TMI Blog2020 (12) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... turvedi Judicial Member And Prasanta Kumar Mohanty Technical Member For the Petitioner-Companies : Pavan S. Godiawala and Naishal J. Modi ORDER HARIHAR PRAKASH CHATURVEDI (JUDICIAL MEMBER). - 1. The petitioner-companies have preferred the present joint application under sections 230-232 of the Companies Act, 2013, seeking sanction of this Tribunal to a composite scheme of amalgamation of M/s. Ujjain Packaging P. Ltd. (transferor company) with M/s. Vyanktesh Corrugators P. Ltd. (transferee company) and their respective shareholders and creditors ( scheme for short) with effect from the appointed date as mentioned in the scheme. 2. The petitioner-companies have annexed a copy of the proposed composite scheme of arrangement as annexure P13. 3. The rationale of the proposed company scheme as described in the present company petition are stated as under : (1) Both the applicant-companies are under the same management group. The management is of the opinion that the merger will lead to synergies of operations and more particularly the following benefits : (a) Both the companies are under the same management group and it would be advantageous to combine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry authorities on October 18, 2018. 7. The petitioner-companies, thereafter, filed present joint company petition for approval of the scheme of amalgamation on September 14, 2018 and this Tribunal admitted the same on November 19, 2018. While admitting the petition, directions were issued to publish notice of hearing of the petition in English and Hindi newspapers having wide circulation in the area where the registered office of both the companies are situated at least 10 days before the date of hearing of the petition. 8. Pursuant to the order dated November 19, 2018, publications were duly made in English daily Free Press and Hindi daily, Prabhat Kiran Ujjain edition and notice regarding date of hearing having fixed on January 7, 2019, was duly served by the petitioner-companies on the Income-tax authorities on November 24, 2018, on the Registrar of Companies, Madhya Pradesh at Gwalior and the Official Liquidator at Indore on November 24, 2018 and the Regional Director, North Western Region on November 24, 2018 and an affidavit of service and publication dated December 12, 2018, confirming the same has been placed on record. 9. In response to the notice of the Company A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the hon ble National Company Law Tribunal. This Directorate is not aware about serving the notice under section 230(5) of the Companies Act, 2013 to the Income-tax Department. Further, the Registrar of Companies, Madhya Pradesh has reported vide letter dated September 28, 2018 that the Income-tax Department conducted a survey proceedings on the premises of the applicant/transferor company on July 27, 2017 under section 133A of the Income-tax Department and search and survey operations has been conducted on the transferor company, its directors and key officials of the company. The hon ble National Company Law Tribunal may therefore be pleased to direct the petitioner-companies to place on record all the relevant facts of the matter for compliance with section 230(5) of the Companies Act, 2013 as also about the survey and search conducted by the Income-tax Department. In response to the query raised at paragraph 2(f), the petitioner has duly replied in the said clarificatory affidavit that, regarding service of notice to IT department, the Registrar of Companies MP has informed the learned Regional Director that Income-tax search and survey proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification and there shall be no need for taking approval of such third party who is a party to the contract/ debt to give effect to this clause and hence observation has no substance and merits. The petitioner explained and clarified in the affidavit regarding such observation about appearance by Shri Sharma that, the department has already giver clearance for the same and such observations is without any basis and there is no substance and such observations are devoid of the substance of the fact and merits There is no conflicting of interest. In respect of query pertaining to four charges pending in respect of petitioner transferor company, it is clarified as above, the liabilities upon the sanctioning of the scheme would become the liabilities of the transferee hence there is no dilution of the liabilities. 11. That, the Regional Director respectfully submits that the related legal/ fees expenses of the office of the Regional Director for submitting this report and represent the matter on behalf of the Central Government, i.e., this Directorate may kindly be paid by the applicant company(ies) to the Central Government. Therefore, this hon'ble Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be traced in the schedule of long term or short term advances. The nature and purpose of above said loan is not clear. Copy of relevant page of the aforesaid audit report for financial year ended 2017 is enclosed and marked as annexure B. The report dated October 29, 2018 of the said CA has no adverse remarks or comments on the financial state of affairs of the petitioner/transferor prejudicial to the scheme between the petitioner-companies. The official liquidator at point No. 15 of his report reads out that, the petitioner/transferor has given a loan of ₹ 7 lakhs to its directors under section 189 of the Companies Act, 2013 for financial year ending on March 31, 2017 The petitioner in the aforesaid detailed affidavit dated February 8, 2019 filed in the petition, in response to the said query stated that, transferor has not granted any loans to the directors as per the report of the chartered accountant as appointed by the official liquidator for the said year March 31, 2017 but auditors of the petitioner/transferor due to inadvertence in his report mentioned the above for the year ended on March 31, 2017 and there is no prejudice caused to any concern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber 2, 2018. Copy of letter dated October 16, 2018, October 25, 2018, October 30, 2018 and November 2, 2018 received from Assistant Commissioner of Income-tax (Central)-Ujjain (Stationed at Indore) and Principal Commissioner of Income-tax, (Central), Bhopal is enclosed and marked as annexure C (Colly.) At paragraph No. 16, the official liquidator in his report states that, the Assistant Commissioner of Income-tax gave information to the learned official liquidator that, companies belongs to the Bangur Group and assessment proceedings of various assessment years are pending or contemplated and it would not be in the interest of revenue, if these companies are allowed to be amalgamated at least before completion of assessments and crystallization of issues and official liquidator further made observations to clarify the issue. In response to the same the petitioner/transferor in the above mentioned affidavit clarified that, survey proceedings under section 133A is conducted by IT Department while the petitioner/transferor in regular course of work and thereafter a general assessment under section 143(3) is carried out after the survey proceedings. The IT Department ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns, it is categorically submitted that, the petitioners are juristic person and comply with the provisions of the Companies Act from time to time and paying tax and having tax paying identity and the department has accepted the petitioner as an Assessee and accepted Income-tax every year since incorporation of the petitioner-companies. It is submitted that, with immense respect there is no concept such as paper company defined under the Act. In fact the IT department only assess income and verify the genuineness of transactions and even if, in case department is not satisfied of the genuineness of any transaction then such transaction could be deemed to be considered as its income and accordingly taxed and hence it is submitted that, such bald allegations lacks merits. In response to the query that, as the assessment proceedings in relation to the petitioner is completed till then the sanction of the said scheme may not in the interest of the Revenue, the petitioner strongly contended at paragraph 12 that, the petitioner transferee shall absorb the petitioner/transferor with all of its assets and liabilities along with the rights and duties as on the appointed date at the same te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaken the compliance and submitted that, the compliance with section 133 is already annexed with the petition at annexure P15 collectively. In response to the compliances of other laws, the petitioner undertake to comply with all applicable laws and not to absolve from any of its statutory liabilities. Further, the Income-tax Department has opined that, the inter-connection of various entities of the group and inter-circulation of transactions/amounts, if any, within the group and its possible future impact are to be examined. In view of the same, it would not be in the interest of the Revenue, if these companies are allowed to be amalgamated at least before the completion of the assessments and crystallization of the issues, which are expected to be finalized by September 30, 2020. It is noteworthy that amalgamation may be a colourable device to give legitimacy to the funds introduced through layering and therefore the scheme of amalgamation may kindly be note be allowed at least at this stage . In this regard it appears that the opinion of the Income-tax Department is genuine as some other companies of the same group against which block asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 239 of the Companies Act, 2013. Further, direction be issued to the transferee company to ensure statutory compliance of all applicable laws on sanctioning of the present scheme, the transferor company shall not be absolved from any of its statutory liability in any manner. 16. The Assistant Commissioner of Income-tax (Central), Ujjain, has sent his letter of the official liquidator, which was forwarded to the Regional Director, North, Western Region, no separate report from the Income-tax Department is filed. 17. In the light of above, the petitioner-companies have already assured and gave an undertaking to this effect that it shall comply with all the statutory compliance including pending Income-tax proceedings. Thus, it is made clear that sanction and approval of the present scheme shall, however, be subject to the outcome of pending IT proceedings and appeal. Therefore, the observations made by the Regional Director and official liquidator stands satisfied. 18. On perusal of the scheme of amalgamation annexed as annexure P13 to the present company petition, at 6.7 it has been mentioned as such : It is further specifically clarified, admitted, assured and declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isite material contemplated by the proviso to section 391(2) of the 1956 Act is placed before the court by the concerned applicant seeking sanction for such a scheme and the court gets satisfied about the same. 6. That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not, contrary to the public policy. For ascertaining the real purpose underlying the scheme with a view to be satisfied on this aspect, the court, if necessary, can pierce the veil of apparent corporate purpose underlying the scheme and can judiciously X-ray the same. 7. That the company court has also to satisfy itself that members or class of members or class of creditors, as the case may be, were acting bona fide and in good faith and were not coercing the minority in order to promote any interest adverse to that of the latter comprising the same class whom they purported to represent. 8. That the scheme as a whole is also found to be just, fair and rea sonable from the point of view of prudent men of business taking a commercial decision beneficial to the class represented by them for whom the scheme is meant. 9. Once the above said pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory majority is a strong evidence of its reasonableness if the scheme is otherwise fair then the Tribunal will not act into its merits. On similar footing, the hon'ble Bombay High Court has also held that no interference in commercial wisdom of shareholders and their management can be made by the company court. It is now a well settled legal position that the above stated legal proposition have been well-settled in the hon'ble Supreme Court's decision in the matter of Miheer H. Mafatlal v. Mafatlal Industries Ltd. [1996] 87 Comp Cas 792 (SC) ; AIR 1997 SC 506, that a company court is not expected to sit an appeal over the commercial wisdom to be exercised by the shareholders and management of the company nor it can substitute its view, its jurisdiction is supervisory and not the appellate. 23. Thereafter, the petitioner-companies filed the present company petition, being company petition C. P. (CAA) No. 128 of 2018, before this Tribunal seeking sanction of the scheme of arrangement for amalgamation. 24. We heard learned counsel, Mr. Pavan S. Godiawala for the petitioner-companies. We also perused the contents of the present company scheme petition. We have al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The legal fees and expenses of the office of the Regional Director are quantified at ₹ 25,000 in respect of the petitioner-companies. The said fees to the Regional Director shall be paid by the transferee company within four weeks from the date of issuance of certified copy of the order by the Tribunal. 28. Filing and issuance of drawn up orders are dispensed with. All concerned authorities to act on a copy of this order along with the scheme of amalgamation duly authenticated by the Registrar of this Tribunal. The Registrar of this Tribunal shall issue the certified copy of this order along with the scheme of amalgamation immediately. 29. The petitioner-companies are further directed to lodge a copy of this order, the schedule of immovable assets of the transferor company as on the date of this order and the scheme duly authenticated by the Registrar of this Tribunal, with the concerned Superintendent of Stamps, for the purpose of adjudication of stamp duty, if any, on the same within 60 days from the date of the order. 30. The petitioner-companies are further directed to file a copy of this order along with the copy of the scheme of amalgamation with the concern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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