COMMISSIONER OF INCOME TAX, (CENTRAL II) vs. MAYANK TRADERS(P) LTD.

CO.PET.471/2015 Page 1 of 16 IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment reserved on : 06.12.2016 Judgment pronounced on: 30.05.2017 CO. PET. 471/ 2015 ATNA ENGINEERING PRIVATE LIMITED …. Petitioner /Transferor Company No. 1 AND SAGIT INVESTMENT PRIVATE LIMITED …. Petitioner/Transferor Company No.2 AND SANAT INVESTMENT PRIVATE LIMITED …. Petitioner/Transferor Company No.3 AND PUNJ SONS PROPERTIES PRIVATE LIMITED …. Petitioner/Transferor Company No.4 AND INDTECH INVESTMENT PRIVATE LIMITED …. Petitioner /Transferor Company No.5 AND D AND A FOODS PRIVATE LIMITED …. Petitioner /Transferor Company No.6 WITH

CO.PET.471/2015 Page 2 of 16 SHUBHVIR INVESTMENTS PRIVATE LIMITED … Petitioner /Transferee Company Through: Ms. Babli Kala, Advocate for the Petitioner Companies. Mr. Rajiv Bahl, Advocate for OL. Ms. Aparna Mudiam, AROC. CORAM: HON'BLE MR. JUSTICE SIDDHARTH MRIDUL J U D G M E N T SIDDHARTH MRIDUL, J. 1. The present petition has been filed jointly, under sections 391 to 394 of the Companies Act, 1956 (hereinafter referred to as ‘the Act’), by Atna Engineering Private Limited (hereinafter referred to as ‘Transferor Company no.1’), Sagit Investment Private Limited (hereinafter referred to as ‘Transferor Company no.2’), Sanat Investment Private Limited (hereinafter referred to as ‘Transferor Company no.3’), Punj Sons Properties Private Limited (hereinafter referred to as ‘Transferor Company no.4’), INDTECH Investment Private Limited (hereinafter referred to as ‘Transferor Company no.5’), D and A Foods Private Limited (hereinafter referred to as ‘Transferor Company no.6’) and Shubhvir Investments Private Limited (hereinafter

CO.PET.471/2015 Page 3 of 16 referred to as ‘Transferee Company’), seeking sanction to the proposed Scheme of Amalgamation (hereinafter referred to as ‘proposed scheme’) of the Transferor Company nos.1 to 6 with the Transferee Company. 2. The Transferor Company nos.1 to 6 and the Transferee Company are hereinafter collectively referred to as ‘Petitioner Companies’. 3. The registered offices of the Petitioner Companies are situated at New Delhi, within the jurisdiction of this Court. 4. The Transferor Company no.1 was incorporated under the Act on 19.03.1984, with the Registrar of Companies, N.C.T. of Delhi & Haryana at New Delhi. 5. The Transferor Company no.2 was incorporated under the Act on 04.06.1981, with the Registrar of Companies, N.C.T. of Delhi & Haryana at New Delhi. 6. The Transferor Company no.3 was incorporated under the Acton 31.07.1981, with the Registrar of Companies, N.C.T. of Delhi & Haryana at New Delhi. 7. The Transferor Company no.4 was incorporated under the Act on 22.03.1990, with the Registrar of Companies, N.C.T. of Delhi & Haryana at New Delhi.

CO.PET.471/2015 Page 4 of 16 8. The Transferor Company no.5 was incorporated under the Act on 08.03.1989, with the Registrar of Companies, N.C.T. of Delhi & Haryana at New Delhi. 9. The Transferor Company no.6 was incorporated under the Act on 01.11.1985, with the Registrar of Companies, N.C.T. of Delhi & Haryana at New Delhi. 10. The Transferee Company was incorporated under the Act on 04.06.1981, with the Registrar of Companies, N.C.T. of Delhi & Haryana at New Delhi. 11. The present authorized share capital of the Transferor Company no.1 is Rs.50,00,000/- divided into 50,000 equity shares of Rs.100/- each. The present issued, subscribed and paid-up share capital of the Transferor Company no.1 is Rs.1,00,000/- divided into 1000 equity shares of Rs.100/- each. 12. The present authorized share capital of the Transferor Company no.2is Rs.5,00,000/- divided into 50,000 equity shares of Rs.10/- each. The present issued, subscribed and paid-up share capital of the Transferor Company no.2 is Rs.3,00,000/- divided into 30,000 equity shares of Rs.10/- each.

CO.PET.471/2015 Page 5 of 16 13. The present authorized share capital of the Transferor Company no.3 is Rs.5,00,000/- divided into 50,000/- equity shares of Rs.10/- each. The present issued, subscribed and paid-up share capital of the Transferor Company no.3 is Rs.1,00,000/- divided into 10,000 equity shares of Rs.10/- each. 14. The present authorized share capital of the Transferor Company no.4 is Rs.10,00,000/- divided into 1,00,000 equity shares of Rs.10/- each. The present issued, subscribed and paid-up share capital of the Transferor Company no.4 is Rs.1,00,000/- divided into 10,000 equity shares of Rs.10/- each. 15. The present authorized share capital of the Transferor Company no.5 is Rs.25,00,000/- divided into 25,000 equity shares of Rs.100/- each. The present issued, subscribed and paid-up share capital of the Transferor Company no.5 is Rs.1,00,000/- divided into 1,000 equity shares of Rs.100/- each. 16. The present authorized share capital of the Transferor Company no.6 is Rs.10,00,000/-, divided into 95000 equity shares of Rs.10/- each aggregating to Rs.9,50,000/-; and 5000 9% redeemable preference share of Rs.10/- each aggregating to Rs.50,000/-. The present issued, subscribed and

CO.PET.471/2015 Page 6 of 16 paid-up share capital of the Transferor Company no.6 is Rs.1,00,000/- divided into 10,000 equity shares of Rs.10/- each. 17. The present authorized share capital of the Transferee Company is Rs.15,00,000/- divided into 1,50,000 equity shares of Rs.10/- each. The present issued, subscribed and paid-up share capital of the Transferee Company is Rs.10,00,000/- divided into 1,00,000 equity shares of Rs.10/- each. 18. Copies of the Memorandum of Association and Articles of Association of the Petitioner Companies have been filed on record alongwith the joint application, being Company Application (M) no.35 of 2015, earlier filed by the Petitioner Companies.The latest balance sheets of the Petitioner Companies have also been filed on record. 19. A copy of the proposed scheme has been placed on record and the salient features thereof have been incorporated and set out in detail in the present petition. It has been stated on behalf of the Petitioner Companies that the Transferor Companies are wholly owned subsidiaries of the Transferee Company and the scheme will enable the Petitioner Companies to, inter alia, rationalize and streamline their management, businesses and finance and

CO.PET.471/2015 Page 7 of 16 lead to a better economic control, over the running and management of the businesses and undertakings of the said companies. 20. So far as the share exchange ratio is concerned, the proposed scheme provides that the entire shareholding of the Transferor Companies are held by the Transferee Company and therefore, the investments of the Transferee Company in the shares of the Transferor Companies shall stand cancelled upon the proposed scheme becoming effective; and no new shares shall be issued by the Transferee Company. 21. It has been further stated on behalf of the Petitioner Companies that, no proceedings under Sections 235 to 251 of the Act (or under the corresponding provisions of the Companies Act, 2013) are pending against the Petitioner Companies as on the date of filing of the present petition. 22. The Board of Directors of the Petitioner Companies, in their separate meetings held on 20.10.2014, have unanimously approved the proposed scheme. Copies of the Resolutions passed at the meetings of the Board of Directors of the Petitioner Companies have been placed on record. 23. To recapitulate, the Petitioner Companies had in the earlier round filed Company Application (M) no.35 of 2015, whereby a prayer was sought to dispense with the requirement of convening the meetings of their equity

CO.PET.471/2015 Page 8 of 16 shareholders and creditors. This Court vide order dated 14.05.2015 allowed the said application and dispensed with the requirement of convening and holding the meetings of the equity shareholders and creditors of the Petitioner Companies to consider and if thought fit, approve, with or without modification, the proposed scheme. 24. The Petitioner Companies have thereafter filed the present petition seeking sanction to the proposed scheme. Vide order dated 03.09.2015, notice in the present petition was directed to be issued to the Regional Director, Northern Region and the Official Liquidator; and the notice was accepted on behalf of the Regional Director and the Official Liquidator. Furthermore, citations were directed to be published in the Delhi Edition of the newspapers, namely, ‘Statesman’ (English) and ‘Veer Arjun’ (Hindi). An affidavit dated 29.02.217 has been filed by the Petitioner Companies showing compliance regarding publication of citations in the aforesaid newspapers on 18.12.2015. 25. Pursuant to the notices issued in the present petition, the Official Liquidator has filed a report wherein it has been stated that, no complaint has been received against the proposed scheme from any interested person/party; and that the affairs of the Petitioner Companies do not appear to have been

CO.PET.471/2015 Page 9 of 16 conducted in a manner prejudicial to the interest of its members, creditors or to public interest as per second proviso of Section 394(1) of the Act. However, an observation has been made by the Official Liquidator in the said report that, there is no provision in the proposed scheme as regard the merger or addition of the authorized share capital of the Transferor Companies into the Transferee Company. 26. In response to this observation made by the Official Liquidator, the Petitioner Companies have filed an affidavit dated 05.09.2016, stating as follows: “4. Contents of paragraph no.4 are denied and it is submitted here that as per part V of the scheme, para 10, it is stated that upon the sanction of the Scheme, the Memorandum of Association of the Transferee Company shall without any further act, instrument or deed be stand altered, modified and amended pursuant to section 13 of the Companies Act, 2013, 394 of the Companies Act, 1956, other applicable provisions of the companies Act, 1956 and Companies Act, 2013 in so far applicable, hence it is stated that after the amalgamation of the Transferee Company and Transferor Companies the Authorised share capital of the Petitioner Companies stands merged as per the MOA.” 27. Further, in response to the notices issued in the present Petition, Regional Director (RD), Northern Region, Ministry of Corporate Affairs has

CO.PET.471/2015 Page 10 of 16 filed an affidavit dated 27.07.2016, wherein it has been noted that there are outstanding dues against the Transferee Company payable to the Income Tax Department; that the Petitioner Companies have not complied with various provisions of the Companies Act, 2013, and rules made thereunder; and further that the Petitioner Companies have also misrepresented material facts qua holding/subsidiary status and passing of resolutions for the proposed scheme. The relevant portions of the said affidavit of the RD are reproduced hereinbelow: “5. That the Deponent states that in response to the letter sent by the office of the Deponent to the Additional Commissioner of Income Tax, Delhi, no comments/ observations of the Income TaxDepartment has been received in the office of the Deponent. However, a letter dated 02.11.2015 in the matter has been received from Income Tax officer, Ward-23(3), New Delhi wherein it has been stated that according to the Arrear Demand & Collection Register available on ITD, there are outstanding demand of Rs.80/-, Rs. 2844/- and Rs.1110/- for the A.Y.s 2003-04, 2005-06 and 2006-07, respectively in the case of M/s. Shubhvir Investment P. Ltd. i.e., the Transferee Company. It has been further stated that the pendency of payment of central revenues (corporation tax) may be kept into consideration while disposing off the petition of the said company for amalgamation. (Copy of the letter dated 02.11.2015 received from the Income Tax department is marked as Exhibit-C for kind perusal of the Hon'ble Court). xxxxxxxxxxxxxx

CO.PET.471/2015 Page 11 of 16 (I) It has been mentioned in the petition inter alia that all the above companies are wholly owned subsidiaries of the Transferee Company whereas:  The Transferor Companies have not yet filed eform MGT -6 regarding declaration of beneficial interest, if any, in the shares held by individual shareholder in terms of the provisions of section 86 of the Companies Act, 2013;  Subsequent to filing of the petition before the Hon’ble High Court, the Transferor Companies have filed eform MGT-7 (Annual Return) on MCA-21 portal which shows that the entire share capital of these companies are not being held by the Transferee Company, thus the statement made in the petition that these are wholly owned subsidiaries of the Transferee Company is prima facie wrong and misleading to this extent;  As per latest MGT -7 (Annual Return) filed by the Transferor Companies, the shares of these companies were purportedly transferred to the Transferee Companies on 08.07.2014 whereas as per disclosures made in para IX(B) in the said eForms, no Board meeting was held on 08.07.2014 thereby it could not be ascertained as to how without calling Board Meeting, the shares were purportedly transferred to the Transferee Company.  In terms of the provisions of section 186(2) r/w 186(3) of the Companies Act, 2013, the Transferee Company was required to seek prior approval, by means of a special resolution of its shareholders for acquisition of shares in the Transferor Company whereas as per MGT-14 filed by the Transferee

CO.PET.471/2015 Page 12 of 16 Company on 27.07.2014, the approval was subsequent to the investment; (II) The Board of Directors of the Transferor Companies and the Transferee Company have purportedly approved the proposed Scheme of Amalgamation in their Board meeting held on 20.10.2014. Accordingly, in terms of the provisions of section 117(3) r/w179 (3) of the Companies Act, 2013, these companies are required to file eform MGT -14 with this office within thirty day of passing the said resolution whereas none of the above companies have filed the same so far thereby prima facie contravened the provisions of section 117(3) of the Companies Act, 2013. (III) The MGT-7 (Annual Return) filed by the Transferor companies and the Transferee Company subsequent to the petition shows that the Board of Directors of these companies met four times, however, no Board Meeting of these companies was held on 20.10.2014. (IV) None of the above companies have yet filed eform MGT-14 regarding resolution passed by the Board of Directors of the respective companies for adoption of their Balance Sheets for the financial year ended 31.03.2014 & 31.03.2015 as required under the provisions of Section 179(3)(g) and 117(3)(g) of Companies Act, 2013 alongwith Rule 8 of Chapter XII.”

CO.PET.471/2015 Page 13 of 16 28. It has been further observed in the said affidavit dated 27.07.2016 that, the Petitioner Companies in their reply dated 15.07.2016 furnished the challans of filing the revised e-Form MGT-7 and e-Form MGT-14. 29. In response to the observations made by the Regional Director in its said representation/affidavit dated 27.07.2016 qua the proposed scheme, the Petitioner Companies have filed an affidavit dated 05.09.2016. The relevant portions of the said affidavit 05.09.2016 are reproduced hereinbelow: “ 5. …It is submitted that the outstanding demand as per the Arrear Demand and collection Register available on ITO the Transferee company paid the said outstanding demand and the copy of the payment receipt is annexed herewith as Annexure-'A'. xxxxxxxxxx 9. That it is denied that the facts mentioned in para 9(i), (ii), (iii) and (iv) indicates non compliance of various provisions of the Companies Act, 2013 and rules made thereunder as well as misrepresentation of material facts regarding holding /subsidiary status and passing of resolution for the proposed Scheme of Amalgamation. It is submitted that the transferor companies and Transferee company/ petitioner companies have already furnished revised MGT-6, MGT-7 and MGT-14 in the office of the Regional Director, Northern Region, New Delhi and the same has been admitted by the RD in their Representation/ affidavit filed before the Hon'ble Court.”

CO.PET.471/2015 Page 14 of 16 30. In view of the foregoing, it has been stated by Ms. Aparna Mudiam, Assistant Registrar of Companies, appearing on behalf of the Regional Director, that there remains no further objection to the grant of sanction to the proposed scheme. 31. No objection has been received to the proposed scheme from any other party. By way of affidavit dated 28.02.2017 filed on behalf of the Petitioner Companies, it has been stated that neither the Petitioner Companies nor their counsel have received any objections pursuant to the publication of citations in the newspapers on 18.12.2015. 32. In view of the approval accorded by the shareholders of the Petitioner Companies to the proposed scheme; the report filed by the Official Liquidator and the affidavit filed by the Regional Director, Northern Region, wherein all observations raised stand satisfied, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioner Companies will comply with the statutory requirements in accordance with law. Upon the sanction becoming effective from the appointed date of the proposed scheme i.e., 1st August, 2014, the Transferor Companies shall stand dissolved without undergoing the process of winding up.

CO.PET.471/2015 Page 15 of 16 33. Resultantly, it is hereby directed that the Petitioner Companies will comply with all the provisions of the proposed scheme and, in particular, those which are referred to hereinabove. 34. It is also made clear, that the concerned Statutory Authority will be entitled to proceed against the Transferee Companies qua any liability which it would have fastened onto the Transferor Companies for the relevant period, and that, which may arise on account of the proposed scheme being sanctioned. 35. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction hereby granted by this Court to the proposed scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the Petitioner Companies. 36. It is made clear, that this order shall not be construed as an order granting exemption, inter alia, from, payment of stamp duty or, taxes or, any other charges, if payable, as per the relevant provisions of law or, from any applicable permissions that may have to be obtained or, even compliances that may have to be made, as per the mandate of law.

CO.PET.471/2015 Page 16 of 16 37. A certified copy of this order, sanctioning the proposed scheme, be filed with the ROC, within thirty (30) days of its receipt. 38. Keeping in view the fact that the matter has involved examination of extensive records, the Petitioner Companies shall deposit a sum of Rs.1,00,000/- by way of costs, in the Delhi High Court Bar Association Lawyers Social Security and Welfare Fund, New Delhi, within a period of two weeks from today. 39. Consequently, the Petition is allowed in aforesaid terms and is accordingly disposed of. SIDDHARTH MRIDUL, J MAY 30, 2017 mk/ap