Sapphire Management Consultants ... vs ...
2016 Latest Caselaw 1025 Del

                   IN THE HIGH COURT OF DELHI
                  COMPANY PETITION NO. 512/2014

                                      Reserved on 7th December, 2015
                           Date of pronouncement: 10th February, 2016
In the matter of
The Companies Act, 1956 & the Companies Act, 2013 (to the extent
applicable):

And

Petition under Section 391(2) & 394 of the
Companies Act, 1956

Scheme of Amalgamation of:

Sapphire Management Consultants Private Limited
                                Petitioner/Transferor Company No. 1

Silica Media Private Limited
                                     Petitioner/Transferor Company No. 2
      WITH

Sapphire Bizforecasting and Consulting Private Limited
                                         Petitioner/Transferee Company

                               Through      Mr.    Mukesh    Sukhija,
                               Advocate for the petitioners
                               Mr. Sanjay Bose, Dy. Registrar of
                               Companies for the Regional Director
                               Mr. Rajiv Bahl, Advocate for the
                               Official Liquidator

SUDERSHAN KUMAR MISRA, J.

1. This joint petition has been filed under Sections 391(2) & 394 of

the Companies Act, 1956 by the petitioner companies seeking sanction

of the Scheme of Amalgamation of Sapphire Management Consultants

Private Limited (hereinafter referred to as the transferor company no. 1)

and Silica Media Private Limited (hereinafter referred to as the transferor

company no. 1) with Sapphire Bizforecasting and Consulting Private

Limited (hereinafter referred to as the transferee company).

2. The registered offices of the transferor and transferee companies

are situated at New Delhi, within the jurisdiction of this Court.

3. The transferor company no. 1 was incorporated under the

Companies Act, 1956 on 24th January, 2008 with the Registrar of

Companies, NCT of Delhi & Haryana at New Delhi.

4. The transferor company no. 2 was incorporated under the

Companies Act, 1956 on 25th January, 2006 with the Registrar of

Companies, NCT of Delhi & Haryana at New Delhi.

5. The transferee company was originally incorporated under the

Companies Act, 1956 on 24th December, 2001 with the Registrar of

Companies, NCT of Delhi & Haryana at New Delhi under the name and

style of NEOL Equity Research Private Limited. The company changed

its name to Sapphire Bizforecasting & Consulting Private Limited and

obtained the fresh certificate of incorporation on 24 th March, 2006.

6. The present authorized share capital of the transferor company

no.1 is Rs.5,00,000/- divided into 50,000 equity shares of Rs.10/- each.

The issued, subscribed and paid-up share capital of the company is

Rs.3,50,000/- divided into 35,000 equity shares of Rs.10/- each.

7. The present authorized share capital of the transferor company

no.2 is Rs.50,00,000/- divided into 5,00,000 equity shares of Rs.10/-

each. The issued, subscribed and paid-up share capital of the company

is Rs.2,48,000/- divided into 24,800 equity shares of Rs.10/- each.

8. The present authorized share capital of the transferee company is

Rs.1,00,00,000/- divided into 10,00,000 equity shares of Rs.10/- each.

The issued, subscribed and paid-up share capital of the company is

Rs.80,77,000/- divided into 8,07,700 equity shares of Rs.10/- each.

9. Copies of Memorandum and Articles of Association of the

transferor and transferee companies have been filed on record with the

joint application, being CA(M) 116/2014, earlier filed by the petitioners.

The audited balance sheets, as on 31st March, 2013, of the transferor and

transferee companies, along with the report of the auditors, had also

been filed.

10. A copy of the Scheme of Amalgamation has been placed on

record and the salient features of the Scheme have been incorporated

and detailed in the petition and the accompanying affidavit. It is claimed

that the proposed amalgamation would enable pooling of physical,

financial and human resources of these companies for their most

beneficial utilization in the combined entity. It is further claimed that the

proposed amalgamation will result in usual economies of a centralized

and a large company including elimination of duplicate work, reduction in

overheads, better and more productive utilization of human and other

resource and enhancement of overall business efficiency. It will enable

these companies to combine their managerial and operating strength, to

build a wider capital and financial base and to promote and secure

overall growth of their businesses.

11. So far as the share exchange ratio is concerned, the Scheme

provides that, upon coming into effect of this Scheme, the transferee

company shall issue and allot equity shares to the shareholders of the

transferor companies in the following ratio:-

"2.25 equity shares of Rs.10/- each of the transferee company for every 01 equity share of Rs.10/- each held in the transferor company no. 1."

"01 equity share of Rs.10/- each of the transferee company for every 01 equity share of Rs.10/- each held in the transferor company no. 2."

12. It has been submitted by the petitioners that no proceedings under

Sections 235 to 251 of the Companies Act, 1956 are pending against the

petitioner companies.

13. The Board of Directors of the transferor and transferee companies

in their separate meetings held on 24th March, 2014 have unanimously

approved the proposed Scheme of Amalgamation. Copies of the

Resolutions passed at the meetings of the Board of Directors of the

transferor and transferee companies have been placed on record.

14. The petitioner companies had earlier filed CA (M) No. 116/2014

seeking directions of this court to dispense with the requirement of

convening the meetings of their equity shareholders, secured and

unsecured creditors, which are statutorily required for sanction of the

Scheme of Amalgamation. Vide order dated 4th August, 2014, this court

allowed the application and dispensed with the requirement of convening

and holding the meetings of the equity shareholders and unsecured

creditors of the transferor and transferee companies, there being no

secured creditor of the petitioner companies, to consider and, if thought

fit, approve, with or without modification, the proposed Scheme of

Amalgamation.

15. The petitioner companies have thereafter filed the present petition

seeking sanction of the Scheme of Amalgamation. Vide order dated 14th

August, 2014, notice in the petition was directed to be issued to the

Regional Director, Northern Region, and the Official Liquidator. Citations

were also directed to be published in 'Business Standard' (English) and

(Hindi) editions. Affidavit of service has been filed by the petitioners

showing compliance regarding service on the Regional Director, Northern

Region and the Official Liquidator, and also regarding publication of

citations in the aforesaid newspapers on 31st October, 2014. Copies of

the newspaper clippings containing the publications have been filed

along with the affidavit of service.

16. Pursuant to the notices issued, the Official Liquidator sought

information from the petitioner companies. Based on the information

received, the Official Liquidator has filed a report dated 15th December,

2014 wherein he has stated that he has not received any complaint

against the proposed Scheme of Amalgamation from any person/party

interested in the Scheme in any manner and that the affairs of the

transferor company do not appear to have been conducted in a manner

prejudicial to the interest of its members, creditors or public interest, as

per second proviso of Section 394(1) of the Companies Act, 1956.

17. In response to the notices issued in the petition, Mr. A. K.

Chaturvedi, Regional Director, Northern Region, Ministry of Corporate

Affairs has filed his report dated 6 th January, 2015. Relying on Clause

8(a) of the Scheme, he has stated that, upon sanction of the Scheme of

Amalgamation, all the employees of the transferor companies shall

become the employees of the transferee company without any break or

interruption in their services. He has further submitted that in Clause

15(a) of the Scheme, it has been stated that amalgamation shall be an

'amalgamation in the nature of merger' as defined in Accounting

Standard-14 issued by the Institute of Chartered Accountants of India

and shall be accounted for under the 'pooling of interest' method in

accordance with the said AS-14. He further submitted that in Clause 10

of the Scheme, it has been stated that upon this scheme becoming

effective, the transferor companies shall stand dissolved without the

process of winding up.

18. The Regional Director in Para 3 of his report has submitted that the

Income Tax Department vide letter dated 11.11.2014 has informed that

the case of transferor company no. 2 was selected for scrutiny under

section 143(3) of the Income Tax Act, 1961 and the last notice issued to

the company u/s 142(1) of the Act remained un-complied with. Therefore,

the Income Tax Department has requested that the amalgamation

proceedings may be kept in abeyance till the completion of scrutiny

assessment u/s 143(3) of the Act for AY 2012-13. In response to the

aforesaid objection, the petitioner companies in the affidavit dated 6 th

February, 2015 of Ms. Vishakha Banga, Director of the transferee

company have submitted that the income tax assessment of the

transferor company no. 2 for the assessment year 2012-13 has already

been completed and the Assessment Order dated 24.12.2014 has

already been passed. A copy of the said assessment order has also been

placed on record. In view of the aforesaid, the objection raised by the

Regional Director does not subsist.

19. The Regional Director in para 8 of his report has stated that the

auditors have qualified their report to the balance sheet dated 31.03.2013

of the transferee company in respect of non-provision of the liability on

account of leave benefits as per the provisions of AS-15 to the

Companies Act, 1956. He has further submitted that as per Annual

Return made upto 30.09. 2013 filed by the transferor company no. 1 on

25.11.2013, it has three shareholders namely Sh.Piyush Kumar (holding

9,900 shares), Sh. Diksha Kumar (holding 100 shares) and Vama Exim

Private Limited (holding 25,000 shares) whereas as per list enclosed to

the petition, as on 24.03.2014, it has two shareholders namely Silica

Media Private Limited (holding 200 shares) and Saturn the Trust holding

34,800 shares. Similarly, as per Annual Return made upto 30.09.2013

filed by the transferor company no.2, it has four shareholders, out of

which three shareholders appear to have transferred their shareholding

to Shri Manish Marwah and the transferor company no. 1. The Regional

Director has submitted that it could not be ascertained as to when the

shareholders shown in the Annual Return have transferred their shares to

the present shareholders. The Regional Director has further submitted

that the transferee company has not filed its due Annual Return for the

year ended 31.03.2008, thus there is prima facie violation und er Section

159 of the Companies Act, 1956 (now Section 92 of the Companies Act,

2013).

20. So far as the first objection with regard to non-compliance of AS-15

is concerned, the petitioner companies in the affidavit dated 6 th February,

2015 of Ms. Vishakha Banga, Director of the transferee company have

submitted that the issue raised has been adequately addressed by the

Directors in the Notes to Accounts of the balance sheet that the

operational cost to the requirement of Accounting Standard-15 (Revised)

is much more than the benefits of the disclosure, therefore, the company

has not complied with the same. It is further submitted that the Registrar

of Companies, while verifying the Auditor's Report, ignored the

explanation provided by the Board of Directors in the Annual Accounts of

the transferee company for 31st March, 2013. The transferee company

vide affidavit dated 10 th December, 2015 of Ms. Vishakha Banga,

Director of the transferee company has, however, undertaken to comply

with the provisions of Accounting Standard-15 with regard to Employees

Benefits, as issued by the Institute of Chartered Accountants of India, as

applicable.

So far as the second objection regarding change in the

shareholding pattern of the petitioner companies is concerned, it is

submitted by the petitioners that old shareholders of the transferor

companies no. 1 & 2 have transferred their shares to the existing

shareholders on 03.03.2014, in accordance with the applicable provisions

of the Companies Act, which was allowed by the Board of the respective

companies, and the same was duly recorded in the records of the

transferor companies no. 1 & 2. Details with regard to the shares

transferred in the transferor companies no. 1 & 2 are also placed on

record.

So far as the third objection with regard to non-filing of the Annual

Return for the year ended 31.03.2008 of the transferee company is

concerned, the petitioners have submitted that the Annual Return of the

transferee company for the financial year ended 31.03.2008 has been

duly filed as mandatory attachment with Form 20B filed vide SRN

P28625846 dated 24.12.2008 and a copy of the same is also placed on

record. In view of the explanation noticed above, the objections raised by

the Regional Director stand satisfied and do no subsist.

21. No objection has been received to the Scheme of Amalgamation

from any other party. The petitioner companies, in the affidavit s dated

10th November, 2014 of Sh. Peyush Kumar Srivastava, Director of the

transferor companies no. 1 & 2 and Ms. Vishakha Banga, Director of the

transferee company, have submitted that neither the petitioner

companies nor their counsel have received any objection pursuant to the

citations published in the newspapers on 31st October, 2014.

22. Considering the approval accorded by the shareholders and

creditors of the petitioner companies to the proposed Scheme of

Amalgamation; the affidavit filed by the Official Liquidator not raising any

objection to the proposed Scheme of Amalgamation, and there being no

surviving objection to the same by the Regional Director, Northern

Region, there appears to be no impediment to the grant of sanction to the

Scheme of Amalgamation. Consequently, sanction is hereby granted to

the Scheme of Amalgamation under Sections 391 and 394 of the

Companies Act, 1956. The petitioner companies will comply with the

statutory requirements in accordance with law. Certified copy of this order

be filed with the Registrar of Companies within 30 days. It is also clarified

that this order will not be construed as an order granting exemption from

payment of stamp duty as payable in accordance with law. Upon the

sanction becoming effective from the appointed date of Amalgamation,

i.e. 1st April, 2013, the transferor companies no. 1 and 2 shall stand

dissolved without undergoing the process of winding up.

23. Learned counsel for the Official Liquidator prays that costs of at

least Rs.1,00,000/- should be paid by the petitioners keeping in view the

fact that the matter has involved examination of extensive records and

also prioritized hearings. Learned counsel for the petitioner companies

states that the same is acceptable to him. As already directed vide order

dated 07.12.2015, the petitioners shall deposit a sum of Rs.1,00,000/ - by

way of costs with the Common Pool Fund of the Official Liquidator.

24. The petition is allowed in the above terms.

Dasti.

SUDERSHAN KUMAR MISRA, J.

February 10, 2016