to oppose the Company Scheme Petition. Petitioner Company 3 has received certain representations from some of its shareholders and unsecured creditors in respect of the Scheme, and Petitioner Company 3 has dealt with such objections by filing requisite responses which are on record. 3. The Petitioner Companies have jointly filed the present Company Scheme Petition seeking sanction of this Tribunal to the Composite Scheme of Amalgamation of Bamnipal Steel Limited and Tata Steel BSL Limited into and with Tata Steel Limited ( Scheme ) under Sections 230 to 232 of the read with other applicable provisions Companies Act, 2013 ( Act ). 4. The Learned Senior Counsels for the Petitioner Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icity of legal and regulatory compliances required to be carried out by the Petitioner Company 2 and the Petitioner Company 1. (iv) The Petitioner Company 2 being a wholly owned subsidiary of the Petitioner Company 1 is under the management of the Petitioner Company 1 and it would be advantageous to amalgamate the two entities to ensure focused management in the Transferee Company, thereby resulting in efficiency of management and maximizing value to the shareholders. (v) This amalgamation will also result in significant reduction of administrative, operational, financial, and managerial and such other costs. (b) Commercial rationale for amalgamation of the Petitioner Company 3 with the Petitioner Company 1 (i) The Petitioner Company 3 and the Petitioner Company 1 are engaged in the business of manufacture and sale of steel and steel products. The amalgamation will ensure focused management in the combined entity, thereby resulting in efficiency of management and maximizing value for the shareholders. Such restructuring will lead to simplification of group structure by eliminating multiple companies in similar business. (ii) The proposed amalgamation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s could significantly reduce logistics and distribution costs for both the Petitioner Company 3 and the Petitioner Company 1 Clubbing of shipments may help reduce shipping costs, port terminal charges and ocean freight. Enhancing Value in Marketing: With an overlap in products across the Petitioner Company 3 and the Petitioner Company 1 the combined entity would be better positioned to service customer needs. The Petitioner Company 3 could expand its existing core market in North-India using the strong distribution channel and dealer network of the Transferee Company. Further, the Petitioner Company 3 could also have access to the Petitioner Company 1's branded product portfolio and marketing capabilities. The Petitioner Company 1 would benefit from complementary product offerings of the Petitioner Company 3, resulting in a strong presence across market segments. The proposed amalgamation will result in access to new markets and product offerings as well as increased export volumes. Improving Customer Satisfaction and Services: The proposed amalgamation would make it easier to address needs of customers by providing them uniform product and service experience, on- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able statutory requirements, if any, as required under the Act and rules made thereunder, the Securities and Exchange Board of India, 1992, and regulations made thereunder, as and when applicable. The said undertakings given by the Petitioner Companies are accepted. 11. The Regional Director, Western Region, Mumbai, ( RD, Mumbai ) has filed his report dated June 17, 2021 in respect of Petitioner Company 1 and Petitioner Company 2 ( P1 and P2 RD Report ) with this Tribunal, inter alia, stating therein that this Tribunal may consider the observations made at Serial No. IV (a) to (r) of the said Report, and pass such other order or orders as deemed fit and proper in the facts and circumstances of the case. The observations made by the RD, Mumbai, in paragraph IV of the Report are, reproduced hereunder, for sake of ready reference: IV. The observations of the Regional Director on the proposed Scheme to be considered by the Hon'ble NCLT are as under:- (a) In addition to compliance of AS-14 (IND AS-103) the Transferee Company shall pass such accounting entries which are necessary in connection with the scheme to comply with other applicable Accounting Standards such as A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the issues arising after giving effect to the scheme. The decision of such Authorities is binding on the Petitioner Company(s). (f) Petitioner Company have to undertake to comply with section 232(3)(i) of Companies Act, 2013, where the transferor company is dissolved, the fee, if any, paid by the transferor company on its authorised capital shall be set-off against any fees payable by the transferee company on its authorised capital subsequent to the amalgamation and therefore, petitioners to affirm that they comply the provisions of the section. (g) The Petitioner Company may be directed to submit undertaking that the petitioner company shall ensure compliance of the all provisions of the Income Tax Act, 1961 including provisions of section 2(1B) of the Income Tax Act. (h) As per Part-II - (Amalgamation of The Transferor Company 1 into and with The Transferee Company) Clause 7(7.1) of the Scheme (Accounting Treatment).Upon coming into effect of this scheme, the transferee company shall account for the amalgamation of the transferor company 1 in its books of accounts in accordance with pooling of interest method of accounting as laid down in Ind AS 103 (Busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and falls within the jurisdiction of Hon'ble NCLT, at New Delhi Bench. Accordingly, necessary orders be obtained by the Transferor Company 2 from Hon'ble NCLT, at New Delhi Bench. (l) Since the Transferee Company limited by shares, is listed on the Bombay Stock Exchange and the National Stock Exchange, the Petitioner Companies be directed to place on record whether necessary approval from SEBI and the concerned Stock Exchange have been obtained and whether the meeting of the Shareholders/class of shareholders have been convened as per the listing/SEBI guidelines. (m) Since the Transferee Company listed on Luxembourg Stock Exchange and the London Stock Exchange, the Petitioner Company de directed to undertake to comply with all Rules and Regulations as stipulated by London Stock Exchange. (n) The Petitioner Companies to place on record and to provide details regarding meeting of Shareholders other than Promoters, has been convened or not. (o) Since the Transferor Company 2 and The Transferee Company have foreign/nonresident shareholders, therefore, it is subject to the compliance of section 55 of the Companies Act, 2013 the FEMA Regulations/RBI Guidelin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petitioner Company 1 and Petitioner Company 2 submit as under: (a) Petitioner Company 1: Pursuant to the directions of this Tribunal passed vide the CSA Orders and in terms of Section 230 (1) read with Section 230 (3) to (5) of the Act, the NCLT convened meeting of equity shareholders of the Petitioner Company 1 was duly held on Friday, March 26, 2021 at 11:00 a.m. (IST), when the Scheme has been approved by an over-whelming majority of the equity shareholders (99.99% of the equity shareholders present and voting at the NCLT convened shareholders' meeting) of the Petitioner Company 1. The report of the Chairperson appointed by this Tribunal, setting out the result of the meeting, along with the Affidavit in support thereof, has been filed with this Tribunal on April 13, 2021, and is annexed to the Company Scheme Petition as Exhibit X . Learned Senior Counsels further submit that are the minutes of the NCLT convened meeting of equity shareholders of Petitioner Company 1 held on March 26, 2021 are annexed as Exhibit A to the P1 and P2 RD Response, and in terms of the CSA Orders, the convening and holding of meeting of the creditors of the Petitioner Company 1 was dispense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity shares to the shareholders of Petitioner Company 3, pursuant to the Scheme. 19. So far as the observation in paragraph IV (g) of the P1 and P2 RD Report is concerned, Petitioner Company 1 and Petitioner Company 2 undertake to comply with the applicable provisions of Income Tax Act, 1961 including provisions of Section 2 (1B) thereof, as applicable and to the extent required. 20. So far as the observations in paragraphs IV (h) and (i) of the P1 and P2 RD Report are concerned, the Petitioner Company 1 undertakes that the Capital Reserves, if available, with the Transferee Company, shall not be utilized for distribution of dividends and other similar purposes. 21. So far as the observation in paragraph IV (j) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 states that the Petitioner Company 1 is not undertaking any amendment to its memorandum of association, pursuant to the Scheme, and Clause 21 is merely an enabling provision in the Scheme to facilitate such amendment, in case required. In this regards, the Petitioner Company 1 undertakes to comply with the applicable provisions of the Act, if and when such need arises. Petitioner Company 1 further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plied with by Petitioner Company 1. The Petitioner Company 1 further submits that the meeting of its equity shareholders was convened in accordance with the listing/SEBI guidelines, and as required under SEBI guidelines, the number of votes cast by the Public Shareholders of the Petitioner Company 1 in favour of the Scheme, was more than the number of votes cast by its Public Shareholders against the Scheme. 24. So far as the observation in paragraph IV (m) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 (i.e. Transferee Company) states that the Global Depository Receipts of the Transferee Company are listed on the Luxembourg Stock Exchange and the London Stock Exchange. In this regard, Petitioner Company 1 undertakes to comply with applicable rules and regulations as stipulated by Luxembourg Stock Exchange and the London Stock Exchange pertaining to matters in relation to the Scheme. 25. So far as the observation in paragraph IV (n) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 submits that pursuant to the CSA Orders, the meeting of equity shareholders of Petitioner Company 1 was held on Friday, March 26, 2021 at 11:00 a.m. (IST) to seek ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaint of Mr. Paras Mal Bhutoria, the Petitioner Company 1 states that by its letter dated June 25, 2021, Petitioner Company 1 has appropriately responded to the said complaint. It is pertinent to mention that Mr. Paras Mal Bhutoria also filed a similar complaint before the SEBI, which has been disposed off by the SEBI. Further, as regards the complaint filed by Mr. Jatinder Singh Ahuja, Petitioner Company 1 states that in spite of the fact that the said complainant is not a shareholder of the Petitioner Company 1, Petitioner Company 1 responded to the said complaint by its letter dated May 24, 2021 enclosed to an e-mail dated May 28, 2021 sent to the Registrar of Companies, Mumbai ( ROC ) and RD. The copies of the letter dated June 25, 2021 and the e-mail dated May 28, 2021 along with a copy of the letter dated May 24, 2021, both sent to the ROC, are annexed to the P1 and P2 RD Response as Exhibit B and Exhibit C , respectively. In any event, the above complainants have also filed an Application before this Tribunal, on the same subject matter which is on the records of this Tribunal. It is pertinent to mention that the Scheme has been approved by an overwhelming majority of eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Item 9 to Schedule 1 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 and therefore no approval is required to be obtained from the CCI. In view of the above, the approval of CCI has not been obtained by the Petitioner Companies. 30. Upon perusal of the responses of the Petitioner Companies as contained in the P1 and P2 RD Response, as detailed in paragraphs 12 to 29 hereinabove, the office of RD, Mumbai filed a supplementary report dated July 13, 2021 with this Tribunal ( Supplementary Report ). The Supplementary Report, inter alia states that the Petitioner Company 1 and Petitioner Company 2 have submitted their replies by way of the P1 and P2 RD Response, and a copy of the same was annexed as Annexure A to the Supplementary Report. As regards the replies of the Petitioner Company 1 and Petitioner Company 2 to paragraphs (IV) (a), (b), (d), (e), (g) to (j), (l) and (m), the officer appearing for the RD submits that the replies submitted by the Petitioner Companies in P1 and P2 RD Response are satisfactory. As regards the replies of the Petitioner Companies 1 and 2 to paragraphs (IV) (c), ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Vijesh Vishwanathan which is in reference to the proposed scheme of Amalgamation of Tata Steel BSL Limited with the Tata Steel Limited in regard to share swap ratio of 15:1. He stated in the complaint that he is a public shareholder of Tata Steel BSL Limited, with current shareholding of 164205 shares. The said scheme was beneficial for all parties involved, when it was approved on 25.04.2019. But the Scheme could not be implemented due to reasons beyond the control companies involved. A gap of almost 2 years is enough for the change of matrices of the Valuation report, which is being relied upon now. The said scheme now is against the public/minority shareholdings interest holding 27.35% equity share in Tara Steel BSL Limited f or the following reasons. A. Fair Exchange ratio of 15 Tata Steel BSL Limited (FV ₹ 21/-) for 1 share of Tata Steel Limited (FV ₹ 101/-), is based on valuation reports which is almost 2 years old and hence cannot be the basis as on date. And as an icon group Tata 's cannot accept the valuation report which his more than 6 month old, which is against all norms of Corporate Governance. B. Public/Minority shareholding 27.35% share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trar of Companies, New Delhi, ('RoC') in their report has stated that their office is in receipt of two complaints viz. one each from Mr. Vijesh Viswanathan and Mr. Jatinder Singh Ahuja in respect of the Scheme. As regards, the complaint of Mr. Vijesh Viswanathan, the Petitioner Company 3 states that vide email dated June 29, 2021, the RoC had forwarded the complaint of Mr. Vijesh Viswanathan and sought a response from the Petitioner Company 3 on the same. The Petitioner Company 3 vide its letter dated July 11, 2021, Petitioner Company 3 has appropriately responded to the said complaint. Further, as regards the complaint filed by Mr. Jatinder Singh Ahuja, Petitioner Company 3 states that it is not in receipt of the representation dated April 28, 2021 from Mr. Jitender Ahuja, through the RoC. However, apart from the aforesaid letter, Mr. Jitender Ahuja has written several representations regarding the Scheme and the share exchange ratio to various regulators including SEBI, and the Petitioner Company 3 has appropriately responded to such representations on numerous occasions. Vide email dated June 10, 2021 in response to the reply of the Petitioner Company 3 dated May 31, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner Company 3 has filed appropriate responses to the said claims of the objecting creditors. In response to Creditors objections, Counsel for Petitioner company submitted that clause 18(e) of the scheme provides the definition of undertaking 2 to include all undertaking and business of the Company as a going concern including the assets, properties, investments, rights, approvals, licenses and powers, leasehold rights and all its debts, outstanding liabilities, duties, obligations and employees. Clause 18(i) of the Scheme provides that upon the Scheme coming into effect, the Undertaking 2 shall without any further act, instrument or deed be and stand transferred to and vested in and/or be deemed to have been and stand transferred to and stand vested in the Transferee company, as a going concern, so as to become the undertaking of the Transferee Company, with effect from the Appointed Date. 41. Therefore, as per above submissions and clear position of law the grievances of the objector is addressed accordingly and nothing survives in CA 156 of 2021 and CA 261 of 2021, Accordingly both CA 156 of 2021 and CA 261 of 2021 disposed of as dismissed. 42. From the material on re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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