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In Re. : M/s. CL Media Private Ltd. Company AND M/s. CL Educate Limited Company

2014 (5) TMI 1153 - DELHI HIGH COURT

Scheme of Amalgamation - Held that:- In view of the approval accorded by the Shareholders and Creditors of the petitioner Company, representations/ reports filed by the Regional Director, Northern Region and the official liquidator, attached with this court to the proposed scheme of Amalgamation, 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 Arrangement under Section 391 and 394 of the Companies .....

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eev Sachdeva , 1. This second motion Petition has been filed under Sections 391- 394 of the Companies Act, 1956( hereinafter referred to as Act‟) by the Petitioner Company seeking sanction of the Scheme of Amalgamation (hereinafter referred to as Scheme‟). The Transferor Company is a wholly owned subsidiary of Transferee Company. A copy of the proposed Scheme of Amalgamation is filed along with this application. 2. The Registered Offices of both the Petitioner Companies are situated .....

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ition. 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 company had earlier filed C.A. (M) No. 4 of 2012 seeking directions of this Court for dispensation of the meetings. Vide Order dated 10thJanuary,2014 this court allowed the application and dispensed with the requirement of convening meetings of Equity Shareholders, Secured and Unsecured Creditors of .....

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e and publication has been filed by the petitioner Company showing compliance regarding service of the petition on the Regional Director, Northern Region, Official Liquidator and to the sole Secured Creditor i.e. Kotak Mahindra Bank and also regarding Publication of Citations in the aforesaid News papers on 11.02.2014, copies of the news papers cuttings, in original, containing the publications have been filed with the affidavit of service. 9. Pursuant to the notices issued, the Official Liquida .....

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e said report that the Official Liquidator has not received any complaint against the proposed Scheme of Amalgamation. It is further stated that affairs of the Petitioners 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 second proviso to Section 394(1) of the Act. 11. In response to the notices issued in the Petition, learned Regional Director, Northern Region, Ministry of Corporate Affairs has filed his affidav .....

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dated 25.04.2014 was filed on behalf of the Petitioner Company. The objections raised by the Regional Director and its reply by the Petitioner Company is as follows: a. The Regional director has submitted that the scheme is incomplete & vague and liable to be dismissed on the grounds that there is no dissolution clause of the Transferor Company in the scheme or in the Petition. The Petitioner Company in response to the objection has stated that the Petitioner Company in the prayer clause of .....

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13 and the petitioner Company may be asked to file an undertaking by way of an affidavit that they will comply with the provisions of Section 2(43) of Companies Act, 2013. The Petitioner Company in response to the said objection has stated that the proposed scheme of amalgamation is a merger of wholly owned subsidiary with its holding company and as per clause 6.1 of the scheme, all the assets and liabilities of transferor company shall be transferred at their respective book value, so no reserv .....

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section 209 of Companies Act, 1956. Hence, it is submitted that the Petitioner Company may be asked to move the compounding Application under Section 209 of Companies Act, 1956. The Petitioner Company in response to the said objection has stated that the Transferor Company has started to maintain inventory of books and a new ERP system has been implemented and now the records in the proper manner are being maintained. A certificate has been issued by the chartered accountant certifying that Tra .....

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have further reported unpaid‟ advance tax of ₹ 58,19,580/-. Therefore, it was not clear as to whether notice were issued to the Income Tax Department. The petitioner Company in response to the said objection has stated that since profits of the Transferor Company are exempted u/s 80IC of the Income tax Act, 1961, its income is non taxable and therefore no advance tax was to be deposited in FY 2012-13 with the Income Tax authorities. However, on account of book Profits in the Transfer .....

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authorities. The Transferor Company has deposited the tax due on Book Profits of ₹ 1,18,74,010/- along with the interest on 28.11.2013 with the income tax authorities. Further, the Regional director in compliance of MCA circular no. 1/2014 dated 15.01.2014 had sent a letter dated 06.02.2014 to Chief Income Tax Commissioner, New Delhi to examine the scheme of amalgamation and submit their comments and observations, if any. As reported by Regional director at para no. 8 of its affidavit tha .....

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submitted that on perusal of Balance sheet of the Transferee Company, following observations were reported by the Auditors In our opinion and according to the information and explanations given to us, the rate of interest and other terms & conditions for loans given to CLmedia Private Limited, Career Launcher Asia Educational Hub Pte. Ltd., Career Launcher USA INC are prima facie prejudicial to the interest of the Company. The year end balance of such loans was Rs. Nil, ₹ 9,362,491 and .....

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feree Company to its subsidiary companies for meeting their short term fund requirements. It is further stated that granting of these loans, in fact, is in the interest of shareholders of the Transferee Company to protect their investment in these subsidiary companies and these being 100% subsidiaries , any grant of interest free loan is not prejudicial to the company. Further, the provisions of Section 372Aof the Companies Act 1956 has no applicability which makes obligatory to charge interest .....

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nal Foundation aggregating ₹ 112,878,251. Accordingly, in our opinion such loan was prejudicial to the interest of the Company. The Petitioner Company in response to said objection has stated that the loan, in fact, was infrastructure charges recoverable from Career Launcher Education Foundation on account of running of business school from the premises owned by the company. Initially due to inability to pay these infrastructure charges were converted into a loan, which was returnable and .....

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tarted maintaining the records of inventory of books, the new ERP system has been implemented in the Transferee Company an now the records are being maintained in the proper manner and a certificate of the C.A. has been issued to certify that the records have been maintained in the proper manner. h. The Regional Director has further submitted that the Transferor Company is subsidiary of the Transferee Company as such under the proposed Scheme of Amalgamation, the Transferee Company has not filed .....

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n. This issue has been considered and approved by this High Court and other High Courts in the case of Auto Tools India Pvt. Ltd. [Co. Appl. (M) No. 41 of 2010], Sharat Hardware Industries Pvt. Ltd. [1978 (48) Com Cas 23 Delhi], Mahaamba Investments Ltd. vs. IDI Limited [2001 (105) Com Cas 16 Bombay and Andhra Bank Housing Finance Ltd. [2004 (118) Com Cas 295 Andhra Pradesh]. In view of the above submissions, the objections/ observations made by Regional Director do not survive and are addressed .....

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