Delhi High Court
Earthcon Vertical Limits ... vs ............... on 23 December, 2014
$~3
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CO.PET. 2/2014
IN THE MATTER OF
EARTHCON VERTICAL LIMITS INFRACON PRIVATE
LIMITED & ANR ....Petitioners
Through: Mr. Rajiv Tyagi and Mr. Ajay
Kumar, Advocates for the
Petitioners.
Mr. Atma Sah, Assistant
Registrar of Companies for the
Regional Director.
Mr. Rajiv Behl, Advocate for the
Official Liquidator.
CORAM:
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
ORDER
% 23.12.2014
SANJEEV SACHDEVA, J (ORAL)
1. This second motion joint petition has been filed under
sections 391 & 394 of the Companies Act, 1956
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("Act") seeking sanction of the Scheme of
Amalgamation ("Scheme") of Earthcon Vertical Limits
Infracon Pvt. Ltd (hereinafter referred to as Transferor
Company) with Earthcon Constructions Private
Limited (hereinafter referred to as Transferee
Company) (hereinafter both Companies collectively
referred to as Petitioner Companies). A copy of the
scheme has been enclosed with the petition.
2. The registered offices of the Petitioner Companies are
situated at New Delhi, within the jurisdiction of this
Hon'ble Court.
3. Details with regard to the date of incorporation of the
Petitioner Companies, their authorized, issued,
subscribed and paid up capital have been given in the
Petition.
4. Copies of the Memorandum and Articles of
Association as well as the audited Accounts of the
Petitioner Companies have also been enclosed with the
Petition.
5. Copies of the Resolutions passed by the Board of
Directors of the Petitioner Companies approving the
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Scheme of Amalgamation have also been placed on
record.
6. Learned Counsel for the Petitioner Companies submits
that no proceedings under Sections 235 to 251 of the
Companies Act, 1956 is pending against the Petitioner
Companies.
7. The Petitioner Companies had earlier filed an
Application C.A (M) No. 127 of 2013 seeking
directions of this Court for dispensation of requirement
of convening meetings of Shareholders, Secured
Creditors and Unsecured Creditors of the Petitioner
Companies. Vide order dated 24 th September, 2013,
this Court allowed the Application and requirement of
convening meetings of Shareholders and Secured
Creditors of the Transferor Company; and the meetings
of Shareholders and Secured Creditors of the
Transferee Company; were dispensed with. This Court
further directed for convening of separate meetings of
Un-secured Creditors of the Transferor Company and
the Transferee Company under its supervision to
consider and approve the proposed Scheme of
Amalgamation. The Scheme of Amalgamation was
unanimously approved and adopted in the meetings of
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Unsecured Creditors of the Transferor Company and
the Transferee Company.
8. The Petitioner Companies had thereafter filed the
present Petition seeking sanction to the Scheme of
Amalgamation. Vide Order dated 3 rd January, 2014,
notice of the Petition was directed to be issued to the
Registrar of Companies, Central Government through
the Regional Director, Northern Region, Ministry of
Corporate Affairs, Noida and the Official Liquidator
attached with this Court. Citations were also directed
to be published in 'Business Standard' (English, Delhi
Edition) and 'Dainik Bhaskar' (Hindi, Delhi Edition).
Affidavit of Service and Publication has been filed by
the Petitioners showing compliance regarding service
of the Petition on the Regional Director, Northern
Region and the Official Liquidator and also regarding
publication of citations in the aforesaid newspapers.
Copies of the newspaper cuttings, in original,
containing the publications have also been filed along
with the Affidavit of Service.
9. In response to the notice issued, the Official Liquidator
sought information from the Petitioner Companies.
Based on the information received, Learned Official
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Liquidator has filed his report dated 15 th April, 2014
wherein he has stated that he has not received any
complainant against the proposed Scheme from any
person/party interested in the Scheme in any manner
and that the affairs of the Transferor Company, which
is subject matter of dissolution, do not appear to have
been conducted in a manner prejudicial to the interest
of its members, creditors or to public interest as per the
2nd proviso of section 394(1) of the Act.
10. The learned Official Liquidator has also pointed out
that the Petitioner Companies by the Board Resolution
dated 13 th October, 2014 have amended the Paragraph
12.2 of the Scheme of Amalgamation providing for the
occurring of the effective date on or before 31.12.2014
in substitution of 01.04.2012 mentioned in the draft
Scheme filed along with the First Motion.
11. The Official Liquidator in his report dated 15th April,
2014 has made the following observations :
i. That it is pertinent to mention here that it is
provided in Para 12.2 of the scheme that in the
event of non-occurrence of Effective Date before
December 31, 2014 or such further time as may
be agreed to by the Boards of Directors of
petitioner companies, this scheme shall become
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null and void. However, the petitioner companies
have passed the Board Resolution on 1 st April,
2013 for modification of the said scheme by
amending the above date as 31 st December, 2014
subject to the sanction of the modified scheme by
the Hon'ble Court.
ii. That it is observed that the Share Valuation
Report for the proposed amalgamation was
prepared by "M/s Hemant Gosain & Associates
for the Transferor Company and by M/s Deepak
Gulati & Associates, Chartered Accountants for
the Transferee Company". The valuation report
by M/s Hemant Gosain & Associates is undated
while the valuation report by M/s Deepak Gulati
& Associates for the Transferee Company is
dated as 23.05.2013. However, the Board of the
Petitioner companies approved the draft scheme
on 01/04/2013. Petitioner companies may be
asked to clarify the same as the
modalities/procedure followed by them appears to
be improper.
iii. That as per Para 25 of the petition, the Transferee
Company shall allot equity shares as set out in the
Share Valuation Report dated 25.08.2013
submitted by M/s Deepak Gulati & Associates,
Chartered Accountants. But, the share valuation
report by M/s Deepak Gulati & Associates is
dated 23.05.2013 which does not indicate how the
share exchange ratio i.e. 127:100 has been arrived
at. Further, as per Para 6.2 in Part C of the
affidavit attached to Application C.A. 127/2013,
Share Exchange Ratio is 1:1 and as per the
Scheme, the share exchange ratio is 127:100.
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Petitioner Companies may be asked to clarify the
above discrepancies.
iv. That Para 17 of the affidavit to the Application
C.A. 127/2013 is as follows:
Upon sanction of the scheme, the Transferee
Company shall allot Equity Shares of Rs.
10/- each fully paid up to the shareholders
of the Transferor Company as per the share
exchange ratio set out in the Share
Valuation Report dated 1 st April, 2013
issued by M/s. Hemant Gosain &
Associates, Chartered Accountants the
Share Valuation report dated Nil, issued by
M/s Deepak Gulati & Associates, Chartered
Accountants.
It is observed that the above Para is not correct as
the share exchange ratio is not derived in the
Share Exchange Report submitted by M/s Deepak
Gulati & Associates. Further, the report is dated
as 23/05/2013 and the report of M/s. Hemant
Gosain & Associates is dated 24.05.2013.
v. That it is observed that the Share Valuation
Report for the proposed amalgamation was
prepared by "M/s. Hemant Gosain & Associates
for the Transferor Company and by M/s. Deepak
Gulati & Associates, Chartered Accountants for
the Transferee Company". The valuation report
by M/s. Hemant Gosain and Associates is dated
24.05.2013 while the valuation report by M/s.
Deepak Gulati & Associates for the Transferee
Company is dated as 23.05.2013. However, the
Board of the Petitioner Companies approved the
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draft scheme on 01.04.2013. Petitioner
Companies may be asked to clarify the same as
the modalities/procedure followed by them
appears to be improper."
12. In response to the above observation raised by the
Official Liquidator it has been submitted by the
Petitioner Companies that the Petitioner Companies
maintain their account electronically and the financial
statements as on 31.03.2013 were available on that
very date for the purpose of computing the value of the
shares. The valuation of shares has been done as on
31.03.2013 and the same was considered by the Board
of the Petitioner Companies on 01.04.2013 and
approved on that date. The brief Share Valuation
Reports prepared by "M/s. Hemant Gosain &
Associates for the Transferor Company and by M/s.
Deepak Gulati & Associates, Chartered Accountants
for the Transferee Company" on 31.3.2013 was used as
the basis for the final and formal share valuation
reports dated 24.5.2013 and Nil prepared by "M/s.
Hemant Gosain & Associates for the Transferor
Company and by M/s. Deepak Gulati & Associates,
Chartered Accountants respectively. It is further
submitted that the Annual Return and the Balance
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Sheets as on 31.03.2013 have been filed along with
Additional fees and the Proof of filing has also been
filed along with the Affidavit.
13. In response to the notices issued in the petition, Mr.
A.K. Chaturvedi, Regional Director, Northern Region,
Ministry of Corporate Affairs, has filed his Affidavit
on 11th April 2014 and 2 9th September 2014. Relying
on the Scheme of Amalgamation, he has stated that,
upon sanction of the Scheme, all the employees of the
Transferor Company shall become the employees of the
Transferee Company without any break or interruption
in their services.
14. Further, the learned Regional Director in his Affidavit
dated 11th April 2014 and 29th September, 2014.
Relying on the Scheme of Amalgamation, it has been
stated that, upon sanction of the Scheme, all the
employees of the Transferor Company shall become the
employees of the Transferee Company without any
break or interruption in their services.
15. Further Learned Regional Director has observed that
the Appointed Date as per the Scheme shall be
01.04.2012 and since the Financial Year ended
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21.03.2013 is already complete, the Appointed Date be
shifted to 01.04.2013 to avoid any revision of Balance
Sheet and Profit & Loss Account and other returns
including Tax Returns. Further, it is submitted that
since the Financial Year 31.03.2014 is already over, the
appointed date be shifted to 01.04.2014.
16. In reply to the above observation, the Petitioner
Transferee Company in the Reply Affidavit dated 15 th
December, 2014, has submitted that Clause 2.1.3 of the
draft Scheme has been amended to define the
Appointed Date as 1 st April, 2014 instead of April 1,
2012. The Petitioners Transferor Company and
Transferee Company has filed the Board Resolution
dated 01.12.2014 in this regard. By the separate Board
Resolutions both dated 13.10.2014, the Transferor
Company and Transferee Company have amended
paragraph 12.2 of the Scheme of Amalgamation to
provide the last effective date i.e. 31 st December, 2014.
Learned Counsel for the Petitioner Companies submits
that the Petitioners have confirmed that they are
agreeable to any such date as the Appointed Date. It is
clarified that the Scheme is modified and the
Appointed Date is shifted to 01.04.2014.
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17. Further it is directed that the Registrar of Companies is
also at liberty to independently examine the books of
accounts irrespective of the sanction of the scheme and
in case any violation or breach of any statutory
provision is found, the directors of the transferor and
the Transferee Company shall be liable, despite the
sanction of the Scheme.
18. Learned Regional Director has further observed in his
Affidavit that the Transferor Company has shown M/s.
Vertical Limits Infratech Private Limited (now known
as Home & Soul Infratech Private Limited) holding
3300 shares, whereas, as per Note 12 to the Balance
Sheet as on 31.03.2013, the said shareholding has been
shown under the head "Investment in Subsidiaries"
which is contrary to the averments made in the petition.
19. In response to above observation, learned Counsel for
the Petitioner Companies submits that M/s. Vertical
Limits Infratech Private Limited (now known as Home
& Soul Infratech Private Limited) holds only 3300
shares and the Transferor Company is not a subsidiary
of the said Company. It is submitted that erroneously it
has been shown under the head "Investment in
Subsidiaries"
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20. Further, learned Regional Director has raised another
concern raised that the Transferee Company had
allotted 11,134 shares of Rs.10 each at a premium of
Rs.1090 per share on 01.09.2011 and, ultimately, the
shares have been repurchased on 01.04.2013 at Rs.194
per share. It is contended that in this fashion, revenue
has been generated for the Company. Further it is
submitted that the Income Tax may be permitted to
examine this aspect irrespective of the sanction of the
Scheme.
21. It is directed that the Income Tax Authorities are at
liberty to assess the income of the Transferor and
Transferee Companies irrespective of the sanction of
the Scheme and are also at liberty to examine the issue
of allotment of shares at a premium and in case any tax
liability arises, the Transferee Company shall be liable
to pay the same, irrespective of the sanction of the
Scheme.
22. It is further clarified that the sanction of the Scheme
would not affect the powers of the Income Tax
Department for recovery, including imposition of
penalties, etc. as permissible under law.
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23. Further, learned Regional Director has also observed
that e- form 8 in respect of registration of charges has
not been filed by the Transferee Company.
24. In response to the above observation, learned Counsel
for the Petitioner Companies submits that the Petitioner
Companies undertakes that the said form shall be duly
filed within six weeks of the sanction of the Scheme.
25. Further, the Regional Director has raised a concern that
the Transferee Company has admitted the default of
contravention of provisions of Section 210(1) of the
Act and in respect of this has been submitted that the
Registrar of Companies be permitted to examine the
accounts in detail irrespective of the sanction of the
Scheme and, in case, any lapse or contravention is
found, the Director of the petitioner Company and the
Transferee Company shall continue to be liable for any
breach.
26. Further it is clarified that the Registrar of Companies is
also at liberty to independently examine the books of
accounts irrespective of the sanction of the scheme and
in case any violation or breach of any statutory
provision is found, the directors of the transferor and
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the Transferee Company shall be liable, despite the
sanction of the Scheme.
27. Learned Counsel for the Petitioner Companies submits
that no objection has been received to the Scheme from
any other party. The Petitioners have filed an affidavit
confirming that neither the Petitioner Companies nor
their Legal Counsel has received any objection
pursuant to citations published in the newspapers.
28. In view of the approval accorded by the Shareholders
and Creditors of the Petitioner Companies,
representation/affidavit/report filed by the Regional
Director, Northern Region and Official Liquidator
attached with this Court to the proposed scheme, there
appears to be no impediment to the grant of Sanction to
the Scheme. Consequently, sanction is hereby granted
to the Scheme under sections 391 and 394 of the
Companies Act, 1956. The Petitioner Companies will
comply with the statutory requirements in accordance
with law.
29. Certified copy of the order will be filed with the
Registrar of Companies within 30 days from the date of
receipt of the same. In terms of the provisions of
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sections 391 and 394 of the Act, and in terms of the
Scheme the whole of the undertaking, the properties,
rights and powers of the Transferor Company be
transferred to and vest in the Transferee Company
without any further act or deed. Similarly, in terms of
the Scheme, all the liabilities and duties of the
Transferor Company be transferred to the Transferee
Company without any further act or deed. Upon the
Scheme coming into effect, the Transferor Company
shall stand dissolved without following the process of
winding up.
30. It is, however, clarified that this order will not be
construed as an order granting exemption from
payment of stamp duty or taxes or any other charges, if
payable in accordance with any law; or permission/
compliance with any other department which may be
specifically required under any law.
31. Learned Counsel for the Petitioner states that the
Petitioner Companies (collectively) would voluntarily
deposit a sum of Rs. 1,00,000/- in the Common Pool
fund of the Official Liquidator within three weeks from
today. The statement is accepted.
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32. The Petition is allowed in the above terms.
Order Dasti.
SANJEEV SACHDEVA, J
DECEMBER 23, 2014
st
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