The present petitions are for seeking sanction to the Scheme of Amalgamation of Amrapali Developers (India) Ltd., petitioner of Company Petition No.13/09 and Korrwett Capital Investments Private Ltd., petitioner of Company Petition No.14/09 (hereinafter referred to as the 'Transferor Company') with Amrapali Industries Ltd., the petitioner of Company Petition No.15/09 (hereinafter referred to as the Transferee Company'). The Scheme which is proposed to be sanctioned as produced at Annexure C to the petitions.
In Company Petition No.13/09, vide order dated 25.11.2008 passed by this Court in Company Application No.595/08, the meeting of the equity shareholders was ordered to be convened for consideration of the Scheme and the declaration was recorded of the said Company that there was no secured or unsecured creditor. Thereafter, the meeting has been held of the equity shareholders for consideration of the Scheme on 27.12.2008 and the report has been filed by the Chairman at Annexure-E together with the affidavit. As per the said Report, the scheme is approved unanimously by the shareholders present and voting at the meeting.
In Company Petition No.14/09, vide order dated 25.11.2008 passed in Company Application No.596/08, the meeting of the shareholders and of the creditors were disposed with.
In Company Petition No.15/09, vide order dated 25.11.2008 passed by this Court in Company Application No.598/08, the meeting of the equity shareholders was ordered to be convened. Thereafter, the meeting has actually been held on 27.12.2008 and the report has been filed by the Chairman at the meeting together with the affidavit and the report shows that the Scheme is approved by the shareholders of the Transferee Company unanimously and voting at the meeting.
In case of both the Transferor Companies, on 20.01.2009, the petitions were admitted and advertisement was ordered to be published in Times of India, English daily and Sandesh, Gujarati daily and publication in the Government gazette was dispensed with. The notices were ordered to be issued to the Central Government to be served through the Regional Director, Corporate Affairs and Notice were also issued to the OL for examination into the affairs of the Transferor Companies through the Chartered Accountant.
In Company Petition No.15/09, being Transferee Company, on the same date, i.e. on 20.01.2009, the petition was admitted and the advertisement was ordered to be published in the same manner in the same newspaper and publication in the official gazette was dispensed with. Notice was also issued to the Central Government through Regional Director, Ministry of Corporate Affairs.
Affidavit has been filed by Mr.Dharmendra Mavjibhai Rathod, registered Clerk of learned Advocate Mrs. Soparkar dated 18.06.2009 for compliance to the order for publication in the newspaper and the relevant extract of the advertisement as was ordered is also produced with the said affidavit. Further, as stated in the additional affidavit dated 15.07.2009, at para 1, in response to the said publication in the newspaper, the petitioner or its advocate has not received any objection from any person.
In the petitions of both the Transferor Companies, OL has filed the report dated 22.04.2009 together with the report of the Chartered Accountant Shri P.G. Tulsian & Co. and it has been stated by the OL in the report that the affairs of the Companies have not been conducted in the manner prejudicial to the interest of its members or to public interest.
In response to the notice issued to the Central Government, the affidavit has been filed by Shri R. K. Dalmia, Dy. Registrar of Companies based on the letter dated 16.06.2009 received by Registrar of Companies from the office of the Regional Director. On behalf of the respondent Company, in response to the objection, the additional affidavit is also filed. The objections raised on behalf of the Central Govenrment and the explanation of the concerned Company shall be referred to in detail hereinafter.
The first objection raised on behalf of the Central Government is that there was unusual affairs of tax evasion by the Transferee Company inasmuch as in the Balance Sheet as on 31.03.2008, Schedule P discloses that the Company disclosed the sum of Rs.1,59,28,500/- to the Income Tax Authorities as unexplained income in the survey conducted by the Income Tax Authority.
In the additional affidavit filed on behalf of the Transferee Company dated 15.07.2009, the explanation given to the aforesaid objection is that the Income Tax Department had done survey in the office premises of the Transferee Company on 07.09.2007 and balance-sheet was finalised on 09.07.2008. The Income Tax Return for the same year was filed on 30.09.2008 and the Transferee Company in order to not to enter into avoidable litigation with the Income Tax Department, it has shown the additional income and has paid up due amount of taxes on the same.
If the Company has paid additional income tax based on the survey, by showing additional income as desired by the income tax department with a view to avoid the litigation, such cannot be said as a valid ground for denying the sanction to the Scheme of Amalgamation since in any case, the revenue or the public interest is benefited by higher payment of the income tax and cannot be termed as against the public interest, more particularly when it has not come out from the objection on behalf of the Central Government that any further proceedings were taken for falsification of the accounts or nonpayment of the Income Tax though such was payable.
The second objection raised on behalf of the Central Government is that clause 10(g) and h) of the Scheme are inconsistent with the Accounting Standard-14.
The Transferee Company in the affidavit while meeting with the said objection has stated at para B of the Additional Affidavit as under:
(B) With regard to the second observation, it is hereby submitted that clause 10(g0 and 10(h) are not inconsistent with Accounting Standard-14. It is respectfully submitted that clause 35 and 37 of the AS-14 deals with the said issue. The same are reproduced herein below:
35. The difference between the amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) and the amount of share capital of the transferor company should be adjusted in reserves.
37. Any excess of the amount of the consideration over the value of the net assets of the transferor company acquired by the transferee company should be recognised in the transferee company's financial statements as goodwill arising in amalgamation. If the amount of the consideration is lower than the value of the net assets acquired, the difference should be treated as Capital Reserve.
It is further submitted that the above two clauses are not contradictory but supplementary to each other. In any case, it is not mandatory to observe the requirements of Accounting Standard at the stage of amalgamation.
However, if the Hon'ble Court so directs, the company agrees to adjust the said difference against or treat it as the Capital Reserve. With regard to clause 10(h), it is hereby submitted that it is only enabling provision, which can be used only in case of a controversy or necessity.
In view of the above, the Company shall as per the above agreement adjust the said difference against or treat it as the Capital Reserve. Order accordingly.
The third objection raised on behalf of the Central Government is as under :
(C) The Transferee Company being a listed company had violated provision of section 383A, 58A, section 211 r.w. Part and Part II of Schedule VI in respect of disclosure of its investment, non discloser of nature of security provided to secured loans, non disclosure of Bank balance in current Account and Fixed Deposits Account in scheduled or non scheduled Banks, non disclosure as to whether the Sundry Debtors and loans and Advances were secured or unsecured and whether good or otherwise, non discloser of TDS from interest income, the names of the scrips in which the company purchased and sold during the year, break up of remuneration paid to Directors, section 212 in respect of its subsidiary etc. during 2006-2007 and 2007-2008 and therefore the ROC has been advised to carry out Balance Sheet scrutiny and take appropriate action. Similar disclosure violations have been observed in respect of Amrapali Developers(India) Ltd. Transferor Company which is also a listed company.
The Transferee Company has submitted the explanation at para C of the additional affidavit as under:
(C) With regard to the third observation, it is respectfully submitted that various alleged violations of the provisions of law and the alleged non disclosures are not material or relevant to the proposal of amalgamation. The petitioners hereby clarifies as follows:
Factually, there is no violation of Sec.58A of the Act as the company has not accepted any deposits from the public. The deposits received are from others in corporate sector. The same has been confirmed by the Chartered Accountant in the Audit report.
Similarly, since the Transferee Company does not deal in shares and securities, it is not relevant for it to disclose the names of scripts purchased or sold. The quantitative details regarding the various commodities is given vide note no.7 in Schedule !-Notes Forming part of accounts.
The petitioners have declared the break up of the remuneration given to their Managing Directors.
So far as other alleged offences are concerned, the petitioner companies would be approaching the appropriate authorities for compounding of the said irregularities under Sec.621A of the Act in short time and on payment of the requisite fine shall comply with the provisions of the Companies Act.
It is further clarified that the present scheme does not envisage any exemption against any contraventions or procedural lapses, if any, in case of the Petitioner companies. The scheme does not come in the way of any proceedings, if initiated for such alleged lapses against the company or its directors. The said view is consistently taken by our High Court in various matters while sanctioning the Scheme.
It may be recorded that similar objection was raised by the Chartered Accountant in the report in respect of Transferor Company in the case of Norfolk Infotech Pvt. Ltd. in Company Petition No. 30/07 and others decided on 03.08.2007. This Court at para 7 had observed as under :
No material is placed on record to show that any proceedings are initiated by RBI or the competent authority under the Banking Regulation Act or other appropriate authority concerning to the alleged non-banking activities of the transferor company. Therefore, it appears that it may not be necessary for this Court to conclude on the said aspects as to whether the activities were conducted in accordance with the main objects of the Company given in the Memorandum of Association or that any approval of the RBI was required or any prohibition for such purpose. If the proceedings are initiated for such purpose in accordance with law, appropriate authority may take independent view. Therefore, on such aspects the rights and contentions of the concerned authority and/or the Directors of the company as the case may be shall remain open and the order of this Court in the present proceedings shall not be read as concluding the same and/or putting a seal over such alleged activities. The reference may be made to the decision of this Court in the case of Arvind Mills Ltd. , reported in Vol111 Company Cases, p. 118 and more particularly the observations made at page 165 and 166 and another decision of this Court in Company Petition No.10 of 2006 in case of Core Health Limited and more particularly the observations made at para 32. Hence, subject to the aforesaid observations, as the opinion of the Official Liquidator is that the affairs of the companies are not being conducted in the manner prejudicial to its members or public interest, it appears that the scheme can further be considered for sanction accordingly.
Therefore, if the objection is considered in light of the aforesaid view taken by this Court, the only observation deserves to be made is if the proceedings are initiated for such purpose in accordance with law, the appropriate authority may taken independent view on the aspects of initiation of the proceedings and for alleged breach of provisions of any law, the rights and contentions of the concerned authority and/or Directors of the Company, as the case may be, shall remain open and the order of this Court in the present proceeding shall not be read as concluding the same and/or putting the sale over such activity. Hence, in view of the aforesaid observations, the scheme can further be considered for grant of sanction and the objections would not survive in view of the observations made hereinabove.
The last objection raised on behalf of the Central Government is that the latest financial position is submitted before this Court at the time of hearing.
As such, the latest financial statements on provisional basis as on 31.03.2009 have been filed together with the additional affidavit filed on behalf of the petitioning company and therefore, the said objection of the Central Government would no more survive.
The perusal of the Scheme shows that the Appointed Date is 01.04.2007 or such other date as this Court may direct. However the process for consideration of the Scheme appears to have been initiated after the expiry of the accounting year, i.e. after 31.03.2008 and the application was moved for convening and/or dispensation of the meeting on 25.11.2008 only.
I would have further considered the matter. However, the learned counsel for the petitioners has stated that the petitioners have no objection if the Appointed Date is altered by this Court and fixed as of 01.04.2008. Hence, no further discussion is required. Therefore, the Scheme shall stand modified to the extent that the Appointed Date as per the Scheme shall be 01.04.2008. The order accordingly.
No other adverse circumstances are brought to the notice of this Court.
Hence, subject to the aforesaid observations and modifications, the Scheme of Amalgamation at Annexure-C is sanctioned as per the provisions of the Companies Act.
Petitions are allowed to the aforesaid extent.
The fees of the Central Government Standing Counsel Mr. Iqbal Shaikh is quantified at Rs.3,500/- for each petition. The cost of the OL in respect of Transferor Company is quantified at Rs.1,500/- for each of the petition. It will be open to the Company concerned to pay the cost of the Central Government as well as of the OL directly to the concerned counsel or OL as the case may be by A/c. payee cheque.
(JAYANT PATEL, J.) *bjoy Top