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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 ..... s 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 Companies stated that the Petitioner Company 1 is engaged in the business of manufacturing steel and offers a broad range of steel products including a portfolio of high value-added downstream products such as hot rolled, cold rolled and coated steel, rebars, wire rods, tubes and wires. The Petitioner Company 1 also has a well-established distribution network. The Petitioner Company 2 is a wholly owned subsidiary of Petitioner Company 1 and was incorporated inter alia for the purpose of completing the acquisition of the Petitioner Company 3 pursuant to corporate insolvency resolution process of Petitioner Company 3 ("CIRP") und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 Petitioner Company 3 with the Petitioner Company 1 in accordance with the terms of this Scheme would enable both the companies to realize benefits of greater synergies between their businesses, yield beneficial results and pool financial resources as well as managerial, technical, distribution and marketing resources of each other in the interest of maximizing value to their shareholders and the stakeholders. (iii) The proposed amalgamation will be beneficial to both the Petitioner Company 3 and the Petitioner Company 1 in the following manner: * Operational integration and better facility utilisation: The amalgamation in accordance with this Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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-time supplies, and improved service levels thereby improving customer satisfaction. With common credit management, the customers are expected to benefit from the channel financing benefits from the combined entity. * Improved safety, environment and sustainability practices: Increased coverage of plant automation can be achieved across plants of the Petitioner Company 3, by using the Petitioner Company 1's information technology applications and systems. Thus, the proposed amalgamation is beneficial, advantageous and not prejudicial to the interests of the shareholders, creditors and other stakeholders of the Petitioner Company 3 and the Petitioner Company 1 and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces 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 AS-5(IND AS-8) etc.; (b) As per Part-I-Definitions Clause 111(1.4), 111(1.9) & 111(1.18) of the Scheme "Appointed Date" means April 1, 2019 or such other date as approved by the NCLT; "Effective Date" means the date on which the last of conditions referred to in Clause 25.1 hereof have been fulfilled. Any reference in this Scheme to the date of "coming into effect of the/this Scheme" or Scheme becoming effective" shall be construed accordingly; "Record Date" means the date to be mutually fixed by the Board of Directors of the Transferor Company 2 and the Transferee Company, for the purpose of determining the shareholders of the Transferor Company 2 who shall be entitled to receive fully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 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 (Business Combinations) and relevant clarifications issued by institute of chartered accountants of India (ICAI). In this regards it is stated that in Indian Accounting Standard (Ind AS) 103 - prescribes application of pooling of Interest Method to account for common control business combinations. Under this method:... Any difference, whether positive or negative, shall be adjusted against the capital reserves (or "Amalgamation Adjustment Deficit Account" in some cases). In view of the above it is submitted that the difference so credited to "Capital Reserve arising out of Amalgamation" shall not be available for distribution of dividend and other similar purposes. (i) As per Part-III- (Amalgamation of The Transferor Company 2 into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 Guidelines by the Transferee Company. (p) As regards the complaints indicated at para 21 above, under the head -Complaint received against the propose Scheme, it is submitted that the petitioners be directed to mention all the facts in this regard about complaints and explain about the allegations made therein, before approval of the scheme. (q) In view of the observation raised by the ROC Mumbai, mentioned at para 22 above Hon'ble NCLT may pass appropriate orders/orders as deem fit; (r) The Petitioner Company be directed to place on record whether necessary NOC/approval from Competition Commission of India (CCI) have been obtained or not." 12. In response to the observations made by the RD, Mumbai in its Report, the Learned Senior Counsels submit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dispensed with. (b) Petitioner Company 2: In terms of the CSA Orders, there was no requirement of convening of meeting of the equity shareholders of the Petitioner Company 2, in view of the consent affidavits obtained from its equity shareholders, and the question of convening and holding of meetings of the creditors of the Petitioner Company 2 didn't arise since Petitioner Company 2 didn't have any creditors as on September 30, 2020. 16. So far as the observation in paragraph IV (d) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 and Petitioner Company 2 undertake that the copy of the Scheme annexed as Exhibit "A" to the Company Scheme Application filed by the Petitioner Company 1 and Petitioner Company 2, viz. CA (CAA) 3083/MB/2019 and the copy of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes 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 undertakes to pay applicable stamp duty payable in accordance with the applicable laws. 22. So far as the observation in paragraph IV (k) of the P1 and P2 RD Report is concerned, the Petitioner Company 1 and Petitioner Company 2 submit that since the registered office of the Petitioner Company 3 (Transferor Company 2) is situated at Delhi, the Petitioner Company 3 had filed its Company Scheme Application viz. CA (CAA)-129 (ND)/2019 before New Delhi Bench of this Tribunal. On September 9, 2019, the Petitioner Company 3 filed an application before the Principal Bench of this Tribunal viz. CA 1955 (PB)/2019, seeking transfer of the said application from New Delhi Bench to Mumbai Bench of this Tribunal, on the ground that the registered office of the Transferee Company is situated at Mumbai. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 their approval to the Scheme. The resolution proposed for the Scheme was passed with requisite majority of the equity shareholders (which also included the public shareholders of Petitioner Company 1). The Petitioner Company 1 further clarifies that the provisions of paragraph 9(b) of Annexure I of the Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017 issued by the Securities and Exchange Board of India ("SEBI") as amended from time to time ("SEBI Schemes Circular") require a listed company to seek approval of majority of public shareholders to the Scheme only if it falls within any of the specific cases mentioned under the SEBI Schemes Circular. For such approval, no separate meeting of public shareholders is required to be convened either under the SEBI Schemes Circular or Sections 230 to 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter 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 equity shareholders of the Petitioner Company 1 (99.99% of the equity shareholders present and voting at the NCLT convened shareholders' meeting) at the NCLT convened meeting held on March 26, 2021. 28. So far as the observations in paragraph IV (q) of the P1 and P2 RD Report is concerned, the Petitioner Companies state as under: (a) Petitioner Company 1 states that as mentioned in paragraph 22 of the P1 and P2 RD Report, ROC had received 10 complaints in respect of the Petitioner Company 1 vide SRN Numbers mentioned therein, which are pending. Petitioner Company 1 states that all such complaints as reported by the ROC, have been adequately responded to by the Petitioner Company 1, by way of its letter dated July 2, 2021 sent to the ROC. In the said letter, the Petitioner Company 1 has inter alia i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eport. 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), (f) (k), (n) (o) (p) (q) and (r) of the P1 and P2 RD Report, the Supplementary Report states that the Tribunal may pass appropriate orders as deem fit. 31. The observations made by the RD, Mumbai in its report dated June 17, 2021, have been reproduced in paragraph 11 above. The clarifications and undertakings given by the Petitioner Company 1 and Petitioner Company 2 to the P1 and P2 RD Report have been explained in paragraphs 13 to 29 above. The clarifications and undertakings of the Petitioner Company 1 and Petitioner Company 2 are accepted by this Tribunal, and the said Petitioner Companies are directed to comply with the same. 32. The Regional Director, Northern Region, New Delhi ("RD, New Delhi") has filed his report dated July 16, 2021 in respect of Petitioner Company ("P3 RD Report") with this Tribunal, inter a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of Tata Steel Limited (FV Rs. 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 capital of Tata Steel BSL Limited as on date will be left with only 1.6285% of holding in amalgamated company Tata Steel Limited. The Scheme, if implemented as such will cause huge loss to the Public/Minority shareholders of Tata Steel BSL Limited. The complainant has requested that as fresh swap ratio should be computed by considering recent valuations of the company so that the interest of public shareholders is safeguarded. Another Complaint dated 28.04.2021 is received from Sh. Jatinder Singh Ahuja in regard to share exchange ratio." 33. In response to the observations made by the RD, New Delhi in its Report, the Learned Senior Counsels submit that the Petitioner Company 3 has filed affidavit dated July 18, 2021 dealing with the observations of the RD, New Delhi as contained in its Report ("P3 RD Response") with this Tribunal on July 18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, 2021 to the complaint of Mr. Jitender Singh Ahuja on the SCORES platform dated May 12, 2021, SEBI affirmed that the response of the Petitioner Company 3 was satisfactory and closed the complaint. 37. The observations made by the RD, New Delhi in its Report have been reproduced in paragraph 32 above. The clarifications and undertakings given by the Petitioner Company 3 to the P3 Report have been explained in paragraphs 34 to 36 above. The clarifications and undertakings of the Petitioner Company 3 are accepted by this Tribunal, and Petitioner Company 3 is directed to comply with the same. 38. In respect of the Petitioner Company 2, the Official Liquidator, High Court, Bombay has filed his report dated July 7, 2021 inter alia, stating that the affairs of the Petitioner Company 2 (Transferor Company 1) have been conducted in a proper manner. 39. In respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 record and after perusing the clarifications and submissions of the Petitioner Companies to the Reports filed by the Regional Directors, the Scheme appears to be fair and reasonable and is not violative of any provisions of law and is not contrary to public policy. 43. Since all the requisite statutory compliances have been fulfilled, the Company Scheme Petition filed by the Petitioner Companies is made absolute in terms of prayer clauses (a), (b), (c), and (d) of the joint Company Scheme Petition. The Scheme is hereby sanctioned with the 'Appointed Date' as April 1, 2019. 44. Petitioner Companies are directed to file a certified copy of this order along with a copy of the Scheme with the concerned Registrar of Companies, electronically along with e-Form INC-28, within 30 days from the date of receipt of the certified copy of this order along with the sanctioned Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X
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