Regional Director vs Nanak Consultants Pvt. Ltd

1

National Company Law Appellate Tribunal Principal Bench, New Delhi COMPANY APPEAL (AT) No. 175 of 2020 (Arising out of Order dated 08th June, 2020 passed by National Company Law Tribunal, New Delhi Bench - VI, New Delhi, in CAA- 131(ND)/2019, in CA(CAA)-54(ND)/2019).

IN THE MATTER OF:

Regional Director, Through Raj Singh S/o Shri Suraj Bhan B-2 Wing, 2nd Floor, Paryavaran Bhawan, CGO Complex New Delhi - 110003. ...Appellant

Versus

1. Nanak Consultants Pvt. Ltd. 414, 4th Floor, DDA Commercial Complex, Transferor Company Distt. Center, JanakPuri, New Delhi - 110058. No.1/Respondent No. 1

2. Kewaldeep Consultants Pvt. Ltd. 414, 4th Floor, DDA Commercial Complex, Transferor Company Distt. Center, JanakPuri, New Delhi - 110058. No.2/Respondent No. 2

3. Sayush Consultants and Investment Pvt. Ltd 414, 4th Floor, DDA Commercial Complex, Distt. Center, Janak Puri, New Delhi - 110058. Transferor Company No.3/Respondent No. 3 4. Ganga Kaveri Credit and Holdings Pvt. Ltd. Transferor Company 414, 4th Floor, DDA Commercial Complex, No.4/Respondent No. 4 Distt. Center, Janak Puri, New Delhi - 110058.

5. Sacred Heart Company Investment Pvt. Ltd. Transferor Company 414, 4th Floor, DDA Commercial Complex, No.5/Respondent No. 5 Distt. Center, Janak Puri, New Delhi - 110058.

6. Kenstar Investment and Finance Pvt. Ltd.

Company Appeal (AT)No.175/2020 2

414, 4th Floor, DDA Commercial Complex, Transferor Company Distt. Center, Janak Puri, New Delhi - 110058. No.6/Respondent No. 6

7. Osiatic Consultants and Investment Pvt. Ltd Transferor Company 414, 4 Floor, DDA Commercial Complex, th No.7/Respondent No. 7 Distt. Center, Janak Puri, New Delhi - 110058.

For Appellant: Ms. Shankari Mishra and Ms. Priyadarshini Dewan, Advocates.

For Respondent Mr. Saurabh Kalia, Mr. Rajiv Malik and Mr. Manoj No. 1 to 7: Sharma, Advocates for R-1 to R-7.

JUDGEMENT

[Per; ShreeshaMerla, Member (T)]

1. Challenge in this Company Appeal (AT) No.175/2020 is the Impugned

Order dated 08.06.2020 passed by NCLT (National Company Law Tribunal,

New Delhi, Special Bench) in CAA- 131 (ND)/2019, whereby and whereunder

the NCLT has allowed the Joint Application filed by the Petitioner Companies

under Section 230-232 of the Companies Act, 2013 (hereinafter referred to as

the "Act) for the purpose of approval of the Scheme of Amalgamation. By the

impugned order the NCLT has observed as follows:-

"7. The Official Liquidator has filed its Report wherein no specific objection has been raised against the approval of the scheme. It is submitted in the report that the official liquidator has not received any complaint against the proposed Scheme from any person/party interested in the Scheme in any manner and the affairs of the Petitioner Companies do not appear to has been conducted in a manner prejudicial to the interest of its members, creditors or public interest.

8. It is further submitted by the Petitioner Companies that the dues of Income Tax Department are fully secured as all the dues, if any, shall be the liability of

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the Transferee Company as provided in the Scheme of Amalgamation.

9. Further the Certificate of respective statutory auditors of the Petitioner Companies have been placed on the record to the effect that Accounting Treatment proposed in the Scheme of Amalgamation is in conformity with the Accounting Standard notified by the Central Government as specified by under the provisions of Section 133 of the Companies Act, 2013.

10. In view of the foregoing, upon considering the approval accorded by the members and creditors of the petitioner Companies to the proposed Scheme, and the affidavit by the Regional Director, Northern Region, Ministry of Corporate Affairs, reply submitted by the Transferee Company and the report of the Official Liquidator and, there appears to be no impediment in sanctioning the present Scheme. Consequently, sanction is hereby granted to the Scheme under Section 230 to 232 of the Companies Act, 2013. The petitioner shall however remain to bound to comply with the statutory requirements in accordance with the law.

11. Consequently, the scheme is hereby granted to the Scheme under section 230 to 232 of the Companies Act, 2013.

12. The Petitioner Companies shall however remain bound to comply with the statutory requirements in accordance with law.

13. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rules and regulation, the sanction granted by this Court to the Scheme will not come in any way of action being taken, albeit, in accordance with the law, against the concerned persons, directors and officials of the petitioners.

14. While approving the Scheme as above, we further clarify that this order should not be construed an order in any granting exemption from payment of stamp duty, taxes including Income Tax, GST etc. or any other charges, if any, and payment in accordance with law or in respect of any permission/compliance

Company Appeal (AT)No.175/2020 4

with any other requirement which may be specifically required under any other law."

2. It is the case of the Appellant that Respondent had filed five different

schemes of merger under Section 230-231 of the Companies Act, 2013 on

25.3.2019 with Sunrays Finance Limited emerging as the final transferee

company. The five different Schemes were filed before the different coordinate

Benches of NCLT, Delhi which are detailed as hereunder:-

Scheme Transferor Companies Transferee companies

1 Indus Valley Investment and M/s Osiatic Finance Pvt Ltd Consultants and Investment (Approved vide order dated 12.12.2019 in CA(CAA) 59(ND)/2019)

I 1.Neeraj Consultants Pvt Ltd Sunrays

2. Motlay Finance Pvt Ltd, Properties and Global Capital Limited Investments Company Pvt Ltd (Approved vide Order dated 17.2.2020 in CA(CAA) 55 (ND)/2019)

III 1.Nanak Consultants Pvt Ltd (Under present

2. Kewaldeep Consultants Pvt Ltd Appeal)

3.Sayush Consultants and Investment Pvt Ltd.

4. Ganga Kaveri Credit and Holdings Pvt Ltd

5.Kenstar Investments and Finance Pvt Ltd

Company Appeal (AT)No.175/2020 5

IV M/s Osiatic Consultants and Apollo Finance Investment Ltd. The said scheme is pending in petition bearing (CAA)145-

PB2019.

V Apollo Finance Limited Sunrays Properties and Investment Company Pvt Ltd The said Scheme is pending in Petition bearing (CAA)- 146(PB)/2019.

3. The Learned Counsel for the Appellant strenuously contended that all

the Schemes wee filed at the same time before different coordinate Benches

of Hon'ble NCLT New Delhi and due approval of Scheme I vide order dated

12.12.2019 into the Transferee Company/the Seventh Respondent herein

existing and pending during the pendency of Scheme III in CAA-

131(ND)/2019 no longer existed after the due approval of Scheme I of the

Transferor Company into the Seventh Respondent. Therefore, any such

merger into a hypothetical Company is absolutely void ab initio and is hence

liable to be set aside.

4. The Schemes of Merger filed by the Respondents are an attempt to

execute a sequential merger which is in violation of the provisions of the Act.

The Learned Counsel for the Appellant contended that instead of filing a single

Scheme for merger wherein Sunrays Finance Limited emerges as the

Company Appeal (AT)No.175/2020 6

Transferee company, they preferred simultaneous Applications wherein after

the approval of the each Scheme, the identity of the Companies in the First

Motion Petitions become fictional and the pending Applications for merger

become infructuous.

5. The Learned Counsel for the Appellant further submitted that the

approval of the stakeholders cannot be a justification for contravening the

provisions of the Act and the procedure established by law.

6. It is also contended that in the event of passing an order with respect

to one Application, the new members, stakeholders, creditors, debenture

holders of the respective transferee companies would be deprived of Notice

under Section 230(3) of the Act. It is also further submitted by the Learned

Counsel for the Appellant that the contentions of the Appellant were not heard

and also were not taken on record on 16.03.2020 and NCLT has passed the

order without giving an opportunity to them for putting forth their arguments.

7. At the outset, we address to the submissions of the Learned Counsel

for the Appellant as to whether they were not heard by NCLT on 16.03.2020,

It is seen from the material on record that the counsel for the Appellant was

present and their arguments were heard and the Counsel for the Regional

Director were also present and heard and only then NCLT had reserved the

Order.

8. It is seen from the record that at the time of filing of the First Motion

Application before the NCLT for the Scheme, NOC of all the shareholders and

debenture holders of all the Applicant Companies was filed. The shareholders

and debentures holders of the Applicant Company 1 to 6 are the Group

Companies and had been apprised of the particulars of the Scheme and had

Company Appeal (AT)No.175/2020 7

also provided their consent to the Scheme and for dispensation of meetings.

At this juncture, it is relevant to reproduce the details of the meeting of all the

stakeholders together with debentures holders with the Applicant Companies

who had approved the Scheme unanimously.

S.No. Company Details Date Time Result of Meeting (Approval in %)

1 Nanak Equity 11.09.2019 10.00 AM 100% Consultants Pvt Shareholders Ltd 2 Nanak Debenture 11.09.2019 11.00 AM 100% Consultants Pvt Holders Ltd 3 Kawaldeep Equity 11.09.2019 12.00 AM 100% Consultants Pvt Shareholders Ltd 4 Kawaldeep Debenture 11.09.2019 01.00 PAM 100% Consultants Pvt Holders Ltd 5 Sayush Equity 11.09.2019 14.30 AM 100% Consultants and Shareholders Investment Pvt Ltd 6 Ganga Kaveri Equity 11.09.2019 15.30 PM 100% Credit and Holders Holding Pvt Ltd 7 Ganga Kaveri Debentjure 11.09.2019 16.30 P M 100% Credit and Shareholders Holding Pvt Ltd 8 Sacred Heart Equity 12.09.2019 10.00 AM 100% Investment Shareholders Company Pvt Ltd 9 Sacred Heart Debenture 12.09.2019 11.00 AM 100% Investment Holders Company Pvt Ltd 10 Sacred Heart Professional 12.09.2019 12.00 PM 100% Investment holders Company Pvt Ltd 11 Kenstar Equity 12.09.2019 13.00 PM 100% Investments and Shareholders Finance Pvt Ltd 12 Osiatic Equity 12.09.2019 14.30 PM 100% Consultants and Shareholders Investments Pvt Ltd 13 Osiatic Debenture 12.09.2019 15.30 PM 100% Consultants and Holders Investment Pvt Ltd 14 Osiatic Unsecured 12.09.2019 16.00 PM 100% Consultants and Creditors Investment Pvt Ltd

Company Appeal (AT)No.175/2020 8

9. The Company subsequent to the approval forwarded the Scheme to the

Regulatory Authority and then for the approval of the Tribunal. Section 230(1)

of the Companies Act, 2013 reads as follows:

"230. Power to compromise or make arrangements with creditors and members.-- (1) Where a compromise or arrangement is proposed--

(a) xxxxx

(b) between a company and its members or any class of them,

the Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs.

Explanation.--For the purposes of this sub-section, arrangement includes a reorganisation of the company's share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods.

10. The aforenoted Section does not stipulate that consent of shareholders

is to be taken as on the date of the sanction of the Scheme by the NCLT.

Admittedly all the Meetings as per directions of the NCLT were held and the

Scheme of Amalgamation was approved by all the stakeholders unanimously

and the Chairman appointed by the NCLT filed Reports as per provisions of

the Act read with Companies (Compromise, Arrangement and Amalgamation)

Rules, 2016. It is submitted that subsequent to the order dated 19.11.2019,

the copies of the Petitions were duly served to the Statutory Authority

including the Regional Director on 04.12.2019 and the Office of the Regional

Director filed their Report on 18.02.2020 after 77 days instead of the

Company Appeal (AT)No.175/2020 9

stipulated 30 days. The Report filed by the Regional Director dated

18.02.2020 does not anywhere specify that they are required to be heard on

the representation in terms of Rule 16(2) of Companies (Compromise,

Arrangement and Amalgamation) Rules, 2016. However, the NCLT after

hearing their arguments passed the order.

11. The Learned Counsel for the Respondent submitted that after the

approval of the Schemes of Amalgamation i.e. Scheme I, Scheme 2 and

Scheme 3 by the NCLT, New Delhi, the Respondent Company duly filed INC-

28 with the Registrar of Companies (ROC)/Ministry of Corporate Affairs (MCA)

in the same sequence as mentioned in the Scheme of Amalgamation i.e.

Scheme 1 on 17.03.2020, Scheme 2 on 12.06.2020 and Scheme 3 on

03.07.2020.

12. It is significant to mention that the Appellant had given their consent

and not objected to Scheme 1 and Scheme 2. The Registrar of Companies

(ROC) had duly approved the E-Form INC-28 filed and the 'Status' of the

Respondent Companies were changed in their 'Record'. With regard to

Scheme 1 and 3, the relevant E-forms INC-28 have also been duly filed and

approved by the Registrar of Companies (ROC).

13. The Appellant has not been able to establish whether there is any loss

to the exchequer or such a merger of the Group Companies is opposed in

Public Policy.

14. Section 230(1), (3) and (5) read as hereunder:-

"230. Power to compromise or make arrangements with creditors and members.-- (1) Where a compromise or arrangement is proposed--

(a) between a company and its creditors or any class of them; or

Company Appeal (AT)No.175/2020 10

(b) between a company and its members or any class of them, the Tribunal may, on the application of the company or of any creditor or member of the company, or in the case of a company which is being wound up, of the liquidator, order a meeting of the creditors or class of creditors, or of the members or class of members, as the case may be, to be called, held and conducted in such manner as the Tribunal directs.

Explanation.--For the purposes of this sub-section, arrangement includes a reorganisation of the company's share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods.

(2) xxxxx (3) Where a meeting is proposed to be called in pursuance of an order of the Tribunal under subsection (1), a notice of such meeting shall be sent to all the creditors or class of creditors and to all the members or class of members and the debenture-holders of the company, individually at the address registered with the company which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key managerial personnel, promoters and non-promoter members, and the debenture-holders and the effect of the compromise or arrangement on any material interests of the directors of the company or the debenture trustees, and such other matters as may be prescribed:

Provided that such notice and other documents shall also be placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the Securities and Exchange Board and stock exchange where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner as may be prescribed:

Provided further that where the notice for the meeting is also issued by way of an advertisement, it shall indicate the time within which copies of the compromise or arrangement shall be made available to the concerned persons free of charge from the registered office of the company.

(4) xxxx (5) A notice under sub-section (3) along with all the documents in such form as may be prescribed shall also be sent to the Central Government, the income-tax

Company Appeal (AT)No.175/2020 11

authorities, the Reserve Bank of India, the Securities and Exchange Board, the Registrar, the respective stock exchanges, the Official Liquidator, the Competition Commission of India established under sub-section (1) of section 7 of the Competition Act, 142 2002 (12 of 2003), if necessary, and such other sectoral regulators or authorities which are likely to be affected by the compromise or arrangement and shall require that representations, if any, to be made by them shall be made within a period of thirty days from the date of receipt of such notice, failing which, it shall be presumed that they have no representations to make on the proposals."

15. It is seen from the Record that the Respondent Companies has complied

with all the provisions of Section 133 of the Act which provides for a certificate

from the Company's Auditor that all accounting is in conformity with the

accounting standards prescribed under Section 133 of the Act and have also

placed on record the documentary evidence that there is 100% approval of all

the stakeholders. At this juncture, we find it relevant to place reliance on the

Judgment of the Hon'ble Supreme Court in the matter of Mihir H. Mafatlal

Vs. Mafatlal Industries Limited (1997) 1 SCC 579 in which the Hon'ble

Supreme Court has observed that if the stakeholders have approved the

valuation after applying their commercial wisdom, the same need not be

interfered with and has laid down the scope and ambit of the jurisdiction of

the Company Court; broad contours of which is as follows:-.

"a) The sanctioning court has to see to it that all the requisite statutory procedure for supporting such a scheme has been complied with 13 that the requisite meetings as contemplated by Section 391(1) (a) have been held.

b) That the Scheme put up for sanction of the Court is backed up by the requisite majority vote as required by Section 391 sub-section (2).

c) That the concerned meetings of the creditors or members or any class of them had the relevant

Company Appeal (AT)No.175/2020 12

material to enable the voters to arrive at an informed decision for approving the scheme in question. That the majority decision of the concerned class of voters is just and fair to the class as a whole so as to legitimately bind even the dissenting members of that class.

d) That all necessary material indicated by Section 393(1) (a) is placed before the voters at the concerned meetings as contemplated by Section 391 sub-section (1).

e) That all the requisite material contemplated by the proviso of Subsection (2) of Section 391 of the Act is placed before the Court by the concerned applicant seeking sanction for such a scheme and the Court gets satisfied about the same.

f) That the proposed scheme of compromise and arrangement is not found to be violative of any provision of law and is not contrary to 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.

g) That the Company Court has also to satisfy itself that members or class of members or creditors 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 of the same class whom they purported to represent.

h) That the scheme as a whole is also found to be just, fair and reasonable 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.

i) Once the aforesaid broad parameters about the requirements of a scheme for getting sanction of the court are found to have been met, the Court will have no further jurisdiction to sit in appeal over the commercial wisdom of the majority of the class of persons who with their open eyes have given their approval to the scheme even if in the view of the Court there would be a better scheme for the company and its members or creditors for whom the scheme is framed. The Court cannot refuse to sanction such a scheme on that ground as it would otherwise amount to the Court exercising appellate jurisdiction over the scheme rather than its supervisory jurisdiction."

Company Appeal (AT)No.175/2020 13

16. It is also seen from the 'Record' that the Official Liquidator has also filed

its 'Report' without raising any objection.

17. For all the aforenoted reasons, specially keeping in view that the

Appellant has given their unconditional approval for Scheme 1 and 3; that all

the stakeholders have approved and given consent; that the rights of the

stakeholders are not affected and the provisions under Section 230 of the Act

is met, this Tribunal is of the considered view that the ratio of the Hon'ble

Supreme Court in Mihir H Mafatlal (Supra) is applicable to this case and

hence we find that there is no illegality or infirmity in the order of the Learned

NCLT and this Appeal fails and is accordingly dismissed. No order as to costs.

18. The Registry is directed to upload the Judgement on the website of this

Tribunal and send a copy of this Judgement to NCLT (National Company Law

Tribunal), New Delhi Bench-VI, New Delhi forthwith.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

4th April, 2022

Bm

Company Appeal (AT)No.175/2020