Mukul Sales Private Limited and Another v. Prem Sales Private Limited (2018)

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2018 SCC OnLine NCLT 31422
In the National Company Law Tribunal†

(BEFORE R.P. NAGRATH, MEMBER (JUDICIAL) AND PRADEEP R. SETHI, MEMBER (TECHNICAL))
Mukul Sales Private Limited and Another … Petitioner/Transferor

Company No. 1;
Versus
Prem Sales Private Limited … Petitioner/Transferee Company;
CP(CAA) No. 16/Chd/CHD/17‡
Decided on December 17, 2018
Advocates who appeared in this case:
Counsel for Petitioners : Mr. Dinesh Bhandari, Practising Company Secretary
Mr. Ajit Singh, Practising Company Secretary
For the Official Liquidator, Chandigarh and Regional Director, Northern Region,
Ministry of Corporate Affairs, New Delhi. : Mr. Deepankur Sharma, Advocate.
For Income Tax Department : Mr. Yogesh Putney, Advocate.
The Judgment of the Court was delivered by
PRADEEP R. SETHI, MEMBER (TECHNICAL):— This is a joint Second Motion Petition
under section 230-232 of the Companies Act, 2013 (for short the ‘Act’) filed by the
Petitioner-Companies in terms of Rule 15 of the Companies (Compromises,
Arrangements and Amalgamations) Rules 2016 (for brevity, ‘Rules’) for the sanction of
Scheme of Amalgamation (for brevity, ‘Scheme’) of Mukul Sales Private Limited,
(Transferor Company No. 1), Atulaya Healthcare Private Limited, (Transferor Company
No. 2) with Prem Sales Private Limited, (Transferee Company). The joint petition is
maintainable in terms of Rule 3(2) of the Rules.
2. The Petitioner-Companies filed First Motion Application bearing CA(CAA) No.
12/Chd/CHD/2017 before this Tribunal for convening meetings of equity shareholders,
unsecured creditors and secured creditors except for secured creditors of Transferor
Company No. 1 (there being no secured creditors).
3. The First Motion Petition was allowed on 17.08.2017 and directions were made
for calling and convening of meetings of equity shareholders and unsecured creditors
of Transferor Company No. 1 and Transferor Company No. 2 and secured creditors of
Transferor Company No. 2 and also in respect of equity shareholders, secured creditors
and unsecured creditors of Transferee Company (Petitioner-Company No. 3) along with
other directions. There being no secured creditor (in Transferor Company No. 1), there
was nothing to call and convene their meeting. Copy of the order dated 17.08.2017
passed in the First Motion Application is at Annexure N-1.
4. The affidavits dated 25.09.2017 with regard to compliance of all the directions
given in the order dated 17.08.2017 was filed by Mr. Pankaj Kansil, Director of the
Transferor Company No. 1 and 2 (diary No. 2221 and 2220) and by Mr. Sukant Kansil,
Director of Transferee Company (diary No. 2219) alongwith newspaper publications in
‘Indian Express’ (English)(Chandigarh Edition) and ‘Dainik Tribune (Hindi)
(Chandigarh Edition) both dated 11.09.2017 and notices sent to Statutory Authorities
including Regional Director, Northern Region, Delhi, Registrar of Companies, Punjab &
Chandigarh, Official Liquidator, Chandigarh, Income Tax Department and Sectoral
Regulators, Director, DHS - PNDT, Chandigarh and New Delhi Division, Atomic Energy
Regulatory Board, Mumbai and Director General Medical Education & Research,
Panchkula, Director, PNDT Division, New Delhi.
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5. Reports dated 16.10.2017 of the Chairperson along with the report of Scrutinizer
dated 14.10.2017 in respect of meetings of equity shareholders of all the petitioner-
companies and secured creditors of petitioner companies No. 2 and Transferee
Company were filed on 26.10.2017 vide diary No. 2456.
6. The Chairperson has reported that the equity shareholders and unsecured
creditors of all the petitioner-companies and secured creditors of Transferor Company
No. 2 and Transferee Company have unanimously approved the Scheme and have
passed special resolutions in favor of the Scheme. Thereupon the instant petition was
filed for approval of the Scheme in terms of Rule 15 of the Companies (Compromises,
Arrangements and Amalgamations) Rules, 2016.
7. The main objects, date of incorporation, paid-up share capital and rationale of
the Scheme alongwith interest of employees and clauses related to Provident Fund,
Gratuity Fund and any other Special Funds were already discussed in detail in the First
Motion order dated 17.08.2017 passed by this Tribunal.
8. The meeting of secured creditor of Transferor Company No. 1 was not convened
as there was only one secured creditor i.e. Siemens Financial Services Pvt. Ltd. whose
loan of Rs. 2,10,799/- was subsequently fully repaid and closed. Certificate of Naveen
Soni & Associates, Chartered Accountants dated 10.08.2017 confirming NIL secured
creditor is attached as Annexure A-10BB with the affidavit dated 11.8.2017 of Mr.
Pankaj Kansil, Director, Transferor Company No. 1 attached with the amended First
Motion Petition filed by diary No. 1642 dated 14.08.2017.
9. The certificate dated 27.02.2017 of Naveen Soni & Associates, Chartered
Accountants for Transferor Company No. 1 and certificate dated 27.2.2017 of R.K.
Deepak & Co., Chartered Accountants for Transferor Company No. 2 and Transferee
Company is attached as Annexure P-51, P-52 and P-53 respectively, stating therein
that the accounting treatment provided in the Scheme is in compliance with the
applicable Accounting Standards specified under Section 133 of the Companies Act,
2013 read with Rule 7 of Companies (Accounts) Rules, 2014. The same certificates
have been again filed with the compliance affidavit filed by diary No. 123 dated
12.01.2018. The office has made a report that no objection to the Scheme has been
received in this Tribunal from any quarter.
10. The accounts of the petitioner companies have been audited and the audited
financial statements up to 31.03.2016 are at Annexure P-10 of Transferor Company
No. 1 at Annexure P-15 (standalone), Annexure P-16 (consolidated) of Transferor
Company No. 2 and at Annexure P-22 (standalone), P-23 (consolidated) of Transferee
Company. Further, supplementary accounting statements for the period 01.04.2016 to
31.12.2016 of Transferor Companies No. 1, 2 and Transferee Company are at
Annexures P-11, P-17 (standalone), P-18 (consolidated), P-22 (standalone) and P-23
(consolidated) respectively.
11. As per the Scheme the appointed date is 01.01.2017 or such other date as may
be approved by the Tribunal. The Scheme provides for the manner in respect of share
exchange ratio for which valuation report was also filed. The Share Exchange Ratio
under the Scheme has been determined in accordance with the Report on Valuation of
Shares dated 27.02.2017 determining the share exchange ratio issued by Balwinder
Associates, Chartered Accountants, Annexure-P-29 and P-30. According to the share
exchange ratio the Transferee Company shall issue shares to the shareholders of the
Transferor Company No. 2 in proportion of 10 equity shares of Rs. 10 each fully paid in
Transferee Company for every 33 equity shares of Rs. 10/- each fully paid. Since the
entire shareholding of Transferor Company No. 1 is held by Transferor Company No. 2
& Transferee Company together, no consideration will be paid for transfer of the
undertaking of the Transferor Company No. 1 to the Transferee Company and similarly
no shares will be issued to Transferor Company No. 2 being also amalgamated in
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Transferee Company.
12. When the petition was listed on 04.12.2017, the following order was passed:
“x x x
i) The date of hearing of the joint petition filed by the petitioners for the approval
of the Scheme is fixed on 24.01.2018.
“ii) Notice of the hearing shall be advertised in the newspapers i.e. “The Indian
Express” (English, Chandigarh Edition) and “Dainik Tribune” (Hindi,
Chandigarh Edition) not less than 10 days before the aforesaid date fixed for
hearing.
iii) In addition to the above public notice, each of the Petitioner shall serve the
notice of the petition on the following Authorities namely, (a) Central
Government through Regional Director (Northern Region), Ministry of
Corporate Affairs (b) Registrar of Companies, NCT of Delhi & Haryana, Ministry
of Corporate Affairs (c) the Income Tax Department along with copy of this
petition by speed post and to the Official Liquidator (Dasti) immediately and
file affidavit of service with necessary documents, tracking reports at least 3
days before the date fixed.
iv) Further, notice shall also be served to Objector(s) or to their representative as
contemplated under sub-section (4) of Section 230 of the Act who may have
made representation and who have desired to be heard in their representation
along with a copy of the petition and the annexures filed therewith at least 15
days before the date fixed for hearing.
v) Both the petitioners shall at least 7 days before the date of hearing of the
petition file an affidavit of service in relation to paper publication effected as
well as service of notices on the authorities specified above including the
sectoral regulator as well as to objectors, if any.
vi) Objections, if any, to the scheme contemplated by the authorities to whom
notice has been given on or before the date of hearing fixed herein may be
filed, failing which it will be considered that there is no objection to the
approval of the Scheme on the part of the authorities by this Tribunal and
subject to other condition being satisfied as may be applicable under the
Companies Act, 2013 and relevant rules framed thereunder.
vii) The petitioner companies shall individually comply with proviso to sub-
section (3) of section 232 or proviso to sub-section (7) of Section 230, as may
be applicable under the circumstances on or before the date fixed for hearing
by filing the certificate of company's auditor.
viii) Registry shall also report as to whether any objection has been received to
the proposed Scheme in the registry.
x x x”
Further vide order dated 22.12.2017, it was observed that in place of ‘Registrar of
Companies, Chandigarh’ ‘Registrar of Companies, NCT of Delhi and Haryana, Ministry
of Corporate Affairs’ was mentioned in the order dated 04.12.2017 and the same be
corrected and read as ‘Registrar of Companies, Chandigarh’.
13. The authorized representatives of the petitioner-companies filed compliance
affidavits dated 11.01.2018 by diary No. 123 on 12.01.2018 with which copy of paper
publications in Indian Express (English, Chandigarh Edition) and Dainik Tribune
(Hindi, Chandigarh Edition), both dated 21.12.2017 were annexed at page Nos. 5 and
6. The Registry also reported on 23.01.2018 that no objection was received from any
quarter in this Tribunal to the proposed Scheme.
14. It was also stated in the affidavit dated 11.01.2018 that notices were sent to
the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi;
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Registrar of Companies, Chandigarh; Official Liquidator, Chandigarh and Income Tax

Department. The postal receipts of the notices sent to the statutory authorities are
attached with the affidavit. Also the certificate of Naveen Soni & Associates and R.K.
Deepak & Co., Chartered Accountants dated 27.02.2017 regarding compliance of
Accounting Standard was again filed with the affidavit.
15. As per the affidavits dated 19.01.2018 filed vide diary no. 235 the petitioners
stated therein that they have not received any complaint/objection against the
proposed Scheme of Arrangement from any of the statutory authorities. Further as per
the separate affidavit dated 15.05.2018 filed vide diary no, 1615 the petitioners stated
therein that they have not received any objections/representation from any of the
Sectoral Regulator(s) relating to the proposed Scheme of amalgamation.
16. It is further represented that according to the Scheme, if any suit, appeal or
any other proceeding of whatsoever nature (hereinafter called ‘the proceedings’) by or
against the Transferor Companies be pending or which may be instituted in future in
respect of any matter relating to the Transferor Companies, the same shall not abate,
be discontinued or be in any way prejudicially affected by reason of the transfer of the
undertaking of the Transferor Companies or anything contained in this Scheme but the
proceedings may be continued, prosecuted and enforced by or against the Transferee
Company in the same manner and to the same extent as it would be or might have
been continued, prosecuted and enforced by or against the Transferor Companies if
this Scheme had not been made.
17. We have heard the learned counsel for the petitioners, Mr. Deepankur Sharma,
counsel for the Official Liquidator and the Regional Director, Northern Region, Ministry
of Corporate Affairs and Mr. Yogesh Putney, counsel for the Income Tax Department.
18. Mr. Satya Pal Singh, Deputy Registrar of Companies, Punjab and Chandigarh
stated in his report dated 12.01.2018 (diary no. 247 dated 22.01.2018) that there are
no proceedings pending against any of the Petitioner Companies. Also no inspection
has been carried out against any of the Petitioner Companies.
19. Mr. S.B. Gautam, Regional Director, Northern Region, Ministry of Corporate
Affairs has filed his report by way of affidavit dated 28.02.2018 (diary no. 690 dated
09.03.2018) which is based on the report of the Registrar of Companies. The Regional
Director has made few observations in his report which are as follows:—
a) In para 8 of the report, the Regional Director has observed that with regard to
clause 11 of the Scheme, the Petitioner Companies may be directed to follow the
prescribed procedure for change of name under the Rules of the Companies Act,
2013;
b) In para 9 of the report, it has been observed that with regard to clause 21 of the
Scheme (statement of disclosure), the Hon'ble Tribunal may consider the issue
raised by the Auditors in their report and reply by the management on merits.
Further, the Petitioner Companies may be directed to file their overdue financial
statement for the year 2016-2017 to verify the respective disclosure; and
c) In para 14 of the report, the petitioner-companies are directed to file the overdue
statutory return for the year ending 31.03.2017.
d) In para 15 of the report, it is stated that no prosecution, technical scrutiny,
complaints, inspection and proceeding under Section 235 to 251 of the Act and
violation of Section 383A/215 of the Act, 1956/2013 against any of the petitioner
-companies is pending under the Companies Act, 2013.
e) In para 16 of the report, the Regional Director has stated that the Petitioner may
be directed to give an undertaking to pay the stamp duty as may be applicable
upon transfer of assets due to the amalgamation of undertaking/assets.
20. The Petitioner Companies filed reply to the report of the Regional Director by
way of joint affidavit dated 12.04.2018 by diary no, 1192 dated 18.04.2018 which is
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as under:—
a) With regard to the observations made in para 8 of the report, it has been
submitted that the company has already obtained approval of shareholders and
further undertakes to follow the procedure prescribed for change of name as may
be required under the applicable rules in Companies Act, 2013 and directions
made by Hon'ble NCLT bench in this regard, if any.
b) In relation to the observations made in para 9 of the report regarding auditors'
observation in Transferor Company No. 1, the petitioner-companies have
submitted the reply of the management in tabular form duly replying to all the
observations raised by the auditors in their report.
c) In relation to the observations made in para 14 of the report, it has been
submitted by the petitioner company No. 1 that the company has filed due
balance sheet and annual return for financial year 2016-2017. Copy of challan of
filing made to Ministry of Corporate Affairs Office is attached as Annexure-5.
d) With regard to the observations made in para 16 of the report, it has been
submitted that the petitioner company agree and undertake to pay applicable
stamp duty on amalgamation at the appropriate time.
21. In his report dated 09.02.2018, the Official Liquidator has made the following
observations:—
a) In para 14 of the report, the Official Liquidator with regard to Consideration and
Exchange Ratio for the Transferor Companies No. 1 & 2 observed that:
“i) Exchange Ratio of shares of Transferor Company No. 1 held by the Transferor
Company No. 2 is not mentioned as well as these shares are not taken for
paying consideration.
ii) Valuation report of shares of Transferor Company No. 1 held by Transferor
Company No. 2 is not given.
iii) 10(Ten) New Equity Share of Rs. 10/- each in the Transferee Company
credited as fully paid up for every 33 (Thirty-Three) Equity Share of Rs. 10/-
each fully paid up held by them in Capital of Transferor Company, but it is not
mentioned if shareholders of Transferor Company No. 1 (holding Shares even
through Transieror Company No. 2) holds less than 33 shares, i.e. say 15
shares then how many shares will be given to them in exchange?”
b) In para 16(i) of the report, the Official Liquidator has observed that as per
auditor report of Transferor Company No. 1 dated 31.03.2016, during the period
ended 31.03.2016, the company has arrived at an ‘One time Settlement’ (OTS)
of dues with its lenders who have waived principle amount of Rs. 12,23,25,403/-
and such amount is credited to Capital Reserve which is not in accordance with
the Accounting Standards (AS) 5 on “Net Profit or Loss for the period, prior
period items and changes in Accounting Policies” as notified under the
Companies (Accounting Standards) Rules, 2014. In fact, the said treatment is
also not in line with the opinion of the Expert Advisory Committee (EAC) of the
ICAI on accounting treatment on waiver of loan.
c) In para 16(ii) of the report, it has been observed that the entity has transferred
by way of sale of a business division to one of its associates (Atulya Healthcare
Private Limited) on slump sale basis for a lump sum consideration of Rs.
2,80,00,000/-, as a result of this sale, company suffered a loss of Rs. 86,58,121/
-.
d) In para 16(iii) it has been observed that on the basis of Part C of Schedule II of
Companies Act, 2013, useful lives of Plant & Machinery and Medical Equipments
should have been 20 years & 13 years respectively. Had depreciation been
provided based on the useful lives specified in Part C of Schedule II of
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Companies Act, 2013; depreciation for the period would have been Rs.
3,56,35,012 (instead of Rs. 19,01,35,985/-), Profit for the year (net of deferred
tax assets) would have been Rs. 10,56,41,487/- (instead of loss of Rs.
1,73,19,465) and for the period end, Net block of Fixed Assets would have been
Rs. 19,44,63,296/- (instead of Rs. 7,63,08,535/-).
e) In para 16(iv) of the report, it is stated by the Official Liquidator that the terms
and conditions of loan granted by the company to Transferor Company No. 2
covered in the register maintained under Section 189 of the Companies Act,
2013 are prejudicial to the Company's interest on account of the fact no interest
has been charged on the said loan amount during the financial year under
consideration. No specific repayment schedule has been stipulated, therefore we
are unable to comment on the matters specified in the clause (iii)(b) & (c) of
para 3 of CARO 2016.
f) In para 16(v) of the report, the Official Liquidator has observed that the company
has contravened the provisions of Section 185 of the Companies Act, 2013 in
respect of loans granted in excess of limits specified under such section to a
Company in which Director has interest (Atulaya Healthcare Pvt. Ltd.) that has
maximum outstanding balance during the year Rs. 11,78,59,124/-.
g) Further, in para 16(vii) and (ix) it is observed that as per auditor report
31.03.2015 the accumulated losses of Transferor Company No. 1 at the end of
the financial year is more than fifty percent of its net worth. Also, the details with
regard to contingent liabilities are not provided.
22. In response to the observations of the Official Liquidator, the learned counsel
for the petitioner companies filed an affidavit dated 15.04.2018 on behalf of petitioner
companies vide diary No. 1614 dated 16.04.2018 which is as follows:—
a) With regard to observation in para 14 of the report, it has been submitted that
Transferor Company No. 2 is a shareholder in Transferor Company No. 1 which is
going to amalgamate with same Transferee Company at the same time. The
Transferee Company cannot issue shares to Transferor Company No. 2 after
simultaneous amalgamation of Transferor Company No. 1 & 2 in it and therefore,
exchange ratio and valuation of shares of Transferor Company No. 1 for shares
held by Transferor company No. 2 is not applicable in this case. Further, issue of
fraction of shares will not arise, as Transferor Company No. 1 does not hold any
shares in Transferee Company. Further, in case any equity shareholder's holding
in Transferor Company No. 2 is such that the shareholder becomes entitled to a
fraction of equity share of Transferee Company, Transferee Company shall round
off the said entitlements to the nearest integer and allot equity shares
accordingly. Moreover, shareholders of Transferor Company No. 2 and Transferee
Company are closely held private limited companies and related to each other
and running family owned business.
b) In relation to observation made in para 16(i) of the report, it has been submitted
that the total amount of Rs. 33,12,00,000/- waived by SBI under OTS (One Time
Settlement), which consist of Principal Amount of Rs. 12,23,25,403/- plus
interest amount of Rs. 20,88,74,597/- which is shown as extraordinary item in
Profit & Loss Account. The management is of the view that as far as principal
amount is concerned that is for Term loan for the purchase of assets and is a
long term loan. So the same is rightly shown as addition to “Capital Reserve”
which seems to be correct treatment of the amount as per our opinion. Judgment
passed by Hon'ble Madras High Court in the case of Iskraemeco Regent Limited
v. CIT [(2011) 196 TAXMAN 103] is also attached as Annexure-1.
c) In relation to the observations made in para 16(ii), it has been submitted that
Income Tax Act recognizes slump sale as a transfer of an undertaking which
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constitutes a business activity when taken as a whole. The Transferor Company

No. 1 sold and transferred its diagnostic center to Transferor Company No. 2 for
consideration keeping in mind the useful life of assets. Copy of the valuation
report of the slump sale of assets is attached as Annexure-2.
d) In relation to the observation made in para 16(iii) of the report, it is stated that
the useful life of plant and machinery and other equipments is based on the
report dated 31.03.2016 submitted by Siemens Limited, Independent
professional firm. Copy of the report is also attached as Annexure-3.
e) Further, in response to the observations made in para 16(iv) and (v) of the
report, it is submitted that sums referred in the report were given to Transferor
Company No. 2 as Capital Advances for implementation of a project to expand
scope of healthcare services. However, the company decided to drop the project
in between and received back whole of the Capital Advances paid to Transferor
Company No. 2 during the financial year 2015-2016 and therefore, the
outstanding balance due was NIL as evident from financial statement. A copy of
the expert opinion from independent Practising Company Secretary is attached
as Annexure 4.1 and certificate of statutory auditor of Transferor Company No. 1
clarifying his own observations in the report for the financial year 2015-2016 is
attached as Annexure 4.2.
f) In reply to the observations made in para 16(vi) & (vii) of the report, it is
submitted that Sustainable Assets Management Department which revalued the
assets against which the company opted for OTS as offered by bank and
thereafter company made payment against OTS Settlement to the bank and
account of the company became regular. Further due to expansion in the
company there was increase in the fixed as well as the operational cost, sales &
marketing which came out of as losses next year.
g) Observations with regard to Section 44AB of the Income Tax Act, 1961 has also
been replied in para Nos. 16(viii) to (xiv) of the affidavit.
23. The Income Tax Department filed its report dated 21.05.2018 by diary No.
1740 dated 25.05.2018 in which it has been observed that:—
“…5… A perusal of the Second Motion petition as presented before this Hon'ble
Tribunal suggests that since December, 2016 status of audited Books of Accounts,
Profit & Loss Accounts and Balance Sheets is not known. Thus, in view of above, the
revenue department reserves its right to file supplementary objections.
x x x
…7… The real intent of the amalgamation of two companies is nothing but to
evade the liability to pay Tax by evolving the colorable mechanism of
amalgamation.
8. That as per the Audit Balance Sheet of transferor company no. 1/namely
Mukul Sales Private Limited dated 31.03.2016 have observed that During the period
ended March 31, 2016, the Company has arrived at an “One Time Settlement” OTS
of dues with its lenders (SB), as a result, the lenders have agreed to waive the
principal amount of Rs. 12,23,25,403A and such amount is credited to Capital
Reserve which is not in accordance with the Accounting Standard (AS) 5 on “Net
Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies”
as notified under the Companies (Accounting Standards) Rules, 2014. In fact, the
said treatment is also not in line with the opinion of the Expert Advisory Committee
(EAC) of the ICAI on Accounting Treatment of waiver of Loan.
9… If the depreciation been provided based on the useful lives specified in Part C
of the schedule II companies Act, 2013, depreciation for the period would have
been Rs. 3,56,35,012/- (instead of Rs. 19,01,35,985/-), profit for the year (net of
deferred tax assets) would have been Rs. 10,56,41,487/- (instead of Loss of Rs.
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1,73,19,465/-) and for the period end, Net Block of Fixed Assets would have been
Rs. 19,44,63,296/- instead of Rs. 7,63,08,535/-. Thus this would result in
avoidance of tax, of the Transferor depicting the primary object of the scheme to be
evasion of Tax.
DEPRECIATION CLAIMED DEPRECIATION AS PER EXCESSIVE CLAIM OF
SCHEDULE II DEPRECIATION
Rs. 19,01,35,985/- Rs. 3,56,35,012/- Rs. 15,45,00,973/-
10. That the Transferor Company No. 1 has also incurred cash losses of Rs.
1,70,09,047/- during the financial year and cash losses of Rs. 1,60,86,125/- in
immediately preceding financial year which will make the Transferee Company also
a sick unit and resulting to losses in the coming financial years of the Transferee
company effecting the liability of payment of Due Tax otherwise being a profit
oriented unit.
ASSESSMENT YEAR LOSS INCURRED BY TAX BENEFIT/LOSS OF
TRANSFEROR CO. TAX TO THE
EXCHEQUER
2017-2018 Rs. 1,70,09,047/- 46,86,417
2016-2017 Rs. 1,60,86,125/- 44,32,129
TOTAL 91,18,546
11. That the Transferor Company No. 2 namely Atulaya Health Care private
Limited having PAN No. AAHCA15516, is having an outstanding demand off Rs.
18,50,100/- during the Assessment Year 2014-2015 and thus, the policy is
prejudicial to the interest off the Revenue Department.
12. That a perusal off present scheme off amalgamation between the Transferor
Companies and Transferee Companies suggests that the same does not involve any
public interest as such.
13… the real intention off the common director is to evasion off Tax liability and
the same is against the interest off the Revenue and general public at large…”
24. In response to the objections of the Income Tax Department, the petitioners
filed reply by way of affidavit dated 23.07.2018 which is as follows:—
“…5…Both the Transferor and Transferee Companies have duly filed their
respective Income Tax Returns for the Financial Year ended March 31, 2017 along
with their Tax Audit Reports. Proof of the same is attached for your perusal and
record as per Annexure-1.
Further, we wish to state that all statutory filings of the Transferor and
Transferee Companies including their financial statements consolidated along with
their respective subsidiaries are upto date with the Registrar of Companies (through
the Ministry of Corporate Affairs) and the same are attached herewith as per
Annexure-2.
…7… The purpose of the scheme is to provide the long term stability and
transparency to the business of the transferee company. There is nothing illegal or
unlawful or dubious or colourful in the scheme and the same is perfectly legitimate
and permissible by law. The above submission are made in case of Unichem Lab
case 670 of 2011 of Bombay High Court attached here with for your reference as
Annexure-3.
…Any and all the objections of the Income Tax Department are superfluous in the
light of the above Section 170, which provides that all liabilities due to the Income
Tax whether assessed before or after the amalgamation will have to be duly settled
by the successor company.
…8…The treatment of the “Principal Component of the Loan Waiver” has been
well settled by the Hon'ble Supreme Court of India vide their judgment “CIT v.
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Mahindra & Mahindra Ltd. (2018) 404 ITR 1”, that any such amount is a “Capital
Receipt” which is not liable to tax. Hence, the financial treatment in the books of
the Transferor Company Mukul Sales Pvt. Ltd. of such Principal Component of the
Loan Waiver being credited directly to the Capital Reserve and not the Profit & Loss
Account is entirely correct and as per law.
CIT v. Mahindra & Mahindra Ltd. (2018) 404 ITR 1 Annexure:—4
…9…The useful life of plant and machinery and other equipment prescribed as
per schedule II of Companies Act 2013. Where in part A paragraph 3 and sub-
paragraph (i) has clarified that “The useful life of an asset shall not ordinarily be
different from schedule. Provided that where a company adopts a useful life
different from what is specified in Part C provided such justification in this behalf is
supported by technical advice.”
…Whatever depreciation is charged to books, the same has been added back in
the computation off income while determine the taxable income as per Income Tax
Act.
…Hence, this change in the useful life off the equipment by the Transferor
Companies is in no manner detrimental to the revenue of the Income Tax
Department and rather it reflects the true value of Assets in the Balance Sheet.
…10…The Transferor Company No. 1 has a cash profit of Rs. 4,46,96,792 and the
Transferor Company No. 2 has a cash profit of Rs. 2,33,23,089.32 for the FY 2016-
2017 and the Transferor Company No. 1 has a cash profit off Rs. 5,99,299.59 and
the Transferor Company No. 2 has a cash loss off Rs. 45,15,001 for the FY 2015-
2016 as per the books off account and financial statements filed.
…post the amalgamation, the profits off the merged entity will be much higher
on account off the optimization off the costs across the Transferor and Transferee
Companies.
…11…that the Transferor Company No. 2 is having outstanding demand off Rs.
18,50,100/- needs to be updated by the Learned Counsel off the Income Tax
Department. The demand made by the assessing officer on the Transferor Company
No. 2 has been set aside by the Commissioner Appeals. Copy off orders passed in
this regard are attached as Annexure 6.
…12…the intentions off the management off the Transferor and Transferee
Companies is clearly to increase their competitive strength by optimizing their
costs, which will enable them to serve their customers more efficiently and at more
affordable rates.
…13…the proposed amalgamation will not prejudicially effect the revenue off the
Income Tax Department in any manner, and their interests are more than protected
by Law vide Section 170 off the Income Tax Act. Hence, even after the
amalgamation, both the predecessor and successor companies remain liable for any
tax demands (subject to their legitimate right to appeal) either in the present or
what may arise in the future.”
25. When the matter was listed for rehearing on 08.10.2018, the learned counsel
for the petitioner-companies sought time to inspect the record as to whether the
tracking reports in respect of the notice sent to other Regulators by which the
companies are being governed were filed with the compliance report in the record of
first motion proceedings. Vide order 11.10.1028, it was noted that the authorized
representative of the petitioner companies submits that he will file the tracking report
in respect of the notices sent to the sectoral regulators and other documents in the
Registry on the same date.
26. During the First Motion, the list of sectoral regulators was furnished by the
petitioner-companies by diary No. 2220, 2221 and 2219 dated 29.09.2017 which are
as follows:—
-----------------------------------------------------------------------------------------------------------------------------------------------------------
(a) With respect to Transferor Company No. 1, the sectoral regulators are Atomic
Energy Regulatory Board, Mumbai and Director, PNDT Division, New Delhi.
(b) With respect to Transferor Company No. 2, the sectoral regulators are
Department of Health, PNDT, Chandigarh and Director General, Medical &
Research, Panchkula, Haryana.
(c) With respect to Transferee Company there are no sectoral regulators.
27. The authorized representative of the petitioner-companies filed affidavit dated
10.10.2018 (diary No. 3945 dated 11.10.2018) verifying delivery of notices at the first
motion stage sent to concerned Sectoral Regulators of Transferor Companies No. 1 and
2 alongwith certificate of Sai Express, Trackon Couriers Pvt. Ltd. showing the delivery
date of the notices delivered on 18.09.2017 to Chairman, Atomic Energy Regulatory
Board, Mumbai with respect to Transferor Company No. 1 and on 13.09.2017 to
Director, Department of Health, PNDT, Chandigarh and Director General Medical &
Research, Panchkula, Haryana with respect to Transferor Company No. 2. It is also
stated by the authorized representative of Transferor Company No. 1 that in the
petition it was mentioned that PNDT Department, New Delhi is a Sectoral Regulator of
the petitioner-company No. 1 but as the regulatory permissions and clearances are in
the name of Fortis Hospital, C/o Fortis Hospital Ltd., New Delhi, the Transferor
Company No. 1 is not governed under PNDT Regulations and therefore, PNDT
Department, New Delhi is not a sectoral regulator. Copy of the certificate of
registration issued by PNDT, New Delhi is attached with this affidavit.
28. In the order dated 23.10.2018, it was noted that while issuing notice of hearing
of this petition on 04.12.2017, notice to sectoral regulators was not directed to be
issued and we deem it appropriate that notice to sectoral regulators be also issued.
The order dated 23.10.2018 notes that the authorized representative of the petitioner
companies submitted that the companies have already obtained no objections from
the Director, PNDT Division, Chandigarh (wrongly mentioned as New Delhi in the
order) and Chairman, Atomic Energy Regulatory Board, Mumbai and sought time to
place on record the same. It was further noted that in the affidavit dated 10.10.2018
(diary No. 3945 dated 11.10.2018) it was stated that PNDT Department, New Delhi is
not a sectoral regulator. Therefore, directions were sought for issue of notice to
Director General, Medical Education and Research, Haryana. In the order dated
23.10.2018, notice was accordingly directed to be issued to the Director General,
Medical Education and Research, Haryana.
29. In compliance with the order dated 23.10.2018, the petitioner company No. 2
filed affidavit dated 08.11.2018 stating therein that it had delivered notice to Director
General, Medical Education and Research, Haryana for hearing on 15.11.2018. A copy
of proof of dispatch was also attached with this affidavit. However, no reply was
received and no representation was made on the date of hearing by Director General,
Medical Education and Research, Haryana.
30. The position regarding no objection from the sectoral regulators is as under:—
(a) With regard to Transferor Company No. 1 Atomic Energy Regulatory Board,
Mumbai has given no objection to the scheme by way of e-mail dated
11.10.2018 (diary No. 4325 dated 09.11.2018).
(b) With regard to Transferor Company No. 2, No objection letter/certificate has
been received from Director, Health Services, PNDT Division, General Hospital,
Sector-16, Chandigarh vide letter dated 21.10.2018 (diary no, 4325 dated
09.11.2018).
31. In view of the discussion, we conclude that the petitioner-companies have
adequately replied to the objections/observations raised by the Regional Director,
Official Liquidator and Income Tax Department and the sectoral regulators have filed
their no objection to the scheme except Director General, Medical Education and
-----------------------------------------------------------------------------------------------------------------------------------------------------------
Research, Haryana to whom notice was issued but there was no reply/representation.
Therefore, the Scheme (Annexure - P/28) is sanctioned and we hereby declare the
same to be binding on all the shareholders and creditors of the petitioner companies
and on all concerned. While approving the Scheme, it is clarified that this order should
not be construed as an order in any way granting exemption from payment of any
stamp duty, taxes or any other charges, if any, and payment in accordance with law or
in respect of any permission/compliance with any other requirement which may be
specifically required under any law. With the sanction of the Scheme, the Transferor
Companies No. 1 and 2 shall stand dissolved without undergoing the process of
winding up resulting in increase in the authorized share capital of the Transferee
Company and simultaneous alteration in main object clauses, liability clause, name
clause of memorandum of transferee company approved as per the terms of Scheme.
Upon the Scheme coming into effect, the paid-up share capital of Transferor Company
No. 1 will stand cancelled and extinguished and no shares will be issued by the
Transferee Company in lieu thereof as the Transferor Company No. 1 is a subsidiary of
the Transferee Company and the Transferee Company cannot issue shares to itself.
Similarly, as Transferor Company No. 2 will simultaneously amalgamate by absorption
with Transferee Company, therefore, no shares will be issued to Transferor Company
No. 2 in lieu of shares held in Transferor Company No. 1, as the Transferee Company
cannot issue shares to itself.
THIS TRIBUNAL DO FURTHER ORDER:
(1) That all the property, rights and powers of the Transferor Companies No. 1
and 2 be transferred, without further act or deed, to the Transferee Company
and accordingly, the same shall pursuant to sections 230 to 232 of the
Companies Act, 2013, be transferred to and vested in the Transferee Company
for all the estate and interest of the Transferor Companies No. 1 and 2 but
subject nevertheless to all charges now affecting the same; and
(2) That all the liabilities and duties of the Transferor Company No. 1 and 2 be
transferred, without further act or deed, to the Transferee Company and
accordingly the same shall pursuant to sections 230 to 232 of the Companies
Act, 2013, be transferred to and become the liabilities and duties of the
Transferee Company; and (3) That all the proceedings now pending by or
against the Transferor Company No. 1 and 2 be continued by or against the
Transferee Company; and
(4) That all the employees of the Transferor Company No. 1 and 2 shall be
transferred to the Transferee Company in terms of the ‘Scheme’; and
(5) That the Transferee Company do, without transfer application, allot to the
existing members of the Transferor Company No. 2 shares of transferee
company to which they are entitled under the said Scheme of Amalgamation;
and
(6) The fee, if any, paid by Transferor Companies No. 1 and 2 on their authorized
capital shall be set off against any fee payable by the Transferee Company on
its authorized capital subsequent to the sanction of the Scheme; and
(7) That the Petitioner Companies do, within 30 days after the date of receipt of
the order of this Tribunal, cause a certified copy of this order to be delivered to
the Registrar of Companies for registration and on such certified copy being so
delivered, the Transferor Company No. 1 and 2 shall be dissolved without
undergoing the process of winding up and the concerned Registrar of
Companies shall place all documents relating to the Transferor Company No. 1
and 2 and registered with him on the file kept in relation to the Transferee
Company and the files relating to the said Transferor Company No. 1 and 2,
Transferee Company shall be consolidated accordingly, as the case may be;
-----------------------------------------------------------------------------------------------------------------------------------------------------------
and
(8) That the Transferee company shall deposit an amount of Rs. 1,00,000/-
(Rupees one lac only) with the Pay and Accounts Officer, in respect of the
Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi
and Rs. 40,000/- (Rupees forty thousand only) in favour of “The Company Law
Tribunal Bar Association, Chandigarh”, within a period of three weeks from the
receipt of the certified copy of this order; and
(9) That any person interested shall be at liberty to apply to the Tribunal in the
above matter for any directions that may be necessary.
32. As per the above directions and Form No. CAA 7 of the Companies
(Compromises, Arrangement and Amalgamation) Rules, 2016, formal order be issued
on the Petitioners on filing of the Schedule of Property i.e. (i) freehold property of
Transferor Companies No. 1 and 2; and (ii) leasehold property of the Transferor
Companies No. 1 and 2, by way of affidavits of Transferor Companies No. 1 and 2.
———
† “Chandigarh Bench”
‡ Under Sections 230-232 of the Companies Act, 2013
In the matter of Scheme of Amalgamation of:

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Mukul Sales Private Limited and Another v. Prem Sales Private Limited (2018)

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Mukul Sales Private Limited and Another v. Prem Sales Private Limited (2018)

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SCC Online Web Edition, © 2023 EBC Publishing Pvt. Ltd.

Page 1 Wednesday, January 11, 2023

2018 SCC OnLine NCLT 31422

In the National Company Law Tribunal†

Mukul Sales Private Limited and Another … Petitioner/Transferor

Registrar of Companies, Chandigarh; Official Liquidator, Chandigarh and Income Tax

constitutes a business activity when taken as a whole. The Transferor Company

In the matter of Scheme of Amalgamation of:

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