Ufo Moviez India Ltd. & Anr vs Union Of India, Ministry Of Corporate ...

IN THE MATTER OF: UFO Moviez India Ltd. & Anr. .....Appellants Vs. Union of India, Ministry of Corporate Affairs, Through the Regional Director, Western Region ......Respondent

Present : For Appellant: Mr. Sudipto Sarkar, Senior Advocate with Ms. Sonali Mathur, Ms. Roopali Singh, Mr. Aman Sharma, Ms. Neeraja Balakrishnan, Advocates For Respondents: Mr. Sanjay Shorey, Director, Mr. R.K. Tiwari, JD Mr. Balooni, AD for R-1

24.10.2019 - 'Qube Cinema Technologies Private Limited' ('QCTPL' for short)

demerges business synergic with 'UFO Moviez India Ltd.' (Appellant herein), into

'QDCPL' businesses that are non-synergic were left behind in 'QCTPL'.

Subsequently, MPL merged into 'QDCPL' resulting dissolution of 'MPL'. The

Intellectual property rights of the demerged entity, 'QCTPL' would vest in 'QDCPL

along with the nil value intellectual property rights of 'MPL'. All shareholders in

'QCTPL' and 'MPL' were allotted shares in 'QDCPL' as a consideration for the

demerger and merger above.

Company Appeal (AT) No. 48 of 2019 The 53.2% of the shareholders of 'QCTPL' did not wish to participate in the

business that would have been demerged into 'QDCPL' and subsequently UFO.

Accordingly, they were provided an opportunity to exit such business of 'QCTPL'

as would have been demerged into 'QDCPL' and onwards. Accordingly, 'UFO

Moviez' (Appellant herein) and New Investors were to purchase the shares of the

Sellers through SPA. The SPA was not part of the scheme, and was only

described (i) to ensure accurate representation of the post-merger shareholding

structure of UFO; and (ii) disclose the relevant linkage and steps contemplated

in relation to the entire transaction.

The effect was that 'QDCPL' merges into UFO; pursuant to which 'QDCPL'

dissolves. UFO issues shares to the shareholders of 'QDCPL'.

'IPR' flowing from 'QCTPL' (through 'QDCPL') to 'UFO' is transferred to

PJSA by way of a slump sale.

The aforesaid scheme was approved by all the parties to the Scheme,

including by the shareholders of 'QCTPL' included the approval of shareholders

of 'QCTPL' who would be provided an exit from 'QDCPL' pursuant to the scheme.

The decision relating to merger of 'QCTPL' with 'QDCPL' and 'MPL' by

'National Company Law Tribunal' (Chennai).

The 'UFO Moviez India Ltd.' (Appellant herein) (1st Appellant) and 'PJSA'

(2nd Appellant herein) having its registered office at Mumbai filed a separate

Company Appeal (AT) No. 48 of 2019 2 Application for modification and 'Scheme of Merger' u/s 230-232 of the

Companies Act, 2013 before 'National Company Law Tribunal', Mumbai.

Before the 'National Company Law Tribunal', Mumbai the Appellant(s)

brought to their notice that all the procedures prescribed u/s 230 and 232 of

the Companies Act, 2013 were followed. This was noticed by the 'National

Company Law Tribunal' Mumbai. However, by impugned order dated 21st

January, 2019, the 'National Company Law Tribunal' Mumbai rejected the

Application of Merger on certain ground which was not required to be noticed for

determination of merger u/s 230-232 of the Companies Act, 2013.

The said order is under challenge in these Appeals. Director (Legal &

Prosecutor), Ministry of Corporate Affairs appearing on behalf of 'Union of India'.

He accepts that the ground given for rejection in the impugned order dated 21st

January, 2019 were uncalled for and the Tribunal was only required to notice

all the requirements of Section 230-232 of Companies Act. The Tribunal was

also required to follow the Accounting Standard for the treatment of

shareholders. However, it is expected that such Issue was not raised and were

not discussed by the 'National Company Law Tribunal'.

Mr. Sudipto Sarkar, Learned Counsel for the Appellant submits that even

if the Appellate Tribunal allow 'Merger', it will not be given effect to, because of

certain financial changes made during the pendency of the petition of this

Appeal. It is to be re-worked and fresh date is to be notified after following the

procedure.

Company Appeal (AT) No. 48 of 2019 3

In view of the stand taken by the parties and taking into consideration

the facts of the case, we set aside the impugned order passed by the 'National

Company Law Tribunal' Mumbai Bench.

If the Appellant Companies proceeds further, it should follow the

procedure enshrined in Section 230-232 of the Companies Act, 2013 and other

provisions as required to be followed under the Law including the permission

from the Income Tax Department and requirement, if any, from SEBI and if

procedure required to be followed under Accounting Standard so as to ensure

that the shareholders do not suffer on 'Merger'.

The appeal is allowed with aforesaid observations. No costs.

[Justice S. J. Mukhopadhaya] Chairperson

[Justice Venugopal M.] Member (Judicial)

[Justice Jarat Kumar Jain] Member (Judicial)

ss/sk

Company Appeal (AT) No. 48 of 2019 4