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TMI Blog2022 (1) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... (Western Region), Ministry of Corporate Affairs, Mumbai. No objector has come before this Tribunal to oppose the scheme and nor has any party controverted any averments made in the petition to the said scheme. 3. The sanction of this Tribunal is sought under sections 230 to 232 and other applicable provisions of the Companies Act, 2013 to the scheme of arrangement and amalgamation of Protrans Supply Chain Management P. Ltd. (transferor company/petitioner-company I), Ag-Vet Genetics P. Ltd. (transferor company/petitioner-company II) with Baramati Agro Ltd. (the transferee company/petitioner-company III) and their respective share- holders. 4. Counsel for the petitioners state that the petitioner-company I is presently engaged in the business of logistics and transportation, petitioner- company II is engaged in the business of buying, selling, and dealing in poultry, seeds and agricultural products and the petitioner-company III is engaged in the business of farming, agriculture, horticulture dairy, poultry, sugar and farm produce and other allied activities. 5. Learned counsel for the petitioner-companies states that the petitioner- companies believe that the amalgamation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a regular basis. In view of this, it is proposed to convert certain A class equity shares into 9 per cent. non-cumulative optionally convertible redeemable preference shares of ₹ 10 each. 6. The petitioner-companies have approved the said scheme by passing the board resolutions at their respective board meeting held on February 25, 2019 which are annexed to the company scheme petition. 7. Learned counsel for the petitioner-companies state that the joint petition has been filed in consonance with the order dated June 11, 2020 passed by the National Company Law Tribunal, Mumbai Bench in the company application bearing C. A. (C. A. A.) No. 1067/MB/2019. 8. Learned counsel appearing on behalf of the petitioner-companies further states that the petitioner-companies have complied with all requirements as per directions of this Tribunal and they have filed necessary affidavits of compliance. Moreover, the petitioner-companies undertake to comply with all the statutory requirements if any, as required under the Companies Act, 2013 and the Rules made thereunder whichever is applicable. The said undertaking is accepted. 9. The Regional Director has filed a report dated Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this regards, the deponent prays that, the hon'ble Tribunal may decide the matter on merit with compliance of section 13 and other applicable provisions of the Companies Act, 2013. (e) As per MCA portal one complaint is pending against Baramati Agro Ltd., petitioner-transferee company which was referred by SEBI, and on the basis of that complaint office of Registrar of Companies, Pune con ducted suo motu inquiry and submitted their report, same is under examination. (f) The Registrar of Companies, Pune vide report dated October 14, 2020 has, inter alia, mentioned below : (i) As stated in paragraph 9 above, the part D of the petition contains conversion of equity shares into preference shares which is not permissible to issue redeemable preference shares against existing equity shares as its value, terms, rights are different and cannot be terms as same kinds of shares to exchange in ratio for consideration. Further, Ministry vide letter No. 03/08/2019-CL-V, dated July 27, 2020 has stated that one litigation in on going w.r.t. conversion of equity shares into preference shares and vice versa whereby reclassification of such type was rejected by the Registrar of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the financials is not clear and hence interest of shareholders and creditors may be taken into consideration while deciding the application on its merits. 10. In response to the report of the Regional Director, the petitioner-companies have filed affidavit in rejoinder dated December 11, 2020 and have clarified as under : (a) Apropos observations made in paragraph IV(a) of the report of the Regional Director are concerned, the petitioner-companies undertake that 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., to the extent applicable. (b) Apropos the observations made in paragraph IV(b) of the report of Regional Director is concerned, the petitioner-companies undertake and confirm that, the scheme shall be operative with effect from April 1, 2018 as mentioned in the scheme. Accordingly, the effective date is not in contravention with the provisions of section 232(6) of the Companies Act, 2013. It is further undertaken that the petitioner-companies will comply with the requireme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference shares as sought by the petitioners under the scheme cannot be deemed to be impermissible. In reply to the comments of office of Registrar of Companies, Pune the petitioner-companies submit as follows : (i) Pursuant to section 43 of the Companies Act, 2013 both equity share capital and preference share capital appear in the balance sheet under share capital and as per provisions of section 43 of the Companies Act, 2013 there can be only two classes of shares, viz., equity and preference and combination of two depict the total share capital. When shares of one class are converted into another class (for instance, equity shares into preference or vice versa) and value of the paid-up share capital does not undergo any change, the subscribed and paid-up capital remains unchanged ; only the nomenclature of shares undergo change. (ii) Section 230 of the Companies Act, 2013 ( the Act ) contains provisions concerning compromise or make arrangements with creditors and members. According to sub-section (1) of section 230, where a com promise or arrangement is proposed- (a) between a company and its creditors or any class of them ; or (b) between a company and its me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be presumed . (v) As held by the hon'ble Bombay High Court in Vasant Investment Corporation Ltd., In re (Company Application No. 178 of 1978) [1982] 52 Comp Cas 139 (Bom), every alteration of the memorandum of association required under a scheme of compromise or arrangement cannot be looked upon as an ultra vires act. In the first place, under section 391, the court has very wide power of reconstituting company. When, for example, a scheme is proposed which involves a restructuring of the capital of the company-as in a case where the rights of the various shareholders are sought to be altered-it can also be said that under the existing memorandum and articles of association of the company, the rights of the share holders are fixed in a certain way and to change them would involve sanctioning an act which is ultra vires the memorandum and articles of association. Strictly speaking, such an act may be considered as ultra vires. But, in fact, the very purpose of a scheme of reconstruction is to make suit able alterations in the structure of the company to enable it to function. A scheme, therefore, which contains such ultra vires provisions can be sanctioned, and is in fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f whether the equity shareholders can be reclassified as preference shareholders is concerned counsel for the petitioner-companies submits that the word arrangement has not been defined under the Act however, the term in itself carries a very wide import. The Division Bench of the Punjab and Haryana High Court in the matter of Q. H. Talbros Ltd., inter alia observed that (page 10 paragraph at 14) : A merger and a demerger are not the only components of a composite scheme of arrangement. The term arrangement in section 391 is of wide amplitude. It is defined in the Act. The corporate affair are often complex involving the interplay of innumerable factors including those relating to policy matters, management and financial aspects and legal issues. The scheme often requires considerations of various enactments and adherence to various legal provisions not only under the Companies Act but also under other enactments. Financial aspects are not limited in their nature or in scope. Each component is studied, and the resultant arrangement is arrived at after taking all of them into consideration. There are consequential acts to be performed as an integral part of the scheme. Many of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... error as per the said report it is mentioned that the petitioner-company III (transferee company) has taken inter corporate deposit (ICD) from transferor company I whereas petitioner-company III (transferee company) has extended ICD to transferor company I. Also the ICD amounts are matching and the same are disclosed in the notes to accounts of the respective financial statements reference Note. No. B(4)(b) current liabilities for transferor company I and Reference Note No. 2.58(D) 12 for transferee company. (ii) The petitioner-companies further state that figures of Interest on ICD received' is also matching and the same are disclosed in the financial statement of transferor company I reference Note. No. B.17(b) (A) (4) Related Party Transactions- Interest on ICD and Note No. 2.58(D) 9 for transferee company . (iii) The petitioner-company III states that figures of Interest on ICD received is also matching and the same are disclosed in the financial statement of transferor company I reference Note No. B.4.1.(C)(C) Interest payable on ICD and Note No. 2.58(D) 10 for transferee company. (iv) The petitioner-companies state that figures of receipt of services i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent liability of transferee company as upon failure in repayment of the said loan by transferor company I, transferee company would be liable to repay the same. The status of said term loan as on March 31, 2018 is appearing in the financials of transferor company in Note No. B4. The petitioner-company III states that apart from minor differences due to reconciliation of accounts and time difference in finalisation of accounts by transferor companies and transferee company, financials are disclosing true and correct picture. 11. The Regional Director has filed its supplementary report dated December 16, 2020 taking into consideration report issued by the Registrar of Companies, Pune and stated that the petitioner-companies have replied satisfactory to paragraph IV (a) to (e) and the other matters be considered on merit. Further the Regional Director had stated in the report that the Regional Director is not convinced with the reply filed by the petitioner- companies with regard to MCA letter refereed by the Registrar of Companies, Pune, viz., letter No. 03/08/2019-CL-V, dated July 27, 2020. 12. The observations made by the Regional Director mentioned in paragraph 9 above have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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