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SKF Technologies (India) Private Limited, Bangalore & Another

    C.P. (CAA) Nos. 27 & 50/BB/of 2019
    Decided On, 14 February 2020
    At, National Company Law Tribunal Bengaluru
    By, THE HONOURABLE MR. RAJESWARA RAO VITTANALA
    By, JUDICIAL MEMBER & THE HONOURABLE MR. ASHUTOSH CHANDRA
    By, TECHNICAL MEMBER
    For Appearing Parties: Maneesha Kongovi, Nagaraj, Advocates, Prema Hatti, Central Government Standing Counsel, Ganesh R. Ghale, Standing Counsel.


Judgment Text

1. These Company Petitions were filed by the Petitioner Companies under Sections 230 to 232 of the Companies Act, 2013 by inter alia seeking that the Scheme of Arrangement & Amalgamation between the Transferor Company, the Transferee Company and their respective Shareholders be sanctioned by this Hon’ble Tribunal so as to be binding on the Petitioner Companies and all their respective shareholders and all the concerned, etc.

2. Brief facts of the case, as mentioned in the Company Petitions, are as follows:

(a) M/s. SKF Technologies (India) Private Limited (hereinafter referred to as ‘Transferor Company’) is a Private Limited Company incorporated on 07.07.1997 under the Companies Act, 1956 with Corporate Identity Number U29195KA1997PTC027954 and having its registered office situated at Plot No.2, Bommasandra Indl. Area, Bangalore-560099. Its present Authorized Share Capital is Rs.3,500,000,000/- divided into 3,500,000,000 Equity Shares of Rs.1/- each and its Issued, Subscribed and Paid-up Capital is Rs.3,240,000,000/- divided into 3,240,000,000 Equity Shares of Rs.1/- each. It is stated that there has been no change in the Capital structure of the Company as on 30.05.2019. Its main objects inter alia are to carry on in India or elsewhere the business of manufacturers of, agents for or distributors of and assemble, acquire, build, dismantle, design, develop, fabricate, install, hire, repair, maintain, modify, market, own operate, renovate, import, export, buy, sell, resell, service or otherwise deal in all types of oil seals and bearing seals, selected engine radial shaft seals, selected wheel seals and imported products including LDS, etc.

(b) The Board of Directors of the Transferor Company at their meeting held on 14.11.2018 have approved and adopted the Scheme of Arrangement and Amalgamation and inter alia resolved as under:

“CERTIIFED EXTRACTS OF THE MINUTES OF THE MEETING OF BOARD OF DIRECTORS OF SKF TECHNOLOGIES (INDIA) PRIVATE LIMITED HELD ON 14th NOVEMBER, 2018 AT 02.00 PM AT BOARD ROOM, GTCI, PLOT NO.2, BOMMASANDRA INDUSTRIAL AREA, HOSUR ROAD, BANGALORE-5600099.

TO CONSIDER AND APPROVE THE SCHEME OF ARRANGMENT AND AMALGAMATION BETWEEN THE COMPANY AND LINCOLN HELIOS (INDIA) LIMITED (‘TRANSFEREE COMPANY’) AND THEIR RESPECTIVE SHAREHOLDERS:

“RESOLVED THAT pursuant to the provisions of Sections 230 to 232 of the Companies Act, 2013, read with Section 179(3)(i) of the Companies Act, 2013 and other applicable provisions, if any of the Companies Act, 2013, rules made thereunder (collectively the “Companies Act”), other applicable provisions, if any, of the Memorandum and Articles of Association, and subject to the approval of the Hon’ble National Company Law Tribunal (“Tribunal”), Bengaluru Bench or such other competent authority as may be applicable and subject to consent of shareholders and regulatory authorities, as may be applicable, the unanimous consent of the Board be and is hereby accorded to the Scheme, a copy of which was placed before the meeting and initialed by the Chairman thereof for the purpose of identification, between SKF Technologies (India) Private Limited and Lincoln Helios (India) Limited and their respective shareholders”.

And the same has been brought before this Tribunal for approval under Sections 230 to 232 and other relevant provisions of Companies act, 2013 (‘Act’).

(c) M/s. Lincoln Helios (India) Limited (hereinafter referred to as “Transferee Comp’ny' is a Limited Company incorporated on 11.02.1993 under the provisions of the Companies Act, 1956 with Corporate Identity Number U23200Ka1993PLC044269 and having its registered office situated at 249/250, Bommasandra Industrial Area, Phase 3, Hosur Road, Bangalore – 560099. Its present Authorized Share Capital is Rs.1,00,00,000/- divided into 10,00,000 Equity Shares of Rs.10/- each and its Issued, Subscribed and Paid-up Capital is Rs.1,00,00,000/- divided into 10,00,000 Equity Shares of Rs.10/- each. It is stated that there has been no change in the Capital structure of the Company as on 04.09.2019. Its main objects inter alia are to acquire and takeover one of the undertakings of Grind Well Norton Limited, a Company incorporated under the Indian Companies Act, 1913 known as ‘THE CENTRALISED LUBRICATING SYSTEMS DIVISION (CLS DIVISION)’ located at the plant complex of Grind Well Norton Limited situated at Devanahalli Road, Bangalore together with its assets and liabilities, service personnel, etc.

(d) The Board of Directors of the Transferee Company at their meeting held on 31.10.2018 have approved and adopted the Scheme of Arrangement and Amalgamation and inter alia resolved as under:

“CERTIIFED EXTRACTS OF THE MINUTES OF THE MEETING OF BOARD OF DIRECTORS OF LINCOLN HELIOS (INDIA) LIMITED HELD ON 31st OCTOBER, 2018 AT 01.00 PM AT BOARD ROOM OF LINCOLN HELIOS (INDIA) LIMITED, PLOT NO.249/250, BOMMASANDRA INDUSTRIAL AREA, PHASE 3, HOSUR ROAD, BANGALORE-5600099.

TO CONSIDER AND APPROVE THE SCHEME OF ARRANGMENT AND AMALGAMATION BETWEEN SKF TECHNOLOGIES (INDIA) PRIVATE LIMITED (‘TRANSFEROR COMPANY’) WITH THE COMPANY AND THEIR RESPECTIVE SHAREHOLDERS

“RESOLVED THAT pursuant to the provisions of Sections 230 to 232 of the Companies Act, 2013, read with Section 179(3)(i) of the Companies Act, 2013 and other applicable provisions, if any of the Companies Act, 2013, rules made thereunder (collectively the “Companies Act”), other applicable provisions, if any, of the Memorandum and Articles of Association, and subject to the approval of the Hon’ble National Company Law Tribunal (“Tribunal”), Bengaluru Bench or such other competent authority as may be applicable and subject to consent of shareholders and regulatory authorities, as may be applicable, the unanimous consent of the Board be and is hereby accorded to the Scheme, a copy of which was placed before the meeting and initialed by the Chairman thereof for the purpose of identification, of arrangement and amalgamation between SKF Technologies (India) Private Limited and Lincoln Helios (India) Limited and their respective shareholders”.

And the same has been brought before this Tribunal for approval under Sections 230 to 232 and other relevant provisions of the Act.

(e) As regards Consideration, it is inter alia stated in the Scheme that upon the Scheme coming into effect the Transferee Company shall allot to each Shareholder of the Transferor Company, 1 Equity Share of face value of Rs.10/- each paid up of the Transferee Company for every 2563 Equity Shares of face value of Rs.1/- each paid up and held by such shareholders in Transferor Company whose names are appearing in the Registrar of Members of the Transferor Company as on a specified date to be fixed by the Board of Directors of the Transferee Company.

(f) M/s. Price Waterhouse, Chartered Accountants LLP, the Statutory Auditors of the Transferee Company, vide Certificate dated 10.01.2019, have inter alia confirmed that the accounting treatment contained in the aforesaid Scheme is in compliance with all the applicable Accounting Standards specified u/s 133 of the 2013 Act, r/w Rule of 7 of the Companies (Accounts) Rules, 2014 and other generally accepted accounting principles.

(g) Pursuant to a global acquisition, the Transferor and Transferee Companies came to be a part of the SKF Group. The management of the Transferor Company is of the opinion that the merger will lead to synergies of operations, administration and achieve, inter alia, efficient utilization of resources, operational efficiency and reduce costs. Both the Companies have common customers in industrial segments and combination of the business is expected to bring in synergy in the offerings of industrial bearings and lubrication systems, besides being benefiting from access to each other’s customer base. The proposed Amalgamation in general will have beneficial results for all the stakeholders concerned, and would not be prejudicial in any manner as a result of the Scheme.

(h) It is stated that the Equity Shares of the Petitioners are not listed on any Stock Exchange and that the Scheme does not involve reduction of Share Capital of the Petitioner Companies.

(i) Further, the Petitioner Companies stated that the Scheme does not in any way violate, override or circumscribe any provisions of the Companies Act, 2013 and other relevant provisions of Companies Act, 1956 and its Rules, etc. and that no investigation or proceedings is pending against them under Section 253 to 291 of the Act or any other provisions of the Companies Act, 1956 or the Companies Act, 2013 or like or pending, and no winding up petitions are pending against them.

(j) Further, the Petitioner Companies stated that the Scheme does not in any way violate, override or circumscribe any provisions of the Companies Act, 2013 and other relevant provisions of Companies Act, 1956 and its Rules, etc. and that no investigation or proceedings is pending against them under Section 253 to 291 of the Act or any other provisions of the Companies Act, 1956 or the Companies Act, 2013 or like or pending, and no winding up petitions are pending against them.

3. It is stated that the Transferor Company had filed CA (CAA) No.15/BB/2019 before this Tribunal inter alia seeking for dispensation with the meetings of the Equity Shareholders and Secured Creditors of the Transferor Company. The Tribunal vide its Order dated 27.03.2019 has dispensed with the meetings of the Secured Creditor and Unsecured Financial Creditor of the Transferor Company and directed to convene the meeting of the Equity Shareholders and Unsecured Trade Creditors of the Transferor Company.

4. Further, the Transferee Company had filed CA (CAA) No.16/BB/2019 before this Tribunal inter alia seeking for dispensation with the meetings of the Equity Shareholders and Unsecured Creditors of the Transferee Company. The Tribunal vide its Order dated 27.03.2019 has directed to convene the meeting of the Equity Shareholders & Unsecured Creditors of the Transferee Company.

5. The Tribunal vide its Orders dated 09.07.2019 and 10.10.2019 directed the Transferor and Transferee Company to issue Notice to the Regional Director, Registrar of Companies, Karnataka, Official Liquidator, Designated Nodal Officer of Income Tax Department, Principal Chief Commissioner of Income Tax, Competition Commission of India and other relevant authorities and also directed to cause paper publication in ‘The Hindu’, English language and in ‘Udayavani’, Kannada language and to file proof of the same.

6. Pursuant to the said directions, the Transferor Company has filed a Memo dated 13.08.2019 affirming compliance of the Order passed by the Tribunal dated 09.07.2019 and an Affidavit dated 13.08.2019 furnishing copies of the paper publication for having taken advertisement in ‘The Hindu’, an English daily newspaper on 08.08.2019 and ‘Udayavani’, Kannada daily newspaper on 09.08.2019. Further, the Transferee Company has filed a Memo dated 13.11.2019 affirming compliance of the Order passed by the Tribunal dated 10.10.2019 and another Affidavit dated 13.11.2019 furnishing copies of the paper publication for having taken advertisement in ‘The Hindu’, Benglauru on 09.11.2019 and ‘Udayavani’, Bengaluru on 10.11.2019.

7. The Competition Commission of India vide its letter bearing No.N-20(5)/NF-1469/2019/CD/9817 dated 21.08.2019 has stated that under the provisions of the Competition Act, 2002, a notice for combination is to be mandatorily given to CCI subject to meeting of thresholds, in terms of combined assets or combined turnover. Further, there are certain exemptions available for which notice may not normally be given to the Commission and it is informed that as of date, the said Scheme has not been filed with the Commission under the provisions of the Act and that an undertaking may be sought from the Companies involved that CCI approval is not required for the said Scheme.

8. Pursuant to the CCI letter, the Authorized Signatory of the Petitioner Companies have filed respective Affidavits dated 10.02.2020 and 12.02.2020 by inter alia stating that the said Scheme does not violate the Competition Act, 2002 in any manner. Further, the value of the assets involved in the merger is less than Rs.350 crore and the turnover of the Companies is not more than Rs.1000 crore in India. The merger is therefore exempt from the provisions of the Competition Act, 2002 under Notification of the Ministry of Corporate Affairs dated 27.03.2017.

9. The Registrar of Companies, Karnataka has filed an Affidavit dated 03.10.2019 by inter alia observing as under:

(1) As per Section 232(6) of Companies Act, 2013, the Scheme shall clearly indicate an appointed date from which it shall be effective, and the Scheme shall be deemed to be effective from that date and not at a subsequent date. Though in the Scheme appointed date is mentioned as 01.04.2019, no effective date as such is mentioned.

(2) Both the Transferor Company and the Transferee Company have related party transactions during the year 2016-17 and 2017-18. Necessary compliance u/s 188 of the Companies Act, 2013 may be called for to the satisfaction of the Hon’ble Tribunal before the approval of the Scheme.

(3) Clause 13.1 of the Scheme states about conversion of Transferee Company from a Public Company into a Private Company, limited by Shares, and consequently change in the name viz. from ‘Lincoln Helios (India) Limited’ to ‘Lincoln Helios (India) Private Limited’ without requiring my further approvals of the shareholders of the Transferee Company u/s 14 of the Companies Act, 2013. The Transferee Company may be directed to given undertaking to that effect.

(4) As per Clause 15 of the Scheme, the Transferee Company will continue the business of the Transferor Company and hence the object clause of MOA will be deemed to be amended, without requiring any further approvals of the shareholders of the Transferee Company u/s 13 of the Act. The Transferee Company may be directed to give an undertaking to that effect.

(5) Both Transferor and the Transferee Companies have foreign shareholders. Hence, both the Companies are required to comply with FEMA/RBI regulations.

(6) Major shares of the Transferee Company are held with foreign entity viz., M/s. SKF Lubrication Systems, Germany.

(7) As per MCA records, the Transferor Company has one open charge and the Transferee Company has two open charges.

(8) There are no prosecutions, complaints, technical scrutiny/inspections pending against the Petitioner Companies and the Petition may be decided on merits.

10. The Regional Director (SER), Hyderabad & Registrar of Companies, Karnataka have filed an Affidavit dated 04.10.2019 by inter alia stating as follows:

(1) As regards Clubbing of Authorized Capital, it is mentioned in Clause 14.1 of the Scheme that the Share Capital of the Transferee Company shall automatically stand increased, without any payment of stamp duty and fees payable. In this regard, the Transferee Company shall comply with Section 232(3)(i) of Companies Act, 2013 and pay the difference fee, after setting of the fee already paid by the Transferor Company on their respective Capital. Transferee Company shall give an undertaking to that effect.

(2) As per MCA records, the Transferee Company has two open charges and Transferor Company has one open charge. Company may be advised to obtain NOC from the lenders.

(3) The Transferor Company and Transferee Company have Related Party Transactions during the year 2016-17 and 2017-18. Necessary compliance u/s 188 of the Companies Act, 2013 may be called for to the satisfaction of the Hon’ble Tribunal before the approval of the Scheme.

(4) As per Clause 12 of the Scheme, the Share Exchange Ratio is 1 (One) Equity Share of face value of Rs.10/- each paid up of the Transferee Company for every 2,563 Equity Shares of the face value of Re.1/- each in Transferor Company.

(5) As per the reply, the Company has submitted valuation report dated 26.07.2019 from M/s. Sudit K. Parekh & Co., Chartered Accountants.

(6) Clause 13.1 of the Scheme mentions about conversion of Transferee Company from Public Limited to Private Limited. The Transferee Company may be advised to follow the due procedure of Conversion u/s 14 of the Companies Act, 2013 for such conversion. Further, the Company may be advised to furnish an undertaking to that effect.

(7) As per Clause 15, the Transferee Company will continue the business of Transferor Company and amend the objects of Transferee Company. The Transferee Company may furnish an undertaking for amending the objects.

(8) As seen from the reply of Transferee Company, the Transferor Company has to pay certain dues to Statutory Authorities. NOC may be furnished from those Statutory Authorities before approval of the Scheme.

(9) As per the Company’s reply, Transferee Company and Transferor Company have foreign shareholders and hence the Petitioner Companies need to comply with the EMA/RBI Rules and guidelines.

(10) The Transferee Company has violated Section 135 of the Companies Act, 2013 and may explain the reasons for the unspent amount of CSR and compliance of Section 134 r/w 135 of the Act, Besides the Company be directed to file Compounding application.

11. In response to the said observations dated 04.10.2019, Transferor Company has filed Rejoinder dated 21.11.2019 by inter alia submitting as follows:

(1) As regards paragraph 3(a), it is stated that the Transferee Company shall comply with the provisions of Section 232(3)(i) of the Companies Act, 2013 and will pay the differential fee and stamp duty, if any, payable on consolidation of the Capital of the Transferor Company with the Transferee Company.

(2) As regards paragraph 3(b), it is stated that the Transferor Company has already furnished no objection from the Secured Creditor basis which this Tribunal had granted dispensation from holding their meeting. Further, in so far as charges on Transferee Company are concerned, there are two open charges one by Bank of Baroda and another by HSBC Bank. The charge by Bank of Baroda is being satisfied as there is no outstanding against it. Further, with respect to charge of HSBC Bank there is no amount of working capital facility or term loan that is outstanding against said charge as such but is being retained mutually to avail facility of bank guarantee(s) being extended in the ordinary course of trade and with a view that in future there will not be necessity to follow the procedure of security creation. However, if the Tribunal directs, the Transferee Company will procure ‘no objection’ from HSBC Bank.

(3) As regards paragraph 3(c), it is stated that in respect of Transferor Company, being private limited company, exemption has been granted u/s 462 of the Companies Act, 2013, vide Notification No.GSR 464(E), dated 05.06.2015, Sr. No.1 of the said notification, from treating certain parties as related parties. Accordingly, compliance with Section 188 of the Act did not attract. Nevertheless, the Transferor Company as a matter of good governance follows practice of approving related party transactions in their Board Meetings. With respect to related party transactions by Transferee Company, it is stated that during the relevant period under review the Company has no transaction which falls u/s 188 of the Companies Act, 2013, because the fellow subsidiaries being foreign companies were not considered as related parties as per extant provisions and hence the transactions with them were not treated as related party transactions. Also, all the transactions by the Transferee Company were on in the ordinary course of business and on arm’s length basis. Nevertheless, the Transferee Company as a matter of compliance follow below to ensure compliance with related party transactions:

i Audit Committee approves and recommends for Board’s approval the transaction by the Company with related party, which Board approves;

ii. Additionally, Audit Committee also grants omnibus approval for transaction not exceeding INR 1 million;

iii. None of the Directors are interested in any related party transaction in terms of Section 184 of the Act;

iv. There are no transactions which requires members’ approval; and

v. The Company enters the transaction on the register of contracts, maintained u/s 189 of the Act.

It is stated that the above procedure is in due compliance with the provisions of Section 188 of the Act. The compliance to above effect has been reported in the Director’s report for FY ended on 31.03.2018 in accordance with the provisions of the Companies Act.

4. As regards observation at paragraph 3(d), 3(e), the averments does not call for any explanation.

5. As regards paragraph 3(f), it is stated that Section 230 r/w 232 of Companies Act, 2013 is complete code so long as the Scheme does not violate the provisions of any law, this has been held in various case laws. Clause 13.1 upon approval of the Scheme envisages conversion of Transferee Company into private limited for which it has followed due procedure. Further, Section 230 to 232 of the Companies Act, 2013 is a ‘single window clearance’ and no further act on the part of Petitioner is required to be done after the approval of the Scheme, for giving effect to conversion of public company to private company, alteration in the MoA of the Company and change in the name of the Company. Further, the proposed Scheme has been approved by all the Shareholders of Petitioner Company and by Creditors with requisite majority. Further, the Petitioner has undertaken to file all the forms in respect of conversion into a Private Company, alteration of the MoA and change of name with the ROC as required under the relevant provisions of the Act. The Petitioner rely on Re: BSBK Engineers P. Ltd. MANU/DE/7440/2011 decided on 18.07.2011.

However, if the Hon’ble Tribunal advises to follow the procedure of conversion u/s 14 of the Act for such conversion the Transferee Company will be abide by such advise and to that effect inclined to give undertaking to the Hon’ble Tribunal.

(6) As regards paragraph 3(g), it is stated that Clauses 27, 58 and 81 of memorandum of Transferee Company empowers it to carry on the business of the Transferor Company on amalgamation as such. However, without prejudice to that, Clause 15 of the Scheme proposes to amend the Objects clause of the Transferee Company to list the separate objects clause to accommodate the business activities of the Transferor Company. Upon approval of the Scheme by Hon’ble Tribunal and on filing of order along with the Memorandum shall be sufficient compliance and the Transferee Company undertakes to make requisite filings to that effect.

(7) As regards paragraph 3(h), it is stated that the Transferor Company has certain dues towards income tax, sales tax, duty of exercise and value added tax, which are legitimate disputed liabilities. The said disputes are pending before the appropriate forums and are being redressed by making requisite representations before the respective forums. Further, a sum of amounts have already been deposited under protest in certain cases, whereas wherever necessary the disputed liabilities are duly recognized as contingent liabilities in the books of the Transferor Company.

Further, Clause 7 of the Scheme provides the para to above effect. This ensures continuance of dispute even in the name of the Transferee Company as and when the Scheme is sanctioned by the Hon’ble Tribunal and in no way, it prejudices the position of respective authorities. On the other hand, the merger further enhances capabilities of companies and strengthens combined financial position to serve any confirmed liability.

Also, the Transferor Company undertakes to comply with all applicable provisions of the relevant tax statutes. All issues arising out of the Scheme will be met and answered in accordance with law by the Transferee Company, as all the liabilities of the Transferor Company will continue and are proposed to be transferred to the Transferee Company in terms of the Scheme. Further, the nature of the pending disputes mentioned herein are matters in the ordinary course of the Company’s business.

(8) As regards paragraph 3(i), it is stated that as per the provisions of the Foreign Exchange Management (Transfer or issue of Security by a Person Resident Outside India) Regulations, 2017 the Transferee Company is eligible to receive 100& equity under the automatic route without any approval. Accordingly, as per Regulation 9 of said Regulations, once the Scheme of Amalgamation has been approved by the Hon’ble Tribunal the Transferee Company is allowed to issue shares to the shareholders of the Transferee Company resident outside India without seeking any approval up to 100% of the total paid up equity share capital of the Transferee Company. Without prejudice, the Transferor and the Transferee undertake that they will comply with all the provisions relating to FEMA/RBI while allotting shares to the shareholders of Transferor Company.

(9) As regards paragraph 3(j), it is stated that the Transferee Company is in compliance with the provisions of Section 135 of the Companies Act, 2013 dealing with the Corporate Social Responsibility (CSR) in law and in spirit. The Transferee Company has always maintained a high level of social engagement and social responsibilities. The initiatives in social sphere have always been built on the Company’s Values of “SKF Care” which comprises of four pillars, namely, ‘Business Care/Employee Care/Environment Care and Community Care.’ The Transferee Company considers it is as its economic, environmental and social responsibility to foster sustainable local development as well as add value to the local communities in which it operates. CSR Committee of Transferee Company reviews and monitors the CSR projects and expenditure undertaken by the Company. During the year under consideration, the Transferee Company has spent an amount of INR 4.5 million on CSR activities as against the statutory requirement of INR 4.5 million, and this has duly been reported in the financials.

(10) Further, the observations made by the ROC on behalf of the Hon’ble RD (SER), Hyderabad are clarified and undertakings are given. Save and except for the above observations, the ROC, on behalf of the Hon’le RD, has raised no objection to the Scheme. The Transferor and the Transferee Company have complied with all the requirements as per the directions of this Tribunal and they have filed the necessary Affidavits of the compliance before this Tribunal. Further, the Transferor and Transferee Company undertake to comply with all the statutory requirements, if any, as required under the Companies Act, 2013 and Rules made thereunder, whichever is applicable.

12. In response to the said observations dated 04.10.2019, Transferee Company has filed Rejoinder dated 28.11.2019 by inter alia stating that the Transferor Company i.e. SKF Technologies (India) Pvt. Ltd. has filed its rejoinder to the Affidavit dated 04.10.2019 vide its Rejoinder dated 20.11.2019 in CP (CAA) No.27/BB/2019. The Transferee Company herein adopts the contents of the said Rejoinder dated 20.11.2019.

13. Official Liquidator has filed OLR No.119/2019 dated 11.10.2019 in CP (CAA) No.27/BB/2019 by inter alia stating that for scrutiny of the books of accounts and records of the Transferor Company has engaged M/s. Varadaraju & Associates, Chartered Accountants, which after examining the affairs of the Transferor Company, has inter alia concluded as under in their report dated 03.10.2019:

“The Transferor Company has maintained all the books and accounts and statutory registers and records up to date.

As could be seen from records, the Transferor Company is regular in paying taxes and other statutory payments.

The Transferor Company has approved Banking facility from the Hongkong and Shanghai Banking Corporation Limited for an amount of Rs.2,51 Million (Rupees Two Hundred and Fifty One Million only).

The Transferor Company has been regularly holding meetings of the Directors and Shareholders as required under law.

From the books of account and records maintained by the Transferor Company and according to the information explanation from the Transferor Company, it is noticed that the affairs of the Transferor Company have not been conducted in a manner prejudicial to the interests of the shareholders, creditors and the public.

Therefore, we conclude that the affairs of the Transferor Company have not been conducted in a manner prejudicial to the interests of the shareholders creditors and the public”.

14. Pursuant to the aforesaid OL report, the Authorized Signatory of the Transferor Company has filed rejoinder dated 20.11.2019 by inter alia stating as follows:

(1) It is stated that the Official Liquidator’s Report inter alia contains that the affairs of the Transferor Company have not been conducted in a manner prejudicial to the interest of the shareholders, creditors and the public.

(2) It is stated that the OL has raised no objection to the Scheme and has only sought the Petitioner’s comments on the observation made in para 3 of the OLR. In so far as the para 3 of the OLR is concerned, it is submitted that the Petitioner Company during the FYs 2013-14, 2015-16 and 2017-18 had made provision for bad debts to the extent of INR 0.6 million, INR 0.5 million and INR 3.0 million, respectively, in line with the Petitioners policy for making provision for overdue debts, which is also in accordance with and as required under generally accepted accounting principles. Therefore, the amounts represented are not ‘bad debts written off’ but ‘accounting provision made for bad debts’. Further, the amounts of the bad debts recognized are negligible in nature having no financial impact on the Petitioner. Nevertheless, the Petitioner continues its efforts to recover such bad debts in its ordinary course of business.

(3) Further, the observations made by the Hon’ble OL, High Court of Karnataka, are clarified satisfactorily. Save and except for the above observation, the Hon’ble OL has raised no objection to the Scheme. The Petitioner Company has complied with all the requirements as per the directions of this Tribunal and has filed the necessary Affidavits of compliance before this Tribunal. The Petitioner Company undertakes to comply with all the statutory requirements if any as required under the Companies Act, 2013 and the Rules made thereunder, whichever is applicable.

15. The Petitioner Companies have filed a Memo dated 03.12.2019 by inter alia furnishing the copy of the Affidavit in compliance of sub-section (9) of Section 230 of the Companies Act, 2013, filed by the Authorized Signatory of the HSBC at Bangalore, stating that it is a Secured Creditor of Transferee Company herein and as per their records, the fund based amount outstanding from Transferee Company as on 21st November, 2019 is Nil and that after due consideration and deliberation, the Bank has agreed/approved and affirmed and has accorded no objection in terms of Section 230(9) of the Companies Act, 2013 to the Scheme of Amalgamation subject to sanctioning of the Scheme by this Tribunal, subject to the conditions that all the terms and conditions of the loan/facility documents executed by the Transferee Company shall be in full force.

16. Intimation of the proposed Scheme was also sent to all the relevant statutory authorities/regulators. Wherever no response has been received from the said authorities/regulators, it is deemed that they have no objection to the Scheme in question.

17. In conclusion, it has been stated by the Regional Director that, on a consideration of the materials on record, the Scheme appears to be fair, reasonable and is not detrimental against the Members or Creditors or contrary to public policy and the same can be approved.

18. We have considered the facts of the case as mentioned in the Petition, the reports of the Regional Director, MCA, in which the para wise replies of the Petitioner Company to his observations have been duly examined, and the relevant provisions contained in the Companies Act, 2013 and other related Acts and Rules. In his report the Regional Director, MCA has concluded that the Scheme appears to be fair reasonable and not detrimental against the Members or Creditors or contrary to public policy and the same can be approved. Further, the OL has on the basis of the report of M/s. Varadaraju & Associates, Chartered Accountant, stated that the Transferor Company has maintained all the books and accounts and statutory registers; is regular in paying taxes and other statutory payments; has approved Banking facility from The Hong Kong and Shanghai Banking Corporation Limited; has been regularly holding meetings of the Directors and Shareholders as required under law; and its affairs have not been conducted in a manner prejudicial to the interests of the shareholders, creditors and public.

19. On a consideration of the facts of the case as mentioned in the preceding paragraphs, which are not elaborated here again to avoid duplication and repetition, we are satisfied that the procedure specified in sub-sections (1) and (2) of section 232 of Companies Act, 2013 has been complied with, and hence the Scheme of Arrangement and Amalgamation, as approved by the Boards of both the Transferor and Transferee Company, is hereby sanctioned, as prayed, and in view whereof, this Tribunal passes the following further order:

(1) Sanctioning the Scheme of Arrangement and Amalgamation should not be construed as an order in any way granting exemption from payment of Stamp Duty, taxes or other charges, if any, and payment in accordance with law or in respect to any permission/compliance with any other requirement which may be specially required under any law; and the same shall be dealt with by the respective Authority in accordance with the extant Laws and Rules governing such Duty, taxes or other charges, as applicable; and

(2) The Transferor Company be transferred without further act or deed to the Transferee Company and accordingly, the same shall, purs

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uant to section 232 of the Companies Act, 2013, be transferred to and vest in the Transferee Company for all the state and interest of the Transferor therein, but subject nevertheless, to all the charges now affecting the same; and (3) All the liabilities including taxes and charges, if any, and duties of the Transferor Company be transferred without further act or deed to the Transferee Company and accordingly the same shall, pursuant to section 232 of the Companies Act, 2013, be transferred to and become the liabilities and duties of the Transferee Company; and (4) The tax implications, if any, arising out of the Scheme are subject to final decision of Concerned Tax Authorities and the decision of the Concerned Tax Authorities shall be binding on the Transferee Company; and (5) All the proceedings now pending by or against the Transferor Company be continued by or against the Transferee Company, if any; and (6) The Petitioner Companies shall within thirty days of the date of the receipt of this order cause a certified copy of this order along with a copy of Scheme of Arrangement and Amalgamation to be delivered to the Registrar of Companies for registration in accordance with applicable rules and regulations; and (7) The acceptance of the Scheme is subject to compliance of the following directions: a. Since the Petitioner Companies have foreign shareholder/s, the Petitioner Companies shall comply with all the Regulations of RBI and FEMA, as may be applicable. b. Petitioner Companies shall file all the due Statutory Returns immediately, if any. c. Any liability of the Transferor Company shall be transferred to the Transferee Company in respect of non-compliance to the provisions of section 135, if any, and the Transferee Company shall also ensure that the unutilized amounts are spent for that purpose, as per the provisions of this section. (8) The Transferee Company shall follow due procedure for the amendment of the Objects Clause of the MOA and conversion of public limited company into private limited company, as prescribed under Sections 13 and 14 respectively, and other applicable provisions of the Companies Act, 2013 and Rules made thereunder, by approaching the ROC/MCA in this regard. (9) The Petitioner Companies shall ensure compliance of their Rejoinders and will submit Quarterly/Annual Status of compliances through an Affidavit by Managing Director/Director of the Company along with CA/ICWA/CS Certificate till the compliance is ensured. (10) The Appointed Date shall be 01st April, 2018. (11) The Transferor Company or its Authorized Signatories are directed that after the completion of the process of arrangement and amalgamation to handover the possession of the books of accounts and other relevant documents of the Transferor Company to the Transferee Company for the purpose of section 239 of the Companies Act, 2013. (12) This Order is limited to the Scheme of Arrangement and Amalgamation, and it will not come in the way of Registrar of Companies or any other authority to take appropriate action(s) in accordance with law, for any other violations/offences, if any, committed by the Company or any of its personnel prior or after the approval of the Scheme. (13) If any of the Companies party to this Scheme contravene any of the provisions of section 232, they shall be liable to be punished with fine as contemplated in section 232(8). (14) Any person shall be at the liberty to apply to the Tribunal in the above matter for any directions that may be necessary. (15) In view of the above, both the Company Petitions bearing C.P. (CAA) No.27/BB/2019 and C.P. (CAA) No.50 /BB/2019 are disposed of accordingly along with the pending IAs, if any.
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