Priapus Real Estate Private ... vs ...
2016 Latest Caselaw 1266 Del

                   IN THE HIGH COURT OF DELHI
                  COMPANY PETITION NO. 51/2015

                                       Reserved on 6th January, 2016
                         Date of pronouncement: 18th February, 2016
In the matter of
The Companies Act, 1956 & the Companies Act, 2013 (to the extent
applicable):

And

Petition under Sections 391 to 394 of the
Companies Act, 1956 read with Rules 67 to 87
of Companies (Court) Rules, 1959

Scheme of Amalgamation of:

Priapus Real Estate Private Limited
                                      Petitioner/Transferor Company No. 1

Priapus Properties Private Limited
                                      Petitioner/Transferor Company No. 2
      WITH

Priapus Developers Private Limited
                                           Petitioner/Transferee Company

                               Through Mr. Sudhir Nandrajog, Sr.
                               Advocate with Mr. D. Bhattacharya and
                               Ms. D. Ojha, Advocates for the
                               petitioners
                               Ms.     Aparna     Mudiam,  Assistant
                               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 Priapus Real Estate Private Limited

(hereinafter referred to as the transferor company no. 1) and Priapus

Properties Private Limited (hereinafter referred to as the transferor

company no. 2) with Priapus Developers 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 22nd December, 2009 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 11th December, 2009 with the Registrar of

Companies, NCT of Delhi & Haryana at New Delhi.

5. The transferee company was incorporated under the Companies

Act, 1956 on 22nd December, 2009 with the Registrar of Companies,

NCT of Delhi & Haryana at New Delhi.

6. The present authorized share capital of the transferor company

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

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

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

7. The present authorized share capital of the transferor company

no.2 is Rs.1,70,00,000/- divided into 17,00,000 equity shares of Rs.10/-

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

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

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

Rs.7,00,000/- divided into 70,000 equity shares of Rs.10/- each. The

issued, subscribed and paid up capital of the company is Rs.1,00,000/-

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

9. Copies of the Memorandum and Articles of Association of the

transferor and transferee companies have been filed on record along with

CA(M) 2/2015 earlier filed by the petitioners. The audited balance sheets,

as on 31st March, 2014, of the transferor and transferee companies,

along with the report of the auditors, as well as the provisional financial

statements of the petitioner companies, as on 15th December, 2014, 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 affidavits. It is submitted by

the petitioners that the Scheme is designed to consolidate the

businesses of the petitioner companies with an overall objective of

ensuring focused management in a single combined entity and for

administrative and compliance convenience to obtain better control and

running of the businesses. It is claimed that the scheme shall enable the

transferee company to consolidate the business activities of the group

thereby attaining economies of scale and the combined net-worth in a

single entity shall also facilitate in attracting funds from strategic

investors.

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

provides that since transferor companies no. 1 and 2 are wholly owned

subsidiaries of the transferee company and their entire issued,

subscribed and paid-up share capital is held by the transferee company,

therefore, upon the scheme becoming effective, the entire share capital

of the transferor companies no. 1 and 2 shall stand cancelled and there

would be no issue of shares of the transferee company to the

shareholders of transferor companies no. 1 and 2 pursuant to

amalgamation of transferor companies with the transferee company.

12. It has been submitted by the petitioners that no investigation

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 15th December, 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. 2/2015

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 20th January, 2015, 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 creditors 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 3rd

February, 2015, 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 'Financial Express‟ (English) and

„Jansatta‟ (Hindi) Delhi editions. Affidavit of service has been filed by the

petitioners showing compliance regarding service one the Official

Liquidator and the Regional Director, Northern Region and also regarding

publication of citations in the aforesaid newspapers on 25th February,

2015. 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 14th July, 2015

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

companies do not appear to have been conducted in a manner

prejudicial to the interest of their 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 21st July, 2015. Relying on Clause 6.11.1

of Part-II 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 9.1

of Part-II of the Scheme, it has been stated that the transferee company

shall account for amalgamation of the transferor companies in the books

of accounts as per the "Purchase Method" specified under the

Accounting Standard-14, „Accounting for Amalgamation‟. He further

submitted that in Clause 12 of Part-II 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 8 of his report has stated as under:

(i) That in the financial year ended 31.03.2014, the transferor

company no. 1 reported nil revenue from its operation except other

income of Rs.5.59 crores including dividend income of Rs.5.52 crores

which shows that the entire income of the company has been derived

from investment of Rs.78.48 crores in Indiabulls Housing Finance Limited

whereas there is no mention whether the said company is registered with

RBI as NBFC to do such activities;

(ii) That on perusal of the balance sheets ending 31.03.2014 of

transferor companies no. 1 & 2, it is indicating that the holding company

was advancing borrowed money to its subsidiaries without interest and

the same was used by the subsidiaries for the business purposes other

than their main objects. Further, both the transferor companies earned

considerable dividend income.

19. In response to the aforesaid objections, the petitioner companies in

the affidavit dated 16th August, 2015 of Mr. Vaibhav Poonia, Director of

the petitioner companies have submitted that the transferor company

no.1 was formed and is engaged in the business of real estate which is in

consonance with its main objects and that the petitioner companies,

including transferor company no. 1, have acquired land located at Village

Bilara, Jodhpur, Rajasthan during the financial year 2010 for the

purposes of development of real estate project. It has been further

submitted that the term „Financial Institution‟ used in Section 45-I(c) of

the Reserve Bank of India Act, 1934 specifically excludes any institution

which carries on as its principal business as purchase, construction or

sale of immovable property. No portion of the income of the companies is

stated to be derived from financing of purchases, constructions or sales

of immovable property. It is, therefore, submitted that all the petitioner

companies are carrying on business of real estate and their activities fall

outside the purview of NBFC. Further, the petitioner companies in the

affidavit dated 13th January, 2016 of Mr. Vaibhav Poonia, Director of the

petitioner companies have submitted that none of the transferor

companies are registered with the Reserve Bank of India. He has,

however, undertaken and confirmed that the petitioner companies will

comply with all the compliances of the Reserve Bank of India and will

take other necessary steps in this regard, if any, and that the petitioner

companies 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. In view of the

aforesaid, the first objection raised by the Regional Director stands

satisfied.

20. So far as the second objection of the Regional Director is

concerned, it is submitted by the petitioners that all the petitioner

companies, being private companies, are not permitted to accept public

deposits and loans, as mandated under law, can only be raised from

shareholders or directors. Accordingly, the transferee company has

obtained loans from one of its erstwhile Directors, Sh. Rajiv Rattan,

which are also interest free. Therefore, the transferee company, being a

private company and there being no public money involved, advances

interest free loans to wholly owned subsidiaries, which is not barred

under any law. In view of the aforesaid, the second objection raised by

the Regional Director also does not survive.

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

from any other party. The petitioner companies, in the affidavit dated 21st

July, 2015 of Mr. Dhritiman Bhattacharyya, counsel for the petitioner

companies, have submitted that the petitioner companies have not

received any objection pursuant to the citations published in the

newspapers on 25th February, 2015.

22. Considering the approval accorded by the equity 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 company 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. 15th December, 2014, the transferor companies no. 1 & 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.1,50,000/- 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 06.01.2016, the petitioners shall deposit a sum of Rs.1,50,000/- 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 18, 2016