Chander Prabhu Financial ... vs ..........
2014 Latest Caselaw 2684 Del

$~65
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+      CO.PET. 642/2013
       CHANDER PRABHU FINANCIAL SERVICES LTD & Anr.
                                                        ..... Petitioners
                                  Through: Mr Rajeev K Goel,
                                  Advocate for the Petitioners, Mr.
                                  Atma Sah, Assistant Registrar of
                                  Companies for the Regional Director
                                  Mr.S.B Gautam, official Liquidator.

       CORAM:
       HON'BLE MR. JUSTICE SANJEEV SACHDEVA

                          ORDER

       %                  26.05.2014

       SANJEEV SACHDEVA, J (ORAL)
       CO.PET.642/2013 and CO. APP 1233/2014

1. This second motion joint Petition is filed under sections 391 to 394, 100 to 104 of the Companies Act, 1956 ("ACT") by Chander Prabhu Financial Services Ltd (Transferor Company) with Ajanta Realtech Pvt Ltd(Transferee Company)( Collectively referred as Petitioner Companies) seeking sanction to the Scheme of Arrangement for (a) Amalgamation of Chander Prabhu Financial Services Ltd with Ajanta Realtech

Pvt Ltd; and (b) Reduction of post merger share capital of the Transferee Company- Ajanta Realtech Pvt Ltd.

2. The registered offices of both the Petitioner Companies are situated at New Delhi, within the jurisdiction of this Court.

3. The details of respective dates of incorporation of the Petitioner Companies, their authorized, issued, subscribed and paid up capital have been set out in the Petition.

4. The copies of Memorandum and Articles of Association of the Petitioner Companies have been enclosed with the Petition.

5. The copies of resolutions passed by the Board of Directors of the Petitioners Companies approving the Scheme have also been filed along with the Petition.

6. Learned Counsel for the Petitioner Companies submits that no proceedings under Sections 235 to 251 of the Companies Act 1956 are pending against the Petitioner Companies.

7. The Petitioner Companies had earlier filed CA (M) 159 of 2013 seeking directions of this Court for dispensation/convening of meetings. Vide order dated 25th November, 2013, this Court allowed the Application and requirement of convening all the

meetings of Shareholders and Un-secured Creditors of the Transferor Company and the Transferee Company were dispensed with. None of the Petitioner Companies had any Secured Creditors.

8. The Petitioner Companies had thereafter filed the present Petition seeking sanction to the Scheme of Arrangement. Vide order dated 10th December, 2013, notice of the Petition was directed to be issued to 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 newspaper. Copies of the newspaper cuttings 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 Liquidator has filed his report dated 9th April, 2014, wherein he has stated that he has not received any complaint 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 second proviso of Section 394(1) of the Companies Act, 1956.

10. In response to the notice issued in the Petition, learned Regional Director, Northern Region, Ministry of Corporate Affairs has filed his Affidavit/Report dated 22nd May, 2014. Relying on the Scheme of Arrangement, 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.

11. The Learned Regional Director has stated that the Registrar of Companies, Delhi has reported that both the Transferor and Transferee Companies are closely held companies. The entire funds collected by these companies in previous years by way of issue of equity shares having voting /non voting rights and

debentures to certain private limited companies have been paved as an investment and granting loans and advances. The shares of these companies have changed hand from time to time. None of the transferor and transferee Companies are doing any significant business activity and reported nominal income except in the financial year ended 31.03.2013. Therefore , it appears that the proposed scheme of amalgamation is consolidation of such funds collected and invested in past into Transferee Company , the however there is no mention as to whether these companies are registered with Reserve Bank of India as NBFC. If so, these Companies have obtained no objection from the RBI with regard to the proposed Scheme of Amalgamation. Despite notice, no comments have been received by the Income Tax authorities.

12. Mr Rajeev Goel, Learned Counsel for the Petitioner Companies, submitted that none of the Transferor and Transferee Companies is required to be registered with the RBI as a Non Banking Finance Company. Hence, question of obtaining „No Objection‟ from the RBI for the proposed Scheme of Amalgamation does not arise at all. He further submitted that even for a company registered with the RBI as a

NBFC, obtaining „No Objection‟ from the RBI for the proposed Scheme of Amalgamation is not required. In terms of the RBI Circular DNBS (PD) C.C. No. 63/02.02/2005-06 dated 24th January, 2006, where merger and amalgamation takes place in terms of the High Court order in pursuance of section 391 and 394 of the Companies Act, 1956, the NBFC is required to inform the RBI about merger or amalgamation along with Court‟s order approving the same within a period of one month from the date of the order. Learned Counsel for the Petitioner Companies, on instructions, undertakes that the Petitioners and their Directors will be bound for any action which may be taken by the RBI in future for any act of commission or omission by the Petitioner Companies with regard to NBFC regulations.

13. It is directed that in case it is found that the transferor company has violated any provision of the Reserve Bank of India Act then the Directors of the Transferor Company guilty of breaching the applicable provisions of the Reserve Bank of India Act shall continue to be liable irrespective of the sanction of the Scheme.

14. No issue with regard to the above issuance of shares or debentures on premium or transfer of funds by way of

investment or granting of loan or advance or of the companies changing hands has been raised by the Income Tax Authorities. The Income Tax Authorities has further not raised any issue with regard to the share application money pending in the petitioner company. It is directed that the Income Tax Authorities shall be permitted to proceed against the Transferee Company in respect of any liability that may arise on account of sanction of the Scheme.

15. In view of the aforesaid clarification and undertaking given by the Petitioners, the concern raised by the Learned Regional Director has been duly addressed.

16. Mr Rajeev Goel, Learned Counsel for the Petitioner Companies, has submitted that the Transferor Company is holding some shares of the Transferee Company which would be cancelled on implementation of the Scheme of Amalgamation as a crossholding. Further, the Transferee Company, after issue of new equity shares to the shareholders of the Transferor Company, in accordance with this Scheme, will re-arrange/reduce its post merger issued and paid up equity share capital to 50% by transferring 50% of its post merger issued and paid up equity capital to Securities Premium

account. He submitted that there would be a reduction of capital of the Transferee Company to that extent. He, however, clarified that such reduction would not involve either the diminution of any liability in respect of un-paid share capital or the payment to any shareholder of any paid-up share capital, and accordingly, the provisions of section 101(2) of the Act would not be applicable. The provisions of Rule 85 of the Companies (Court) Rules, 1959, which provides that where a proposed compromise or arrangement involves a reduction of capital of the company, the procedure prescribed by the Act and the Companies (Court) Rules relating to the reduction of capital, and the requirements of the Act and the Rules in relation thereto, shall be complied with, before the compromise or arrangement so far as it relates to reduction of capital, is sanctioned. Mr Goel submitted that Rule 85 only provides for compliance with relevant provisions with regard to the reduction of capital. Rule 85 does not provide for filing of separate petition under sections 100 to 104 of Act. He also submitted that where reduction of capital is an integral part of the Scheme of Amalgamation/Arrangement, no separate petition is required to be filed under sections 100 to 104 of Act for such capital reduction.

17. It is submitted that the substantial compliance with the provisions of sections 100 to 104 of the Companies Act, 1956, and the applicable rules of the Companies (Court) Rules, 1959, have already been made with regard to the proposed reduction of share capital on account of cancellation of cross holding of share in the following manner:

" a. Members of the Transferor Company and Transferee Company have considered and unanimously approved the proposed Scheme of Amalgamation and the proposed reduction of capital by passing a Special Resolution in the Extra ordinary General Meeting held on 2nd April, 2014.

b. All the un-secured creditors of the Transferor Company and the Transferee Company have already given their written consents/NOC to the proposed Scheme of Amalgamation. The Transferor Company and the Transferee Company does not have any Secured Creditor."

18. A joint Application being CA 1233 of 2014 is moved by the Petitioner Transferor Company and the Transferee Company seeking exemption from filing a separate Petition under

sections 100 to 104 of the Companies Act, 1956 for the aforesaid reduction of capital.

19. In view of the fact that the substantial compliance with the provisions of sections 100 to 104 of the Companies Act, 1956, and the applicable rules of the Companies (Court) Rules, 1959, have already been made with regard to the proposed reduction of share capital of the Transferor Company and the Transferee Company, requirement of filing a separate petition under sections 100 to 104 of the Act, is dispensed with and the present Application (CA 1233 of 2014) is allowed.

20. No objection has been received to the Scheme of Arrangement from any other party. Mr Gagan Goyal, Director of the Transferee Company has filed an affidavit confirming that neither the Petitioner Companies nor their Counsel has received any objection pursuant to citations published in the newspapers.

21. In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court to the proposed Scheme of Arrangement, there appears to be no impediment to the grant of sanction to the Scheme of Arrangement.

Consequently, sanction is hereby granted to the Scheme of Arrangement under sections 391 and 394; 100 to 104 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law.

22. Certified copy of the formal order be filed with the Registrar of Companies within 30 days from the date of receipt of the same. In terms of the provisions of sections 391 and 394 of the Companies Act, 1956, all the property, rights and powers of the Transferor Company be transferred to and vest in the Transferee Company without any further act or deed. Similarly, 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 winding up.

23. It is, however, clarified that this order will not be construed as an order granting exemption from payment of stamp duty or any other charges, if payable, in accordance with any law; or permission/compliance with any other requirement which may be specifically required under any law.

24. The Learned Counsel for the Petitioner submits that Petitioner Companies would voluntarily deposit a sum of Rs. 1,00,000/- (collectively) in the Common Pool fund of the Official Liquidator within three weeks from today. The statement is accepted.

25. The Petition is allowed in the above terms.

Order Dasti

SANJEEV SACHDEVA, J MAY 26, 2014 HJ