TMI Blog2020 (12) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... nd all stakeholders. A Scheme of Arrangement proposed by a Company for commercial expediency and in its commercial wisdom cannot ordinarily be interfered with and has to be sanctioned if the relevant provisions of the Companies Act, 2013 are met and no prejudice is caused to any of the stakeholders. The Board of Directors of the both Demerged as well as the Transferee Company have in their respective meeting held on 16.09.2020 approved and adopted the Scheme of Arrangement. The other requisite stakeholders have given their consent. However, it is a settled position of law that any sanction to a Scheme of Arrangement under the extant provisions of Companies Act, does not imply waiver of any liability or legal action for violation of the provisions of any Statute or the Rules made thereunder, or to prevent any statutory authority from initiating action for any such violation. The procedure specified in sub-sections (1) and (2) of Section 232 of the Companies Act, 2013 has been complied with, and hence the Scheme of Arrangement, as approved by the Boards of the Petitioner Companies, can be sanctioned - Application allowed. - CP (CAA) No. 43/BB/2020 - - - Dated:- 1-12-2020 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Sections 230 to 232 and other applicable provisions, if any, of the Companies Act, 2013 and the rules framed thereunder, as amended or re-enacted from time-to-time and in accordance with the provisions of the Memorandum of Association of the Company, and subject to the approval of the National Company Law Tribunal ( NCLT ), and subject to such terms and conditions and modification(s), as may be imposed, prescribed or suggested by the appropriate authority and subject to the approvals, consents, permissions, and/or sanctions of the appropriate authority, body, institution, shareholders, debenture holders, or other security holders of the Company, creditors of the Company, the consent of the Board of Directors of the Company be and is hereby accorded to the Scheme of Arrangement ('Scheme'), whereby the Services undertaking of the Company be demerged into Embassy Office Ventures Private Limited from the Appointed Date specified in the Scheme. (3) M/S. Embassy Office Ventures Private Limited (hereinafter referred to as 'Petitioner Company No.2/Transferee Company') is a Private Limited Company limited by shares incorporated under the Companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or expansion; c. Provides for the reorganisation of capital structure of the Transferee Company (including consequential cancellation of equity shares and CCDs held by the Demerged Company), which is expected to facilitate fund raising and induction of new investor(s) in the Transferee Company; and d. The businesses and activities of each of the Companies will be carried on more economically, conveniently and advantageously following the Scheme and the same will have beneficial results for the Companies, their shareholders and all other concerned stakeholders. (6) Pursuant to the Scheme coming into effect, the entire 'Services Undertaking' of the Petitioner Company No. 1, which includes inter alia, equity shares and CCDs of the Transferee Company held by the Demerged Company, would stand transferred to and vested on a going concern basis to the Petitioner Company No.2 on and from the Appointed Date, which is also the Effective Date (as defined under the Scheme), or such other date as may be directed by this Tribunal. (7) It is also stated that the Petitioner Company No. 1 has entered into a Business Transfer Agreement (BTA) dated August 20, 2020 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rupees Ten) each credited as fully paid up for every 1 (One) Equity Share of face value ₹ 10 (Rupees Ten Only) each fully paid up held by such member in the Demerged Company. (10) It is stated that no investigation or proceedings are pending against the Petitioner Company No. 1 and/or Petitioner Company No.2 under Sections 235 to 251 or any other provisions of the Companies Act, 1956 or Sections 206 to 229 of Companies Act, 2013. Further, there are no investigations pending against both the Petitioner Companies under any law. (11) M/s. NSVM Associates, Chartered Accountants, the Statutory Auditor of the Transferee Company, vide Certificate dated 16.09.2020, have certified that the proposed accounting treatment as specified in the Scheme is in compliance with all the Indian Accounting Standards specified under Section 133 of the Companies Act, 2013. (12) M/s. N Kiran Associates, Chartered Accountants, the Statutory Auditor of the Demerged Company, vide Certificate dated 16.09.2020, have certified that the proposed accounting treatment as specified in the Scheme is in compliance with all the Accounting Standards specified under Section 133 of the Companies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CCDs of ₹ 100/- each of the Resulting Company held by the Demerged Company. As on effective Date, in accordance with provisions of Sections 230 to 232 of the Act and any other relevant provisions of the Act, without any application or deed, without any payment to any persons including any holders thereof. Accordingly, the shares and Debenture capital of the Resulting Company shall stand reduced to the extent of the face value of equity shares of CCDs held by the Demerged Company as on the effective Date. However, it is noticed from the shareholding pattern that Demerged Company as such is not holding any share or CCDs in the Resulting Company. The shares and CCDs are held by the Embassy Property Developments Private Limited and not by M/S. Embassy Real Estate Development and Services (P) Ltd. This also to be clarified by the petition in toto. (4) It is further observed that the entire shares of Demerged Company is held by another entity. M/s. Embassy Property Development (P) Ltd Likewise 64% share of Resulting Company is held by the above stated Company. In short Directors of both Demerged Company and the Resulting Company and shareholders are different. The Result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares and CCDs held by the Demerged Company in the Transferee Company shall stand cancelled upon the Scheme becoming effective in terms of Clause 23 of the Section-5 in the Scheme of Arrangement. (2) As regards Services to be demerged it is stated that Services undertaking of the Demerged Company consists providing Maintenance Engineering Services, Property Services (viz. repairs, housekeeping, waste management, security etc.), Common area utilities and Administration related services. As part of the Scheme, the Demerged Company proposes to transfer all the assets, liabilities, contracts, etc. pertaining to the said business/undertaking. (3) As regards Appointed Date, it is stated that as per Clause 2.1 of the Scheme, the Appointed Date is defined to mean the Effective Date. The Effective Date is defined as the date on which the conditions or approvals mentioned in the Scheme are obtained or the day on which NCL T order approving the Scheme are filed with the ROC, Karnataka. Since, the Appointed Date is defined as the Effective Date in the Scheme and Effective Date, being a prospective date cannot be determined with certainty, no specific Appointed Date is mentioned in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany and Transferee Company, it is considered desirable and expedient to reorganise and reconstruct the Demerged Company by demerging the Services Undertaking into the Transferee Company in the manner and on the terms and conditions contained in the Scheme. The Scheme would, inter alia have the following benefits: a. Focused and concentrated approach in maintaining Embassy Tech Village from the standpoint of the Transferee Company; b. Enable the Transferee Company to maximize opportunities for strategic partnership and flexibility of fund raising, capability for future growth and expansion and creation of a structure geared to take advantage of market opportunities for further consolidation or expansion; c. Provides for the reorganisation of capital structure of the Transferee Company (including consequential cancellation of equity shares and CCDs held by the Demerged Company), which is expected to facilitate fund raising and induction of new investor(s) in the Transferee Company; and d. The businesses and activities of each of the Companies will be carried on more economically, conveniently and advantageously following the Scheme and the same will have benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the shareholding pattern of the Transferee Company as a consequence of acquisition of equity shares and CCDs of the Transferee Company by the Demerged Company was submitted before this Tribunal by the Petitioner Companies through the reply affidavit filed on November 25, 2020, wherein the revised list of equity shareholders and CCD holders of the Transferee Company certified by an independent Chartered Accountant as on the cut-off date i.e. November 19, 2020. 9. In response to the Reply Affidavit filed by the Petitioner Companies, the Regional Director, has filed an Additional Affidavit on behalf of the Central Government, by inter alia observing as follows: (a) As regards the shareholding it is noticed that the entire shares held by Embassy Property Development (P) Ltd. in Resulting Company had been transferred in the name of Demerged Company viz. Embassy Real Estate Developments and Services Pvt. Ltd. besides 10 lakh CCDs also been transferred from Embassy Property Development (P) Ltd. to the Demerged Company after Scheme is filed before the Hon'ble Tribunal. A certificate from the Chartered Accountant dated 20.11.2020 showing the present shareholding of the Resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red, within 30 days from the orders of the Scheme, if approved. (h) As regards the serving of notice, it is stated that the Company has served notice along with CP to RBI vide email dated 13.11.2020. It is the responsibility of the Petitioner Companies to comply with RBI/FEMA Regulations. 10. As regards Notice sent to the Competition Commission of India (CCI), the Petitioners vide sworn Affidavit have inter alia stated that the Notification No.S.O.988(E) dated March 27, 2017 exempts the enterprises being parties to, inter alia, any acquisition referred to in clause (a) of Section 5 of the Competition Act, 2002, where the value of assets being acquired, taken control of, merged or amalgamated is not more than ₹ 3.5 billion or turnover of not more than ₹ 10 billion. It is also stated that the Demerged Undertaking being transferred by the Demerged Company to the Transferee Company qualifies for the aforementioned criteria and therefore, the Petitioner Company Nos. 1 and 2 are exempted from taking any prior approval from the CCI u/s 5 of the Competition Act, 2002 r/w Notification No.S.O.988(E) dated March 27, 2017. The proposed demerger is not likely to cause an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, it is a settled position of law that any sanction to a Scheme of Arrangement under the extant provisions of Companies Act, does not imply waiver of any liability or legal action for violation of the provisions of any Statute or the Rules made thereunder, or to prevent any statutory authority from initiating action for any such violation. 15. 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 the Companies Act, 2013 has been complied with, and hence the Scheme of Arrangement, as approved by the Boards of the Petitioner Companies, can be sanctioned, as prayed, and in view whereof, this Tribunal passes the following further Order: (1) The Scheme of Arrangement (as annexed with this Petition) is hereby sanctioned and the Appointed Date of the Scheme shall be the Effective Date, i.e., the date on which the Petitioners present this order before the Registrar of Companies, Karnataka; (2) Sanctioning the Scheme should not be construed as an order in any way granting exemption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2013, as may be applicable. Evidence of such transactions being at arms shall be produced before the RD within 30 days of receipt of this order. Further, all Quarterly / Annual Status of compliances shall be filed through an Affidavit by Managing Director/ Director of the Company along with CA/ICWA/CS Certificate till the compliances are met; (10) Petitioner Companies shall file all the due Statutory Returns immediately, if any; (11) 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 to be delivered to the Registrar of Companies for registration in accordance with applicable rules and regulations; and (12) The Petitioner Companies or their Authorized Signatories are directed that after the completion of the process of Arrangement, to handover the possession of the Books of Accounts and other relevant documents relating to the Services Undertaking of the Demerged Company, to the Transferee Company for the purpose of section 239 of the Companies Act, 2013; (13) This Order is limited to the Scheme of Arrangement, and it will not come in the way ..... 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