DOMUS HOLDING PVT. LTD. v. NIL

RESPONDENT (BY SRI K.S.MAHADEVAN & V.JAYARAM, ADV. FOR OL SMT. GOWHAR UNNISA, CGC FOR ROC) : COP NO.186/2011 BETWEEN: NYDHILE INFRASTRUCTURE PVT. LTD., REP. BY ITS DIRECTOR G.SATYANARAYANA, NO.15, 4TH FLOOR, OPP.SHOPPER'S STOP, BANNERGHATTA ROAD, J.P.NAGAR, 3RD PHASE, BANGALORE-560 076. (BY SRI.S.VIVEKANANDA, ADV. FOR M/S.V.G.B.ASSTS.) AND: ...PETITIONER NIL RESPONDENT 4 : (BY SRI K.S.MAHADEVAN & V.JAYARAM, ADV. FOR OL SMT. GOWHAR UNNISA, CGC FOR ROC) THESE COMPANY PETITIONS ARE FILED UNDER SECTION 391 & 394 OF THE COMPANIES ACT, 1956 R/W RULES 11[a][10] & 79 OF THE COMPANIES (COURT) RULES, 1959, PRAYING TO ALLOW THE PETITION SANCTIONING THE SCHEME OF ARRANGEMENT FOR AMALGAMATION FILED HEREWITH AND MARKED AS ANNEXURE-H SO AS TO BE BINDING ON THE PETITIONER COMPANY AND ON ALL THE MEMBERS AND CREDITORS OF THE PETITIONER COMPANY AND ETC., THESE PETITIONS COMING ON FOR ORDERS THIS DAY, THE COURT MADE THE FOLLOWING: O R D E R These Company Petitions have been filed by the Petitioner-Companies under Sections 391 to 394 of Companies Act, 1956 seeking permission to allow the Scheme of Arrangement for Amalgamation, as per Annexure-H & J annexed to the petition, with the Transferee Company. The petitioner-Companies, i.e. M/s. Domus Holdings Private Limited; M/s. Domus Infra Ventures Private Limited; M/s. Domus Infra Projects Private Limited; and M/s. Nydhile Infrastructure Private Limited, (all the four 5 Petitioner-Companies hereinafter are referred to as “Transferor companies”) are proposed to be merged with M/s. Boyance Infrastructure Private Limited (hereinafter referred to as “Transferee-Company”).

2. The Transferor Company in Company Petition No. 183 of 2011 i.e. M/s. Domus Holdings Private Limited was incorporated under the provisions of Companies Act, 1956 at Kolkata, West Bengal, on 12th November 1997 under the name and style of “BRP Stock Broking Services Limited'. The status of the company was changed to a private company on 8th August 2006 and further, on 6th August 2007 the name of the company was changed to “Domus Holdings Private Limited' and pursuant to certificate issued on 14th September 2009 under Section 18(3) of the Act, by the Registrar of Companies, Karnataka, Bangalore, the Registered Office of the Transferor-Company is situate at No.15, 4th Floor, Opp. Shopper's Stop, Banerghatta Road, J.P.Nagar, 3rd Phase, Bangalore-560076. The authorised share capital of the Transferor Company as on 31st March 2010 is Rs.10,00,00,000/- divided into 1,00,00,000 equity 6 shares of Rs.10/- each. Issued, Subscribed and Paid-up Capital is Rs.60,00,000/- divided into 6,00,000 equity shares of Rs.10/- each. The main objects of the Transferor- company, as set out in its Memorandum of Articles of Association is, to carry on the business of an investment Company in India or elsewhere and for that purpose invest in, acquire, underwrite, subscribe for, exchange, sub- underwrite or participation in any syndicate, hold shares, bonds, stocks, securities, debentures, debenture stocks issued or guaranteed by any company constituted and carrying on business in India or elsewhere, any government, State Dominions, Sovereign, Central or Provincial Commissioners, Port Trusts, Public Body or authority, Supreme, Municipal, Local or otherwise whether in India or elsewhere; and etc. and morefully described in the Memorandum of Articles of Association which are annexed at Annexures-C & D to the petition. The latest balance sheet of the Transferor Company is produced at Annexure-E to the petition.

3. The Transferor Company in Company Petition 7 No.184 of 2011 i.e. M/s. Domus Infra Ventures Private Limited was incorporated on 13th May 2005 under the provisions of Companies Act, 1956 in the name and style of “Real Growth Estates Private Limited”. Further, the name of the company was changed to its present name, i.e. Domus Infra Ventures Private Limited on 14th May 2008 vide fresh incorporation certificate consequent to the change of name issued by the Ministry of Corporate Affairs, Registrar of Companies, Andhra Pradesh, Hyderabad. The Registered Office of the Company is situated at No.15, 4th Floor, Opp. Shopper's Stop, Bannerghatta Road, J.P. Nagar 3rd Phase, Bangalore-560 076. The main object of the transferor- company is to carry on the business(es) of dealing in Real Estate, property development, Estate agency and without liming the generality above, to acquire by purchase, exchange, rent or otherwise deal in lands, buildings and hereditaments or any estate or interest therein and any rights over or connected with lands so situated and to turn the same to account in any way as may seem expedient and in particular by laying out, developing or assist in 8 developing, preparing land for building and preparing building sites by planting, paving, drawing and by constructing, re-constructing, pulling down, altering, improving, decorating, furnishing and maintaining offices, flats, service flats, houses, hotels, restaurants, bungalows, chawls, warehouses, shops, cinema houses, shopping and commercial complexes, buildings, works and conveniences of all kinds, by consolidating or sub-dividing properties, by leasing, letting or renting, selling (by instalments, ownership, hire purchase basis or otherwise or disposing of the same) and morefully described in in the Memorandum of Articles of Association enclosed as Annexures C & D to its petition. The authorised share capital of the Company as per the Audited Balance Sheet as at 31st March 2010 is Rs.40,00,00,000/- divided into 4,00,00,000 equity shares of Rs.10/- each. The issued, subscribed and paid-up capital of the Transferor Company No.2 as at 31st March 2010 is Rs.34,76,66,670/- divided into 3,47,66,667 equity shares of Rs.10/- each. The audited balance sheet of the company is enclosed attached as Annexures-E and F to the petition. 9

4. The Transferor Company in Company Petition No. 185 of 2011-M/s.Domus Infra Projects Private Limited was incorporated under the Companies Act, 1956 on 30th May 2005 under the name and style of “Bhagavath Shrusti Estates Private Limited”. Further, on 22nd May 2008 vide fresh incorporation certificate the name of the company was changed as “Domus Infra Projects Private Limited”. The registered office of the Company is situated at No.15, 4th Floor, Opp. Shopper's Stop, Bannerghatta Road, J.P. Nagar 3rd Phase, Bangalore – 560 076. The authorised share capital of the Transferor Company as at 31st March 2010 is Rs.38,00,00,000/- divided into 3,80,00,000 equity shares of Rs.10/- each. The issued, subscribed and paid-up capital of the company as per the audited balance sheet is Rs.37,91,00,000/- divided into 3,79,10,000 equity shares of Rs.10/- each. The object of the company, as per the Memorandum of Articles of Association is, to carry on the business(es) of dealing in Real Estate, property development, Estate agency and without liming the generality above, to acquire by purchase, exchange, rent or 10 otherwise deal in lands, buildings and hereditaments or any estate or interest therein and any rights over or connected with lands so situated and to turn the same to account in any way as may seem expedient and in particular by laying out, developing or assist in developing, preparing land for building and preparing building sites by planting, paving, drawing and by constructing, re-constructing, pulling down, altering, improving, decorating, furnishing and maintaining offices, flats, service flats, houses, hotels, restaurants, bungalows, chawls, warehouses, shops, cinema houses, shopping and commercial complexes, buildings, works and conveniences of all kinds, by consolidating or sub-dividing properties, by leasing, letting or renting, selling (by instalments, ownership, hire purchase basis or otherwise or disposing of the same) and morefully described in in the Memorandum of Articles of Association, which is enclosed as Annexures-C & D to the Petition. The latest audited balance sheet of the company is produced as Annexures-E & F to the petition.

5. The Transferor Company in Company Petition 11 No.186 of 2011 M/s. Nydhile Infrastructure Private Limited was incorporated on 4th April 2008 under the provisions of Companies Act, 1956 with the Registrar of Companies, Karnataka at Bangalore under the name and style of “Domus Infrastructure Private Limited”. Further the name was changed to M/s. Nydhile Infrastructure Private Limited on 30th December 2009. The Registered Office of the Transferor-Company is situate at No.15, 4th Floor, Opp. Shopper's Stop, Bannerghatta Road, J.P.Nagar, 3rd Phase, Bangalore-560076. The authorised share capital of the Transferor Company as on 31st March 2010 is Rs.5,00,00,000/- divided into 50,00,000 equity shares of Rs.10/- each. Issued, Subscribed and Paid-up Capital is Rs.2,01,00,000/- divided into 20,10,000 equity shares of Rs.10/- each. The main objects of the Transferor-company, as set out in its Memorandum of Articles of Association is, to carry on the business(es) of dealing in Real Estate, property development, Estate agency and without liming the generality above, to acquire by purchase, exchange, rent or otherwise deal in lands, buildings and hereditaments 12 or any estate or interest therein and ay rights over or connected with lands so situated and to turn the same to account in any way as may seem expedient and in particular by laying out, developing or assist in developing, preparing land for building and preparing building sites by planting, paving, drawing and by constructing, re- constructing pulling, down, altering, improving, decorating, furnishing and maintaining offices, flats, service flats, houses, hotels, restaurants, bungalows, chawls, werehouses, shops, cinema houses, shopping and commercial complexes, buildings, works and conveniences of all kinds, by consolidating, or sub-dividing properties, by leasing, letting or renting, selling (by installments, ownership, hire purchase basis or otherwise or disposing of the same) and etc. morefully described in the Memorandum of Articles of Association, which is enclosed as Annexure-C & D to the petition. The latest audited Balance Sheet, as on 31st March 2010 of the Transferor Company is also produced as Annexures-E & F to the petition.

6. The Transferee Company i.e. M/s. Boyance 13 Infrastructure Private Limited,-petitioner in Company Petition No.182 of 2011, was incorporated under the provisions of Companies Act, 1956 on 29th September 2008. The Registered Office of the Company is situate at No.15, 4th Floor, Opp. Shopper's Stop, Bannerghatta Road, J.P. Nagar 3rd Phase, Bangalore – 560 076. The object of the company as per the Memorandum of Articles of Association, is to to carry on the business(es) of dealing in Real Estate, property development, Estate agency and without liming the generality above, to acquire by purchase, exchange, rent or otherwise deal in lands, buildings and hereditaments or any estate or interest therein and ay rights over or connected with lands so situated and to turn the same to account in any way as may seem expedient and in particular by laying out, developing or assist in developing, preparing land for building and preparing building sites by planting, paving, drawing and by constructing, re- constructing pulling, down, altering, improving, decorating, furnishing and maintaining offices, flats, service flats, houses, hotels, restaurants, bungalows, chawls, 14 werehouses, shops, cinema houses, shopping and commercial complexes, buildings, works and conveniences of all kinds, by consolidating, or sub-dividing properties, by leasing, letting or renting, selling (by installments, ownership, hire purchase basis or otherwise or disposing of the same), and morefully described in the Memorandum of Articles of Association which is enclosed as Annexures-C & D to the petition. The authorised share capital of the Transferee Company as per the Audited balance sheet as at 31st March 2010 is Rs.5,00,00,000/- divided into 50,00,000 equity shares of Rs.10/- each. The issued, subscribed and paid-up capital of the Transferee company as at 31 st March 2010 is Rs.2,00,00,000/- divided into 20,00,000 equity shares of Rs.10/- each. The audited balance sheet of the Transferee Company is produced as Annexures-E & F to the Petition.

6. The Board of Directors of the Transferor Company and the Transferee-company have approved the scheme of amalgamation of Transferor companies and Transferee Company at its meeting held on 30th April 2011. 15

6. This Court, vide order dated 21st October 2011 in Company Applications No.730, 731, 732, 733 and 738 of 2011, dispensed with the holding of meetings of shareholders and the unsecured creditors of the Transferor and transferee companies.

7. Thereafter, the present petitions have been filed. This Court, vide order dated 25th November 2011 issued notice to the Regional Director and permitted the Petitioners to take out advertisement in English Daily “The Hindu” and Kannada Daily “Samyukta Karnataka” on or before 9th December 2012 indicating the date of hearing as 6th January 2012. Accordingly, the Petitioner has furnished the copy of advertisement taken out in the English daily “The Hindu” and “Vijaya Karnataka” vide Memo dated 13 th December 2011.

8. Pursuant to the notice issued to the Regional Director, the Registrar of Companies, Karnataka has filed affidavit dated 28th May 2012 on behalf of the Regional Director with the following observation in Company Petitions No.183 and 182 of 2011. 16 “1. As on the date of filing of the petition audited accounts as at 31.3.2011 was available but the petitioner companies have enclosed the audited balance sheets as at 31.3.2010 to the petitions which attracts the violation of provisions prescribed under proviso to Sub- section (2) of Sec.391 of the Companies Act, 1956 which prescribes that “no order sanctioning any compromise or arrangement shall be made by the court unless the court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the Court by affidavit or otherwise, all material facts relating to the company, such as the latest financial position of the company, the latest auditors report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under Sections 235 to 251, and the like”. Therefore petitioner companies have to produce audited accounts as at 31.3.2011 before this Hon'ble Court.

2. Since the petitioner companies have filed their latest Balance sheets and Profit & Loss accounts for the financial year ending

31.3.2011 with the Registrar of Companies, the appointed date may be changed as on 17

01.04.2011 instead of 01.04.2010.

3. Though the scheme of arrangement is an amalgamation in the nature of merger as prescribed in clause 28 of Accounting Standard 14 but the petitioner companies preferred to follow an amalgamation in he nature of purchase under Accounting Standard 14 only with an intention of arriving at the exchange ratio by taking market value of assets. All the conditions provided in clause 29 of Accounting Standard are satisfied in the scheme and assets are transferred to transferee company at book value and hence company may file an affidavit undertaking to follow the pooling of interest method under Accounting Standard-14 at the time of implementation of the scheme.

4. It is seen from MOA of transferee company and transferor companies that the transferee company has no such main objects to carry out the business activities of Transferor Companies. Hence, the transferee company has to alter its main object clause to include objects of transferor companies as required under provisions of Sec.17/18 of the Companies Act and the procedure prescribed in MCA portal. Therefore the transferee company 18 may file an affidavit before this Hon'ble Court undertaking to comply with provisions of Sec.17/18 of the Companies Act.

5. It is stated in the petition of transferee company that transferor companies 1 and 4 are wholly owned subsidiaries of transferee company, then how the share exchange ratio is applicable with respect to issue of new equity shares to the members of transferor companies No.1 and 4 by transferee company. Therefore, the transferee company may file an affidavit before this Hon'ble Court substantiating the issue of new equity shares by transferee company to the members of the transferor companies No.1 and 4 which are wholly owned subsidiaries of the transferee company.”

9. With regard to Company Petitions No.184, 185 and 186 of 2011, the Regional Director has filed his affidavit dated 24th August 2012, making the following observation: “1. It is submitted that the petitioner- company, as per para 2 of its affidavit, has filed its audited Annual Accounts of Annual return for the financial year ending 31.3.2011 19 in the office of Registrar of Companies, Karnataka. However, as per proviso to sub- section (2) of Sec.391 of the Companies Act, 1956 it is mandatory that the latest financial position is required to be submitted to the Hon'ble Court as per various judgments in the matter. It is held in KEC International Ltd. v. Kamani Employees Union [(2000) Comp LJ 351; (2000) 36 CLA 124 (Bom)] that where the iformation has to be given of the latest financial position of the company, it has been held it would mean the financial position as at the time of final hearing of the petition and that this requirement is statutory.

2. As regards the submission made by the petitioner company in para 3 of its Affidavit regarding changing of Appointed Date as

01.4.2011 instead of 01.4.2010, it is submitted that as the petitioner company has filed its Balance Sheet and Profit and Loss Account as at 31.3.2011, the appointed date may be changed from 1.4.2010 to 1.4.2011.

3. It is submitted that the petitioner company has stated in para 4 of its affidavit that the choice of Accounting for the purpose of Amalgamation is Purchase Method and not 20 Pooling of interest Method. In such situation, the assets of all the transferor companies are to be transferred at fair value under the prevailing market prices. Further, upon coming into force of the Scheme, the excess of Consideration over the Aggregate Face Value should be credited to the Capital Reserve and not to the General Reserve as stated in clause

8.2 of the scheme and also in case of any differences in the accounting policy between the companies the impact of the same should be quantified and adjusted in the Capital Reserve to ensure that the financial position on the basis of consistent accounting policy and not in the Revenue Reserve as stated in clause

8.3 of the Scheme. In this regard, para 37 of the Accounting Standard 14 is reproduced as below: “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 on 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”. Hence, it is submitted that the company 21 has to file an affidavit undertaking the compliance of above provisions before this Hon'ble Court.

4. It is submitted by the petitioner company in para 6 of its affidavit that transferor companies No.1 and 4 are not the wholly owned subsidiaries of the transferee company. In this connection, it is brought to the kind notice of this Hon'ble Court that it is stated in para 6 and para 9 of their petitions that the transferor companies No.1 and 4 are the wholly owned subsidiaries of the transferee company. However, as per Annual Return made upto 30.9.2011 filed by the Transferor Companies No.1 and 4 have to clarify about para 6 and para 9 of their respectively.”

10. The transferor-companies have filed and affidavit undertaking to comply with the observations made by the Regional Director.

11. The learned counsel for the petitioner placing reliance on the judgment in M/s. NOKIA SIEMENS NETWORK INDIA PRIVATE LIMITED passed in Company Petition No.34 of 2008 disposed of on 9th January 2009, contended that if a scheme by way of transfer of 22 undertaking does not affect the rights of the members of the creditors of the transferee-company as between themselves and the company or does not involve re- organisation of the share capital of the transferee-company, no application by the transferee-company under Sections 391 or 394 of the Companies Act, 1956 would be necessary. In view of the submission made by the learned counsel and also in the light of law declared by this Court, the observations made by the Regional Director, do not survive for consideration. Accordingly, service of Notice and the filing of separate petition by the Transferee Company, is not necessary and the same is dispensed with.

12. The observations made by the Regional Director with regard to the “Appointed Date” cannot be considered and the Appointed Date i.e. 1st April 2010, as mentioned by the transferor companies in its affidavit is confirmed.

12. Upon the Scheme becoming effective, all employees of the Transferor Company in service on the effective date, shall be deemed to have become the employees of the Transferee company with effect from the 23 appointed date without any interruption in their service as a result of the transfer of the undertaking to the transferee company on the same and terms and conditions of employment as were with the Transferor company. On the basis of the continuity of service, the terms and conditions of their employment with Transferee company shall not be less favourable than those applicable to them with reference to the Transferor company on the effective date.

12. Pursuant to the advertisement of the petitioner, no shareholders, creditors and employees of the Transferee company have appeared and objected the proposed Scheme of Amalgamation. The Official Liquidator has filed the application. There is no objection for amalgamation as the Regional Director has also filed his affidavit with an observation that the Transferee Company has not filed any petition to that effect. Accordingly, as per Scheme Annexure-H, the Transferor companies, viz. Domus Holdings Private Limited; Domus Infra Ventures Private Limited; Domus Infra Projects Private Limited; and Nydhile Infrastructure Private Limited are permitted to be 24 amalgamated with the Transferee company-Boyance Infrastructure Private Limited. Further, the Transferor companies are ordered to be dissolved.

13. Hence the following: O R D E R i. The Company Petitions are allowed. ii. The Scheme of Arrangement of Amalgamation of Transferor Companies with the Transferee Company at Annexures-H & J to the petition is hereby sanctioned and the same shall be binding on the shareholders and creditors of the Transferor Companies. Iii. The Petitioner Company shall file copy of this order with the Registrar of Companies, Karnataka within thirty days from the date of receipt of copy of this order. Sd/- JUDGE