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System Builders And Developers Private Limited & Another

    CO.PET. No. 372 of 2014

    Decided On, 18 December 2014

    At, High Court of Delhi

    By, THE HONOURABLE MR. JUSTICE SANJEEV SACHDEVA

    For the Appearing Praties: Praveen Kumar Mittal, Rajiv Behl, Advocates, Atma Sah, Assistant Registrar of Companies.



Judgment Text

Sanjeev Sachdeva, J (Oral)

Co. Appl No.2470/2014 (on behalf of Official Liquidator for condonation of delay)

This application is filed on behalf of the Official Liquidator for condonation of delay in filing and filing the report.

Learned Counsel for the Petitioner does not object to the delay being condoned.

In view of the above, the delay in filing the report is condoned and the report is taken on record.

The applications stand disposed.

CO.PET.372/2014

1. This second motion joint petition has been filed under sections 391 & 394 of the Companies Act, 1956 ('Act') seeking sanction of the Scheme of Amalgamation ('Scheme') of System Builders And Developers Private Limited (hereinafter referred to as Transferor Company) with Gemstar Builders & Developers Private Limited (hereinafter referred to as the Transferee Company) (hereinafter 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 latest audited Accounts for the year ending 31st March 2013 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 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 C.A (M) No. 90 of 2014 seeking directions of this Court for dispensation of meetings. Vide order dated 21.05.2014, this Court allowed the Application and dispensed with the requirement of convening meetings of Equity Shareholders of the Petitioner Companies and Unsecured Creditors of Transferee Company. Since the Petitioner Companies had no Secured Creditors and the Transferor Company had no Unsecured Creditors, requirement for convening meeting of the same does not arise.

8. The Petitioner Companies has thereafter filed the present Petition seeking sanction of the Scheme. Vide order dated 29.05.2014, notice of the Petition was directed to be issued to the Official Liquidator, Registrar of Companies and the Central Government through Regional Director. Citations were also directed to be published in 'Statesman' (English) and 'Veer Arjun' (Hindi). Affidavit of Service and Publication has been filed by the Petitioner Companies showing compliance regarding service of the Petition 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 on the Petition, the Official Liquidator has filed Report dated 1st October 2014. It has been stated that the Official Liquidator has not received any complaint against the proposed Scheme of Amalgamation. It has further been stated in the Report that the affairs of the Petitioner/Amalgamating Company do not appear to have been conducted in a manner prejudicial to the interest of its members or to public interest as per the 2nd proviso of Section 394 (1) of the Act.

10. In response to the notice issued on the Petition, the learned Regional Director has filed Representation Affidavit dated 27.11.2014. Relying upon Clause 9 of Part III of the Scheme, the Regional Director has stated that all employees of the Transferor Company shall become the employees of the Amalgamated Company. Further, learned Regional Director submits that despite notice, Income Tax Authorities has not raised any observation with respect to the Scheme.

11. Further, learned Regional Director in his Affidavit has observed that there is no mention whether the Petitioner Companies will comply with the Accounting Standard-14 issued by the Institute of Chartered Accountants of India.

12. In response to the above observation, the Petitioner Companies filed reply Affidavit dated 24.11.2014, wherein both the Petitioner Companies undertake to comply with/adopt accounting treatment as prescribed under Accounting Standard-14 issued by the Institute of Chartered Accountants of India and will comply with the provisions of section 2(43) of the Companies Act, 2013.

13. Further, learned Regional Director in his Affidavit has observed in Para 5(iv) that:

'as per para 31(3) of the Registrar of Companies, Delhi & Haryana’s report dated 22.09.2014, it is stated that from the Balance Sheet as at 31.03.2013 of the Transferee Company that during the said financial year, its paid up share capital was increased from Rs.1,00,000/- to Rs.44,78,600/-. The shares were allotted to certain individuals and body corporate including Transferor Company namely Systems Builders & Developers Private Limited on differential price i.e. at a premium Rs.190 and Rs.450 respectively and accordingly accumulated superficial premium of Rs.1385.37 lacs. The Transferee Company’s financials do not apparently justify its shares commanding such heavy premium. Its last two years net profits were Rs.24.11 lacs and Rs.25.72 Ins respectively and it has no tangible fixed assets like land, buildings. It, however, has inventories of property under construction Rs.2476.09 lacs, but the Company has taken advances from customer Rs.1673 lacs and outstanding unsecured loan of Rs.390.38 lacs which might have gone to build up inventories. Since there has been an abnormal increase/decrease in the MDT during the year as compared to the earlier years, non-compliance of the AS-7 r/w AS-9 cannot be ruled out. As on 31.03.2013, the Transferor Company is having 30% stake in the Transferee Company (almost entire funds infused therein on heavy premium) which in turn holding 57.48% capital of the Transferor Company. Therefore, both these companies having investment interchangeably. In the present Scheme of Amalgamation, it has been proposed inter-alia that the investments, if any, in the share capital of the Transferor Company inter-se or by the Transferee Company or vice versa shall also stand cancelled. Therefore, it seems that upon sanction of the proposed Scheme of Amalgamation, the inter-se investments shall be cancelled and the obvious beneficiary would be individuals namely Shri Devi Datt Mishra, Shri Mohit Mishra, Shri Kavi Datt Mishra.'

14. In response to the above observation, the Petitioner Companies filed Reply Affidavit wherein it has been submitted that since the Assessee Company is not engaged in the work of carrying out construction contracts and hence revised Accounting Standard-7 is not applicable and it is not bound to follow percentage completion method of accounting. Further, it has also been submitted that provisions of Accounting Standard-7 cannot override the provisions of section 145 of the Income Tax Act in so far as the computation of business income for the purpose of determining assessable income is concerned. It is further submitted that with respect to the Assessee Company, the provisions of Accounting Standard-9 shall be applicable. The Assessee Company has stated that it has been following aforesaid method of accounting on year to year basis.

15. Further, learned Counsel for the Petitioner Companies submits that shares were allotted by the Transferee Company in the year 2013 and the Petitioners have no objection in case liberty is granted to the Income Tax Authorities to examine this issue irrespective of the sanction of the scheme and, in case, on assessment any amount is found payable, the Transferee Company and/or the concerned shareholders shall be liable to pay the same.

16. It is directed that the Income Tax Authorities are at liberty to assess the income of the Transferor and Transferee Companies for the Financial Year 01.04.2011 to 31.03.2013 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.

17. 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.

18. Further, learned Regional Director in his Affidavit has submitted that the Company has not yet filed Form 2 (Return of Allotment) in terms of the provisions of S.75 of the Companies Act, 1956. Hence, the Company may kindly be directed to comply with the provisions of section 75 of the Act.

19. In response to the above observation, the Petitioner Companies filed Reply Affidavit wherein it has been submitted that Transferor Company has already filed Form 2 with the Registrar of Companies in respect to Financial Year as on 31.03.2011 and a copy of the same has also been attached.

20. Further, learned Regional Director in his Affidavit has observed that Transferee Company has not filed Compliance Certificate (Form 66) for Financial Year ended 31.03.2013. Thus, prima facie there has been violation of section 383-A of the Companies Act, 1956. Hence, Company may be directed to comply with the provisions of section 383-A of the Act.

21. In response to the above observation, the Petitioner Companies in their reply Affidavit have submitted that the Compliance Certificate under section 383-A of the Act of Transferee Company with respect to Financial Year 2012-2013 is already filed and a copy of the same has been attached.

22. In view of the above said clarification and undertaking, the concerns raised by the Regional Director has been duly addressed.

23. No objection has been received to the Scheme from any other party. Ms. Janki Mishra, Authorized Signatory of Petitioner Company, has filed an Affidavit dated 30.09.2014, confirming that neither the Petitioner Companies nor its Counsel has received any objection pursuant to citations published in the newspapers.

24. In view of the approval accorded by the shareholders of the Petitioner Company, Representation/Report filed by the Official Liquidator and the Regional Director, Northern Region and the submissions of the Petitioner Company, 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 391-394 of the Companies Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law.

25. Certified copy of the order be filed with the Registrar of Companies within 30 days from t

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he date of receipt of the same. In terms of the provisions of sections 391 and 394 of the Companies Act, 1956, and in terms of the Scheme, the whole or part of the undertaking, 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, 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. 26. 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 requirement which may be specifically required under any law.. 27. Learned Counsel for the Petitioner states that the Petitioner Company 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. 28. The Petition is allowed in the above terms. Order Dasti.
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