Avenir Finvest & Leasing Private ... vs The Regional Director (Northern ...

Avenir Finvest & Leasing Private Limited & Ors. ... Appellants

Versus

The Regional Director (Northern Region) & Anr. ... Respondents

Present: For Appellants : Shri Ashish Aggarwal and Shri Gurcharan Singh, Advocates

ORDER

08.11.2017 This appeal has been preferred by the appellants-

Transferor Companies (Appellants Nos. 1 to 3) and the Transferee

Company (Appellant No. 4) against order dated 11th August, 2017 passed

by the National Company Law Tribunal, Principal Bench, New Delhi

(hereinafter referred to as 'Tribunal') in Company Petition No. 1152 of

2016, whereby and whereunder the Company Petition filed under

Sections 391 and 394 of the Companies Act, 1956 for approval of scheme

of merger/amalgamation has been rejected.

2. The brief facts of the case is that the appellants, originally moved

before the Hon'ble High Court of Delhi by filing application under Sections

391 and 397 of the Companies Act, 1956 read with Companies (Court)

Rules, 1959 for approval of the scheme of amalgamation. The Hon'ble

High Court issued notice of second motion to the Registrar of Companies,

Regional Director and the Official Liquidator, but in view of Central 2

Government's Notification dated 7th December, 2016 issued under Clause

(c) of sub-Section (1) of Section 434 of the Companies Act, 2013, the case

was transferred to the Tribunal.

3. By the impugned order, the Tribunal, taking into consideration the

stand taken by the Registrar of Companies; Regional Director (Northern

Region) and Reserve Bank of India rejected the scheme of amalgamation

on the ground that the Transferee Company is a Non-Banking Financial

Company ('NBFC' for short) but is performing NBFC's activities illegally

without the permission of the Reserve Bank of India.

4. Learned counsel appearing on behalf of the appellants submitted

that the Tribunal wrongly held that the Transferee Company is a Non-

Banking Financial Company. According to appellant, the Transferee

Company being not a Non-Banking Financial Company is not required to

be registered with the Reserve Bank of India nor required to obtain any

prior approval.

5. From the record, we find that the Registrar of Companies, at

Paragraph 31 of his report, as quoted by the Regional Director, Northern

Region, raised following objections:

""That Deponent states that the Registrar of

Companies at para 31 of his report has observed as

under:

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a. It has been observed from the petition that

the Board of Directors of all Companies

have approved the proposed Scheme of

Amalgamation in their Board meetings held

on 30.06.2016. Accordingly, in terms of the

provisions of Section 117(1) r/w 179 (3) of

the Companies Act, 2013, all the

Companies are required to file such

resolution (eform MGT-14) with this office

within thirty days of passing the resolution

whereas none of the above company has

filed such resolution so far thereby prima

facie violated the provisions of section

117(1) of the Companies Act, 2013.

The Deponent states that pursuant to

notification dated 05.062015, Private

companies are exempted from compliance

of provisions of section 117(3)(g) of the

Companies Act, 2013.

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b. The objects clause of all the Transferor

Companies reflects NBFC activities however

there is no mention in the scheme/petition

whether the Company is registered as NBFC

with RBI or not. However, it has been

observed from the Balance Sheet and profit

and loss A/c filed by the Transferor

Companies on MCA 21 Portal that there is

no financial income in the Transferor

companies since last two years in terms of

section 45-1A of the RBI Act, 1934.

In respect of Transferee Company the following

has been the observation:

Company Total Financial % Gross Income % Assets Assets income from (netted financial off by Assets intangible assets) 5

As per Balance Sheet and profit & loss account as on 31.03.2015

Transferee 42,60,95,336 Non 39,26,85,030 92 43,15,625 Revenue 25,15,625 58 Co. current from investment dividend income

Stock in 1,26,50,850 3 trade(in shares)

Cash & 23,79,223 0.6 Bank Balance

The company will be treated as a non-banking

financial company (NBFC) if its financial assets are

more than 50 per cent of its total assets (netted off

by intangible assets) and income from financial

assets is more than 50 per cent of the gross income.

Both these tests are required to be satisfied as the

determinant factor for principal business of a

company."

6. The Tribunal noticed that the financial assets of the Transferee

Company constitute more than 50% of their total assets and income from

the financial assets constitute more than 50% of the total gross income.

As per the MCA21 portal, the paid-up issued and subscribed capital of the

Transferee Company is Rs. 1,62,20,200/-. However, the Transferee 6

Company has shown its paid-up issued and subscribed capital as

Rs.5,68,79,400/- in the scheme. For the aforesaid reason, the Companies

were asked to make necessary compliance of capitals structure of the

Company.

7. In the rejoinder affidavit, the appellants have taken a plea that the

objection that 'MCA21 portal' reflects the paid-up capital of the Transferee

Company is different as per the scheme, is not based on record. The

'MCA21 portal' of the Transferee Company's master data shows that the

paid-up capital is Rs. 5,68,79,400/- and as such, there is no discrepancy

in the issued subscribed and paid-up capital of the Company as alleged.

The appellants have also taken a plea that the Transferee Company is not

a Non-Banking Financial Company (NBFC). However, on perusal of the

report of the Regional Director and letter forwarded to the Reserve Bank

of India dated 28th April, 2017, it is clear that the "Signature Global (India)

Private Limited', namely, the Transferee Company is carrying NBFC's

activities which, according to the Reserve Bank of India, is illegal activity,

as no permission of the Reserve Bank of India has been taken.

8. In view of the specific plea taken by the Reserve Bank of India and

brought to the notice of the Tribunal by both Registrar of Companies and

Regional Director, Northern Region, we are not inclined to interfere with

the impugned order dated 11th August, 2017.

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9. In the absence of any merit, the appeal is dismissed. However, in

the facts and circumstances of the case, there shall be no order as to

costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice A.I.S. Cheema] [Balvinder Singh] Member (Judicial) Member (Technical)

/ng/